Friday, September 14, 2007

First Post - A History of Mr. Steak As Told By The Founder

Twenty Years in Retrospect

EDITOR'S NOTE: We got Mr. Mather together with a tape recorder and asked him to record the chain of events over the past twenty years which have shaped the history o f  M/S. We also dug into our files to come up with some pictures of the early days of M/S's existence. We hope you enjoy this Anniversary issue o f the Guest Check. (October 1982)

In 1961, Dottie and I liquidated Leadership Training Institute, Inc., which we had been affiliated with for over six years, and went into the franchise consulting business, which was fairly new at that time. A year or so prior to this we had thought about a restaurant concept; serving broiled steak, a baked potato and tossed salad which would be served cafeteria style. It would have a theater galley where people could see the restaurant was clean in the back, as well as the front and they could enjoy watching the food being prepared.

We moved to Denver to set up an office, reluctantly leaving our home and friends in Colorado Springs. I couldn't afford a full-time secretary, so I worked out an arrangement whereby my secretary would receive one-half her salary from me and work for other businesses. There was a young attorney in the same building, by the name of Jim Shearon, who as you know, later joined the M/S staff and in 1970, became our President for over eleven years.
A friend, Hoover Holland, owner of Holland Insurance Agency, had been an Army cook, and became enthusiastic about our restaurant concept and wanted to be involved. He in turn interested a friend of his, Ray Bliese, also a former Army cook, who agreed to be our first manager. Additional capital was needed, so I presented the concept to an engineer friend, Chuck Wilson, who agreed to be our fourth investor of the original corporation.

There wasn't much in our financial statement to be attractive to a landlord, however we found one who would do business with us. In retrospect, I think only because the site he had listed had been termed "failure corner," and he felt he didn't have anything to lose by leasing it to us. Originally the building had been designed to accommodate gas pumps where the corner of the building was cut off, so the property was known as "cut-a-corner." It was in downtown Colorado Springs on Pikes Peak and Webber streets, and I believe had been a service station, a new car dealership, a food market, a drug store, and I don't know what else, but it had been closed for over a year when we came along.

The four of us met at Bell's Better Burgers and over hamburgers tried to determine what our company name should be. We came to the conclusion that each of us should go home to make a list of names then ­get together in one week to put the name to a vote. As much as I would like to tell you that "Mr. Steak" was my sug­gestion, it is not the truth. It was Chuck Wilson's.
I worked with restaurant supply people in Denver to help with the design of the kitchen and also as a source for buying and installing equipment . A well-known and successful artist friend, John Roach, designed the steer's head logo which we kept for a number of years, and still adorns some of the older M/S restaurants. John became a shareholder and later Vice-President of Advertising.
We covered the windows with butcher paper on the North and West sides of the building and drew the steer's head and "Coming Soon" on it as we were working on the inside. The galley was on the North side, next to the sidewalk, and you could look right into the galley to see the steaks broil­ing. Even with this humble beginning, we attracted a lot of newspaper publicity. Very few businesses have opened in Colorado Springs with any greater amount of publicity as did our little business.
The day we were to open, I recall how nervous we all were, not only the two men who were going to be doing the cooking, but the cashier, and es­pecially me. We had good reason to be nervous too. It was noontime, and there was a long line forming out on the sidewalk, in fact, it had been for­ming prior to noon. That part was en­couraging, but what was frightening was - our meat delivery had not come, and I was near panic. When it did come, we received it through a side door in the nick of time and our guests never knew we didn't have the product as they waited.
To tell you the truth, we didn't know much about meat in those days, and those first few days as we broiled the steak it would end up in three or four pieces on the broiler. I was in the back end, tenderizing it in a big vat. It was the sort of tenderizer many steak houses still use, which is great for removing warts, and this was causing the meat to break up into pieces. The exciting point is - from day one, the' business was a success!
Within a few weeks after the restaurant was open, I was approached by a retired Colonel who wanted to buy a franchise in Albuquerque, NM. I told him we were not ready yet, that we needed some time to prove the con­cept. His answer was - well, let me be a part of the proving of the concept. We couldn't argue with that, so we agreed that we would not charge him a franchise fee, and would help him design his restaurant, which was going into a strip shopping center, with a rather small space, similar to what we had in Colorado Springs.
We designed the layout, installed the equipment, trained him as well as we knew how, and the only thing he was to do was to pay a continuing fee. As I recall, it too, was an initial success, however it was a tough routine for a retired Colonel and his wife.

Back in Denver, I was working on details to take a proven concept na­tionwide, after the development period. The "grand plan" made some of my intelligent partners nervous, and if I had had good sense, I would have been also. Chuck Wilson, the engineer from Colorado Interstate Gas, asked if he could sell his interest, so I presented it to a former business associate and close friend, Milan Hulbert, who bought Chuck's interest. We were all enthralled with the results of what that first restaurant was doing, and I believe it eclipsed some of my associate's views on expansion. Later, in most cases, they traded their interest in MSI for my interest in the restaurant in Colorado Springs.

We sold our third franchise, which was located in Denver on Littleton Blvd., also on the basis that it be part of the development of the evolving concept. This was to be our first designed, free-standing building, and we had contacted architects who said they had designed many restaurants. The object was to come up with a design which we would be able to build anywhere in the United States for $35,000 (to show you how naive I was). This was prior to extreme infla­tion, and they must have been as naive as I was, because as I recall, it was close to twice the amount they had es­timated.
They convinced us to build it out of concrete hyperbolic paraboloids. They set concrete stems into the air and then built a wooden form on the ground, looking much like an inverted mush­room. The water would run off the roof into the center of the mush­rooms, and then drain on out. There were many things we objected to as it was being built, but was told we just didn't understand good design es­thetics. For instance, there was a step up to double doors at the entrance, one of which was fixed and the other one was where you entered. But there was no way to tell which one was fixed and with the step up you might stumble into the restaurant and fall out upon leaving. Great for liability insurance.
Their design called for brick floor­ing; glass windows from floor to ceil­ing on the west and south sides; and leaving the ceiling concrete bare. All of this in the name of esthetics, with all materials hard surfaced.

When the restaurant was opened you could whisper in one corner of the restaurant and hear it in the other cor­ner. People would stumble on the bricks, waitresses complained about the bricks, and the ladies were reluc­tant to sit next to the windows which gave them no protection for their skirts. So, we had to construct wainscoting on the bottom of the windows; we acoustical sprayed the ceiling; and we got the thickest pad­ding and carpeting we cou1d find to cover the floor. Needless to say we didn't use those architects again. Even with all of these problems, this restaurant was well received.

After a year of trial and error and some research, we made the dramatic move from the cafeteria style to full waitress service and we also added luncheon items. We concluded that the increasing woman workforce and veterans wanted to be served when they dined.
Another momentous decision came when we decided that the only way we would be able to control the quality of our beef products, across the nation, would be to use a system that had already been devised and monitored, called the United States Department of Agriculture and their meat grading system. We felt it was asking too much of a manager to be skilled in prepara­tion of food, advertising, marketing, accounting, interviewing, training and in addition, be an expert in beef grading, which is a life-time career in itself. So, within our first year, or very close to it, we refined the concept to in­clude full waitress service, USDA choice beef only, and a broader menu.

In the meantime, we contracted with Partake, Inc., a Chicago franchise marketing company, to take on the franchise expansion of M/S. They became our sales arm for the first few years. Their Area Directors were located in various parts of the country and they did a good job of screening and selling. The problem was, our ex­pansion was uncontrolled, in that it was based upon where the Area Direc­tors were located, as opposed to a more logical saturation growth, and having more reasonable logistics.
At that time I brought in an Associate to help me operate the Par­take consulting, by the name of Hansel Kennedy, and later another young man who was an entrepreneur type with an engineering background who had owned three dry cleaning establishments. His name is Don Foltz, and he later became President of M/S in late 1968.
We leased a building on Federal Blvd., and simultaneous to this, developed a corporation called M/S Development to do the construction inspection of our buildings across the country. We also formed Franchise Accounting which was to provide a weekly accounting service to our Associates. Lou Levinson was the per­son who headed this operation, based on his experience in accounting. Lou later became a Vice President of MSI. We also established a company to han­dle the equipment and food purchases,­called National Marketing & Leasing, and my brother, Ted, who was manag­ing the Littleton restaurant took over the management of this company. Later, Don Foltz moved over from Par­take to be in charge of NML, as well as M/S Development and sold our con­sulting firm.
The first year in Denver I had started a branch of SWAP Club (Salesmen With a Purpose), and through this group had met a likable, tall young man who represented a ma­jor insurance company. Dale Thomp­son was encouraged to interview with Don Foltz and came to work with him in National Marketing & Leasing.
Two brothers who contributed toward M/S's early growth were Tom and Lew Scifo from Rockford, Ill. Tom was V.P. of Real Estate and Lew, V.P. of Operations. Lew's experience of several years with the International Pancake House was beneficial in the back of the house operation.
In November of '68, a new dimen­sion was added to M/S when Don Stewart joined our staff as V.P. of Marketing and also served on the board of directors. Marketing and Market Research had been ac­complished through consulting firms prior to this.
Don came to us from the marketing consulting firm of Halverson/Slade. He also added to our understanding of computer operations from his previous years with IBM.
M/S's early acceptance had nothing to do with the fact that I was a food­service specialist. As you know, I was not and still am not. Matthew 6:33 says, "Seek ye first the kingdom of God and His righteousness and all these things shall be added unto you." I, along with Dottie and my Associates, dedicated M/S to the Lord Jesus Christ, and as far as I'm concern­ed, it's to Him credit goes for success of those first seven years. I also know who gets credit for the mistakes and problems we have faced, over the years, because in most cases, I've made these decisions without listening to God.
One of those decisions was in 1969 when I listened to the romance of Wall Street and made the decision to go public. (I'm not saying this is wrong for other companies). For me to have committed the company to God and then turn around and sell it to the world, was the same as the Israelites in that they wanted a man king, when they already had the presence of the living God as their King. However, God granted their request and their problems can be pin-pointed from that time on. So has it also been for M/S.
We acquired a potential share­holder class action suit in early 1970 as a result of our going public. The New York attorney who brought the suit, identified the problem as being an ac­counting treatment question. For the next seven years we fought the suit, and in doing so wasted much executive time, energy and money and slowed down our momentum.
As late as this year, the IRS came back and whacked us for another $600,000 on the tax handling of the suit.
We occupied the building on Federal Blvd. for a few years, however, I had for some time felt we needed the ex­posure of owning real estate. Through our Realtor we began looking for a six acre plot on 1-25 between Colorado Springs and Denver where we could build our home office. The M/S building itself would become a bill­board for the thousands of people across our country who traveled between the two cities.
The commercial Realtor was given our requirements and a few days later presented a six acre site within our budget, and we signed for the exact terms the seller required. Our prayer was then - if this is the site we should have, let it go through, but if not, please close the door. Within days the door was closed when the seller took it off the market. Disappointed at first, I later realized our prayer had been answered and perhaps a better site would come up. Soon another 13 acres surfaced and we went through the same procedure with the exact same results. A few days later the Realtor came back with a 30-acre site which was priced at $130,000. At that time it seemed like all the money in the world, however it had a beautiful, large, rambling ranch-type house on it, with a full basement, a swimming pool and a panoramic view of the Rocky Mountains. So I thought, if we could get the zoning changed, we could sell off part of the land and use the house as our temporary headquarters. I met with the Greenwood Village City Council which was very opposed to our coming, say that they didn't want any garnish signs within their ci­ty, and on 1-25. But they did eventual­ly yield to our request and a year or so later the Mayor asked me to head up their first zoning commission. After we got the zoning, the business was doing so well, we decided that rather than sell off any of the property, we would buy more and develop an office park. Over a period of time we ac­quired 118 acres in all. We hired Cal Worthington, whom we considered the most respected professional land planner in Colorado. We then laid out Development to grade the entire area and build the road systems. We got each land partial zoned and laid the underground utilities throughout the roadway.
Later we broke ground for our three floor administration building which was built in the form of a cross, with another small building off to the south of it which was to be a restaurant. The administration building had a recreational area with two handball courts in the basement with showers, so that the staff could exercise early mornings, noons or evenings.
By this time M/S Development and NML had grown to where we were go­ing to need an operational building to house the equipment, food products and trucks. Don Foltz negotiated the lease with the Denver Stockyards Company and M/S Development designed and built the building we now occupy. A few years later, we bought the property.
By the middle of 1969 the country's central bank, the Federal Reserve, decided to use the interest rate as the method to slow down the rate of infla­tion. Construction across our nation plummeted immediately as did the stockmarket an in most industries which were cash intensive. It got to the place where banks were completely out of money, except for their top customers, so we decided to hold off on our expansion and construction of Panalogia, the name we had given the office park project.
To economize and to bring us closer in operations we decided to move into our Operations Center in the Denver Stockyards. Money got so tight that it was difficult to get normal working capital, so we sold a small portion of Panalogia to the John Madden Com­pany. He would only take it if we would grant an option for all of the property, which we did. This was the second worse mistake I have ever made in business. Today, that property, developed exactly according to our long-range plan, is known as Green­wood Plaza and it is worth many times over the dollar value of Mr. Steak, Inc.
One of the more active Partake Area Directors was in the Minneapolis/St. Paul area. He laid out the city and sold many franchises resulting in 22 operating restaurants. In Rockford, Illinois, Parktake Area Director, Bob LaTurner developed an investment' group who chose as their in­vestor/manager a young Bell Tele­phone man by the name of Jack Ross. Jack and his beautiful wife, Bon­nie, opened the third restaurant which was a free standing restaurant of our own design, (having given up the hyperbolic paraboloid design). Without inflation, my objective was to get the restaurant to consistently gross $3,500 a week. Rockford opened at $5,000 and it was beyond our wildest imagination that this could happen. As with the other restaurants, Rockford was also an immediate success.
We literally started opening restaurants across the nation. I believe it was in 1969, through the developed momentum, we opened 75 restaurants. My goal at that time was to have 500 restaurants open within the first six years, and of course, we still don't have 500 restaurants, so we fell far short of that original goal I had set for us. I know now that I had the wrong idea for our goal.
Another goal was to become the largest in the foodservice industry, and secondly, that we would become the best. It was within the first year or so, after I set that goal, that I realized that being the biggest of anything is nothing to crow about, but a worthy goal is to become the BEST at whatever you do. We immediately dropped the first goal and are still con­centrating on the second one. We believe we will be working on the se­cond one for the rest of our business life.

I would like to add that over the past 20 years there have been many wonderful and talented Associates and Staff who have come and gone, who have greatly contributed to M/S and many of you are still making that con­tribution.
In 1968, Don Foltz accepted the Presidency, to allow me more time to concentrate on the development of Panalogia, our office park.
In the early years M/S formed its own franchise sales department to cover areas which were not covered by Partake Area Directors. Around 1966 we discontinued our basic contract with Partake, Inc. and expanded the sales efforts with M/S Staff, which proved very successful.

Our pledge from the very beginning has been: "To serve the best, low calorie, high protein meal, at the lowest possible price." It seems each time we deviate from this original pledge, we always come right back to it and have come to realize that this is our strength and concept.
The most recent change that has taken place within M/S has to do with the selection of Dick Jackson as Presi­dent. He represents the marketing approach which industry studies tell us is where the growth potential lies. Mr. Jackson views the growth potential, in mature markets, as growth through gaining greater market shares from ex­isting competition. To accomplish this, increased concentration will be placed on the perfection of operations, in­creased professional management and a strong emphasis on marketing the strong points of M/S. Our market sur­veys and your response to surveys show the loyalty of our existing Guest base, and the misconceptions the non Mr. Steak consumer public has of what M/S restaurants offer.
The "Steaklover's" approach says that we are still America's Steak Ex­pert. This emphasis is specializing steak names of which the public is aware, and which, due to prices, have not been consistently on our standard menu for some time. One of our former board members, Ford Madison, used to say, "The man who would educate the public will go to the Christmas tree in a seersucker suit." When translated, this says that trying to educate the general public is an ex­tremely slow and costly method.
"Steaklovers" uses the same theory as judo or karate. The Oriental is generally small in structure, so they developed the science of defense which uses the momentum of the attacker and works that momentum against themselves, as opposed to football, where in most cases you run toward each other with brute force. In judo they take the momentum of your ac­tion and flow with it and add their strength to your momentum to assist you to become airborne. Rather than try to educate the public, we propose to make use of the existing momentum of their knowledge of a T-bone steak, a NY Sirloin, or a Top Sirloin.
While many in the industry are cut­ting back on proportions, M/S is offering an even greater variety through more generous portions, while maintaining high quality standards, and going a giant step further. We believe we are the first to present a written, money-back guarantee on our "Steaklovers" steaks. It's really not new, in that we have always said that if the Guest was not pleased, we would prepare another meal, give them a gift certificate, not charge them, or in some way try to make them happy. Now we are going to market the fact, the same as Sears & Roebuck's or Penney's do. We're going to tell people that we're guaranteeing our "Steaklover" steaks!
I'm personally very excited about Dick Jackson's approach and believe it can be the impetus to set the M/S name apart and increase restaurant volume and profit. With many steak houses getting out of the business, M/S is going to end up being THE quality steak house chain. If we are not there now, we will be in the near future. We have stepped up our franchise sales activities this past year and are back in the posture of greater visibility. I believe this is the begin­ning of a new era for M/S and our Associates.