Culture Champion: Growing a diverse portfolio by trusting Smart People

Name: Michael T. Fay
Title: CEO/Franchisee
Company: MTF Companies
No. of units: 25 Subway, 11 Little Medical School, 3 Overtime Athletics, 1 Flex Enrichment
Age: 38
Family: Single, miniature schnauzer Mackenzie
Years in franchising: 5
Years in current position: 5

Early in Michael Fay’s career, he had good bosses who encouraged his willingness to learn. Because he asked questions, he says, “They were willing to help.” He made it a regular practice to absorb whatever he could about running a successful business. Now, at 38, he has a multi-unit portfolio of restaurant and childcare-focused brands.

Fay discovered franchising in college when he was the manager of a Subway shop. He quickly saw the value of the franchise business model as a vehicle for making money, he says. When he became a Subway operator, he applied what he’d learned, and within 2 years grew from four Subways to 25.

In addition, he’s the largest Little Medical School franchisee, with territories in Montgomery County, Maryland, Fairfax County, Virginia, Houston, and Denver. Little Medical School is a Loyalty Brands concept that teaches medicine, science, and the importance of health to children.

Fay’s strategy of diversification also includes Overtime Athletics and his own concept, Flex Enrichment, a before- and after-school care, tutoring, and vacation camp. “I needed more than one egg in the basket,” he says, and choosing childcare-focused brands made sense to him. “I’d worked in the child space for years—and kids aren’t going anywhere,” he says. “I never want to be in a position where I’m relying on all my income to come from one source.”

He describes his management style as being a “culture champion” who makes sure the whole team is on the same page. That’s important because he trusts his leaders to make many of the decisions.

“I really feel lucky to be doing what I’m doing, growing my own business,” he says today.

With franchise locations now in 10 states, Fay says he doesn’t want to grow just to reach a number. However, he does want to grow. “I want revenue (and overall profitability) to be at least 1.5 times my current numbers within 5 years.”

Personal

First job: Toy store cashier.

Formative influences/events: 1) Working at a day camp in high school and seeing the power of what happens when kids are engaged and having fun. 2) Managed a Subway in college and saw the opportunity to make real money in franchising.

Key accomplishments: Largest franchisee of Little Medical School, and going from four Subway units to 25 in less than 2 years.

Biggest current challenge: People, people, people. In the service business, it is all about delivery, and this isn’t possible without good people. It seems to be more and more difficult to find high-quality team members.

Next big goal: I would like us to double our business in the next 4 years.

First turning point in your career: I spent several years working my way up at Blockbuster and saw the negative impact of not being innovative and pushing to keep improving. I promised to myself to never get comfortable and always push to do better in my business and life.

Best business decision: Officially becoming a Subway franchisee. This opened up so many more opportunities in both Subway and the education space.

Hardest lesson learned: Cash is king. You need to be sure to have a solid reserve in case emergencies happen. While Covid was, hopefully, a once-in-a-lifetime event, I’ve made sure my business could weather the storm much better this time around with money in the bank.

Work week: I like to exercise for an hour every morning and then start the day by 8:30 a.m. I normally work until about 7 p.m., take a break, and then come back to it. I really enjoy what I am doing, so most days it goes by fast. One thing I found helpful is to take a break for lunch every day. I read the WSJ and do not respond to work calls or emails. 

Exercise/workout: I walk for several miles outside at least six days every week. 

Best advice you ever got: My father told me, “Be a fountain, not a drain.” I try to be solution-oriented in everything I do.

What’s your passion in business? People. I really like the opportunity to work with so many talented and fun colleagues. 

How do you balance life and work? Not an area of strength for me. Not having a family and traveling about 44 weeks each year, it isn’t easy. I do like spending time in my pool on the weekends.

Guilty pleasure: My mother introduced me to the Dateline NBC true crime podcast series. I am hooked now and sometimes drive a few extra minutes to finish one.

Favorite book:  The Five Dysfunctions of a Team by Patrick Lencioni—really all Patrick Lencioni books.

Favorite movie: “Up in the Air.”

What do most people not know about you? I have never cooked a meal in my life. Literally, I eat all meals out.

Pet peeve: Being late to a meeting or a call.

What did you want to be when you grew up? To have a career in public relations.

Last vacation: All-inclusive in Mexico, my first vacation in a long time. I limited myself to 1 hour of work each day.

Person I’d most like to have lunch with: Greg Flynn, the largest franchisee in the world.

Management

Business philosophy: Find smart people and get out of the way.

Management method or style: I view my role as the culture champion, making sure we are all rowing in the same direction. I don’t make many decisions, but instead trust the leaders I have in the business.

Greatest challenge: Ensuring that everyone knows they don’t work on an island and always have support if needed.

How do others describe you? Engaging, decisive, and fun.

One thing I’m looking to do better: We do a good job of communicating with the leadership of each part of the organization, but between the businesses we have hundreds of team members. I’d like to improve how and when we communicate to those individuals working in restaurants and schools.

How I give my team room to innovate and experiment: Typically, we have a conversation about the idea or experiment, the desired outcome, and the backup (in the event it doesn’t work). From there, I am good. It’s more about a discussion than approval. Hire smart people and then let them be smart and try new ideas. We can always fix it. Most of the evolution of this business is from others, not me.

How close are you to operations? I am involved with the leadership of each division daily and connect with all leaders periodically. You must be careful not to get too deep in the details. 

What are the two most important things you rely on from your franchisor? Clear communication and support if we run into a challenge. I am very fortunate to say all the brands I am involved with check both of these boxes.

What I need from vendors: To do what they say they will do. Most of the time this means being on time.

Have you changed your marketing strategy in response to the economy? How? On the restaurant side of the business, we continue to offer local promotions in addition to ones from Subway. We always did some, but are doing it more frequently to drive traffic. On the childcare/enrichment side of the business, it is about providing a unique experience. Enrichment programs can be a luxury, so we want to make sure families see the value. As a result, we communicate what happens each day and week and provide “take home” items.

How is social media affecting your business? It can help grow the business if used effectively for marketing. On the flip side, if something negative happens, the world can find out in minutes. Fingers crossed—the world has only heard positive feedback so far.

How do you hire and fire? I don’t do a lot of either at this point, although I am part of the hiring process. I base it less on the resume and more on the questions, “Could I work with this person? Do they fit our culture?” Fortunately, I have not personally had to let anyone go in a long time.

How do you train and retain? All of our franchisors do a nice job of providing training tools, which is helpful. I also see a lot of value in learning from a peer, so in all our businesses, we do shadowing as much as possible.

How do you deal with problem employees? I find having direct, specific conversations quickly will often solve the issue. Either behavior changes or the problem employee departs on their own. Everyone is at least owed the opportunity to improve.

Fastest way into my doghouse: Being consistently late or being a drain (and not a fountain).

COVID-19

How did Covid-19 affect your business? It affected both our in-person child services and our restaurant business in huge ways.

How have you responded? Innovation! On the childcare side, we began offering virtual classes. They might not have been the same experience, but they still offered students the opportunity to learn and connect with others. On the Subway side, we leaned into pickup and delivery, and it continues to be a strong part of the business. 

What changes do you think will be permanent? Third-party delivery and the use of an app to order food will continue to be a strong part of the Subway business.

Bottom Line

Annual revenue: $12 million-plus.

2023/2024 goals: We are on track this year to do about 40% more than in 2022 and want to make sure we finish strong. Next year, I think it’s all about continued growth, so I’m hesitant to put a specific number on it.

Growth meter: How do you measure your growth? Bottom-line growth. Yes, top-line revenue is important, but my gauge is year-over-year profitability.

Vision meter: Where do you want to be in 5 years? 10 years? I am always hesitant to list specific numbers because I don’t want to grow just to hit a number. I do want revenue (and overall profitability) to be at least 1.5x the current numbers within 5 years. This growth is so much fun to me. I hope to be doing it for well for at least 10 more years.

Do you have brands in different segments? Why/why not? Yes, in childcare and restaurants. While they seem so different, there actually are a lot of similarities, and there is lots of space to grow in both segments.

How is the economy in your regions affecting you, your employees, your customers? I don’t see a lot of differences between regions, and we operate in 10 states. The focus is on value (both dollars and experience) and finding good people while paying competitively.

Are you experiencing economic growth in your market? Yes. Each segment of the business is up double digits over last year.

How do changes in the economy affect the way you do business? The focus on the employee is critical. It is still hard to find good people, so, as a result, we are thinking more about culture, growth opportunities, and of course, compensation. These have always been important, but in the current climate are essential.

How do you forecast for your business? At this stage, we have a playbook for both segments of the business, so we can look at history to help us predict future growth (both organic and through acquisition).

What are the best sources for capital expansion? I have a great relationship with a lender who has helped me grow both parts of the business.

Experience with private equity, local banks, national banks, other institutions? Why/why not? I have used a national bank, but it can be difficult to obtain financing quickly. On the Subway part of the business, equipment financing has been a great tool to grow the business.

What are you doing to take care of your employees? There is never too much you can do. We offer incentive programs, competitive pay, team events, benefits, and a clear path to advancement. One of the benefits of growth has been the number of individuals I have been able to promote internally.

How are you handling rising employee costs (payroll, minimum wage, healthcare, etc.)? This is top of mind for me, and I do not foresee it getting better anytime soon. The goal is to manage costs as much as possible, pay a little more for stronger people, which ultimately pays for itself, and pass some of it on to the customer.

How do you reward/recognize top-performing employees? Money is important, but I focus a lot on celebrating the success of everyone. Maybe we go to dinner, send a thank-you note, or give an extra day off accompanied by specific feedback on a job well done. Sure, money helps, but I really don’t believe it is the be-all and end-ball.

What kind of exit strategy do you have in place? I have been approached about selling a few times, but I’m having too much fun to be thinking about an exit!