Tim Fulton  00:09

Welcome to the confluence cast presented by Columbus underground. We are a weekly Columbus centric podcast focusing on the civics, lifestyle, entertainment, and people of our city. I’m your host Tim Fulton. This week, every piece is important. For Tom Krause, the outgoing CEO of Domino’s Pizza, this tagline is more than just a catchphrase. With his departure. coming up this fall, we sat down to talk about his journey at Donatos. We’ll explore the key strategies behind their expansion, including the decision to focus on franchising, and the early adoption of online ordering technology. Tom also shares his thoughts on the importance of building the right team, having strong leadership processes and how these factors were crucial to their success. You can get more information on what we discussed today in the show notes for this episode at the confluence cast.com. Enjoy the interview. Sitting down here with Tom Krause, the outgoing CEO of Donatos. Tom, how are you?

Tom Krouse  01:16

I’m great. How are you? Good.

Tim Fulton  01:18

Good. Well, we want to talk today basically, about your tenure there. What’s next what you’ve seen in the I think 24 years, one month that you’ve been there? So why are you leaving? First of all,

Tom Krouse  01:31

so, you know, like you said, I’ve been with and I was 24 years, we brought our, my replacement on? About two and a half years ago. Okay. And, you know, succession planning is something you you really need to be thoughtful about. Yeah, as a company, and we had a few people that had been in senior positions that we thought might be able to move into this role. And that didn’t work out. So we went back and said, Who is the best person that we can possibly have? Right? And that’s a guy named Kevin King,

Tim Fulton  02:06

when you actually got he was internal before? Did he start in 2021? No,

Tom Krouse  02:10

he started with us. He started the franchise department back in 90, something early 90s. Okay, and then left, and went on to do some great things and are like, well, he knows the company, the culture of the company. He knows the family. Yeah. Which is important. It’s still family on business. And he’s had great experience on grown a brand. He really, he was like the perfect person, it was just probably more than we were, you know, shooting for originally. Okay. And so we convinced him actually, we convinced his wife, that was the first thing that convinced him to come. And he’s been here for, you know, two and a half years. Yeah, he’s doing a great job. And it’s, it’s, you know, I’ve been CEO for almost 15 years. That’s, that’s like a generation. That’s probably long enough. It’s time. It’s time for a new and you

Tim Fulton  03:07

were the third and Kevin will be the fourth. Is that right? Or the fourth CEO?

Tom Krouse  03:12

I think I was the I don’t know, let’s see, Jim. Two, three. I was the fourth.

Tim Fulton  03:18

Okay, I won’t be the fifth. And so you made the decision a couple of years ago to do it. Yeah. What was the impetus for that? Well, you know, basically, I did this for 25 years. It’s time Yeah,

Tom Krouse  03:28

at some point, we needed to put ourselves in the right spot. And, you know, honestly, I think a company needs fresh eyes over a period of time. Not that I mean, I’m proud of everything that we’ve done while I’ve been here. But, you know, sometimes, there’s certain things you’re not seeing. And I think it’s important to bring some new people in. Now, the other thing I will tell you is, it is a family owned business, we have our third generation that is working in the business, okay. Jane’s kids are in, you know, potential line to take senior leadership at some point. So, you know, we, they’re not quite ready yet. Right. So we need to make sure we’ve got somebody that has the characteristics that can help them. Yeah, you know, so it all kind of in that diversity

Tim Fulton  04:16

of experience from Kevin, he went out work for two different companies, but again, knew the business. Right. So talk about sort of the difference. This is your chance to gloat. Yes. The the expansion that you’ve done from the time of CEO to now yeah, 29 states now. Yeah. Where were you in before? Like 1213 Okay, so talk about sort of that was an edict I assume from the family to say like, yeah, this needs to grow. Yes, you grow or die. How did you do that? What were you focused on?

Tom Krouse  04:50

Well, I mean, there’s there’s a, there’s some things that are maybe less sexy, but are super important. Yeah. Do you have the right team? Yeah. And when I say right team, it’s not just do they? Did they? Are they great at what they do, but did they understand the culture? So, you got to make sure you have the right team, do you have the right process like leadership process to be able to, to accomplish the things that you, you know, that you want to do? So we, we have to put the right people in place, right had to put the right process, which was simply staying really focused on the most important things that we need to do to grow. Okay, because companies, we do it every company does, you get distracted, you start, you have a plan, but then, you know, you think well, I should move over here. And sometimes when, especially when you’re a smaller company like ours, when when you’re diffused in your efforts, you don’t accomplish what you need to so those are the kind of foundational I call it boring things but super important. The other there were two big, probably pieces that the team accomplished. One was we made a decision if we’re going to grow. The best way to do that is through franchising, versus building company stores. Do it through franchising. Generally you can move quicker because well number one it’s the franchise partners capital not Arcam right? We don’t

Tim Fulton  06:22

it’s easier to work with

Tom Krouse  06:24

exactly billions is laying around so and probably more importantly, if you’re going into Bowling Green Kentucky you want to partner with somebody that really understands Bowling Green, Kentucky, okay, now the market, right the market and the people and, and and you’re just going to be a lot more successful. So we decided first, we’re going to grow through franchising, and then what do we need to do? Well, we need the franchise partners love our product, they love our culture, we needed to improve the cash return that was the thing that was and I’m not saying it was bad it just wasn’t super exciting. Okay amount of profit that you can make from as a partner as a partner, right franchisee it needed to be better so we we doubled the profitability of an average Donatos Okay, time period. So once you do that your current partners want to grow people who use partner because we call them franchise partners, but yeah, basically franchisee potential franchisees who want to grow, they talk to the existing partners, they see that, you know, this is it’s not only a great product and great people, but good investment. So,

Tim Fulton  07:38

but and your, your partners are mostly owning like dozens of store. No,

Tom Krouse  07:45

it’s there’s kind of two groups. There’s there’s a couple of larger groups. We have a group that owns most of Cincinnati. Okay, and we have a group that owns Indianapolis, but the rest are three stores. Okay. Yeah. Okay, five store parameters. Were

Tim Fulton  08:03

you franchising when you started? You were because you said you doubled it?

Tom Krouse  08:07

Yeah, we were franchising what I started, I think we had 10 franchisees, we have 47 right now.

Tim Fulton  08:12

Got it. And so that was your focus and talk sort of through the what was your improving processes, I imagine, yeah, processes.

Tom Krouse  08:21

You know, top line was probably the biggest piece like the top line sales. Okay. And using technology, we got very aggressive with online ordering. In fact, we were doing online ordering, I think, before anybody else was okay. And we’ve perfected that to the point that like 90% of our business is ordered over the phone or over

Tim Fulton  08:45

online or online, right. Yeah, laptop or phone. And so the technology because I imagined one of the top line costs is labor rate, like and so the technology piece allows you to basically hire less people have them focused on being a customer facing role, like that’s the thinking there

Tom Krouse  09:02

are probably more so that it helped drive the top line without increasing a whole lot of costs. Got it. I mean, it is true that you don’t have to schedule people to answer the phones. They don’t really want to answer the phones anyway, because they’re busy making pizzas right? And you can hear it in their voice. What do you want? Right? So by going to, you know, but we didn’t really cut labor we just improved the top line and kept the labor the same. I mean, that’s part of the profitability equation.

Tim Fulton  09:33

Got it. And you guys also was it a switchover to do the baking the dough in house or was that always that the case? You know,

Tom Krouse  09:41

I think I think Jim’s been making the dough at a central location. So we make it we have a plant Yeah, in black luck. But I think he started that in 90, okay, you know, early 90s if not before that, so We’ve grown it

Tim Fulton  10:02

and in terms of your sorry to cut you off. No, no, no problem in terms of your sort of your industry. What are the biggest changes that you’ve seen either in the franchising space in the pizza space specifically, like what’s evolved? talk specifically about the pandemic? Maybe like what’s different? Well,

Tom Krouse  10:20

definitely, you know, the restaurant industry has changed dramatically because of the pandemic forced companies to learn how to bring food to people. Yeah, we’ve been doing it doing it for a long time. It made us it’s making us better at it. I mean, the competition, frankly, is making us better. Okay. Because it used to be the only people that delivered food, you know, was pizza

Tim Fulton  10:49

was you guys in Chinese food? Chinese food? Yeah, much. I

Tom Krouse  10:52

think KFC dabbled in it a little bit. But that was it. Right. And now, nobody thinks twice about we can have food delivered at home. So the competition is, is greater. So the restaurant industry, I think that part third party delivery, like DoorDash and UberEATS. Yeah, that, you know, has exploded, it’s brought convenience to the customer. It’s also brought, you know, more expense to the customer. I mean, yeah, deliveries are not cheap. Right. And, you know, it’s it’s allowed some restaurants to expand their business who really was they weren’t thinking about right delivery or off premise, that’s probably the biggest one. You know, health nutrition continues to be important. We’ve always, you know, my father in law started, the company has always been way ahead on on eating trends. I mean, before I got there, he was one step ahead of it. Everybody else. But you know, it’s people have food allergies, it’s important to have a gluten free, we have two different gluten free options, right? We, we took trans fats out early on, so having clean labels and things like that. Okay, you know, that’s more and more important. And I would say probably the other big change, and this is true, I think, in all business is just a level of transparency between the customer and the, and the brand, or the company behind the brand. Okay, you know, it used to be it really wasn’t talked about, like, Who is this company? And what do they stand for? Okay, customers didn’t really care. You know, like, yeah,

Tim Fulton  12:34

like, people are going to where do you stand on this thing?

Tom Krouse  12:37

Right, you know, and I come into, I come into work for Donatos. And I’m talking to Jim and he’s, you know, he has all these some might say, corny sayings, like treat others the way you’d like to be treated or okay, do the right thing. Right. But, you know, I’m listening and I’m watching this company. I got this. This is really what Donato stands for, right? It’s all about that. And I told Jim I said, Jim, he goes, he never like to accept awards and things like that. Okay, it’s like that’s, that’s bragging I go, you could call bragging but I people want to know what kind of company Yeah. Is

Tim Fulton  13:15

it? Like, I feel better by feel better from somebody I like somebody I can know. Right? You know, I mean, supports their people.

Tom Krouse  13:23

And that’s huge. And with social media, it’s like, you can’t you really can’t hide behind some, you know, yeah, fake thing. I mean, I suppose some people do but

Tim Fulton  13:35

talk about your involvement in the community. You’re a member of a couple of boards.

Tom Krouse  13:38

Yeah, I’m on the board of kappa. I’m on the board of music. Columbus. I used to be on the board of harmony project. I used to be on the board a junior achievement, but yeah, I’m I’m interested in music and arts culture in Columbus, your

Tim Fulton  13:57

songwriter yourself. I am you before we started recording, you have a song that a lot of people hear sometimes

Tom Krouse  14:05

it’s the funniest darn thing. Ya know, I wrote a song called the hot dog boy. My eight year old son at the time, he’s 24 Now, but he had an idea for a business that had these, like, you know, gourmet, pimped up hot dogs. Okay, they changed depending on the season or the holiday and Okay, so I started calling him hot dog boy and it made sense to write a song called Hot Dog boy and turns out the Columbus clippers have picked it up and they play it every home game. Yeah. For the hot dog race. Yeah.

Tim Fulton  14:39

And full disclosure, we both root for monster.

Tom Krouse  14:42

I mean, should we even talk about this now? Yeah, exactly.

Tim Fulton  14:48

Talk about sort of changes you’ve seen in Columbus. It’s it’s evolved certainly in the time that you’ve been here and sorry, you We didn’t say it earlier. You worked for Wendy’s for 13 years before that. You’re in Ohio. they graduate. sort of talk about what where’d you grew up? Sorry, I don’t know,

Tom Krouse  15:04

I grew up in Columbus in Upper Arlington. I was born in Bowling Green, Ohio, moved down here with my family when I was young.

Tim Fulton  15:11

Got it, got it talk sort of about the business climate in Columbus and what you’ve seen change.

Tom Krouse  15:17

Oh, man, it’s, I tell you the thing, and it’s probably talked about a lot, but it is true. And it’s different because I’ve had exposure to other communities that yeah, the collaborative nature of this community is unique. I mean, it is businesses helping one another, you know, we, even within our category, we will tend to help other pizza players. And you know, that’s our competition. But, you know, if you think about it, if people like pizza, and pizza is regarded as a positive thing, it’s good for everybody. Right? You don’t see that in a lot of other communities. I, you know, when Columbus was awarded the smart business city grant, city grant, I think that was kind of a big step for us to look at things differently, like, what is it to be a great city, and something like that, which levels up all technology and levels, but the way the community came together for that grant, and what, you know, Alex, and Jordan, and those did to help that. So that I kind of look at that as a model for the cultural arts. And, you know, I want to see that with music. And, and because I think, you know, it’s great to be a smart city, but it’s probably as important. Maybe you could make a case even more important to be a creative city. Absolutely. How do you solve problems? How do you? How do you deal with rapid change, things like that? You know, I think creativity is really, but we have a great creative community. I’d like to see a tighter infrastructure between the different arts and things like that. Yeah, absolutely. I mean, GC ad, JC GCAC does an amazing job. But I think we all need to kind of pull together.

Tim Fulton  17:14

Yeah, but I mean, I think that, first of all, yes, GCAC does a fantastic job, with all manner of things, especially distributing grants and that sort of thing. But I do see absolutely sort of a segmentation, of like, there’s a difference between, and there’s always going to be re the symphony, the ballet. And then when you get down to individual artists, and you know, I’ve one critique that I’ve had of the Arts Festival, and I realized now, it’s kind of has to be that way, but there’s not a lot of Columbus representation in it. Because these people are touring the country and doing arts festival. Yes,

Tom Krouse  17:54

I think I think all this is changing. I really do. I think, in fact, the Arts Festival, all the music this year was all from Columbus. Yes. All of it was from Columbus. And I think you’re seeing conversations between the symphony, and Opera, and music, Columbia, music, Columbus, we’re hoping that we can help facilitate conversations that allow us to kind of take it to that next level. But but there is, you know, you’ve got to have infrastructure. And you know, there’s a lot of creative musicians from Columbus, that, you know, they’re all of their economy goes outside of Columbus. Yeah. How do we keep that in? In Columbus?

Tim Fulton  18:39

Yeah, absolutely. So what do you see back to Donatos? Yeah, what do you see as basically Kevin’s next big job? When you’re gone in October?

Tom Krouse  18:50

Just don’t screw it up.

Tim Fulton  18:52

Keep it for the kids. Yeah, exactly.

Tom Krouse  18:53

You know, I think growing it, and I think the way to grow that is it’s kind of like patting your head and rubbing your belly a little bit. The rubbing your belly part is how do we make sure that the lat an average Donatos experience is the best that it possibly can be? I mean, it sounds like fundamentals, because it is but how can we how can our service be as reputable as our product reputation, you know, how do we do that? And then at the same time, be very open to growth and growth means, you know, we’re opening and are gonna open three stores in Texas this year. Okay. So it’s literal growth across the country, and growth in terms of being open to new new thinking, technology and innovation. We’re, we’re working with the edge innovation center that’s run by my father in law and my brother in law Tom grody. And Jim has dad and they are working on automation and technology that’s going to make it better for me Like all restaurants, pizza, specifically, and even more specifically us, okay, so looking, you know, so fundamentals over here, but, you know, a growth mindset and a mindset for technology over here. And, and we’re set up for it, we’ve got a great team. We’re in, you know, we’re fully resourced.

Tim Fulton  20:23

I guess the thing I think about is sort of is there a point that you can’t expand beyond right now, like, in terms of, you know, the baking the dough, everything,

Tom Krouse  20:35

you know, not really that sound like I’m sucking up to my father in law, but it is true, he built a system, that it’s unique. And when I’m talking about system, I mean, how the dough comes in. So we don’t mix flour in the store, we need the dough. And that’s fine. And that that’s great for an artisan where you’re really paying attention to it, right. But if you’re not paying attention to it, you might get dough that rises one day and doesn’t rise, the next day might get burned in a cold fire oven on the edge one day and not the next day. And so if you want a consistent product, we’ve vertically integrated so the dough comes to the restaurant, right? The way the product is, is you know, the toppings are weighed 200 The pound we we bake it, it will only bake the right amount of time at the right temperature and all of that. Jim kind of devised all that. And it has super high capacity we have the average pizza place in America does. I want to say $850,000 a year in sales. Okay. And we have restaurants that are close to 3 million. Oh, right now so okay. Now it’s not our average. Right? So the upside?

Tim Fulton  21:57

Yeah, you are built to scale. We are not like I for a very short period of time on a kitchen in the back of a bar. Yep. And we were expanding when to investors, and the first smart question that I had never thought was, Okay, how many can you make in an hour? Right? And I was like, Oh, I’m gonna have to give it to you on that. Right? Yeah,

Tom Krouse  22:20

we’ve got it, we’ve got a really great platform. I think the bottleneck really is labor. I mean, that’s the bottleneck if we don’t have enough drivers on staff, if we don’t have enough people, you know, scheduled or people call off and, you know, that whole the labor markets changing so much. Yeah, we’re, you know, we’re trying to keep up with the changes, because it’s just different. Do

Tim Fulton  22:45

you think I’m just This is, yeah, very minor side note, do you see it going to a thing where, like, I ordered Chipotle on the chipotle app, but I know darn well, that that delivery is not being facilitated by them? Right, that it’s being handled by DoorDash?

Tom Krouse  23:01

We, you know, we we have a percentage of our deliveries are delivered by DoorDash. So, back to the point, okay, like, is there a capacity? So on nights, let’s say, because 40 some percent of our sales come on Friday and Saturday night. So it’s a lot. Yeah. So. And then on top of that, let’s say, you know, in the winter, let’s say a little snowstorm, pops up. Everybody says, I’m staying home, I’m ordering pizza, the demand goes way high. Yeah. And we’re not staff for it, we have a low lever that switches and DoorDash can help augment our driver delivery. So you’re able to just are able to switch the switch. Okay. So, you know, it’s, it’ll be interesting to see how all that shakes out over the next few years. Because, you know, I’m not sure those companies have settled on what their Yeah, you know, economic model. Is there still kind of buy in market share? Oh, yeah. And then once you get past that, yes. Like, what’s the world gonna look like? I don’t know. Yeah.

Tim Fulton  24:06

Well, and where does that cost lie? Right. Right. Does it go back to the customer? Obviously, it’s cheaper to buy directly from you than it is for me to buy dollars from DoorDash. Right? It is. But yeah, if you have to flip that, so we’re

Tom Krouse  24:19

trying to remain flexible. Like, you know, when when UberEATS first came to Columbus, there was no delivery company that was signing up, but that was everybody else, and we signed up right away.

Tim Fulton  24:30

Okay, like, why

Tom Krouse  24:31

did you do that? Like, I want to learn?

Tim Fulton  24:33

Yeah, the devil,

Tom Krouse  24:34

you know, is better than the devil you don’t know. So and that’s turned into actually a pretty good partnership with DoorDash. Got it. I mean, it’s not without its bumps, and they’re not perfect, but we’re not perfect, either. Everybody’s trying to keep up with demand. You know, Customer Services is a challenge. And yeah, it’s a day and age really is how

Tim Fulton  24:56

do you I’m just curious how much you sort of manage your free and tries ease like do you manage their relationship with DoorDash? They get to make those choices on their own or

Tom Krouse  25:05

they make those choices. Gotta just curious. Yeah.

Tim Fulton  25:09

What’s next for you?

Tom Krouse  25:11

Gosh, you know, it’s a hard question. So I hired a coach. Okay, who’s special? Actually, her name is Carol Walker. And she used to be with Cardinal Health and she started a little business that helps cats like me, who have jobs like mine, to retire or transition, whatever. Yeah, because some people don’t do a good job, either.

Tim Fulton  25:36

And it’s specifically that or is it all executive coaching?

Tom Krouse  25:39

No, it’s it’s it’s very much focused on got it a transition in your career to me retirements. Not exactly the right word for it, because I’m not going to just go home and play shuffleboard or great, you know, I love my grandchildren. But it’s not. That’s not the reason I’m retiring. Right. I’ll have more time. So anyway, her directive is don’t make any don’t say yes to anything for six months. So okay. Now, I will tell you, I’m on the board of the International Franchise Association. I’ll stay there. Yeah. I’m interviewing Elena for a couple other board positions. So I would love board positions. Yes. If Yeah. And I’d like to be able to help companies, you know, I mean, I, I’ve been around a while, and I think I could bring some, you know, some good thoughts. And so if I could do that and kind of accelerate what they’re trying to do, I’d like to do that. And then I’m playing a lot more music. Okay. Now we’ve got got a couple of bands going right now. And I’m actually finishing a record next week. There you go putting out so

Tim Fulton  26:46

All right, yeah, I end every interview with the same two questions. What do you think Columbus is doing? Well, and what do you think Columbus is not doing? So well.

Tom Krouse  26:56

I think what Columbus is doing well is is collaborating. And when there’s issues coming together, I think what Columbus needs to do a better job of is really deal with some of the more difficult, you know, poverty issues that fold over into educational challenges, you know, our graduation rates and our kindergarten readiness is, is not anything to be proud of. And it’s a difficult challenge, but we have got to get ahead of that because our children are the future and we can talk all you want about being a smart city or creative city or collaborative city. And if we’re not preparing, you know, young people will be in trouble. So absolutely,

Tim Fulton  27:44

yeah, Tom, thanks for your time. Thank you. Thank you for listening to the confluence cast presented by Columbus underground. Again, you get more information on what we discussed today in the show notes for this episode at the confluence cast.com Please rate subscribe, share this episode of The confluence cast with your friends, family, contacts, enemies, your favorite pizza maker. If you’re interested in sponsoring the confluence cast, get in touch with us. We can be reached by email at info at the confluence cast.com Our theme music was composed by Benji Robinson, our producers Philip Cogley, I’m your host, Tim Fulton. Have a great week.