Frederick R. Greiner: What Makes Family Grocery Successful?

Frederick R. Greiner is president and chief operating officer of Fareway Stores Inc., and the first non-family member to be president of this privately held 70-year-old chain of grocery stores headquartered in Boone, Iowa.

Greiner has been at Fareway since he was 16, that’s nearly four decades except for two years in the Army. He has held almost every position in the stores from bagger to department manager to store manager to vice president. “He is a member of the family,” said Sue Beckwith, a Des Moines surgeon, board member, and descendent of the founding Beckwith family, according to the The Des Moines Sunday Register, May 21, 2006.

Fareway Stores has 94 stores mainly in Iowa, with a few in Illinois and Nebraska. They employ about 7,000 people. Their sales were estimate at $750 million by Hoover online in 2005, though no financials are officially published. They were started in 1938 by Paul Beckwith and Fred Vitt, two former Safeway employees. The top leaders have come from the two families until Fred Greiner was appointed to the top position in March 2006.

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Ethix: There are many people who assume that the conglomerates have put all the smaller family stores out of business, and yet you seem to be thriving. What is your secret?

Frederick R. Greiner: Our secret is the personal customer service that we give every customer. When you build a new store, you build a solid foundation one block at a time. It’s no different building your customer base. We want to make sure that every customer coming through our doors leaves with a good experience. We train our people to recognize when someone is looking for an item, and to ask, “Can I help you find something” Then we expect our employee to take the customer to that item rather than just pointing to aisle 14. If a customer requests an item that we don’t carry, our employee will go to their manager and find out if we can order it, and then contact the customer when the product is shipped to the store.

When the customer arrives at the checkout, we sack and carry out their groceries; it’s a chance for our employee to speak to the customer one-on-one and get to know them. There are times when an item the customer purchased is left at the checkout. When this happens we will offer to deliver the item to the customer’s home. Recently a customer wanted to purchase a Christmas tree, but didn’t have a way to get the tree home. We delivered it to their home. It’s that one-on-one that allows you to build rapport with your customers, and they will come back if you take care of them.

It’s really pretty simple, but that is what has allowed us to continue to expand even as Wal-Mart has continued to grow. We have opened 22 new stores in Iowa since Wal-Mart built their first super center in Iowa in 1998.

Spreading The Culture

As you grow, how to you get new people in the organization to share your passion for customer service?

It starts at the top. Each leader must make sure that clear expectations are given to all employees and then help the employee achieve those expectations. One-on-one we teach each employee what we expect at Fareway. If this is not what they want to do, then Fareway isn’t the place for them to work.

It’s even important at a young age; many of the employees are 14 or 15 years old, and this is their first job. At that age they are looking for direction. Many new employees come from single-parent families and usually this is their first job. It is vitally important to give the new employee direction and responsibilities. The store becomes the teacher for doing many of the basics. It is just constant repetitiveness. It’s store meetings, it’s mentoring, taking current employees and assigning them to a new employee, and spending the amount of time needed to help them to better understand the job and what is expected.

Do you have anything written down or any formal training you do?

Well, it’s kind of ironic you asked that. Fareway will be 70 years old this May, and we just developed our first mission statement. We had all levels of employees come to our education center and work together in developing this mission statement. We also established strategic initiatives for Fareway Stores to focus on. We want to make sure everyone gets the same direction and understands the goals we are trying to achieve. We focus on customer service. We try to make our stores the best place to work. We also use our education center to conduct training and hold seminars.

Managing Costs

The larger chains can get huge volume discounts on the products they buy, more than you can, I would assume. So, how can you compete price-wise with some really large chains?

We know much of our competition is open on Sundays and open 24/7. so we yield that business to our competitors.

We watch our costs internally, we watch the layers of management, and we try not to duplicate anything. We try to avoid situations where we have to lay employees off. In addition, our stores have been built on the belief that we should never incur any debt. We will not build the next store until we have the money to build it. We also built our own distribution center. We own all our trucks and equipment. We have held to this standard for 70 years, and therefore we are able to hold our cost down.

Work Environment

Sometimes there is a conflict between serving a customer and serving an employee. I understand, for example, that you are not open on Sundays, to give employees time with their families. But this may be inconvenient for your customers. How do you deal with this conflict?

We’ve had many requests from customers to open up on Sunday, and we have had requests to stay open later or open earlier. Basically our hours are 8 a.m. to 9 p.m. Monday through Saturday. We have a few stores that open at 7 a.m. and a few that remain opened till 10 p.m. in certain markets. But we have held firm on Sunday closing. We know much of our competition is open on Sundays and open 24/7, so we yield that business to our competitors.

We don’t offer a sit-down deli, movies, etc. We have grocery stores.

Our customers appreciate what we are trying to do in allowing employees to have time with their families on Sundays, and not have to work at night, and so they adjust their own shopping schedules to shop with us. We also know that we have customers who don’t enter our door because of our hours, but if we take care of the customers we do have, and work hard to attract new customers, we will remain in business for many years to come.

So you don’t think your primary purpose is to make as much money as you can?

No, we don’t. There was an article in The Des Moines Register here just a few weeks ago encouraging a community to have Fareway Stores come to their community. It said, “Fareway stores are unpretentious and they are not fanatical about profits.” That hits the nail on the head about Fareway Stores. It is not all about making money. It’s about providing jobs to employees, treating those employees right. If you have happy employees, you will have happy customers, and we try to balance both. Too many times, greed becomes central to growing a company, and in the end that’s what causes the company to fail.

What other things have you done to make this a great place for people to work?

As much as we possibly can we offer flexible hours. This allows high school students to attend school activities, or family members to spend time with their families. We try to schedule a day of eight to 10 hours, not anything more than that. This may be a split schedule if that works best for the employee.

Our benefit package is fantastic for the size of our company, and our health insurance program is one of the best offered in this area for the employees who are enrolled in it. Currently our full-time employees pay about $48 dollars a month for family coverage. That’s about 5 percent of the premium, and we pick up the other 95 percent.

What about salaries?

Well, we monitor the salaries to manage our costs, but we don’t specifically say that each store must meet a target for salaries as a percent of volume. We want to make sure we are taking care of the customer properly. Fareway is paying above the standard in salaries, measured by what the average manufacturing or other businesses are paying in each city we do business in. We also pay based on merit. We look at what the employees do, the type of job they are doing, and how well they are doing the job. A motivated employee who has a great work ethic is going to be well paid.

Differentiation in the Marketplace

What other ways do you distinguish yourself from your larger competitors?

Our meat department is the backbone of our stores. Our meat is not prepackaged. A customer may want to buy one steak, so they may chose which steak they want, and we wrap it for them. If they request a special cut, we will cut it for them at that time. A lot of stores will try to buy a lesser grade of beef to make more profit, but we sell only USDA choice grade beef at a very competitive price.

The sizes of our stores are small compared to the supermarkets of today. The typical combo stores are 80,000 to 100,000 square feet, while most of our stores run 20,000 to 30,000 square feet. So, the shopping experience you get at Fareway is simpler; you are going to be able to get in, get the items you want, and get out in a reasonable amount of time. We don’t offer a sit-down deli, movies, etc. We have grocery stores. You don’t have to walk 300 feet to the back of a store to purchase your gallon of milk; for us it may be 150 feet at the most. As the baby boomers get older, we hear that they are less interested in the mega-store experience, so we are well positioned for the more traditional shopping experience we think our customers want.

How do you fare when large stores such as Wal-Mart open up near you?

When Wal-Mart has opened stores near ours, we found that having the two stores located nearby does help build the traffic. There are other times that we decided to build right across the street from Wal-Mart knowing that the traffic pattern in that particular town is going in that direction. Our prices are low and the customer-service level is high. The combination of the two helps us to receive the majority of the customer’s weekly groceries.

We are continuing to grow. This past year we opened up two new stores, and this is fairly typical. In 1990, we had 50 locations, today we have 94, so in 17 years, we have opened up 44 stores.

Ethical Practices

What does ethics mean to you and how do you practice ethics in your business here?

It’s everyday, doing what is right, whether it’s here in this office or out in the stores. It’s being straightforward with our vendors, and we expect the vendors to be straightforward with us. We try to teach at every level that you are better off to be honest as a company and as an individual. It may be painful at the moment, but in the end it is better for all of us.

One time we received a sizable check made out to us but was not owed to us. We could have cashed it and gone on down the road. The company likely would not have noticed. But we gave it back to them. They just couldn’t believe somebody would do that that. We feel that if we have to cut corners to make a profit then we really shouldn’t be in the business. This has filtered down to all the employees and to our managers, to be honest, to be straightforward. You earn your reputation everyday; it doesn’t mean anything if you aren’t looking to the future and doing what is right and being honest with people.

Our stores have been built on the belief that we should never incur any debt.

This extends to how you treat your employees. Sometimes it is difficult to be honest because it puts you in a situation where you are going to feel uncomfortable because you have to be blunt, but it is still the best thing to do. When I managed a store, I had employees who worked for me that I had to let go because of an issue. It was tough, but it was the right thing to do. They knew they were wrong. Today one former employee is a service technician who takes care of my car, and another works with us in a business relationship. I respect them, and they respect me. People make mistakes, but you have to deal with that appropriately. Life is a lesson.

Technology

How does technology affect your business?

We are currently working on our first website. We hope to use it to get input from our customers and to offer services to them. This might include weekly sale ads, as well as recipes we could provide to them for fixing a roast, for example. We will also use it for job applications, ways for customers to connect with our store managers, etc. We may be one of the last companies to have a website, but we definitely feel it is time!

We haven’t been the front runners in new technology. Rather, we want to learn from others’ mistakes and then do what we feel fits our core philosophy and what works for us to maintain our present culture.

We are moving forward in our use of robotics in the warehouse, helping to become more efficient and to hold our costs down. We have a semi-automated distribution center. We just recently, two years ago, built a new refrigerated warehouse and when the product is received, it’s put on a conveyer system; the barcode is read, and a crane puts that product away without any human touch. When we pick an order, the cases are put on a conveyor and routed to the truck for loading.

It’s amazing what you can do today. We have benchmarked what we do with companies in Germany and Austria as well as in the United States. We are constantly looking to see how that automation and technology fits with what we are doing. We created our own warehouse-management system. Inventory is a critical cost factor at the warehouse level and at the store level, and our system works very effectively for us.

How have Fareway Stores connected with the “green” movement?

We use the heat from the compressors that cool our refrigerators and freezers to heat our stores.

We have been doing what is now called “green” for many, many years. All of the cardboard is recycled and all of the plastic shrink-wrap is recycled. We have very few fossil-fuel furnaces in any of our stores — we use the heat from the compressors that cool our refrigerators and freezers to heat our stores. Acting environmentally is both good for the environment and good for our business.

The Future

What do you see as the future of Fareway? What would you hope it would like in 20 years when you decided to retire perhaps?

We will provide quality at reasonable price, value to the customer, just as we have done from day one. We want this to be a great place to work. Customer service will continue to be key, providing that one-on-one and just communicating with the customer.

Does this imply you would stay in small towns, since one-on-one experience is more difficult in a large city?

No. It was almost 50 years before we went into a large city, and we learned that in a large city you are servicing a small neighborhood of that city. It is like a small town, and you do get to know people.

Personal

How did you get into this business?

I was looking for a job. I grew up in a large family and had to provide for my own clothing and pay for schoolbooks starting at age 12. As soon as I turned 16, I applied for a job at a Fareway store and started working a few weeks later. I enjoyed the work and, except for two years in the Army, I have been here ever since. I started as a bag boy, and just kept moving with the company. I worked as a department manager, assistant manager, store manager, and then became a regional supervisor. It has been a very rewarding experience. I never had the money or time to attend college.

This is a family-owned company, the stock is closely held, they have entrusted me with a lot of responsibility, and I respect them and the opportunities they have given me. So, it’s hard work, but it’s enjoyable. I never woke up in the morning and said, “I don’t want to go to work today.” I’ve always enjoyed working for the company, and they have treated me and my family well. It’s been a great relationship.

Do you take Sundays off as well?

Yes, I do. I try to enjoy the day with my family as much as possible. There have been occasions when I have worked on Sunday, but very seldom. I try to set the example and hopefully others recognize that and try to do the same.

What about your successor?

We are always putting people in positions to recognize their talents and then put them in a position to use their talents. We want people working where they can perform the best. This will help make our company stronger and our employees happier. I want to make sure the company is not dependent on me. That’s what our organization is all about.