Boddie-Noell Enterprises, Inc.

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Boddie-Noell Enterprises, Inc.

1021 Noell Lane
Rocky Mount, North Carolina 27802
U.S.A.
Telephone: (252) 937-2800
Fax: (252) 937-2978
Web site: http://www.bneinc.com

Private Company
Incorporated: 1961
Employees: 11,697
Sales: $420 million (2003)
NAIC: 722211 Limited-Service Restaurants

Boddie-Noell Enterprises, Inc., is a privately owned, family-run company based in the small town of Rocky Mount, North Carolina. Primarily involved in the restaurant industry, Boddie-Noell is the largest franchisee of the Hardee's hamburger chain, operating 316 units in North Carolina, South Carolina, Virginia, and Kentucky. Since Hardee's began to lose popularity with consumers in the 1990s, Boddie-Noell has cut back on its Hardee's holdings and added casual dining concepts. The company operates 28 Texas Steakhouse & Saloon restaurants in North Carolina, Virginia, and West Virginia; a pair of BBQ & Ribs Co. restaurants; several Café Carolina & Bakery units; a handful of Moe's Southwest Grill restaurants; and Boddie-Noell's Highway Diner, a 1950s-style silver diner. In addition, the company runs BNE Land & Development, originally set up to purchase land for Hardee's restaurants but now involved in a wide range of commercial and resort real estate projects. Boddie-Noell also runs Rose Hill Conference Center, housed in the founding family's ancestral mansion, built in 1790. Boddie-Noell has a reputation as a tight-knit organization that emphasizes treating employees like family. As a result, the company has established a record of employee retention unmatched in the restaurant industry.

Founding Family Humbled by the Depression

The history of Boddie-Noell Enterprises is very much a riches-to-rags-to-riches story. The lineage of the Boddie family can be traced as far back as William Boddie, a captain in the English navy during the reign of Henry VIII. The Boddies emigrated to America in the 1660s and in 1790 established a sprawling, 10,000-acre plantation in North Carolina called Rose Hill. But with the defeat of the Confederacy in 1865, the family fortunes went into steady decline. By 1926 the property was mortgaged and during the Depression of the 1930s the family could not keep up with the payments on the farm, now reduced to just 700 acres, on which Nicholas Bunn Boddie grew tobacco, corn, and cotton. The property was sold off and the family, on the verge of poverty, was forced to move to a small house owned by his mother-in-law. They scraped by, selling chickens and eggs at the local farmer's markets, until Boddie found work in the Employment Security Commission office, a job he held until his death in 1951. A few years before he died, however, he established a small fuel-oil delivery business. His two sons, Nick and younger brother Mayo, would become the driving force behind the foundation and growth of Boddie-Noell Enterprises.

Both Nick and Mayo Boddie had little use for college, eager to establish themselves in business. Nick dropped out of the University of North Carolina at Chapel Hill in 1949, attracted to the high wages being offered in Alaska. After several months of working in a gold mine, on the railroad, and in a rock quarry, he returned to North Carolina to assume less arduous employment at a hotel his aunt acquired after her husband died. He liked the work and later opened a motel and restaurant, Carleton House. It was named after an Uncle, Carleton Noell, a vice-president at Garrett Tobacco Co., who provided the financing. In the meantime, Mayo, two years younger, also began college at the University of North Carolina, only to find the classroom too stifling, convinced that the world was passing him by. After a year-and-a-half he dropped out intending to join the Navy. Instead, he married his high school sweetheart, joined the reserves, and worked for the railroad until his father passed away and he took over the fuel delivery business. But he soon shut it down, unhappy about working in a business that relied on the extension of credit. He took a number of jobs over the next several years, and then opened a cut-rate gas station, taking advantage of two 6,000-gallon tanks he owned to buy gasoline in volume. By the 1960s he owned three gas stations as well as a pair of laundromats. Both Nick and Mayo Boddie were successful businessmen, big fish in the town of Rocky Mount, North Carolina, with a population significantly less than 40,000. Neither was content, however, to spend the rest of his life doing more of the same. Then, in 1961, a chance arose to become involved with the Hardee's hamburger chain on the ground floor.

In 1960 Wilbur Hardee opened a McDonald's knockoff in Greenville, North Carolina. His accountant was Leonard Rawls, who had attended high school with the Boddies and also did Mayo's books. Rawls teamed up with another high school friend, Jim Gardner, to franchise the Hardee's concept and tried to convince the Boddie brothers to become franchisees. However, they simply could not understand how it was possible to make money by selling hamburgers at 15 cents a piece. When Rawls and Gardner opened a Hardee's in Rocky Mount, the Boddies saw the lines that formed to buy those 15-cent hamburgers, and they became convinced that they could make a profit in fast food.

Early Hardee's Franchisees in the 1960s

The Boddie brothers joined forces with Carleton Noell and bought five Hardee's franchises for $1,500 each. The first opened in January 1962 in Fayetteville, North Carolina. As would be the case with many of their restaurants, the Boddies made a wise choice in location: The restaurant was on the main route leading into the Fort Bragg Army Post. As Mayo had done with his gas stations—where he kept tabs on his managers by nightly checking the pumps and matching up the numbers with the money in the till—he closely monitored his inventory of food and paper products. The store got off to a strong start, but after six months the new restaurateurs were put to the test when a McDonald's opened nearby on Bragg Boulevard, resulting in an immediate 50 percent drop in sales. The Boddies fought back, putting up more signs, contriving promotions and giveaways, and speeding up service. Soon the restaurant won back its market share and the Boddies were ready to launch their second restaurant, located in Kingston, North Carolina, followed by another unit in Fayetteville.

Boddie-Noell grew along with the Hardee's company, which Rawls and Gardner bought from Wilbur Hardee, took public in 1963, and launched an aggressive expansion program. The Boddies developed a simple, risk-adverse, and effective strategy to expand their operations. First, they were smart about site selection. After their run-in with McDonald's in Fayetteville, they decided to concentrate on smaller towns where there was less competition. Although in time they would come to rely on population statistics, traffic flow, and other factors when considering a location, they always made sure to walk the ground, like true farmer's sons, and in the end relied on instinct. Years later a consulting company tried to sell them on a computerized site selection system. To serve as an example the Boddies provided some data on a site, which the consultants after some analysis insisted would not work. It turned out that the site already housed a Boddie-Noell Hardee's restaurant that was doing quite well, and the Boddies decided to continue doing business their own way.

Boddie-Noell built its chain one restaurant at a time, with no goal on a total number. First, Carleton Noell's standing as a tobacco executive was used as leverage with the banks. The company would buy property for a new restaurant, generally with $5,000 as a down payment, and have the deed subordinated. Noell would then use the deed as collateral to borrow the money needed to build and equip the new Hardee's, roughly $100,000. "We'd put $250 in the change fund to open up," Mayo told Business, North Carolina, in a 1992 profile. "We had two weeks before we had to pay employees and 15 days before we paid suppliers. So really, in essence, for $5,250 in cash we were able to buy a piece of property, build a building and get into business." By 1965 Boddie-Noell operated 19 Hardee's, and a decade later the chain had grown to 100. The operation was so lean that it was not until the late 1960s that the headquarters finally moved out of a converted laundry room at Carleton House.

Along the way, the partners assumed distinct roles in the organization. Because Nick Boddie was busy running Carleton House when Boddie-Noell was launched, Mayo was the one who headed the new enterprise, a position that suited his personality. He was able to make the tough decisions, while his brother was better dealing with people. As one longtime Boddie-Noell executive expressed it, "Nick's the feeler, Mayo is the doer." Whereas Mayo was aggressive, his uncle, who was more conservative, was present to act as a counterbalance. Although Nick may had been better with people, Mayo was well liked by his employees and he quickly came to understand the value of having good managers and took steps to retain top lieutenants. He often sold store managers a 25 percent stake in a restaurant and instead of charging them $25,000 he asked for just $2,500. As a result, Boddie-Noell's annual turnover of store managers would run at just 10 percent, a far cry from the rest of the fast-food industry. Boddie-Noell also established a top-notch training program, which would serve as an industry model. Nor did management lose touch with the reality of the field workers, as each year everyone in management spent a week working in a Hardee's, wearing the same brown uniform as everyone else.

Boddie-Noell was an innovative franchisee in other ways as well. In the early 1970s a Georgia employee developed a biscuit sandwich to serve for breakfast, an idea that would have a dramatic effect on the Hardee's chain and the entire fast-food industry. After a test run at 22 Boddie-Noell restaurants, the sandwich was rolled out in the mid-1970s to the entire Hardee's chain. Hardee's had resisted the idea at first, but the new item added a day-part to the restaurant, which had formerly been solely a lunch and dinner operation.

Company Perspectives:

Our Mission: To value the people of Boddie-Noell by providing a high quality, successful organization which offers everyone the opportunity to be the best they can be.

The Boddie brothers were so successful with their Hardee's operations that in 1979 they were able to buy back Rose Hill, which they then restored to the glory of its plantation days. The brothers were also smart enough to understand by the mid-1970s that they had grown their Hardee's chain as large as they could hope without bringing in some managers with more sophisticated business skills. Not only were new departments formed and job classifications determined, the company began planning a new headquarters. After five years of effort, a new $3.6 million modern headquarters opened in 1982.

Hits and Misses in the 1980s

By 1985 Boddie-Noell was operating nearly 250 Hardee's restaurants, but it also experienced some setbacks during the decade. Efforts to launch a pizza restaurant, a country cooking-inspired restaurant, and a fried chicken concept all failed. A move into the Memphis market with Hardee's restaurants also produced less than spectacular results; 12 restaurants the company opened in Pennsylvania were ultimately closed. But in 1985 the company launched a new fried chicken concept called Skats that caught on. The smaller restaurant format cost much less to launch than a Hardee's and was suitable for small town locations, with populations of 5,000 to 7,000, the kind of markets in which Hardee's was not interested. Once Skats proved successful, however, Hardee's began to open restaurants in some of the same small towns, leading to a 1990 confrontation between Hardee's and Boddie-Noell. It was Mayo's son Bill who brokered a peace between the two parties, leading to the conversion of Skats units to Hardee's restaurants. Another venture launched during the 1980s was BNE Land & Development, a real estate investment trust (REIT) to own restaurant sites in a leaseback program. In 1995 the REIT would extend its activities to apartment and shopping center properties.

Bill Boddie, Mayo's middle son, succeeded his father as president of Boddie-Noell in 1990. Although just 60 years of age, Mayo was determined to effect a smooth succession of power. His choice of Bill was backed by sons Mayo Boddie, Jr., and Mike Boddie, both of whom held prominent roles in the organization. Bill Boddie took over just as the company's chain of Hardee's restaurants was peaking. In 1993 Boddie-Noell's Hardee's portfolio reached its high water mark, with more than 350 restaurants producing revenues of $380 million—sales spurred by the addition of menu items like fried chicken. (The number of Hardee's units topped out at 364 in 1995). But the Hardee's brand was beginning to lose its luster and the chain did not fare well in the discount wars that now flared up with other fast-food restaurants. As the Hardee's business began to tail off, Boddie-Noell began looking to the new casual dining category that was growing in popularity. In 1994 it opened its first Texas Steakhouse in Rocky Mount as a test venture. The concept, launched several years earlier, proved successful and the company soon added three more units in North Carolina. By 2004 another two dozen Texas Steakhouse restaurants would open in North Carolina, Virginia, and West Virginia.

Hardee's changed ownership in April 1997 when CKE Restaurants Inc. bought the ailing chain. Boddie-Noell and the new owners quickly had a falling out over CKE's talk of Hardee's eliminating fried chicken, a major source of income for the Boddie-Noell units. There was, in general, animosity between the franchisee association, formed in 1997 and headed by Bill Boddie, and CKE that took time to recede. CKE had enjoyed success in reviving the Carl's Jr. chain and upon taking over Hardee's insisted that franchisees remodel their stores and add some of Carl's menu items. The attempt to turn Hardee's into Carl's Jr. did not work, however. CKE finally scored a hit in 2001 with the test introduction of the "Six Dollar Burger," a half-pound burger that it claimed would cost $6 at a finer restaurant but less than $4 at Hardee's. In January 2003 the chain began rolling out the new item as the Thickburger, which took some time to catch on but over the course of the next year began to result in increased sales.

While Boddie-Noell struggled to revive the business of its Hardee's restaurants, it continued to delve deeper into the casual dining category. The company launched a concept called The BBQ and Ribs Co., as well as a family dining idea originally called the Shiny Diner, which eventually took on the Boddie-Noell's Highway Diner name. In 2002 Boddie-Noell bought a 60 percent interest in Café Carolina and Bakery, founded in 1995 by Robert Autry, Jr., the son of the former Hardee's Food Systems chairman. The relationship between the two sides soon soured, and Autry sued Boddie-Noell in 2004, claiming that he had been forced out as CEO and Boddie-Noell's interference had hindered his ability to enact the Café Carolina business plan. A few months later a settlement was reached and Boddie-Noell bought out Autry's interest in the business. Another casual dining concept Boddie-Noell pursued was Moe's Southwest Grill. In October 2003 it signed a deal to open 25 of the healthy Mexican food restaurants in North Carolina and Virginia.

Documents that emerged during the Café Carolina suit indicated that Boddie-Noell generated sales of $420 million in 2003. Of that amount, 75 percent came from the Hardee's operations. It was clear that the company's prospects remained very much tied to CKE's efforts in revitalizing the Hardee's brand.

Principal Subsidiaries

BNE Land & Development; Café Carolina and Bakery; Rose Hill Conference Center.

Principal Competitors

Burger King Corporation; McDonald's Corporation; YUM! Brands, Inc.

Key Dates:

1962:: The company opens the first Hardee's restaurant.
1975:: The company owns 100 Hardee's.
1987:: A real estate investment trust is launched.
1990:: Bill Boddie succeeds his father as president.
1994:: The first Texas Steakhouse & Saloon unit opens.
2004:: The company acquires an outstanding interest in Café Carolina & Bakery.