Executive Q&A: Robert Donegan- President, Ivar’s

During his 15-year tenure as president, Bob Donegan has doubled sales at Ivars, the Seattle-based seafood outlet that celebrated its 75th birthday in August. The company now has 850 year-round employees and sales of close to $80 million annually. As chair of the Seattle Metropolitan Chamber of Commerce and a member of the design committee for Seattles waterfront renewal, Donegan is helping to shape plans for this important redevelopment endeavor.

EARLY YEARS: I grew up outside of Milwaukee, the oldest of 10 kids. At age 50, my mom started a catering company that she grew to a dozen employees. She worked around the clock. She believed that there should never be dissatisfied customers or employees. She wanted 100 percent satisfaction. That always influenced me. Her best friends were involved in the business. She and my dad still have Milwaukee Brewers tickets and the people they go [to games] with are people that my mom worked with for 15 years.

CAREER: Out of Yale School of Management, I worked for a decade helping startups and worked as chief financial officer at Peets Coffee before joining Ivars. I didnt know anything about restaurants, but we had a great data system and I introduced a lot of things from outside the industry.

BENCHMARKING: While the typical person dines at six to eight places a month, with each restaurant getting a market share of 12 to 18 percent, our typical seafood bar customer gives us half of their dining-out business. Its hard to find good-quality, fast-food seafood. But its also because customers get treated well. Our typical seafood buyer visits once every 10 days and spends $11.98 [each time]. Over 25 years, thats $26,000. Every customer is important and our employees know that.

WAGES: When I got here in 1997, turnover was high. For every position, we had to hire for it four more times a year. That was costing us $2,040 per person in training and everything [else]. I said, Lets take that money and pay [higher wages]. In our quick-service fish bars and Kidd Valley [hamburger] outlets, the average manager was making $19,000 a year. We could barely get literate people for that. We certainly couldnt get people who could operate computers, order inventory online and make hires. Today, our average manager makes a base of $55,000 a year and has a profitsharing potential of another $15,000 on top of that. The result is that we get far better people.

CAREER PATHS: People who start in fast food dont usually see it as a career choice. We play against that at Ivars. The day someone starts, if he or she wants, we can tell the person what the career path looks like from an on-the-line worker to manager, [and] from shift manager, store manager, director of operations to the time you retire. We pay everyone who works for us full benefits, including medical and dental, counseling, 401(k) that we match 50 cents for every dollar they put in. The average person stays with us for 20 years. The result is we have people who have solved every potential problem that a customer has thrown at them. The employees are happier and customers are happier, so they come back.

HIRING: When we interview new people, we ask questions that determine their optimism quotient. People who are optimistic tend to seek solutions. People who are pessimists tend to be complainers. If there is a problem or a crisis, the optimist is always trying to find a solution. The pessimist is always whining. We also prefer to get people who havent worked at other restaurants because we would rather teach them how to do it right coming out of the box.

CUSTOMERS: We ask the managers of the seafood bars to know three things about their 100 best customers: their name, a regular order and something personal. If you are a regular at the Ballard store, youll just go to your table and five minutes later, Sandy will bring you your order and chat with you about how your new book is going. You dont usually get that for an $11.80 ticket. Its the only quick-service restaurant Ive ever seen where customers leave tips. Kerry Thompson, who just had his 42nd anniversary, probably knows all 500 to 600 of the customers at his Kent store.

KEEPING TRACK: We use a [Seattle] service called Customerville. We put a website address on our receipts where customers go to give comments. The site gives an electronic survey. The last question asks if there was something so bad about the service that you want to talk to someone right away. If you hit yes, that becomes a red flag, and we promise you will get a call or an email response within two hours. The red flag triggers a message to the store and district managers cell phone. By the time I get the message the next morning and call the customer, they have typically already received phone calls from two or three of our managers. Eight years ago, we got 3,300 red flags [per year]. Last month, we got 13 red flags. The store managers earn part of their bonuses based on growing customer accounts. They know that if there is a customer problem, they need to solve it because if it comes to me, Im going to give a gift card that is many more times what the store manager would give and that cost goes against the store managers P&L. When you serve 5,294,000 customers [in 2012], you are going to get some bad customer service cases every day. But you have to have a mechanism in place to fix it.

INNOVATION: We have two development chefs: one at the chowder kitchen and one for the seafood bars. We consider a new menu item a success when it gets to 4 percent of sales. When we started in Safeco Field, we served grilled salmon. It was so successful, we began serving it in our seafood bars. Grilled foods and salads are now about 15 percent of our menu.

GROWTH AND MARKETING: When I joined in 1997, there were 35 stores. The Bothell opening in August is our 70th location. Revenues have doubled to the high seventies [in millions of dollars]. If we can open two to three seafood bars a year, we are happy. It gives us time to train our managers and to roll out our quirky marketing, which is a key element for our success. If we were on a rapid growth path, that would put pressure on us that we dont want to deal with. Weve looked at places in California, but the costs are too high. We have plenty of opportunities in Issaquah, Newcastle, Factoria and Mill Creek without going to San Francisco. SEATTLE WATERFRONT: The fish bar here is 700 square feet and last year it did $3,445,000. Coca-Cola says it is one of the most productive places in the world. Two years ago, when it was apparent the seawall construction would be disruptive, we stopped investing because it looked like we might not survive the construction. We finally agreed to a deal with the city that will close us down for eight months. The city will save at least $15 million and some of the savings will be shared with [waterfront] businesses. Now were planning on major investments that could include $4 million to $5 million to redo the pier and about the same amount on the restaurant.

WATERFRONT PARK: I sit on the design committee and when the park is done in 2019, this will be as pretty a waterfront as [those in] Copenhagen, Denmark, or Melbourne, Australia. The experts predict visitors to the waterfront will double to 70,000 [daily]. We cant depend on a park department whose budget gets hit the first thing in a recession so, like the zoo, the park will be owned by the city but operated by a nonprofit. Well design in facilities for music all along the waterfront, including infrastructure for toilets, water, sound systems and electrical power so that when a producer wants to come and bring an event to town, its a case of plug and play. Unlike any other Seattle project, all of this stuff is being thought about before the first shovel turns on the park in the summer of 2016.