It was all going swimmingly for Henry McGovern. Just weeks after arriving in Poland, the young American had won a privatization auction for a prime location building in Wrocław’s historic main square. Fortuitously, he had also met a wealthy sponsor to help him finance the purchase. Now his plan was to transform the property into the city’s first class-A office block of the recently dawned post-communist era. To attract big corporate tenants, he would first need to equip it with a multitude of telephone and data lines.
Ushering Henry and his translator into his giant office, the regional president of the phone company produced a bottle of vodka. While it was only 10 o’clock in the morning, Henry duly respected the local custom, while making some complimentary small talk about the city. With the vodka shots knocked back, it was down to business. Via his translator, he stated that he needed a hundred phone lines and fifty data lines. The phone company president stared back at him, stony-faced and silent.
My first reaction was that the translator must have miscommunicated what I was after, recalls Henry.
But when I remonstrated with him, he corrected me, saying my request had been met with disbelief. He explained that his own family had been waiting fifteen years for a single phone line. And there I was asking for dozens.
Finally, the president spoke. He could offer Henry just four phone lines and three data lines, he said. Or, put another way, fewer than one phone line for every floor of the building.
I felt sick to my stomach, says Henry.
I must have gone ashen and looked like I was about to faint. The only thing going through my mind was that I’d just lost $250,000 of my own money, and worse still, the same amount of my backer’s money. I didn’t know what I was going to do.
As it happened, though, Henry’s initial streak of good luck was far from over. Back at his office, a local woman he’d hired as his personal assistant was most impressed to hear of the deal struck with the phone company. So much so, in fact, that she called her father, who worked for Poland’s biggest bank, to tell him about the office project and its connectivity. The bank not only offered to take two whole floors but also to make Henry a sizeable loan for renovations.
Looking back, it was idiocy on my part, says Henry.
I’d come to a country not knowing the language or having any contacts, and then bought a building without understanding the risks.
At the time, however, the 27-year-old entrepreneur was not just undaunted but emboldened.
In this early ex-communist environment, there was a widespread sense of limits on what could be done. But we had learned the opposite lesson –
wszystko jest mozliwe – anything is possible! More than just our motto, this became our company’s whole mindset.
Henry’s next challenge was to fill the ground floor of his new building, for which he already had an idea. He had noticed that Wrocław was woefully short of restaurants.
For 750,000 people, I think there were only a handful of places to eat out, he says.
But among international restaurant chains, there was pretty much zero enthusiasm for coming to a city they’d never even heard of.
To begin with, Henry had hoped to rent to exactly such a chain. His backer, Donald M. Kendall, introduced him to PepsiCo, of which Kendall had previously been CEO. Henry tried to persuade the multinational to install one of its fast food brands as a tenant, but PepsiCo rebuffed him, offering him instead a franchise of its Pizza Hut brand.
I had basically ended up in the restaurant business by accident because no one wanted to rent the ground floor, he says.*
This baby step would mark the start of an epic journey for Henry and his new company. But neither he nor any of his immediate team had any experience in the restaurant industry. His move also drew gentle teasing from his siblings, who had grown up in a household that prized homecooked meals using fresh ingredients from the surrounding farms.
My brothers and sisters would joke with me, ‘oh great – that’s exactly what Eastern Europe needs – an American bringing US fast food over! Can’t you think of anything better to do with your life?’
The inhabitants of Wrocław felt rather differently, though. Having never tasted much beyond their native cuisine, they were curious to try something regarded as new and aspirational. Soon, Henry’s new venture extended across Western Poland, operating outlets under the Pizza Hut and Kentucky Fried Chicken (KFC) brands. After five years, the business crossed into the neighboring Czech Republic, acquiring half a dozen loss-making – mainly KFC – units.
With hindsight, I can say we overpaid for them, Henry reflects.
But we turned them around very effectively, which proved helpful when we came to buy another batch of loss-making restaurants in 2000. I went to the corporation that owned them and pointed out that I was making good money on the twenty-eight restaurants I was running. As I didn’t have money to offer for their seventy-two restaurants then, I suggested merging the units, and I would have five years to pay them out. And that’s what we did.
While Henry’s entrepreneurial flair helped to identify and do deals, running a company that had recently tripled in size demanded a new skillset. Realizing the challenge he faced, he enrolled at the Center for Creative Leadership in Colorado. To guide his development, he sat a raft of psychological sets, while his colleagues, business partners and family underwent interviews to give their insights into him. The result was a one-page report summarizing his personality.
I was initially horrified by the idea that my whole being could be distilled onto a piece of paper, recalls Henry.
Once I accepted that, though, I read it and it was unbelievably accurate. It said that I wasn’t trusting, I didn’t handle crisis well, I tried to do everything myself and that I always thought I had the right answer. As a result of that, I wouldn’t be able to build teams bigger than those under my direct control. So there was basically a hard cap on anything I could accomplish.
Henry knew he needed to start trusting and letting go more. First, he shared the intimate report with his executive team and told them his aims. Next, he withdrew himself from projects as they moved from the creative stage to implementation.
I decided to give up control, says Henry.
I would just kind of walk out at a certain point. And that led to better results. But Henry wanted to go further still. Despite being the founding CEO and majority shareholder, he decided that he should have no signing authority in the company whatsoever.
It sounds kind of crazy, observes Henry.
I gave up signing rights to four of my team. And I told them if they ever thought I was being too much, they should simply refuse to sign something. I therefore had no power!
Having surrendered so much traditional executive clout, Henry began to see his role instead as driving the motivations and beliefs of his employees. In what he describes as a
crazy, psychedelic presentation at one of the company’s annual gatherings, he announced that his title of CEO would henceforth stand for
Chief Emotional Officer.
We decided we should measure employee happiness as the key metric of corporate performance, says Henry.
We did all sorts of training around this, which some people found a bit corny to begin with. Our stated purpose was bringing fun to life. The restaurant industry is a tough place, so getting people to be enthusiastic and have fun is vital. Particularly at executive level, this helped keep staff turnover very low, which really helped us grow.
And indeed it did. By 2005, AmRest – as the company was by then known – had become the exclusive franchisee for KFC and Pizza Hut in Poland and the Czech Republic. In the same year, its shares made their debut on the Warsaw Stock Exchange. At the time of listing, it had 156 restaurants, making it the region’s number one and number two player in casual dining and quick service restaurants respectively. Soon, the business would extend into Hungary, while also adding Burger King and Starbucks to its pantry of brands.*
Not long after AmRest’s initial public offering, Henry had a surprising conversation with a friend. While acknowledging his expansion so far, the friend politely pointed out that the business was still comparatively tiny.
‘Why are you being so timid?’ he asked me, recalls Henry.
He challenged me to think about how to go about tripling the business given the greater access to capital we now had. It completely turned my thinking on its head.*
Henry sat down with his executive team to weigh up the possibilities. They were initially stunned by what their Chief Emotional Officer had to say. Didn’t he realize that they were already growing faster than the competition? It simply wouldn’t be feasible to accelerate further, they argued. An executive fact-finding trip to China – the world’s then fastest growing major market – came next, followed by a plan to triple AmRest’s number of outlets. Three years later – and despite the Global Financial Crisis - the company had accomplished this ambitious goal.*
I always buy a house needing work, rather than the finished product. I bought literally the worst property in my city here, which nobody would touch, but now it is probably the city’s best home. I love doing that.
Having turned to China for inspiration as to how to grow, AmRest subsequently sought actual growth from the Middle Kingdom. In 2012, it took on two Chinese brands – Blue Frog and KABB – and established a presence in Shanghai, Beijing and Nanjing. This bold move beyond Europe contributed to the business passing the one thousand restaurants mark in 2016.*
Twenty-six years after investing $250,000 of his own money in the site that would host Wrocław’s first Pizza Hut, Henry sold his shares in AmRest for $300 million to a private equity fund. By then, the company had grown to some 1,836 outlets, employed almost 50,000 people and spanned more than a dozen countries.*
For quite some time, I’ve felt that technology will have to play an increasingly important part in what we eat.
While Henry’s entry into the food service business was accidental, his most recent food ventures are the culmination of a long-term vision.
For quite some time, I’ve felt that technology will have to play an increasingly important part in what we eat, he says.
The global population is set to grow by perhaps another two billion people, with much of the growth in poorer parts of the world. I believe science can dramatically improve our food supply.
Today’s large-scale factory farming could hardly be less sustainable, he continues.
I mean where billions of eggs are laid every year by chickens that never see the light of day, and where many pigs and cattle are pumped full of drugs and hormones. My primary focus is getting the world to shift away from factory farming. What is more, something like half of global food output is consumed either by the animals we end up eating or in biofuels.
To help bring about change, Henry has become an investor in a range of private companies seeking disruptive solutions to major societal challenges. These include the developers of cultured meat and egg technologies, where these proteins are created from cells rather than reared animals, as well as the makers of plant-based meat substitutes.
Alternative proteins are very environmentally friendly and also ethical, says Henry.
We’re talking about perfect cuts of meat grown from a cell, without drugs or hormones. For consumers, it will create more choice while making them feel better about what they’re doing. I think alternative proteins are the next big disruption. We want to transform the global food ecosystem. And I passionately still believe ‘wszystko jest mozliwe’ – that anything is possible!