Clearly Transparent: Communicating and Sharing Success

When it comes to creating a successful corporate culture, veteran Jiffy Lube franchisee Richard Paek has found that seeing does lead to believing. Paek, who opened his first Jiffy Lube in 1992, has built a multi-unit system that emphasizes transparency inside and out. If there is a sales, customer service, or employee performance stat to be had, Paek will use it to rank, reward, and motivate his team.

"'No sugarcoating' is one of our favorite quotes," says Paek, CEO of Newport, Calif.-based Allied Lube Inc., which operates 75 Jiffy Lube service centers in California and Texas.

This focus on sharing the facts with his 800 employees is paying off. With estimated annual revenue of more than $60 million, Allied Lube's growth outpaced the 2,000-unit Jiffy Lube chain by 9 percent in 2012, 7 percent in 2013, and is on track to three-peat growth in 2014.

While Paek contends there is no silver bullet to operating multi-unit locations, it starts with creating an infrastructure that promotes communication from the top down. "If you look at what we have been able to do, it is pretty amazing, " he says. "We worked on structure and morale. Our morale and teamwork are very high and we make sure we communicate efficiently and effectively throughout the entire company."

Paek has spent millions on store upgrades, signage, and advertising, but he contends it is the internal restructuring of his culture, communications, and daily operations that has fueled Allied Lube's growth. The company uses sales and labor data, car counts, mystery shopping, customer satisfaction survey results, and other objective data to award or deduct bonuses and rank stores. Employee favoritism by district managers is frowned upon and challenges among stores makes winning sweeter, he says. This way of thinking is particularly important to the younger generation, who want to have fun doing their job, be recognized for what they do, and love being ranked. Often, this spirit of competition is more about productivity and the pride of doing well than it is about money, he says.

Along the way, Paek discovered that high morale leads to high productivity. "Passion is something that is caught," says Paek. "We hire positive people who deal with employees in positive ways and recognize and reward positive statistics and productivity. When we focus on positive influences and positive reinforcement, we find the negativity falls off. I feel like we have done that well."

Paek learned the value of a strong work ethic early. Born in South Korea, he was a fifth grader when his family moved to California, and he watched his "highly educated" father toil seven days a week as a janitor, welder, taxi driver, and owner of a small mom-and-pop grocery store. Still, he was intrigued by the idea of being in charge of his own destiny.

After studying business administration at USC, Paek bought a printing company he sold three years later to fund his first Jiffy Lube franchise. He chose the brand after a year of researching brands and industries he believed were ripe for multiple units. His portfolio had blossomed to 113 stores, all financed internally, when he decided to sell stores in Colorado and California markets where he viewed growth as "tapped out." He turned his focus on Texas, where he continued to expand.

As his experience grew, Paek says he learned to work smarter and became a quick study of how understanding human behavior can benefit the bottom line. "When I started in this business I had a ton of energy, a ton of drive, and not a lot of experience and mentoring. I feel like I did everything on my own," he says. "The biggest thing I learned was working with people and through people and not stepping in their way so they can be productive--especially if you want to be larger."

Growth is definitely part of a 2015 business plan that includes the addition of at least 10 stores and the evolution of their leader as a coach as many long-term employees move up the ranks. Paek is embracing this supporting role as the mentor he never had, and you can bet he will continue to focus on the positive.

Name: Richard Paek
Title: CEO
Company: Allied Lube, Inc.
No. of units: 75 Jiffy Lubes
Age: 50
Family: 4 kids
Years in franchising: 22
Years in current position: 22

Personal

First job:
In the 7th grade I was in charge of the popcorn stand at the junior high school concession stand.

Formative influences/events:
My dad was a small-business owner and taught me that true freedom comes when you take charge of your own destiny. I learned that I was willing to take risks in order to be in charge of my destiny.

Key accomplishments:
After years of hard work, I feel like I have just hit my stride. I'm in the best place of my life, having recovered from some setbacks, to have a company that has grown significantly over the last few years. I have built an incredibly effective, productive, and efficient team, whom I believe--and it pleases me so much--are happy and loyal. I have four amazing children, all with different styles and ambitions, of whom I couldn't be more proud. I'm at my best both spiritually and physically.

Biggest mistake:
Failure to anticipate the economic crash of 2008.

Smartest mistake:
When I had my first store I did everything. I did too much. While I learned our business from the inside out, I risked burning myself out and didn't focus on the higher priorities of the business.

Decision I wish I could do over:
Not pulling the plug on a key staff member, who was not performing, early enough.

Work week:
On call 24/7 and loving it!

How do you spend a typical day?
I really spend all my days working on the vision of the company and working directly with upper management to implement and help them succeed. Communicating well and functioning as a team are critically important to the success of my business.

Favorite fun activities:
Watching my 13-year-old play baseball and traveling to new locations.

Exercise/workout:
45 minutes of strength, flexibility, and cardio three to five times a week. Regular infrared sauna.

Favorite tech toys:
iPhone 6.

What are you reading?
Delivering Happiness by Zappos CEO Tony Hsieh.

Do you have a favorite quote?
"The quality I most admire in others is the persistence and tenacity to find a solution when there doesn't seem to be one."

Best advice you ever got:
The book The Making of a Blockbuster: How Wayne Huizenga Built a Sports and Entertainment Empire from Trash, Grit, and Videotape taught me to focus on growing at all costs.

What gets you out of bed in the morning?
Interacting with my team.

What's your passion in business?
Watching a team member grow and prosper both professionally and personally.

How do you balance life and work?
I have a detailed 5-year plan that I update yearly for both personal and work--writing things down helps me stay focused.

Last vacation:
Japan (Tokoyo, Osaka, Kyoto).

Person I'd most like to have lunch with:
Ron Paul.

Management

Business philosophy:
If you have passion, everything else will fall into place.

Management method or style:
Closely working with them from the perspective of coaching and teamwork, but otherwise I've learned that micromanaging is overwhelming. At the end of the day, you have to trust the people you hire. However, a key motto of mine is still, "Trust, but verify."

Greatest challenge:
Knowing priorities and always tackling the most important first. Getting the team to focus on the most important things first.

How do others describe you?
Crazy, enthusiastic, optimistic, easygoing, motivating.

One thing I'm looking to do better:
To be in the best physical shape in my life in 2015.

How I give my team room to innovate and experiment:
You have to give enough room for them to try. If they fail, but learn, they grow and become even more competent. Watch for the decisions that have financial implications, but don't over-manage the small pieces, as that erodes their confidence and your teamwork.

How close are you to operations?
Very close. We take one or two team-building trips/events per year, have weekly (and daily if needed!) calls. My team knows that I'm available 24/7 if they need me.

What are the most important things you rely on from your franchisor?
Fairness, objectivity, vision.

What I need from vendors:
Responsiveness and transparency.

How have you changed your marketing strategy in response to the economy? How?
I hired a marketing specialist with extensive knowledge in our category.

How is social media affecting your business?
Not really. Each of our locations has a Yelp page that occasionally gets a comment. But as we are a national brand, most of the social media affects the brand at the national level. We actually dismantled our "Allied Lube" Facebook and Twitter pages, as we got so little traffic to the sites because people go to the national pages instead.

How do you hire and fire?
Hire slow, fire quickly. For our hiring and teamwork, I use a detailed personality/behavior test called the Birkman Method. This test shows usual and stress/need behavior in people and has been a key tool in both hiring and effective teamwork. I have been using this for the last 10 years.

How do you train and retain?
A big chunk of management is focused on training. We don't have a trainer at our stores--each member of management is a trainer. In regards to retention, recognition is key. I believe in sharing a piece of the profitability with performing employees, from senior team members and down through the store levels.

How do you deal with problem employees?
I believe that we have built an incredible system--it works like a well-oiled machine at this point. If we have a problem employee, then they probably aren't fitting within the system and need to be removed. While it may sound cold, we focus so much on our culture of hard work, respect for others, and effectiveness that if you are a "problem" then it is because you do not embody those traits.

Fastest way into my doghouse:
Distorting the truth/facts.

Bottom Line

Annual revenue:
More than $60 million.

2015 goals:
GROW!! At least 5 to 10 new stores and sales growth of 7 percent.

Growth meter: How do you measure your growth?
Sales, profit, productivity/efficiency, EBITDA.

Vision meter: Where do you want to be in 5 years? 10 years?
Continue to be in business and have grown the business smartly. I'd love to have 1,000 stores if it made sense and we could do it smartly.

How is the economy affecting you, your employees, your customers?
95 percent of our stores are located in Texas, which has recovered well. The population of our primary cities has grown (new customers), housing is affordable, and cost of living is reasonable. Our business is thriving right now. If anything, we are struggling to hire, because the job market is so strong.

Are you experiencing economic growth in your market?
Absolutely (see above).

How do changes in the economy affect the way you do business?
Even though Texas is doing well economically, customers are still highly price-sensitive and couponing continues to be a major influencer of how they spend their dollars--especially considering that oil changes are a relatively low-engagement purchasing decision and not considered an "indulgence" that they want to spend money on.

How do you forecast for your business?
Jiffy Lube is the leader in the preventive maintenance service business, and we feel the good direction that the brand is headed will help us continue to grow. At the franchisee level, we evaluate a number of key performance metrics across our network on an hourly basis to make sure we can pivot when needed to win the day. Labor control is key to keeping costs under control to help us hit our daily comp growth goals. Marketing and ops work together closely to ensure that efforts support the business goal.

What are the best sources for capital expansion?
Depends. When I grew from one to 40 stores, I used SBA loans, owner financing, and banks that specialized in established franchise businesses.

Have you used private equity, local banks, national banks, other institutions? Why/why not?
I have not dealt with private equity so far. I have dealt with banks that deal with franchises.

What are you doing to take care of your employees?
We provide and constantly monitor and adjust to provide an environment where well-performing employees, stores, and districts are rewarded. We do it by keeping detailed statistics on all areas of operations and financials and giving feedback on a regular basis (daily to yearly). We have one analyst who keeps track of all the vital statistics, trends, and rankings and communicates to the entire company on a daily basis. We strive to keep morale high by rewarding positive stats and behavior. We hire and promote people who are positive and understand that productivity is directly related to high morale. Our pay and bonus structure is closely aligned with company's financial goals.

How do you reward/recognize top-performing employees?
See above.

What kind of exit strategy do you have in place?
I know that it's smart to have an exit strategy when you start a business. Right now we are on a growth mode and that's our focus.