Rackson Restaurants: Built to Last

After a career playing for the Cleveland Browns and New York Giants NFL football teams, Ron Johnson became an entrepreneur, buying and operating Kentucky Fried Chicken franchises in New Jersey, Tennessee, and Michigan. From the start, this was intended to be a family business. He named the company Rackson—with the initialism “Rack” representing the first letters of the first names of his family:  Ron; his two children, Allison and Chris; and his wife, Karen. His son Chris joined the business after college and became the president in 2008, when his father experienced medical problems. As a leader, Ron was charismatic. He led by example, often visiting his restaurants and relating to both employees and customers. The company was profitable and stable until he became ill.

While indebted to his father Ron for starting and growing the company, Chris quickly realized that Rackson’ s management structure and culture were not poised for growth. The company had done well under Ron’s entrepreneurial leadership, but, like many companies founded by entrepreneurs, it was built and operated under his managerial style. Ron was charismatic and prided himself in having individual relationships with each store manager and his or her team members. Growth plateaued at 31 stores under his managerial style. When Ron backed away from day-to-day management, the culture that had been team-member- and customer-oriented began showing signs of disarray.

Chris knew Rackson, under its current design, could not realize his desire to see it grow. He had a choice to make: change the company culture and organizational design, or start a new company. In 2013, while still running Rackson, Chris decided to start a new food service company focusing on Burger King franchises. Over the next several years, he sold the Rackson Kentucky Fried Chicken restaurants but not the Rackson name, which he used to rename his new food service company.

When asked why he started his own company rather than changing the original company, Chris was very clear in his explanation. Although financially successful, the original Rackson company was clearly a reflection of his father’s management style. When Ron became ill and no longer able to visit stores, the culture he had built began to deteriorate, leading to high employee turnover and less focus on customer service. Reflecting on his own personal philosophy and management style, Chris decided that a new company would offer the best opportunity to build a sustainable culture and an organizational design that would not limit its growth. In an industry known to cut corners and put profits first, Chris believed in putting employees first, followed by processes that included customers and operations. He believed that these priorities would yield profits if done well. He attributed this philosophy to his parents and to a deep belief that people deserved to be treated with respect and dignity.

Chris invested heavily in giving autonomy to his restaurant managers, first by hiring based on cultural fit and then by offering training and coaching to support the culture. His investment paid off as his company has grown to 56 restaurants. Chris added a “chief people officer,” whose main responsibility is to drive culture throughout Rackson but also to manage its day-to-day operations, reinforcing both culture and systems. Together, Chris and his chief people officer designed a decentralized managerial structure with “area coaches” who offered support to five to 10 restaurants each. These coaches were responsible for providing the leadership needed for supporting the culture and systems while also providing the resources needed for each restaurant to be successful.

Rackson emphasizes three core values: fairness, accountability, and recognition. Fairness is part of the company’s cultural DNA. For example, the company handles mistakes made by employees by analyzing them through the prism of the company culture. Rather than using reprimands, disciplinary action, or other punitive measures, mistakes are viewed as opportunities to reinforce the company’s culture.

Everyone is accountable for following company processes, and there are processes for every activity. Through training and coaching, each employee learns how Rackson uses processes to conduct its business. These processes range from how to interview a job candidate, to onboarding new hires, to providing customers a quality experience.

An example of how the company recognizes employee success can be seen in a video posted on its website that congratulates employees and their family members for their recent educational achievements. The company also supports education through scholarships to employees and to worthy candidates who live within the zip codes of its restaurants.

We subtitled the Rackson case study as “Built to Last” after Jim Collins and Jerry Porras’s book by that title about companies that outperform their competitors over time. Building a company for the long haul requires making tough decisions. Rackson has zero tolerance for managers and employees who do not live its culture. When acquiring a new restaurant, one of the first assessments made is the cultural fit of each employee. It is not unusual to change half of the employees of a newly acquired restaurant if they do not fit the Rackson culture while coaching those remaining employees who choose to buy into it.

In recent months, the pandemic has hit the restaurant industry hard, with many establishments laying off workers in order to reduce expenses. Not Rackson. Consistent with its people-first philosophy, the company decided not to lay off any of its 1,500 mostly part-time workers. It also uses technology to connect employees through Zoom meetings and social media. It is not unusual for a Rackson restaurant to engage in fun activities such as dressing in football attire on game day or to celebrate an employee’s birthday. Employees have the autonomy to have fun provided it does not violate cultural norms or processes.

While profits ranked third in priority behind people and processes, the top line and bottom line continued to grow. By all financial measures, Rackson is a very successful company. Its success is also demonstrated by its recognition from Burger King as one of the top franchisees in the country. This recognition is based on a ranking that includes sales, customer feedback, quality, cleanliness, and operational excellence.

Rackson has all the essentials of a healthy culture: clarity of expectations, an employee-centric focus, alignment between management and employees, teamwork, and a winning attitude. Every decision is filtered through its culture. To ensure the continuity and sustainability of its culture, Rackson has created an organizational design that will allow the company to grow without compromising the culture that has played such a pivotal role in its success to date.

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