John Galardi was just 23 when opened his first fast-food hot dog stand, Der Wienerschnitzel, in the Wilmington neighborhood of Los Angeles. Today, 50 years later, Wienerschnitzel (which dropped the “der” in 1977) has grown into one of the world’s largest hot dog chains, selling more than 120 million hot dogs annually through its 350 stores spread among 10 states and Guam. Galardi, who now presides over the Galardi Group, a Newport Beach, California-based company that also owns and operates The Original Hamburger Stand and Tastee Freeze franchises, spoke with Darren Dahl about how he turned 15-cent hot dogs into a multi-million-dollar fast-food empire.
When I was 19, I was fortunate to have a mentor in Greg Bell, the founder of the Taco Bell franchise. I started by working at the counter of Taco Tia, which was his restaurant in Pasadena. When he started franchising later on, he changed the name to Taco Bell. I worked my way up to manager before buying one of his stores for myself for $12,000. I was 23.
Later on, I got offered the chance to buy another building in Wilmington. The problem was that is was next to one of Greg’s taco restaurants, so I had to come up with something other than Mexican food to sell. I looked around and saw that McDonalds had begun selling hamburgers, but no one was selling hot dogs. One of the problems was that the ones you could buy tasted terrible—the buns were hard and the meat was soft. I decided I would grill the hot dogs and sell them for 15 cents each. Drinks were 10 cents.
My friends later told me that whenever I left the room, they would say that I was nuts for trying to build a business selling 15-cent hot dogs.
The problem was that I didn’t want to call the business, “John’s Hot Dogs.” One night I went to Greg’s house and his wife, who had her cookbook out, suggested I call it Der Wienerschnitzel. I thought it was the dumbest name I had ever heard. But about a week later, as I was driving down the road, I realized that I had passed something like 200 businesses and I didn’t remember anything about them. That’s when it hit me that if someone saw a sign with a name like Wienerschnitzel, they would say, “What the hell is that?” If you get a guy to do that two or three times, you’ve captured his attention. That was part of my education about marketing.
I used to work in Greg Bell’s commissary making his hot sauce. I came to realize that people crave flavor, like barbecue. So I came up with a chili dog, which I sold for 30 cents. That was considered a bargain in those days.
The restaurant business in those days wasn’t about the food, though, it was about delivering a customer experience. People keep going back to places like Costco or Starbucks because they like the experience. Fast food became a way to give the customer a pleasant experience by serving them fast and in a clean environment.
One of the big breakthroughs I had was by putting in a drive-through. At the time, I had trouble with kids in what they called "car clubs," who would drink and get into fights in my parking lot, which only had three spaces. I also didn’t have any indoor seating. I figured that if I put in a drive-through, the kids would get their food and go somewhere else to eat it. So I put a lane right through the middle of the building, which was an A-frame structure. What happened was that just about everyone found that staying in their car was a convenience and the drive-through sales became 70 percent of the business.
My next big product move was French fries. At first people told me that fries didn’t go with hot dogs. So I started selling baked beans. I sold like 12 cups a day. One day, we tested selling fries. We sold 400 units in a single day. That taught me a valuable lesson that the only thing that matters is what the customer wants to buy.
After I built the business up to 12 stores, I recognized that I needed a better and faster way to grow. I didn’t come from money; I grew up on a farm and my folks were working people, and the company was too small to go public. You couldn’t borrow from banks in those days either. That’s when I decided to start franchising. I had been against the idea at first because I didn’t think you could train people to act like owners. What I came to realize is that if you use sophisticated advertising and controls, you could educate, motivate and monitor someone in running the business. You can’t force anyone to do anything, but you can convince him through logic and salesmanship that this is the way to go.
My philosophy is that the people who make it in this world are the people who have never worked a day in their life. I remember that I didn’t like school much, so I would sit there and dream about what I was going to do on the weekend. I never did that with my business. It would be 9 at night and I would look up and think, Where did everyone go? Even on Sundays, I was already dreaming about what I was going to do on Monday morning. Anyone who is good at something does it because they love it.
By 1968, we had grown to more than 200 stores and I even turned down an offer of $20 million to sell the company. I started thinking about taking the company public. That’s when I almost lost everything. The economy turned and half our restaurants started losing money. We quickly found ourselves with $8.5 million in debt and a negative cash flow of $150,000. But I didn’t give up or even file for bankruptcy. I rolled up my sleeves, took out a blank piece of paper and wrote down what I needed to do. It’s like the saying, How do you eat an elephant? One bite at a time. It took me six years to pay off my creditors, but I did it.
I like to tell people that I retired 25 years ago. But the truth is you never really retire when you own an asset, and I still own everything. I am now more like a general manager of a football team where the president I hired, Dennis Tase, is the quarterback. He’s the one that now makes it all happen on the field like a store manager who turns the key, opens the door and services the customer every morning at 7 a.m. I don’t get up that early anymore.