BusinessTN

Competition among employees climb- ing the proverbial corporate ladder is a given in the business world. So are stockholders. But both can be roadblocks to quality, says Kingsport businessman Pal Barger. Pal's Sudden Service—Barger's drive-thru burger-n-shake chain—was built on the convictions that growth should be slow and deliberate and employees should share their secrets to success.

So far, it’s working. In 2003, there was zero turnover among managers. Turnover among assistant managers was just 2%.

“We’ve only lost three managers since 1981. We had one who had a stroke, one who retired, and one who had a chance to start his own business,” Barger says. “We plan on a manager coming with us and staying until they retire.”

The turnover for hourly line workers is high—82%—a number Barger ascribes to the restaurant’s practice of recruiting mainly high school students and college students home on summer break.

Pal’s promotes from within, but only up to the position of store manager. Barger says if people are constantly grappling for the next job up, they’ll keep their knowledge “close to the vest.” In fact, the only people above the level of store manager in the Pal’s chain are chairman Thom Crosby, Barger and an assistant. The “lean at the top” model leaves more money for the individual stores, Barger says, adding that his store managers make “three to five times what an average fast food manager makes.”

Each of the 19 units in Tennessee and southwest Virginia—branded with a giant hot dog, french fries and soda cup—occupies only about 1,000 square feet, but each averages about $1 million in sales annually. The chain has gained marketshare for 20 consecutive years.

The first Pal’s opened as a walk-up on Revere Street in Kingsport in 1956. The first drive-thru-only store opened in 1985. Barger opens just one or two stores a year, “when we have the right location and the right manager.” The goal is to have 35 stores in the next 10 years.

Barger makes it clear he’s not interested in franchising or taking his chain public. “When you start working for the stockholder and worrying about the price of your stock, you stop working for the customer,” he says. “Maybe we have funny ideas about that, but it’s how we feel.”

Those “funny” ideas caught the attention of the Baldrige National Quality Program in 2001, earning one of the program’s coveted awards in the small business category. Baldrige Quality Awards—named for former U.S. Commerce Secretary Malcolm Baldrige—are presented annually by the president of the United States. Getting one isn’t easy.

“Applicants are examined by experts in management, quality and industry,” says Jan Kosko with the Baldrige program. “They interview employees. They look at records. They pretty much have free rein.”

Barger works to instill his philosophy in a larger populations than just Pal’s employees. To this end, he holds a class for Tri-Cities area business people called the Business Excellence Institute.

Kingsport City Manager Ray Griffin took the class, along with all of the city’s department heads.

“He’s very gracious to us in the nonprofit sector, to help train us to improve our operations,” Griffin says. “The training enforces the need for teamwork and the further empowering of employees to do their jobs.”

Barger says there’s more than one benefit to having employees invested in the business. “You get to go fishing every once in a while.”