Tim Taft isn’t ashamed to say he’s jobless. He’s thrilled about taking his kids to school in the morning and having private breakfasts with his wife for the first time in years.
As the recently resigned chief executive of Pizza Inn, based in The Colony, Texas, Taft spent the past two and a half years leading the company out of what he calls “a death spiral” of negative same-store sales, franchisee apathy and crippling lawsuits to what insiders are calling a near-complete turnaround.
The slide from nearly 800 Pizza Inn outlets in the 1970s to 355 today appears over, and operators are eager to remodel units, officials of the company say.
Deep in the red when Taft took over, Pizza Inn now says it is debt free and expecting to report positive same-store sales for its second quarter.
It was not surprising to industry veterans, therefore, that the Pizza Inn community seemed shocked by Taft’s abrupt resignation Aug. 15.
“Tim’s leaving was not something we expected at all,” said Hap Squires, a two-unit franchisee in Devine, Texas, and president of the chain’s franchisee association. “We felt like the heavy lifting required to fix the company had been done, so we were surprised he left when the going would be getting a lot easier.”
Larry Rust, a one-unit franchisee in Paducah, Ky., said Taft’s departure “felt like somebody just punched me in the gut.” Rust also believes that the stress of the chief executive’s job likely took a toll.
“There’s no question it was hard on him, even with all the positive things that happened,” Rust said. “But if you look at all he accomplished in such a short period of time, I don’t know if he could have sustained that momentum. Maybe it was a good time to leave.”
It was a good time, said Taft, 49, who believes he accomplished what he was hired to do: heal Pizza Inn and position it for growth.
“I guess I could have stuck around longer, taken some bows and looked at what we’ve done here,” Taft said. “But I’m not hardwired that way.”
Taft also admitted he’s tired. Before coming to Pizza Inn in 2005 he was president and chief operating officer of Corpus Christi, Texas-based Whataburger, where he’d worked seven years.
Because of one of his two daughters’ special-education needs, he kept a home in Austin, Texas to which he commuted on weekends. The grind wore him down, and he resigned in 2004 intending to take a year off.
“But then the Pizza Inn opportunity just fell out of the sky,” he said. “I knew the job wouldn’t be a picnic, but I couldn’t pass up the challenge.”
Taft inherited a chain reeling from a string of boardroom battles that included the 2004 firing of chief executive Ronald Parker, who took over in 2002 following the forced resignation of then-CEO and vice chairman Jeffrey Rogers.
That Parker’s combined salary and bonus earned him more than $1 million a year rankled Pizza Inn’s largest shareholder, Newcastle Partners. According to Securities and Exchange Commission filings, Newcastle claimed that Parker’s performance not only was mediocre, but that he made more than the company earned.
Newcastle also accused Parker and three Pizza Inn officers of redrawing labor agreements in 2002 to include parachute clauses that purportedly could have bankrupted the company.
Hoping to establish trust with franchisees and shareholders, Taft took the job for $1 a year, plus modest stock options. At the time Pizza Inn shares traded for about $2.50 each.
Taft knew he was stepping into a maelstrom, which included a 2005 lawsuit filed against Pizza Inn by Parker, who claimed he was fired unfairly. In 2006, PepsiCo sued Pizza Inn for breach of contract when Taft ordered a switch to Coke products. Both became burdensome distractions from the task of fixing the company, he said.
“We had all that to deal with while tackling the real issues, like a lot of franchisees who weren’t making enough money to stay in business,” he said. “At the same time, franchisees were being overcharged for groceries [by the company’s NORCO distribution arm]. Products weren’t consistent at the unit level and the stores looked tired. Nobody was reinvesting in the system.”
Tim Broome, a two-unit franchisee in Johnson City, Tenn., said a strong leader like Taft was necessary to reinvigorate franchisee interest, though the chief executive occasionally was heavy-handed.
“Tim has the heart of a lion, a good heart,” Broome said. “But he’ll also roar like a lion when maybe he shouldn’t have. He was fair and honest, though, and the franchisees trusted him.”
Despite his forcefulness, franchisees said Taft believed Pizza Inn’s long-term success depended on their profitability.
That tack wasn’t always popular with shareholders, Taft said, but they backed his decisions.
Taft formed a purchasing committee that assessed the quality and necessity of every product bought by operators, and the effort led to price reductions for franchisees. In 2006, Pizza Inn cut costs further by outsourcing its distribution to two regional firms.
He also led the rollout of an innovative “back-fed buffet” restaurant design that franchisees said revolutionized their operations and boosted sales dramatically.
Also in 2006, the company settled the lawsuits, and the sale-leaseback of its headquarters building made Pizza Inn debt-free and yielded positive cash flow.
That news was credited with lifting the chain’s stock and spurring the scheduled remodeling of about 100 buffet stores through 2008. In January, for the first time in many years, Pizza Inn signed new franchisees, inking pacts with four operators.
Knowing that Pizza Inn was on a revival course made Taft confident in leaving.
“There is an unbelievably strong management team in place right now enjoying a rock-solid relationship with the franchisees,” Taft said.
When he hired Charles Morrison as chief financial officer this year, Taft knew he was hiring his replacement.
“Charlie’s a lot smarter man than me,” Taft said. “He can take this chain a long way.”
While Taft, who will be paid his $300,000 annual salary for another year, regrets that his abrupt departure disappointed some, he’s proud that his efforts breathed life back into a system many had given up for dead.
“So many insiders said it could not be turned around, that the franchisees were too burned, that it was too far gone, that the life had been sucked out of it because of one scandal after another,” he said. “I say, ‘Talk to the ones that were here then and still are.’ I’m sure they will tell you they have turned 180 degrees.”