Pal’s Sudden Service

Pal’s Sudden Service is a privately owned quick-service restaurant chain operating about thirty units in Tennessee and southwestern Virginia. It is also the only quick-service restaurant ever to win the Malcolm Baldrige National Quality Award, which it did in 2001, and the firm whose operating discipline now attracts study tours from Harvard Business School professors, Toyota executives, and senior leaders from American firms many times its size. Pal’s is the kind of operation that earns more attention from the operations literature than its size would predict, because the discipline it has built is the kind a much larger firm tends to claim and rarely produces.

The supplier-development practice the firm developed for the Baldrige assessment is the part of the Pal’s story the practice has carried into client conversations most often. Thom Crosby, the chief executive who led the firm through the Baldrige process, described it to Quality Digest in the following terms after the award:

> They said a lot of the companies, given their size, can’t have any influence or major impact on their suppliers. And we told the people at NIST, “That’s wrong.” We have a major influence on our suppliers. The first piece of “assess and improve” that we did was in the category of supplier relationships. We were in a situation where we had multiple suppliers. We had a redundancy factor. We also had competitive bidding going on. By using the criteria to assess and then going out and saying, “What are the best-known methods, and what are we doing?” we went from twenty-one suppliers to four. Our cost of goods reduced by ten per cent, which all dropped to the bottom line.

Two structural points in this passage are worth dwelling on. The first is the firm’s refusal of the assumption that scale equals leverage. Pal’s was small relative to its peer chains and was told by NIST that small firms could not influence their suppliers; the firm proceeded to demonstrate that they could, by exercising the discipline of assess and improve as a rigorous method rather than as a slogan. The second is the shape of the result: a five-fold reduction in supplier count, a ten-per-cent cost-of-goods reduction, and the operational simplification that allowed the firm to pursue the further disciplines that produced the Baldrige award. The supplier work was foundational, not incidental.

Pal’s remains, twenty-five years on, one of the few American quick-service operations whose internal training and supplier-development practice would survive close examination by a serious Lean auditor.

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