[Opinion] Why an Atlanta Institution Can’t Seem to Expand

Cliff Oxford guest blogs about The Varsity’s inability to scale its success.

[This article was originally published in the New York Times.]

Here is the thought that flashed through my mind as I washed down my Red Dog (hot dog with ketchup) with an F.O. (frosty orange) and a side of Strings (fries): If the Varsity can sell a thousand Naked Walking Dogs (hot dog to go on a plain bun) every day of the week from a restaurant that has become an Atlanta institution, why can’t it stamp out locations all over the state, region or even country?

The Varsity created its own menu language from top to bottom, and that is surely a big part of the reason the place — basically a giant hot-dog stand — has achieved world renown. Presidents, celebrities, tour buses and locals like me come in droves. When I go to the Varsity, I get the same feeling I get when I walk into the Empire State Building in New York or Ryman Auditorium in Nashville, I love it every single time. Which is why, as I was eating the other day, I couldn’t help but wonder why it’s been so hard to replicate the business in more locations.

But then it hit me: Maybe the same lingo that has helped make it an icon has also made it a one-hit wonder? I grew more convinced as I watched people herded through the doors and toward the counter servers who sang out, “what’ll ya have?” as if the phrase were a single word.

Many in Atlanta would probably disagree with me on why the Varsity can’t expand. In fact, the most common theory that I have heard in academic and management circles is that you simply cannot duplicate the so-called Varsity experience. And they have a point. The Varsity experience is a lot more than food and lingo. All rolled into one, it is the chaos of a three-ring circus the size of a megachurch with 600 parking spaces out front and a dining pad that is one of the coolest places in town.

The good news is you can duplicate the brick and mortar. While the company has built big and shiny new Varsities, the bad news is that they somehow have not come close to matching the flagship’s iconic status. The last time I went to one of the sister locations about 20 miles from Atlanta, I was almost offended. It had no energy and the “what’ll ya have?” was just a whimper. And I swear to this day the place was not using the original formula in the F.O. When we got in the car to leave, I told my nephew, “We are not coming back.”

The Varsity was founded as a hot dog/hamburger stand for Georgia Tech students by a Georgia Tech dropout named Frank Gordy in 1928 — 12 years before McDonald’s was founded. Today, the company, which is still in the Gordy family, has seven other locations, so growth has been more than a passing concern, but it has never really taken hold.

O.K., I get that not everybody wants to build a McDonald’s empire, but you would think that a restaurant that has been operating since 1928 and claims to be the largest drive-in fast-food restaurant in the world could have opened a few hundred locations with its eyes closed. For example, why hasn’t the Varsity grown to be at least a regional chain like In-N-Out Burger, which was founded in 1948 and has about 300 locations?

Here’s my answer: To scale means more than just opening more locations. It also means replicating both the customer and the employee experience over and over and over while decreasing some incremental costs as you get bigger.

When I ask bean counters in Atlanta why the Varsity can’t scale, the first things they mention are margins and costs of goods sold. In this case, I think they are looking in all the wrong places. No doubt the Varsity could buy hot dogs and supplies cheaper with more stores and volume but what messed up the growth is what we locals love most about the place — and that is the Varsity lingo (here is a list for the uninitiated).

Building an excellent business and then adding locations is the hardest thing you will do in your entrepreneurial life. And creating new lingo for the customer to learn is simply adding another layer of complexity. The golden rule of scale is this: Keep it simple. It took Starbucks 30 years to teach three minor lingo changes — tall, grande, venti. Customers finally got it, but it was a hassle.

Dave Thomas, founder of Wendy’s, kept it simple and stuck with a single, a double and a triple. And a Frosty is a Frosty. He was about scale. If you are too, keep it simple, don’t get too cute and don’t think everybody is going to fall in love with you the way your home team did. The lingo helped Mr. Gordy create a national monument in Atlanta but it probably shorted his heirs anywhere from 300 to 30,000 stores.

Of course, without the lingo, maybe there never could have been a Varsity experience. Sometimes, you have to pick one or the other. So, I am going to stop asking questions and get back in the long line here at the Varsity. If you are wondering what’ll I have — I am thinking Heavy Weight (hot dog with extra chili) and Ring One (onion rings). This time, I’m going to pass on the Naked Walking Dog — even though local legend has it that if you put it in your refrigerator, you can hear it bark during the night.

Here’s another legend in the making: You can keep it simple, the way Dave Thomas did. Or you can make it great, the way the Varsity did. But it’s very hard to do both.