The man sitting across the table suddenly stood up unable to contain his excitement.  “Look,” he said.  “We know how to open and run restaurants!  We did it for years at Bennigan’s Steak and Ale.  Only this time we will be doing it for ourselves.”  Chris Sullivan was telling the story of how he started Outback Steakhouse, and what his business plan was for the future. 

    He and his two partners had decided on their concept; it was to be a mid-price steak house.  At the time, almost all national steak house chains were focused on the high-end.  They chose the name, and theme, because they felt Americans really liked Australians.  Chris, believing ownership was a great motivator, required his general managers to buy 20% of their restaurant.   If they didn’t have the money –and few did- he would lend it to them.  Debt –he also believed- was a great motivator.  He found a butcher in Chicago whose way of chopping steak made a significant difference in taste.  The butcher was given a piece of ownership and a long term contract.  It gave him another vested owner in the business.

      The three partners were originally going to open just a few restaurants in Florida.  Their plan was to open at 4PM and serve only dinner.  This would give them time to spend with their families and play golf.  Hopefully, they would then make a good living and life would be good.  But from the first restaurant opening they were astonished to see people standing in line. They immediately recognized that they had an opportunity to get very, very rich and decided to go for it!   Chris Sullivan was a man who had passion and most importantly a clear business plan.  We now know that he created a billion dollar business employing thousands of people.  In fact, I ate there just the other night!

    That lunch meeting represented the very essence of capitalism and of investing.  Looking back, I realize how fortunate I was to have met so many entrepreneurs.  I found it fascinating to learn how they created their businesses.  Each lunch was like getting a Harvard Business School case study to learn.  Only these studies were being taught in real time by the men who actually created the business.  Moreover, I got lunch and a glass of wine as well.          

     After 40 years of meeting these entrepreneurs, there was hardly an industry that I wasn’t exposed to.  But it was the consumer discretionary sector that intrigued me the most.  Perhaps it was because I knew they were creative right-brained hemisphere people.  In addition to Chris Sullivan of Outback, there was Charlie Lazarus - Toys R Us, Phil Knight- NIKE, David Overton- the Cheesecake Factory, and Howard Schultz of Starbucks that come immediately to mind.  But what set them apart I wondered?

     It took a while but one day I finally had an investment epiphany!  What they all had in common was:  These companies were entrepreneurially run, the C.E.O owned a great deal of stock and while they were small companies they were dominant in a particular niche, yet still had a small market share, because the business was large but highly fragmented.  That was their secret, or good luck?

FRANCIS PATRICK BOLAND