Improving customer service, keeping a facility clean and installing strong leadership.
It all sounds like the basics to running a restaurant and, as simple as it sounds, it has gotten Roland Spongberg far in the industry.
The CEO of Cypress-based restaurant franchisee WKS Restaurant Group started out in the restaurant business with no experience to his name in 1987, losing money every month the first three years.
He reversed course, increasing profits unit by unit, all the while funneling his earnings into buying his next restaurant.
“I’d say the food business expanded over the years,” Spongberg said. “I think more people take advantage of going out to eat more often. There’s less cooking at home.”
That’s been a boon for him and WKS.
Today, the company’s footprint totals 302 franchised restaurants across the El Pollo Loco, Wendy’s, Krispy Kreme, Denny’s, Corner Bakery and Blaze Pizza brands.
That makes it the 29th largest restaurant franchisee in the United States.
The company was one of five honored by the Business Journal with a Family-Owned Business Award on Oct. 7 (see stories, pages 4, 6 and 8).
Family Ties
“It’s a great business,” Spongberg said of the industry. “It’s a people business and I love to see people progress. I work with some great people and I’ve watched many of them progress over the years. When you have as many restaurants as we do, you have to rely on good people. You can’t be all of it.”
Spongberg oversees thousands of workers across the restaurants and corporate office. That also includes three sons, a son-in-law and nephew who are part of WKS, although Spongberg is quick to point out with a business that size, it can’t be just a family business.
“You can’t just have the same name as I do to grow and be promoted. That’s not going to work,” Spongberg said. “We have about 11,000 employees and so it has to be opportunity for all.”
Real Estate Background
In 1987 Spongberg had the opportunity to move from the real estate development world into food. He had previously been building in Southern California with a partner since 1982.
A friend of his lived next door to the president of Denny’s, and the idea of becoming an El Pollo Loco franchisee was floated. Spongberg and his friend, neither with any restaurant experience, built three locations.
“We lost money every month, and in 1990 there was a recession and my partner said ‘Let’s get out of this business. We don’t know what we’re doing,’” Spongberg recalled.
He ended up buying out his friend, turning the restaurants around and slowly adding to the portfolio.
“The restaurant business is like two businesses,” Spongberg said.
“One is running restaurants, and two is finding the sites and building them, and trying not to build any bad sites.”
That’s not unlike the development business, the CEO pointed out, saying his time as a builder proved incredibly helpful to growing WKS.
Spongberg continued adding El Pollo Locos. Today WKS has 67 units, making it the $640 million-valued Costa Mesa-based grilled chicken chain’s (Nasdaq: LOCO) largest franchisee.
WKS didn’t begin diversifying until around 2004 when a friend operating four El Pollo Locos and a Denny’s said he wanted to retire and sell his restaurants to Spongberg.
Spongberg told his friend he wasn’t interested in Denny’s, but he’d take the El Pollo Locos. The conversation continued for three more months until his friend put his foot down and told him it was the package of units or nothing. Spongberg took the package.
Denny’s turned out to be good idea. The location that came with the acquisition was doing around $1.9 million in sales when Spongberg took it over. Eighteen months later WKS brought sales up to $2.5 million.
“We said ‘Denny’s is a pretty good business’ and there’s a lot more Denny’s,” Spongberg said.
Last year WKS bought QK Holdings LLC, adding more than 90 additional Denny’s, and making it the largest franchisee of the diner-style chain in the U.S. with 127 units. It added some 4,500 employees as part of the deal.
WKS is also the largest Wendy’s franchisee in the state with 55 locations.
He said WKS’ portfolio mix is good at the moment, and he’s not looking at any other brands to expand. Instead, growth continues to be measured not unlike the early days when Spongberg was finding his footing in the industry.
“We continue to expand in the brands that we operate in,” Spongberg said. “We don’t have a plan to buy X number of restaurants because there might be some [restaurants] for sale this year; there might not be any. We organically grow by about 10, 12 restaurants a year and we continue to grow that way.”
