Donatos at 60: Founder reflects on humble start, McDonald's takeover and the golden rule

Jim Grote knows it's hard to believe a business executive who says he always looks to do the right thing, treats others as he wishes to be treated and leads with love. He knows we’ve all seen too many examples of the opposite.

So, if you need proof that the founder of Donatos Pizza and those around him walk the walk, consider this: In 2020, as profits rose during the height of the pandemic, the company turned down $8.2 million in Paycheck Protection Program money because it felt the federal assistance should go to those who really needed it.

“Capitalism, in itself, really has almost got a bad name,” Grote said. “My mother always said money is the root of all evil. I said, ‘Not if you don’t want it to be.’”

Sixty years after buying a South Side pizza shop for $1,300 – he forgets now whether the previous owner’s final phone bill was subtracted from that price or included in it – the 80-year-old and his family have built not just a multi-state chain of restaurants, but also a global manufacturing empire for food-processing equipment and a local incubator for businesses that believe in their principles-driven brand of capitalism.

The company includes 177 restaurants in 12 states, with an annual sales volume of almost $1.3 million per restaurant. A partnership with Red Robin has put Donatos' pizza on the menu in 273 of that chain’s restaurants. That makes Donatos available in 28 states. With franchisees in the pipeline and expanded partnerships, the company expects to add more than 150 locations in 2024.

The team seems equally proud, though, of Donatos' concentration on charitable causes such as affordable housing, hunger and health. Employees donate time, and the company has donated money in partnership with Habitat for Humanity, food banks, Nationwide Children's Hospital and other organizations.

Today, Grote's daughter, Jane Grote Abell, 57, is chairwoman of the Donatos board of directors and the company's chief purpose officer. She has two children in the executive ranks as well.

"You talk like this, and people say, 'Well, you guys are perfect, aren’t you?' No. Sometimes we don't get it done," Grote said. "But you just brush yourself off, you get back up, you keep the bar where it is, and you try again. The worst thing is to lower the bar."

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'A great way to grow up'

Pizza is just a fad, Harold Grote said when his son came home in 1960 with the idea to buy the pizza place where he’d been working since age 13. Finish high school, he told Jim. Go to college.

Jim Grote had filled in as manager on nights the two owners took off. He learned valuable lessons watching how both operated.

“The one guy was just real friendly,” he said. “People would come in; he’d make jokes with them. He put a lot of toppings on the pizza. His nights were busy as can be. The other guy, who was not a dishonest guy – he was a nice guy – but he was introverted. He didn’t talk much to the customers. He told me if I took three pieces off each pepperoni pizza, I’d have enough to make one that didn’t cost anything.”

When Grote finally bought a pizza business after his sophomore year at Ohio State University, that earlier experience set the guideposts for his career. He kept the Donatos name – with an apostrophe originally – because he liked the story behind it. Don Potts, the original owner, had been a seminary student. Donato is a conjugation of the Latin word, dono, which means to give.

“When I went into business, I talked about opening up on the Golden Rule, treating others as you would be treated, love your neighbor as yourself. All the old timers said, 'You won’t make it, it’s a dog-eat-dog world,'” Grote recalled. “I said, 'Gee, if I can’t bring my principles to work, I might as well go back to Ohio State and try to pass accounting again.'”

His first Donatos went in a building his father-in-law owned on the South Side. He built a restaurant across the street at 1000 Thurman Ave. (a rebuilt version was dedicated in May) and bought the house behind it for his growing family.

“He didn’t build a dining room (in the restaurant), so he’d say to the customers, ‘Hey, go back and see Nancy and the kids. Go back to the house and we’ll bring it back to you,’” Jane Grote Abell said.

“Janie thought it was a party,” her dad interjected.

“We loved that,” Grote Abell continued. “We got to learn hospitality in a way that’s really different. That was a great way to grow up.”

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Enter the Golden Arches

Donatos was doing just fine, posting annual sales of $121 million at 147 restaurants, when McDonald’s first approached in late 1998. The burger chain was embarking on a strategy to gather established brands with different specialties.

When a deal was announced on May 5, 1999, McDonald's called Donatos the “gold standard of the pizza business” and said the company wasn’t going to change under new ownership.

“I was very naïve about that,” Jim Grote says now.

While McDonald’s took Donatos global with two restaurants in Germany, its menu-expansion strategy backfired. The parent company reported a $383 million loss three years later, and Wall Street analysts called its pizza business a distraction.

An expansion into the Atlanta market with 23 dine-in Donatos ended with a decision to shut them all down, a move Jane Grote Abell insisted be handled with more empathy than McDonald's had planned. She demanded two weeks' notice and severance pay for managers and hourly workers. She set up a career fair with other restaurants and said all 38 Donatos managers found new jobs.

Her father calls it “Jane’s strong-headed will.” Grote Abell says she’s “determined.”

She also became determined to buy the company out of McDonald's ownership before it was too late.

She and her father exchanged slight smiles when Jim said the family bought Donatos back “at a very low price" in 2003. They’ve never disclosed their sale price to McDonald’s or their purchase price from the chain.

Both pointed out things they learned from the McDonald’s experience – real estate, efficiency, innovation, drive-through windows – and praised the company for handling the sale with fairness.

'They really are genuine'

Cheryl Bergsman, Donatos’ vice president for field training and operations excellence, was around during the McDonald’s days.

She remembers checks Jim Grote gave to every manager after the sale based on their years with the company. More recently, she said, the owners gave everyone paid sabbaticals during the second year of the pandemic as a thank you for weathering a stressful and busy time.

But it's not the largesse that has kept her with the company for 33 years.

“They are great people,” she said via email. “They appreciate the people that work at Donatos. I feel this is unique when you see other companies today. I grew up knowing the leadership and have always felt appreciated and valued. My voice is heard.”

Cynicism about businesses professing love and values isn’t misplaced, said Pattye Moore, a former president of Sonic Drive-In, and a former board chair and interim CEO at Red Robin Gourmet Burgers.

“It’s very easy to say your company is going to operate with these values. It’s very hard to have that every day,” she said.

Moore retired in 2019. But when a friend told her last year about a desire to open a restaurant franchise in their Oklahoma City suburb, “I just sort of blurted out: ‘Do Donatos. If you do it, I’ll partner with you,'" she said.

She said she and her partners have interacted with every Donatos division, from real estate, development and the supply chain to training, operations and marketing.

“It’s in their DNA,” she said of the Grote philosophy and its influence inside Donatos. “They’re the kind of people I want to do business with. They really are genuine.”

rvitale@dispatch.com

This article originally appeared on The Columbus Dispatch: Donatos looks back on 60 years of business