Golden Corral Corporation Business Information, Profile, and History

Company Perspectives:

At Golden Corral restaurants, our goal of pleasing each and every guest is made possible through the dedicated efforts of our caring and knowledgeable co-workers. Since the beginning, they have been preparing and serving the highest quality food at reasonable prices in a clean, friendly atmosphere thereby fulfilling the Golden Corral mission of making pleasurable dining affordable.

History of Golden Corral Corporation

Having started with one small steakhouse, Golden Corral Corporation has grown into one of the nation's strongest family restaurant chains. The ability to adapt to changing tastes allowed Golden Corral to continue growing during the 1980s and 1990s as changes in eating habits and increased competition brought drastic change to the family steakhouse business. Success continued in the 2000s as well--by 2003 the company operated and franchised 467 restaurants throughout the United States, serving 167.5 million guests that year.

1970s Origins

Golden Corral was born in 1973, when James H. Maynard and William Carl were unable to convince Ponderosa, Bonanza, Western Sizzlin', or any of the other major chains that they were financially worthy of a franchise. Undaunted, they mapped out the plans for their first steakhouse in a North Carolina library and raised money by selling shares to friends from high school and college. The first Golden Corral opened in 1973 in Fayetteville, 40 miles from the company's Raleigh headquarters. The motif was western and the emphasis was on meat and potatoes. Patrons raised their hands for their orders when the waitresses, or "steerettes," called out their numbers. During the 1970s, about 90 percent of Golden Corral customers raised their hands for red meat.

The new company counted on freshness to separate itself from other budget steak houses. From the beginning, each Golden Corral restaurant cut its own steaks from fresh, USDA Choice beef. "Nobody in America at the time was doing that," Maynard told Restaurant Hospitality. "We started with a seven-ounce sirloin and ran up to a 12-ounce. We cut top butts, tenderloins, filets, and ribeyes." Golden Corral charged only slightly more for its fresh steaks than the other budget chains did for their frozen, imported steaks. The company also set itself apart by focusing on small-town America, opening most of its units in markets with almost no direct competition. In addition, Golden Corral distinguished itself by avoiding franchising agreements; many Golden Corral managers became partners, owning 20-30 percent of the units they ran.

They may have started on a shoestring, but Golden Corral's cofounders had big plans. "We set out from day one to do multiple units," said Maynard. Using money from sales and lease-backs, bank loans, and internally generated cash, the young company grew rapidly. By 1979, Golden Corral owned more than 100 restaurants. By the end of 1980, the total was 151. The 1982 purchase of 193 restaurants from Sirloin Stockade, a Kansas-based competitor, further swelled the ranks. Approximately 100 Sirloin Stockades became Golden Corrals, either owned outright by the privately held company or managed under the Golden Corral banner through a leasing agreement with parent company Investors Management Corporation (IMC). By the mid-1980s, there were 430 Golden Corral restaurants. Each unit averaged about 5,000 square feet in size and about $1 million in annual sales.

The company continued to add restaurants and make a profit throughout the 1980s, but increased competition, the recession, and changes in American eating habits threatened to make the steakhouse a dinosaur. As consumption of red meat dropped and demand for fresh green foodstuffs grew, Golden Corral and its competition first added salad bars and then expanded them. Some Golden Corral units gave up more than 30 seats to make room for salad bars up to 27 feet long. Expanding the dining room added 75 seats but reduced parking. Waste and spoilage shrank profit margins because employees were not trained to handle fresh fruits and vegetables. On top of that, market researchers reported that family steakhouse chains were losing market share to fast-food restaurants and to more upscale chains like TGI Friday's and Chili's.

By 1987, Golden Corral had more than 500 restaurants in 38 states; revenues reached $457 million in 1988. The company never lost money, but as its market share and profit margins grew leaner, Golden Corral--like competitors Bonanza, Western Sizzlin', Quincy's, and Western Steer--began trimming money-losing units. It eventually cut 87 restaurants (although several would reopen as Ragazzi's, an Italian chain also owned by Investors Management). The company also began taking a long, hard look at what it would take to begin growing again.

New Directions in the Late 1980s

Leading the company in its new direction were Maynard, now chairman and treasurer, and Theodore M. Fowler, president and soon-to-be CEO. Fowler, who started as an area supervisor in 1977, succeeded Maynard as president in 1982 and as CEO in 1989. (Cofounder Carl left Golden Corral in 1984 but remained a director.) Following a series of strategy sessions in 1988, Golden Corral decided to ask its customers which way it should go. The company hired market researchers to poll current and potential customers on their attitudes about every aspect of "the experience of eating in a restaurant," Fowler told Business/North Carolina. "We wanted to design a concept better than anything else in the market."

Golden Corral's late 1980s soul-searching resulted in a number of changes of direction for the company. Most readily apparent to customers was the Metro Market concept. The company hired architect Jerry Cook to design a prototype based on its market research. The first Metro Market, in Lawton, Oklahoma, was a far cry from the dark, wagon-wheeled decor of the earlier Golden Corral. It was light, airy, and large, although at 7,800 square feet it fell about halfway between the older units and the model the company eventually would adopt. Most importantly, it replaced the old salad bar with a U-shaped buffet court that took up about a third of the floor space.

The first seven Metro Market, or GC-10, restaurants opened in 1991. At approximately 10,000 square feet and able to seat 400 to 440 customers, the new units dwarfed the old, which averaged 5,000 square feet and 175 seats. The centerpiece of the new units was, of course, the food bar, dubbed the Golden Choice Buffet. Entering a cafeteria-style line, customers could still order a fresh-cut USDA choice-grade steak; now, however, they could also opt for any of up to 170 all-you-can-eat items. A typical Golden Choice Buffet might include Salisbury steak, chicken pot pie, fried chicken, shrimp, and meatballs and gravy among the entrees and corn, green beans, carrots, turnip greens, creamed potatoes, and baked potatoes with six different toppings among the vegetables. A health-conscious diner could balance the many fried items with fresh fruit and salad fixings. At the Brass Bell Bakery, the ringing of a brass bell every 15 minutes signaled that more fresh bread, rolls, and pastries were coming out of the oven. For those who saved room, there were plenty of choices for dessert, too.

To many, the new Golden Corral hardly seemed to be a steakhouse anymore. About 80 percent of the customers ordered the food bar, either alone or with an entree. Only about 20 percent still ordered steak. "That's why we call it a steak, buffet, bakery concept," Fowler told Business/North Carolina. Whatever they called it, it worked. The average customer spent $5.45 at the first Metro Markets, down from the $6 average at the older units. The combination of menu management and sheer volume, however, boosted annual earnings at the best performing of the newer restaurants to nearly $3 million, close to triple the $1 million average of the old restaurants. In Restaurant Hospitality, Fowler explained why the food bar worked. "The genius is to have a lot of great tastes at four cents an ounce, which then allows you to offer more expensive items like chicken wings or shrimp at ten cents an ounce." A large, well-trained staff that kept large numbers of people moving through the lines also helped.

The location of the new restaurants marked another departure for Golden Corral. Moving away from its almost exclusive commitment to small communities, the company designed its GC-10 units for markets of 50,000 or more, although it planned a limited number of smaller and medium-sized restaurants for areas of 18,000 to 35,000 and 35,000 to 50,000 people. In 1993 and 1994, the company estimated that 60 percent to 70 percent of its new units would be Metro Markets. Most of the first wave of new units were located in the southern states of Texas, Oklahoma, North Carolina, and New Mexico.

Focusing on Franchising in the 1990s

Another major change was Golden Corral's decision to hitch its growth plans to an aggressive franchising effort. The company took its first tentative steps in this direction between 1988 and 1991, when it franchised some 55 troubled outlets to its most talented general managers. In 1991, it awarded seven new franchises. The franchising effort began in earnest in 1992. Larry Tate, vice-president of franchising, told Southeast Food Service News that Golden Corral intended to award 40 franchises that year. "But the concept took off so well," Tate said, "that we closed the year with 102 new franchises." The company planned to open two new franchises and one company store per month in 1993, boosting the total to three franchises and one company store per month in 1994.

To insure that a commitment to franchising did not compromise Golden Corral's reputation for quality and value, the company said it would award franchises only to qualified applicants, train them well, offer them support, and continue to adapt to shifts in customer tastes. The company set its franchising fee at a modest $40,000 but estimated the total commitment involved in opening a new Golden Corral at about $2 million per location. Golden Corral required potential franchisees to have $300,000 in liquid assets and a net worth of $1.5 million. Previous restaurant experience was necessary, as was the completion of a 12-week training program that taught a franchise operator every task performed at a Golden Corral restaurant.

As Golden Corral remodeled and expanded, it also reorganized. In 1991, Fowler's management team completed three years of examining the company's corporate structure by giving more decision-making authority to restaurant managers and their regional supervisors. The company added two geographic divisions, for a total of six, and moved the positions of marketing manager, human resources and training director, division administrator, and district manager from its Raleigh, North Carolina, headquarters to the six divisional offices. The changes resulted in Golden Corral division headquarters in Raleigh; Washington, D.C.; Tampa, Florida; Kansas City, Kansas; Dallas; and Houston. Golden Corral's divisional offices also offered support to franchises.

Golden Corral opened a Center for Training and Development in 1991 to train restaurant managers, prospective managers, and training professionals. The center marked the company's effort to standardize training, which in the past had varied from restaurant to restaurant. It also indicated a growing trend in the restaurant industry. In an economy with a shrinking number of young job-seekers and increased competition, the possibility of training and advancement helped companies attract people with the potential to move into management.

The early returns on Golden Corral's reinvention of itself were promising. Following several years of near-zero growth, Golden Corral's system-wide sales were $449 million in 1991, up 27 percent from 1990. Total sales increased to $481 million in 1992 and to $514 million in 1993. In July 1992, Restaurants and Institutions cited the company's emphasis on value when it named Golden Corral one of "10 Great Growth Chains." Earlier that year, the same magazine's "Choice in Chains" survey of 2,500 U.S. households named Golden Corral the best steak chain. According to Southeast Food Service News, Golden Corral had also become the largest privately owned company in North Carolina.

In February 1993, Golden Corral celebrated its 20th anniversary in Fayetteville, the site of the company's first restaurant. During the celebration, company executives emphasized their lofty plans to open 500 new restaurants and triple revenues to $1.7 billion within five years. By the end of the decade, the company planned to celebrate the opening of the 1,000th Golden Corral restaurant. "We want to make Golden Corral the largest family restaurant chain in the world," Larry Tate said.

Later in 1993, IMC announced a five-year development deal that would bring Golden Corral 47 units closer to its goal of 1,000 restaurants. Under the terms of the agreement, Corral Midwest, Inc., agreed to purchase 26 existing Golden Corral units and open up 47 new Metro Market units. Corral Midwest, the largest Golden Corral franchisee, planned to open the new units in Indiana, Illinois, Iowa, Kentucky, Missouri, Kansas, Oklahoma, Nebraska, and Tennessee. IMC, Citicorp Venture Capital, and several members of the Corral Midwest management have ownership stakes in the franchise concern. Golden Corral also announced a 14-restaurant deal with the Winston Group of Atlanta and an 18-unit agreement with Golden Partners of Fort Smith, Arkansas.

The first international Golden Corral opened in Juarez, Mexico, in July 1993. A Juarez investor planned to open five restaurants, and a franchisee in Monterrey, Mexico, planned eight more. The south-of-the-border Golden Corrals differed from their northern siblings in one important respect--they planned to serve alcohol.

The many challenges Golden Corral faced as it entered the mid-1990s included maintaining uniform quality as it took on new franchises and planning how to break into the nation's largest markets with a restaurant concept that required 2.5 acres of space. Just above its niche loomed the more upscale steak chains; the cheaper fast-food joints lurked below. The obstacles were many and its goals ambitious, but Golden Corral's ability to recreate itself to meet its customers' desires boded well for its chances of growing into one of the largest family restaurant chains in the world.

Success Continues in the Late 1990s and Beyond

While Golden Corral fell short of its goal of 1,000 units by 2000, the company continued to experience success in the late 1990s. During 1997, the company moved into the Miami, Fort Lauderdale, and New York City markets. Fifty-five restaurants were opened that year, and the company secured a $45 million franchise agreement with Frisch's Restaurants Inc., a Big Boy restaurant operator in the Midwest. By 1998, there were over 450 restaurants in operation. With plans to open an additional 70 stores that year, Golden Corral stood as one of the fastest-growing family restaurant chains in the United States.

As sales inched toward the $1 billion mark at the start of the 21st century, Golden Corral moved into the Northeast--a region known for its high real estate prices. In 2000, the company announced that it planned to open 17 franchises over a five-year period in the Boston area. It also set plans in motion to enter Detroit, St. Louis, and Cleveland, as well as Idaho and Oregon.

A new restaurant design called the "strata" was launched in 2000. This style--known as display cooking in the restaurant industry--positioned the kitchen in the front of the restaurant and allowed guests to watch the preparation of salads and other buffet items. Sales surpassed $1 billion in 2001, a sure sign that customers liked the new restaurant setup.

Franchising continued to play a key role the Golden Corral's success. By this time, franchise locations outnumbered company-owned stores three to one. An October 2001 Business North Carolina article summed up the advantages of franchising, observing that "franchising gives Golden Corral a way to leverage outside capital without giving up equity. Franchisees absorb the risk and cost of building and operating restaurants, and the company doesn't pile up debt and interest costs." The article also gave insight to potential problems related to franchising, reporting that "the down side is that Golden Corral shares profits with franchises and can see its image charred if one stumbles."

That had yet to happen, however, and Fowler and Maynard forged ahead with their expansion plans. The company chalked up its 12th consecutive year of sales increases in 2003 as it celebrated its 30th anniversary. By now, 54 out of 467 restaurants were reaching over $4 million in annual sales. In 2004, Frisch's--the company's largest franchisee--announced that had signed a contract to open 21 new restaurants in Columbus, western Pennsylvania, and southern Michigan. Frisch's planned to operate 62 Golden Corral units by 2011.

With over 30 years of success under its belt, Golden Corral had secured an envious position in the restaurant industry. Nation's Restaurant News had ranked it as the leader in the grill-buffet category for the eighth straight year in 2003, and Entrepreneur magazine had listed it as the top franchiser in the family steakhouse segment for nine consecutive years. While intense competition and dollar-conscious consumers would no doubt remain obstacles for Golden Corral in the years to come, the company appeared to be on track for continued success.

Principal Competitors: Metromedia Restaurant Group; Ryan's Restaurant Group Inc.; Western Sizzlin Corporation.

Chronology

• Key Dates:
• 1973: James H. Maynard and William Carl open the first Golden Corral.
• 1979: By now, Golden Corral owns more than 100 restaurants.
• 1982: The company acquires 193 restaurants from Sirloin Stockade.
• 1991: The first seven Metro Market concept restaurants open.
• 1992: Aggressive franchising efforts begin.
• 1993: The first international Golden Corral opens in Juarez, Mexico.
• 1997: The firm signs a $45 million franchise agreement with Frisch's Restaurants Inc.
• 2003: Golden Corral celebrates its 30th anniversary; 24 new restaurants are opened.