Famous Brands: Kevin Hedderwick

Famous Brands: Kevin Hedderwick

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The Halamandres family (actually Halamandaris but the name was spelled incorrectly by an immigration official) came to South Africa from Greece in the 50s with just $50 between them, and the will to work hard and achieve something. It was one of the brothers, George, who decided that Johannesburg needed an American style steakhouse and so he opened the first Steers restaurant in the 60s. The rest, as they say, is history.

Steers was a huge success, and George was joined by his son John and his nephews, the Halamandaris brothers, Peter,  Theofanis, Perry and Babis in the 1970s. More restaurants were opened and the concept of franchising was introduced to the South African market. It expanded rapidly to become one of South Africa’s most well-known fast-food chains. In March 1994, the company listed under the name Steers Holdings (including Debonairs and FishAways) on the Johannesburg Stock Exchange. There were 162 Steers restaurants. On 1 January 1995 the company’s share price closed at 92c. But four years later, the family realised that the true value of the business had yet to be unlocked. In 1999 the share price was about 85c and the market cap R65 to R70 million. That meant that the family’s combined stake in the business was about R35 million to R40 million after all their hard work over a period of 37 years.

They were quite rightly very disappointed that they had worked hard at it for 37 years, and collectively were worth only R35 million to R40 million. You might be forgiven for thinking that’s hardly an achievement to sneeze at, but the family had grander plans. They complained that they had friends who owned Spar stores who had created far more wealth. It was as though the market was saying to them ‘you may as well delist and just remain a family business.’ Hard though it was to acknowledge, they needed to bring someone on board to change the company’s fortunes. Enter Kevin Hedderwick.

The man with a plan

Hedderwick is self-taught. Coming from a humble background in a small town, he has what he calls a “boere matriek”. There was no money for him to study further when he finished school so he went straight to work after completing his time in the army. One thing he knew was that he did not want to be poor. By the time the Steers founders met him, he had left the corporate world, but he had more than 20 years’ corporate experience behind him, and had also been the co-creator of the very successful Keg franchise which he’d helped launch and grow to 65 outlets. A highly effective leader and manager with a sharp mind for business, Hedderwick shared with the Halamandaris family humble beginnings, a need to learn as much as possible, and an almost insatiable drive to work hard and make it to the top. He was their man.

Craig McKenzie, creator of Debonairs, knew him well and brought him to the attention of the Halamandaris family who, McKenzie knew, were looking for a leader with the right set of business and people skills. That was how he found himself sitting in a boardroom with the family one day in 1999. He describes that first meeting as odd.

“I’d come out of a business where we wore jeans and takkies and I walked into a room with a bunch of guys in silk shirts and ties. I thought ‘Oh hell, back in corporate.’ But I soon got to know Theofanis really well. The chemistry between us was just great. Soon we were getting along really well and a relationship of trust developed. George and I both came from poor backgrounds and we spoke the same language. I didn’t walk in there waving qualifications around and claiming loudly that I would revolutionise the business. Instead, I listened to what they had to say and told them what I could do. After several more meetings, we agreed that we could work together and I joined what was then called Steers Holdings as MD.”

Working in a family business can present some tough challenges. But it was not like that for Hedderwick. “It’s been an amazing journey. I think that meeting the Halamandaris family and joining Steers was almost pre-ordained. I felt like I’d been practising for this all my life.”

He has huge admiration for the family. “They came here with nothing and built an amazing business. Then they were wise and smart enough to see that to take it to the next level, they would have to bring in an outsider. That’s quite a gamble.”

From vision to reality

Hedderwick, CEO of what is today known as Famous Brands, calls his story a fairytale. Having grown up in an environment where there was little money, he was determined that his family would not be deprived. He started his career at Distillers Corporation (known today as Distell) as a merchandiser, and through sheer hard work, determination and a focus on continuously improving himself, built himself into a man who was capable of taking what was essentially a family business and growing it into a South African franchising giant.

“My job at Distell was to make sure that our products were always within arm’s reach of the consumer. I was very blessed to get that job because the company invested heavily in its people.” It was at Distell that his raw enthusiasm and desire to learn caught the attention of Rauch van Reenen, the company’s Port Elizabeth sales manager. Van Reenen became his first mentor and an important influence in his life. In the young Hedderwick he found someone who was ready to learn what he had to teach. From him, Hedderwick learnt how to do presentations, how to manage other people and what business skills were critical. Like a sponge, he soaked it all up.

Ten years later, at the age of 30, Hedderwick’s hard work and commitment paid off and he was marketing director of the company, having played many different roles in the business. He had also become aware of how top-driven the company was. He’d learnt as much as he could and it was time for something new. In the mid-80s he made the move to South African Breweries, a time he recalls as one of the best in his life.
“I always say that SAB was where I did my MBA. Even though I don’t actually have the qualification, it’s a learning organisation like I have never come across in my life before. I spent 11 glorious years there working for some incredible leaders.”

At SAB he developed his knowledge further by moving from classic sales and marketing to doing lots of other tasks, like running depots. That’s how he built his skills in distribution, warehousing, and industrial relations, all of which he was to apply later in the franchising world.

A voracious reader, Hedderwick learnt much of what he knows from business books and biographies.

It was at SAB that he met marketing director Peter Savory, who was to become the next major influence on his career. Savory taught him to slow down, to take a deep breath before charging ahead into a situation and never to do anything impulsive. He says he was fortunate to find mentors as he believes the wisdom they have to impart is hugely beneficial for young people who want to grow. But luck played far less of a role in his achievements than his sheer drive and commitment to hard work. It was while at SAB that he moved to a much broader management position that included responsibility for human resources, warehousing, sales, industrial relations, finance and everything else in his district. His time there prepared him for the legendary turnaround that he was to effect at Famous Brands just a few years later.

At SAB, he got to know two of his customers who were starting the Keg franchise. They were great restaurateurs, but unlike Hedderwick, they were not great businessmen. Yet people were lining up to get into the Keg business so he decided to opt out of the corporate world and join them in 1994.

“By this stage, 20 years down the line, I was in my forties and ‘gatvol’ of corporate. I felt that I had learnt what there was to know about running a big operation and I thought it would be good to move to a smaller environment.”

It was a rash decision for someone who had thrived in the world of big business, but it opened the door to his future in franchising, or what he calls his ‘life’s work’.

He returned to his home town of East London and opened the Keg and Rose pub, a venture that taught him a lot about entrepreneurship. The former SAB hot shot served drinks and swept the floors, but he also turned the pub into a huge success. He was then persuaded to join the Keg team at head office where his management skills were sorely needed. He took over as MD and, in the second half of the 90s, grew the franchise into a very successful brand and was sad to see it sold to King Co when his partners decided to emigrate. He stayed on for three years, just long enough to see the company through its warranty period.

Believing in people

When Hedderwick joined Steers in 1999, McDonalds’s had set up shop in South Africa and there was a sense of panic in the air. But he focused on what he knew best: people, systems and processes. He applied everything he had learnt about the corporate world and running his own business to the franchising system.

“We sat in that same boardroom and decided that to unlock value for all the shareholders, we needed to take some risks and drive rapid business growth,” he recalls. “There certainly wasn’t investment in the right calibre of people.”

He stresses the importance of surrounding yourself with experts and not being intimidated by people who might be smarter than you. If you want to ramp up your game, he says, you have to make sure you have the right team. That’s really where he started.

“We brought in an HR consultant and installed a performance management system across the organisation. To this day, if you speak to the people in Famous Brands they’ll tell you that there is a high performance culture here and that’s the way it ought to be.”

On top of that, every four months Famous Brands does an executive officer review. It’s a well-known fact that Steve Jobs drives people around him so hard that if you fail to deliver you’re toast. That may well apply to Hedderwick too. Business unit heads present to him and his team. “We ask, ‘Are you on track, why aren’t you on track, what’s happening?’” he says. “So it’s not just a plan that you dust off once a year and pull out. It’s a living thing that’s been underpinned by scorecards. At the end of every fiscal year, everybody has an appraisal, so there are no surprises. Employees know how they’ve performed over the year. Everybody in this organisation, right down to the receptionist, has a scorecard that is part of the performance management system. We ensure that every scorecard is aligned with where we want to take the business in the long term.”

He says other people in the business will claim that he’s a workaholic and a micro manager. It’s not uncommon for a franchisee to call him late at night and complain that his bakery order has not arrived. He’s also straightforward and likes to tell people how it is. “With me, what you see is what you get. I love what I do. I’m a very lucky man. I get up every day of my life and I think I’m in such a great place. I’m surrounded by great people and wonderful franchise partners. I know them by name, I know their families, they know me, and they know my wife. So working long hours doesn’t faze me.”

He believes in management by walking around. Bureaucracy at Famous Brands is kept to a minimum, and he is often found visiting people at their desks. “I’m told that CEOs don’t usually walk around the building, but I always remind everyone that I’m just a burger salesman.”

Perfecting the systems

Hedderwick’s a stickler for formalities. Although he has achieved phenomenal successes, he has not rested on his laurels. Instead, he remains unassuming and refuses to ever be self-satisfied. His vision for Famous Brands to continue its growth trajectory requires unwavering focus. For him, constant reinvention is critical. Every year in October he and his team do a complete unpack of the business from a strategic planning point of view and robustly examine every area. Despite their significant size, they get right down to the detail and then put it all back together again. “That means that we have a strategy plan for the business going forward. We then share that with all the different business units and they make sure that they develop a plan that aligns with that macro strategy plan.”

It’s that drive to standardise the systems at the heart of the company that enabled him to turn a business that was already in franchising into the industry leader. He’s proved the obvious: the franchise business model is most successful when it’s ruled by systems.

“What was glaringly apparent when I joined is that there wasn’t a hell of a lot of attention being paid to process, which is typical in a family-run business. Decisions were written on the back of cigarette boxes.”

He can’t highlight enough the importance of processes. “That’s what was ingrained in us at SAB – if you can’t measure it, you can’t manage it. It’s as simple as that.

Underpinning all the systems and processes is a vision that was first articulated in 2000. “We set ourselves a four-year plan to take Steers Holdings and turn it into the leading quick service franchisor in Africa. Through luck, effort, hard work, and honest endeavour, come 2004 we ticked the box. Since then, every four years, we’ve articulated a new vision for the business and made sure that the planning process underpins that vision. If you wake any of our people up in the middle of the night and ask them what the vision is for Famous Brands right now, they’ll reply that it’s to double the size of the business by 2013.”

Growth through acquisition

Having put the right people and processes in place, Hedderwick took the business on an aggressive growth path. He refers to it as taking the lift rather than the stairs. “Right from the beginning we knew that in order to unlock value for ourselves and our shareholders, we needed to grow. We could play it safe, or we could take some risks. We decided to take the risks.” The Brazilian Coffee and House of Coffees franchises were bought in 2003. These small acquisitions were followed by a far more daring move – the buyout of that old family favourite, Wimpy. It was priced at R124 million, more than its own market cap. People in the industry and the company scoffed at Hedderwick. It was almost unthinkable that the deal would go through. “The family said to me, ‘Kevin you’re going to choke us on this thing.’ The big question for me was where the money was going to come from. We did not want to issue more shares as that would dilute the shareholding so we had to find a funder. We put a presentation together and pounded the streets. Five different financial institutions laughed us out the door, but then we met with Investec and they believed in what we wanted to do.” Hedderwick’s confidence in the Wimpy brand was soon vindicated. It proved to be a silver bullet. His persistence, self-belief and sheer ability to spot a good deal had paid off.

It became clear that a new name was needed for the group. “The Steers name was no longer representative of the business. What we were doing was buying brands and making them well-known. Hence, the new name, Famous Brands, was chosen in 2004. We chose it because it was in line with what we wanted to do – our philosophy has always been that we will acquire a business which is best in its class or that we can make best in its class.”

The 51% acquisition of boutique daytime café, Tasha’s in 2008 signalled a new direction for Famous Brands. “We had so many bases covered – pizza, burgers, fish, speciality coffee – all of which are mainstream businesses. It was time for us to look at something a little more upmarket for our portfolio. That’s when I met Natasha Sideris, who had two restaurants in Bedfordview and Athol. She has an energy that I would bottle if I could, so I said to her ‘let us buy into your business and we’ll help you realise your dream.’ People said there was no way we would be able to franchise Tasha’s, but we’ve done it and it’s been a great success. There are now eight shops and they are performing exceptionally well.”

Never one to be complacent, Hedderwick took another big bite at the franchising industry in 2009 with the purchase of Mugg & Bean for
R104 million, which significantly strengthened Famous Brands’ coffee offering. “I’d been talking to Mugg & Bean founder, Ben Filmalter for a long time and I loved the business,” he says. “Subsequently we’ve entered into joint ventures with an artisan bakery chain called Vovo Telo, and a township-based flame-grilled chicken business called
Giramundo.”

The group’s focus has now moved to leisure, a more encompassing concept than ‘quick service and casual dining’. Continuing to focus strongly on growth, Hedderwick says that being about leisure has opened up the market for Famous Brands more than ever before. “It just so happened that we were approached to buy the ailing Keg business, which came along with McGinty’s and O’Hagan’s, which we acquired for a relatively low cost. We did not acquire these businesses for the brands. Instead, we are launching a ground-breaking trading model, The Brewers Guild, for the pub and restaurant industry. It’s designed to reinvent what has become an ailing category and adds liquor to the portfolio.”

Taking care of brands

It’s worth noting that Hedderwick is also a great believer in bringing along good management teams when he acquires companies because they understand the culture and the business of their brand. Brand stewardship is a critical component of Famous Brands’ core strategy.

Under Hedderwick’s leadership, the group has always displayed a willingness to use the broadest array of tools and techniques to understand, develop and enhance the relationship between the consumer and the brand. Because the different brands have different requirements, it’s a strategy that underpins this business – one core corporate value buoyed by multiple individual brand values.

“Many people have asked me how we have managed to build a multi-branded portfolio when most other companies have failed because, they say, you can’t be all things to all people. But I learnt all about brand stewardship at SAB, and that’s the model we’ve applied here. No matter what brand we acquire or how big or small it may be, from the day we buy it that business has a champion who looks after it – they eat, drink and sleep that brand.”

He says that leads to healthy, if somewhat vocal, competition between brands at the group’s headquarters. “The other day the Steers guys launched a new range of burgers and wanted to get everyone to run a new screensaver for the product. The Wimpy people flatly refused. There’s good banter between everyone, and it creates a lot of brand loyalty within our team. That’s important because we always have to remember how different our brands are from each other. A Steers customer is very different from a Tasha’s customer, and the franchisees have to be people who can fit into those different environments.

“People ask me sometimes what keeps me awake at night. Right now I suppose the only thing that keeps me awake at night is the economy. If the economy works, we’re going to work. One of the things that I say we are fanatical about here is continuous improvement so we try and always keep up our game.”

Right now, Hedderwick heads up a franchising giant with 2 000 outlets, a market cap of R4 billion, and a share price of more than R40. Add to that his vision to double the size of the business by 2013 and you begin to understand the level of energy he has. At 58, his desire to continue to grow the business is relentless. As for the Halamandaris family, they still own 43% of the business. “They don’t spend much time here, but they know that I do and that I’m having a hell of a time.”

The Famous Brands Portfolio

  • Steers (520)
  • Wimpy, incl. UK (636)
  • Debonairs Pizza (334)
  • FishAways (115)
  • Mugg & Bean (115)
  • Tasha’s (8)
  • House of Coffees (16)
  • Brazilian/Brazilian Café (48)
  • Blacksteer (8)
  • Giramundo (6)
  • Keg (25)
  • McGinty’s (4)
  • Vovo Telo (3)
  • O’Hagan’s (19)
  • Milky Lane (90)
  • Juicy Lucy (16)

Acquisitions

2003

  • Acquisition of Pleasure Foods, comprising the Wimpy and Whistle Stop brands
  • Acquisition of the franchise agreements of House of Coffees and Brazilian brands

2004

  • The holding company changes its name from Steers Holdings Limited to Famous Brands Limited, to reflect more accurately the diversity of the group’s brand portfolio

2005

  • Acquisition of TruFruit, a manufacturer and distributor of fruit juices
  • Acquisition of Baltimore Foods, a manufacturer and distributor of ice-cream products

2006

  • Acquisition of Bimbo’s franchise agreements at selected Engen garage sites and successful conversion to Steers

2007

  • Acquisition of a 75% interest in Wimpy UK

2008

  • Acquisition of a 51% interest in the Tashas brand
  • Acquisition of Cape Franchising master licence and business

2009

  • Acquisition of the South African and African business of Mugg & Bean, the brand leader in the fast-casual coffee-themed category
  • Acquisition of a further 20% of Wimpy UK and settlement of foreign debt

2010

  • Acquisition of the trademarks and franchise agreements of Keg, McGinty’s, O’Hagan’s, Black Steer
  • Acquisition of a controlling stake in Giramundo, a flame-grilled peri-peri chicken offering and Vovo Telo, an artisan bakery and café business
  • Launch of black economic empowerment owner-driver initiative

2011

  • Acquisition of the trademarks and franchise agreements of Milky Lane, Juicy Lucy

Quote

“With me, what you see is what you get. I love what I do. I’m a very lucky man. I get up every day of my life and I think I’m in such a great place. I’m surrounded by great people and wonderful franchise partners.
I know them by name, I know their families, they know me, and they know my wife. So working long hours doesn’t faze me.”

Quote

“At the end of every fiscal year, everybody has an appraisal, so there are no surprises. Employees know how they’ve performed over the year. Everybody in this organisation, right down to the receptionist, has a scorecard that is part of the performance management system. We ensure that every scorecard is aligned with where we want to take the business in the long term.”

Monique Verduyn
Monique Verduyn is a freelance writer. She has more than 12 years’ experience in writing for the corporate, SME, IT and entertainment sectors, and has interviewed many of South Africa’s most prominent business leaders and thinkers. Find her on Google+.