Chief Execution Officer Rick Federico
Award-winning chain leader Rick Federico shares his perspective on business today and in the future.
By Charles Bernstein, Editor-at-Large -- Chain Leader, 9/1/2004 12:00:00 AM
 P.F. Chang’s Chairman and CEO Rick Federico took the company public in 1998. |
Rick Federico began his restaurant career in 1973 as a dishwasher for Steak and Ale at age 19. He soon became a manager there, then progressed to general manager at Bennigan’s and Houston’s. In the early ’80s, he co-founded Grady’s and served as operations vice president until Brinker International acquired the chain in 1989. At Brinker, Federico became senior vice president and concept chief of Macaroni Grill and was promoted to president of the Italian concept division, directing operations and development for Macaroni Grill and Spageddies.
The executive joined P.F. Chang’s China Bistro in 1996 as president. Paul Fleming had launched the upscale-casual Asian concept just three years earlier. Jerry Gallagher was one of four members of the search committee looking for a candidate to fill the position.
“We fairly quickly chose Federico as president,” Gallagher says. “It was unanimous. In retrospect, we made a marvelous pick. Federico was and is very smart, experienced in this field, shows great values, has a highly successful track record and is tops with food quality and strategy.”
|
Federico took P.F. Chang’s public with a challenging IPO that he finally consummated in December 1998. Since then, the company has continued to improve sales and earnings. In 2003, revenues reached $559.2 million, and the company expects $727 million this year.
Now chairman and CEO, Federico launched Pei Wei in 2001. The fast-casual concept has an average check of $8.50 and a takeout business of about 40 percent of sales.
New York-based First Boston restaurant analyst Janice Meyer lauds the combination of Pei Wei’s inexpensive values and the ability to “have a glass of wine and dessert at Chang’s.” She calls Federico “a highly talented executive. He executes well, the old stores keep growing, and he offers quality foodservice.”
Federico’s peers applaud him as well. Chain Leader launched its first Chain Execution Awards this year, and asked the executives it has featured on the cover over the years to vote for the Chain Leadership winner. They chose Federico.
“Rick has done a great job of building a strong team culture and has built an organization that is based upon quality of execution,” one voter noted. “He has built P.F. Chang’s into a concept that is craved and loved by its customers and team members.”
“He has not only built a highly successful concept in P.F. Chang’s with its brilliance but also a wildly successful fast-casual offshoot in Pei Wei,” wrote another. “He has steered the public entity with integrity.”
Chain Leader talked to Federico about his company, leadership and the industry.
You’ve gotten a lot of accolades in the business press.
Personally I don’t believe in press clippings. We just have to go out and do it on our own. But some people will do anything for press clippings, and I am convinced this is a mistake.
What are some of the attributes of your best leaders?
They articulate and recognize things. They bring strength and keep developing and growing. Bert Vivian, Chang’s president and former CFO, greatly helped me establish our core competencies. He built the financial end of the business for me. I learned from the IPO, but Bert headed investor relations and understood how to raise money.
What is your leadership philosophy?
At the end of the day, we must demonstrate consistency and give people room to manage the business. To use a football analogy, we must keep within 50-yard boundaries to produce the results. And we must not step out of bounds. I don’t believe in micromanaging every activity.
My job is to create the best possible environment for our people. Cultural integrity is foremost in our ideas. We’ve learned to adopt a culture of individuals and to focus on the customers. When we delve into Pei Wei, we make sure it is not a Chang’s express but rather has its own attributes.
How do you handle both concepts?
Each has its own niche, with Bert as Chang’s president and Russell Owens [former Brinker CFO] as president of Pei Wei ever since that concept started four years ago. Chang’s and Pei Wei each have their own vibrancies. Pei Wei eventually will have more restaurants, but Chang’s will have higher volumes and returns. Our goal is to be the best in each category.
What is the operating environment for both concepts?
It is tough and has an impact on employees and guests. We must smooth out the difficult spots. We are facing high inflation, world unrest in the aftermath of 9/11, and there are always bumps in the road. We must create an environment and execute at key operations levels. There are lots of opportunities for our people to do new things. The critical needs are to grow sales, emphasize a clean and safe working environment and make sure we do our very best so the customers will keep returning.
 Federico relies on the strengths of Chang’s President Bert Vivian (upper r.) and Pei Wei President Russell Owens. |
Will you develop a third brand?
Not right away, but maybe within a year or two. And it would be an Asian brand. We need to manage our two brands carefully now. We have the ongoing development of Pei Wei in a position as a leader of the Asian segment. In fact, we are the Asian leader with both our concepts. We’ve seen some Asian concepts fall back, and we don’t underestimate the difficulty of this. Darden’s China Coast was one of the first multiunit Chinese restaurants, but it just didn’t work. Still, Brinker’s Big Bowl and Carlson’s Pick Up Stix are certainly in the thick of competition.
There is a huge amount of room for Asian concepts to grow. It has been the least branded popular cuisine until now, but that is definitely changing with consumer acceptance and national development of sushi products, for example.
How do you feel about the state of the chain restaurant industry?
Frankly there is a lack of cohesion between companies. State organizations and the National Restaurant Association are almost competitive. We do have Rick Berman to bring in key leaders. But behind the curve there is a lack of cohesion.
The perception is always there that chain restaurants are at odds with independents. It is all incredibly ludicrous. We learn, but we’re not here to beat out independent restaurants. It shouldn’t be that we win or lose but rather work together. Chains are seen as demons, and it is ridiculous. More independents should be collaborators on mandated health care and minimum-wage issues.
What can chain leaders do about that?
They need a level of expertise and dedicated resources. Three of our market partners work with state associations on key issues. Recently the living wage passed in Santa Fe, N.M., because we simply didn’t have anyone there to stop it. But in California we had key people who stopped it in Santa Monica and other places.
How do you feel about your competition?
I strongly believe in healthy competition. Chang’s and Pei Wei are great competitors to others. But I call it healthy competition. I praise Cheesecake Factory’s Dave Overton, Houston’s George Biel, Panera’s Ron Shaich and Maggiano’s Mark Tormey among others. They all believe in a diverse use of real estate.
As an executive director of the American Beverage Institute, I’ve been a beneficiary of working with and sharing with Outback’s Chris Sullivan, Darden’s Joe Lee and other great leaders.
Who have been your strongest mentors?
Certainly Norman Brinker and Bill Regas have been masters at hiring and accountability. Ron McDougall, who rose to Brinker International CEO, has been a great mentor, too, adamant on taking risks and stepping outside the box. He asked me to be the concept chief for Macaroni Grill, and I’ve learned from him ever since. Phil Romano also has been an inspiration.
How long do you want to keep going in this business?
At age 50 I’m still enjoying the restaurant business, and I think I’m an effective leader. I suppose the day I’m not, I’ll be out of here. The best leaders have a true appreciation of the chain-restaurant business or else there is no effectiveness. If I’m not effective, I shouldn’t be here.
Down the road, who might succeed you as CEO?
We have full succession planning, and we are identifying leaders. We are convinced that Bert Vivian or Russell Owens would be fine CEOs. We’re not likely to go outside on this.
The fact is that the CEO operates at the whims of the board. But, truthfully, things look rosy.
How do you see the role of the CEO?
A CEO should have the capacity to do careful self-evaluation and develop complementary talent. I’m a reflection of our employees. I surround myself with people better than I am in certain areas.
What do you see as your biggest leadership challenges?
Make sure we focus on the guests, the employees and the products. And we must avoid bureaucratic nightmares.
Look into the future. Where do you see the industry heading?
The biggest issues our industry faces are the ones we perceive to be out of our control. That perception leads us to be less involved and to underestimate the potential impact that our government and outside activist groups can have on our business. Ten years from now, our guests will still be concerned about the flavor of our food, the excellence of our service and the quality of our atmosphere. However, if we are not careful, our capacity to provide these basic elements could be compromised.
| Chain Leader Execution Awards | |
| This year, Chain Leader initiated the Chain Leader Execution Awards, honoring the industry’s legends, leaders and future leaders. Following are the awards and the winners. | |
|
Protégé: Chain Leader’s readers were invited to nominate a young up-and-comer, and the editorial staff selected the winner, Jeff Sinelli, founder and president of Which Wich. |
|
Chain Leadership: All of the executives who have appeared on Chain Leader’s cover were invited to vote for the person who currently has great influence on his company and the industry. They selected Rick Federico, CEO of P.F. Chang’s. |
|
Legend: The cover subjects were asked to name the industry leader who has inspired them the most in their career. The winner was Norman Brinker. |
| Editor-at-Large Charles Bernstein will present the Chain Leader Execution Awards at Chain Leader Live, Sept. 12-14, 2004. | |
