Gringo’s finds cutting costs not the key to success
Russell Ybarra likes to brag about his MBA, only his stands for Mop and Bucket Attendant. He earned it at his dad’s La Porte restaurant, El Toro.
Sitting today in the headquarters of his restaurant empire, called the Tex-Mex Institute, Ybarra recalls some not-so-pleasant memories from when he first tried to prove himself. He struggled with his first food business, made some poor decision and focused on the wrong priorities.
“I got married at 18, I had two kids by the time I was 25, I lost a house to foreclosure when I was 26, and I returned a vehicle because I could no longer afford the $420.91 payment. You always remember the hard numbers,” he told me. “Whenever I focused on making money, I didn’t make any money.”
Ybarra looked again at how his father operated El Toro. Ybarra had worked full time there after graduating high school, and he remembered how his father spent profits to help
build a church, sponsor a little league and care for employees.
When Ybarra tried again to open a restaurant in 1993, he had a whole new plan.
“I was no longer going to focus on making money. I was going to focus on producing the absolute best product that I could and offer it at the absolute best value that I could,” he said.
Fabulous Gringo’s Tex-Mex has since grown into a chain of 18 family restaurants with annual revenue of $110 million and 2,500 employees.
Ybarra still credits quality, service and price as keys to his success, but he recognizes none of those are possible without good employees. Skilled workers — and as someone who has worked in restaurants, believe me, these jobs require skills — are hard to find in today’s tight labor market.
“It’s almost too competitive right now,” Ybarra said. “Our management team spends a lot of time interviewing, hiring and training and, we’re trying to reduce that the best way we can.”
Ybarra’s restaurants, which include Jimmy Changa’s and Burger Libre, offer full-time jobs with health insurance, retirement plans and bonuses, even for hourly workers. Everyone makes well above minimum wage, and managers focus on retention by developing a culture based on loyalty.
“Had you told me when I opened this restaurant in ’93 that one day I’d pay for funerals, pay for vehicles, pay for houses and surgeries, I would never have believed you,” Ybarra said. “At the core of it, it’s about our people, which we consider our first stakeholders.”
On the cutting edge, the company is implementing a system called Instant Pay, which allows workers to draw a portion of their wages using a debit card within 24 hours of completing a shift.
“The payday loan companies are just milking them, and the people that need it the most don’t have access to their wages,” Ybarra said.
The Gringo’s leadership team is also reviewing company practices to figure out how to better retain female managers.
“We have to do something to improve their quality of life and be more flexible to their lifestyle, especially if they’re raising a child because it’s difficult to do both,” Ybarra added.
With unemployment below 4 percent, every employer is experiencing the same labor challenges. But some managers are choosing to churn through workers by offering low pay and no benefits. Ybarra argues that costs more in the long run.
“It’s hard to grow a company,” Ybarra acknowledged. “But once you have momentum, you need to take advantage of that and start doing the right things.”
Having worked as a waiter and a cook, I asked Ybarra about the fierce competition and thin margins in food service. We talked about the discipline required to ensure consistently good food and service, especially at suburban family restaurants where regular customers are the key to success.
“We don’t necessarily worry about our margins as much as we worry about our product,” he said. “If we make our product right and consistent and highquality, that will solve everything.”
Rather than obsess over costs, Ybarra said he focuses on volume, which reduces per-unit costs. Consistency is critical to growing volume, and for that, you need long-tenured employees, he added.
“I’m looking for the added benefits of increased revenue,” he explained.
Too many entrepreneurs underestimate the difficulty of launching a business, or they assume revenues will come quicker than they do. The instinct then is to cut costs, which lowers quality. That’s a death spiral and one that Ybarra has experienced.
If you build a strong culture, workers are not the problem; they are the solution.