terms of the relationship on a handshake-which is the fast-food giant’s corporate policy for suppliers. New Horizons would provide McDonald’s with a continuous supply of buns in perpetuity for about 1,300 restaurants-approximately 10% of its U.S. business-in Michigan, Ohio and West Virginia. Brown was assured by Paterakis, who had done business with McDonald’s for nearly 40 years, that the restaurant would honor its end of the bargain.
The potential problem with this type of agreement is that McDonald’s is 85% of New Horizons’ volume. The agreement precludes Brown from seeking other clients in the quick-service restaurant industry, so he’s diversifying his client list by adding other food-service companies.
The next goal, says Brown, was to turn the company around and build it into a stable, money making enterprise. “My first set of challenges was coming to grips with the fact that there was no big brother up there who was going to pave my road for my future. I had to make those decisions that would impact my future.” Within the first week, Brown and his team sat down to identify ways to trim fat and increase profitability. First they reduced unnecessary manpower, dropping down to 205 employees from 345. Then they automated several tasks, which improved productivity and decreased workers’ compensation claims by 20%. The final step involved disbanding the corporate office and splitting it between the bakery locations in Norwalk, Ohio, and Fremont, Indiana, to save money on rental space. In seven years, Brown was able to invest about $18 million in capital improvements.
In 2003, the company decided to diversify its customer base and develop several noncompetitive customers outside of McDonald’s, including ALDI, Michael Foods, and Schwebel Baking Co. Over the last 10 years, McDonald’s began shifting its menu to offer more salads and chicken products, Brown says. This left New Horizons with the equipment to produce a lot more buns than McDonald’s needed, and the excess capacity was costing both companies money. “If I have excess capacity and you are the only customer that I have, who eats all of the overhead? You do,” Brown says. “So if I can spread that overhead over a broader base, I help maintain some stability in the pricing to my major customer, and in some cases, even reduce that price. It just makes good sense.”
HARD-LINE DEALING
Cris Carter, former NFL wide receiver for the Minnesota Vikings, was in a league of his own. Ranked second on the NFL’s all-time list for total receptions and receiving touchdowns, Carter, 41, was named the 1999 NFL Player of the Year. But in 2001, injuries and age forced Carter to consider retirement. He saw this as an opportunity to partner with his brother, John, 42, to start the company they had always dreamed of: Carter Brothers L.L.C. (No. 80 on the BE INDUSTRIAL/SERVICE 100 list with $47.8 in sales). The electronic security company installs and provides security management, such as fire alarms, burglar alarms, and intrusion detection systems to corporations such as General Electric, Frito Lay,