"Skip" Sack and Applebee's

Abstract

The case of Burton "Skip" Sack, former holder of the New England franchise for Applebee's restaurants, demonstrates how to build both a restaurant business and personal wealth. The Applebee's case provides the following lessons. The odds of success are better with a franchise than with a newly developed concept. The franchisee must be familiar with numerous aspects of restaurant operation (or have personnel who are), including finding sources of capital, choosing a site, making an operation profitable, selecting and training personnel, and marketing. Each of those matters presented a challenge that Sack had to overcome. Having bought the franchise, he could at first raise no capital to open a restaurant, until he was able to get funds from a friend (and mortgage his house). Having opened one restaurant he had insufficient capital to open a second, and most prospective sites were too expensive. Choosing secondary sites on which to open a handful of restaurants, Sack planned to develop a chain that could be sold or taken public. He was able to do that, although his final merger with Applebee's was nearly undone by a sudden dive in the stock price. His willingness to accept a given number of shares rather than a firm value of shares demonstrates a key lesson for restaurant success-flexibility in defining an opportunity.