Iconic Tour

A Texas fast-food king, slowed by a hurricane, but still on the way to $1 billion

Bob Woods, special to CNBC.com
Interstate highway 45 is submerged from the effects of Hurricane Harvey seen during widespread flooding in Houston, Texas, August 27, 2017.
Richard Carson | Reuters

Guillermo Perales is the founder and CEO of Sun Holdings, a private company in Dallas that operates more than 750 franchises across eight different brands, mostly fast-food restaurants, in eight states. The vast majority are in Texas. Every day, he has to keep a close eye on myriad aspects of running such a huge, multifaceted organization, from tracking inventories to the management of nearly 17,000 employees.

On August 25, though, he was particularly focused on several dozen stores in the Houston area, which was bracing for the impact of Hurricane Harvey. The storm was pounding the Texas Gulf Coast and about to dump more than 48 inches of rain in and around Houston, resulting in catastrophic flooding and the evacuation of tens of thousands of residents, many of whom had to be rescued from the raging waters.

From his office 240 miles away, Perales fielded reports from his management team in Houston and the coastal area. Over the next several tense days, they had to close around 60 stores and monitor the fate of hundreds of employees. A week later, as outlets were gradually reopening, Perales reported, "We know that several Burger King, Krispy Kreme and Cicis Pizza stores were damaged," although the National Guard still hadn't let them back into some to assess the extent. Staffing was difficult, because some employees couldn't get to work. "We're trying to figure out what to do with insurance claims," he said.

On the bright side, Perales talked about how a couple of his Krispy Kreme stores were distributing doughnuts at shelters. An Arby's was setting up a portable kitchen to cook sandwiches to give away. "We just want to make happy faces," he said, trying to put on his best in the midst of the upheaval — including the fretful evacuation of his son, a freshman at Rice University in Houston.

Guillermo Perales, founder and CEO of Sun Holdings
Source: Sun Holdings LLC

Hurricane Harvey presented Perales, 55, with a once-in-a-lifetime challenge, yet he's faced many others during the 20 years it has taken to build his franchising empire. Born in Mexico City, he moved north with his family to Saltillo, his father's hometown, as a youngster. "My mother, like most in Mexico, stayed home," he recalled. "My father, I saw him working real hard all his life" — at a large factory where Perales says his father climbed the ladder and became CEO.

Along with a strong work ethic, Perales' parents emphasized the importance of education. He went to college in Monterrey, earning a CPA degree but also nurturing an entrepreneurial spirit. "I brought candies home to Saltillo on the weekends and sold them," he said. "I was always trying to make money on the side and to save."

Perales is also a self-avowed A-type. "Most of my life, I sought to be No. 1," he said. "In school I had to get recognized at the top of my class. Whatever I did, I always tried to excel."

Guillermo is among the top one-half percentile of operators. ... He's larger than many franchisors.
Eric Stites
CEO and managing director of Franchise Business Review

That zeal continued after college when he went to work for Grupo Maseca, a Mexican food producer (now known as Gruma, a $4 billion multinational). "I worked real hard, a lot of hours, and that was my life," he said. All the while, he dreamed of moving to the United States and opening his own business. "I saved every penny and lived very tight so that I could start something, but I didn't know what."

In the late 1980s, Grupo Maseca transferred Perales to its Los Angeles office and then to Dallas. He helped manage the company's growth as it acquired other food companies and integrated them into its system. Benefiting from the experience, he was finally motivated to go off on his own in 1994. He was in negotiations with Golden Corral to expand its family-restaurant franchising business to Mexico. Alas, the country's economy tanked that year, derailing his plans but serendipitously paving the way for his move to the States.

Perales convinced Golden Corral to grant him the rights to open five franchises in the Dallas area, where he emigrated in 1997. He launched his first restaurant in Richardson that year and has been off to the races ever since. "Once we opened the other Golden Corrals, doors began to open with other brands," he said.

Today, Sun Holdings is the eighth-largest franchise operator in the country. At last count, Perales listed 295 Burger Kings, 120 Popeyes Louisiana Kitchens, 70 Arby's, 30 Cicis, 20 Golden Corrals, 18 Krispy Kremes and 10 various restaurants in Dallas' two airports. A few years ago he ventured into non-food franchising and now includes 120 T-Mobile and 85 GNC stores in his ever-expanding portfolio. With reported revenues of about $800 million this year, "we're on our way to $1 billion," he said.

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To get there, Perales is adhering to an aggressive growth strategy of owning multiple units of each brand, then either building new locations or acquiring existing company-owned stores ("refranchising," in industry parlance). This year, for instance, he's on pace to meet his goal of opening 150 new locations, building 100 and making purchase deals for the other 50.

"It's an amazing story," said Eric Stites, CEO and managing director of Franchise Business Review. "Guillermo is among the top one-half percentile of operators. ... He's larger than many franchisors."

Stites said that many franchisees go from one or two locations to maybe 10, but very few scale up to the size of Sun Holdings. "I can tell he's a very hands-on guy, but he's also built a great management team," he said. "It's not like he's sitting in his ivory tower with a strategy. He's out there working with his team to make it all happen."

Hurricane Harvey slams into restaurant industry

The success Perales has experienced is also an exemplary immigrant story. In fact, Sun Holdings is the largest Latino franchise operator in the United States, a designation he's rightfully proud of. "If I can serve as an example for other Hispanics and Latinos to jump into business and succeed, that's okay," he said.

At the same time, Perales wants his achievements to transcend his ethnicity. "I want to be successful as a businessperson," he said. "There are very few things you can control in your life, and this [being Latino] is one you cannot."

He is less hesitant in talking about the Trump administration's stricter enforcement of immigration laws, which have seen rising numbers of deportations and a heightened wariness among undocumented workers, particularly Latinos in Texas and other border states. He disagrees with the argument that immigrants are taking away low-wage jobs from U.S. citizens; is against canceling NAFTA; and thinks building a wall on the U.S.–Mexico border is a waste of money. "I'm good with securing the border," he said, "but why spend all that money — and we know Mexico is not going to pay — when there are so many other things it could be used for to benefit people in the States?"

The immigration issue is directly impacting Sun Holdings. Perales said it is tough to get visas for people, which is why he favors guest-worker visas for restaurant employees, similar to those currently issued for hospitality and agriculture businesses.

Regardless of such pressures, Perales is a proud ambassador for the franchising industry and offers sound advice for aspiring entrepreneurs who want to follow his lead: Look for a good brand that offers opportunities to grow, to buy and to build, rather than going with a brand that's not well known, has management issues or doesn't have scale to grow. Talk to other franchisees and become familiar with the economics of the franchising company.

In 2013, Perales received the American Dream Award during the Multi-Unit Franchising Conference. "I hear that term a lot," he said, referring to the ubiquitous label for prosperous achievers, but in his case puts it in perspective: "I have a successful company, and if that's what the American Dream is, that's okay."

By Bob Woods, special to CNBC.com