Entrepreneurship: business and government.

• Author: Francis, Eddie
• Position: Canada-United States Law Institute Annual Conference on Comparative Legal Aspects of Entrepreneurship in Canada and the United States

INTRODUCTION

Charles Magerman

MR MAGERMAN: Good evening. Sorry for interrupting the dessert portion of the meal, but can everyone in the back hear me? Is the microphone working back there? I don't know. Thank you. It is working? I am getting nods from the back, so I think it is working.

If you haven't met me already, or if you weren't paying attention when we met, my name is Chuck Magerman, and I practice corporate and finance law with Baker & McKenzie's Toronto office, where I head up the corporate finance practice group in Toronto.

I have been asked, and it is my pleasure to be here tonight, to introduce the Mayor of Windsor, Eddie Francis, who will be making comments to you about--I don't want to steal his wind--but about entrepreneurship and about government and the relationship between the two.

If you haven't read the bio in the book, I may add a little bit to that. Francis was elected as a councilor in 1999 in the City of Windsor, and he was the youngest ever elected at age 25. (1) You can do the math and figure out how old he is now.

He was re-elected as a councilor again with the largest majority ever in 2000, (2) and you may wonder why was he elected in such a short period, but the 1999 election is a by-election. (3) And then he was elected in May 2003. (4) After he was elected as a councilor, he entered law school at the University of Windsor, and he was called to the bar and belongs to the Law Society in Canada and here in Ontario.

Before politics, however--and this is what makes him especially qualified to speak to us this evening--he, together with his brothers, successfully built a pita bread company that grew. This is Royal Pita that grew and was distributing to twelve states and various parts of the province.

And I think he is going to tell us a few stories about that and his experience with that business. And you may want to know one of the questions we were dealing with this afternoon is when do you decide when it is time to sell, and when do you know when it is a good price, at what multipliers. You can get into that if you like, Mayor.

So the question is: will he be talking to us tonight about entrepreneurship, business and government as the topic reads, or will he be talking about entrepreneurship leading to government positions or how entrepreneurs can access government funding?

We have many choices, but I leave it to the Mayor, and I welcome you.

SPEAKER

Hon. Eddie Francis *

MAYOR FRANCIS: Thank you, Chuck. Thank you for that kind and warm introduction.

And I have got to admit right off the bat, as a politician, having someone copy each and every single word makes me nervous, but it is good to be here. And part of my discussion this evening will be a discussion focused on, obviously, entrepreneurs, and given my position as Mayor of the City of Windsor, how entrepreneurs play a role in the government if it does have a role to play at all.

But first and foremost, I would like to recognize and thank Henry for having me and inviting me here. I know that you had a great couple of days of discussion, and it has been a great program thus far. Now, it is odd for me to be standing here, and I told my wife I was going to be here speaking to each and every one of you. Here you have an individual that was in private business as an entrepreneur, then became a lawyer and ended up in politics - eating chicken dinners and spending long hours and low pay that attracted me to politics. And I told her there is going to be a group of lawyers, and she said, "Good. Get one of them to represent you to sue you for being a fool to go into politics."

To give you some background in terms of how it all became possible for me to represent the City of Windsor--which is a true honor, something I enjoy every single day--I attended the University of Windsor Law School, and I did my undergrad at the University of Western Ontario.

Doing my undergrad at the University of Western Ontario in chemistry, biochemistry in my fourth year, I had intentions of going into practice and to research. Growing up in high school and grade school, I was a student of the sciences, and that's why I did biochem.

But my parents had emigrated here from Lebanon in the early 1970s; and they immigrated to Windsor. My father, after putting in his time in Kelsey-Hayes and some of the plants, he was trying to find a meaningful way to make some money and raise a family, and he discovered there was something that was missing in the Southwestern Ontario area.

There is a large Arab population, both in Southwestern Ontario as well as in Michigan and even in Ohio. (5) But all of them were still making bread in their own kitchens and their own ovens. So my father established the first pita bread operation in Southwestern Ontario in the early 1970s, and he only catered to the Arab population because that's all he knew.

In the 1990s, he decided to retire. Here is an individual who worked 16 hours a day, seven days a week, and he decided to retire. He had no hobbies; he knew nothing else but to work. Growing up, we grew up in the family business, so when we wanted to see our family, we went to the family business to see them. When our friends were doing things on the weekends or having parties or taking in extracurricular activities, we were growing up in the family business doing what we had to do as part of our responsibilities. So he retired for two years and then decided to get back into it in 1997 as I was deciding where my future career was going to be after my undergrad.

He bought the building. He bought the machines. He was about to get started again, and then he fell ill. So I was asked, being the oldest, to come down and run the family business. I thought it would be a summer job, which was great. And growing up in the family business is not that hard, right? I grew up in it. It seemed pretty easy. The machines did everything, and the workers were there, distributed the product. It was just flour and water, and the rest is simple. After all, for years he had been making a living doing this; he had taken care of us, raised three kids, and provided for us. It can't be that hard.

So I decided to come down, take a summer leave, graduated from Western, decided to come down and run the business, and that's when I discovered something. I discovered that, although my dad was very good at what he did, my father was very smart at what he did. He only catered to one aspect of the market, and that was the Arab market. You can't blame him for it because he did a good job.

So my brothers and I decided that we could take this to the next level. And again, that was 1997. This is 1998. This is before the Atkins diet. This is before the carb craze. This is when people were starting to discover pita. McDonald's even had pita on the menu. (6) Subway was getting into flatbreads. (7)

When I went to school, when I was growing up, I was the only kid with a rolled sandwich where everybody else had these thick-layered Italian sandwiches. Nobody knew about pita growing up. But in the late 1990s, when we decided to get into the business, everybody was starting to discover the health consciousness and the understanding in terms of what pita was.

So my brothers and I wanted to exploit that. We wanted to take it to the average citizen. We wanted to take it to the Canadian and American marketplace, outside of the traditional Mediterranean-Arab marketplace. So we said we are going to do that. So we got the business.

We started running it, and we ran into a couple of problems. Back then, when we first started--I was 22 years old, my next brother Roger was three years younger, and Frank was 16 years old. We ran into some problems.

Growing up in the family business wasn't as easy as it appeared to be. We couldn't find anybody to supply us with our raw materials. The flour companies did not want to give a group of young guys a credit line. They didn't even want to supply us with product. The banks didn't want to give us money.

We were going to make a pitch to the Costcos, to the Sam's Clubs, to the Wal-Marts, to the retail markets. A 23-year-old kid sitting across the table from you, you are not going to take him too seriously. You are not going to give him shelf space in your retail establishment, especially with all the competition.

So we came up with a pretty innovative product mix. What we did was we were going to take pita bread to the next level in the sense of recognizing that it was not a specialty product. It is only flour, water, sugar, salt and yeast. You go to the store and buy a pack of five of pita bread, it is like four dollars. It cost us 30 cents to manufacture and produce it. Yet, people were still selling it at four dollars, and that's because people were treating it as a specialty product. So we said we were going to go with a product that was an accurate reflection of the cost. We were going to market it, fresh every single day, and produce the product and get the pita into the stores.

Again, to go back to my original point--we didn't even have the flour. I couldn't get the flourmills to supply us with flour. So we approached Costco, and we said to Costco--you have all been at Costco, fight? You know Costco sells flour? So we said we are going to go to Costco, and we are going to say to Costco, "We need some flour. Will you supply us?"

And in return, we are going to ask them to carry our product for us. So we went into Costco, we scheduled a meeting. It was the biggest meeting ever, again I was 23, 24, right? Put on our best suits. This is our first pitch we ever made, and we go to Costco and said to Costco, we are owners of Royal Pita. We want to buy flour from you. In return, we want you to carry our product in all of your stores. We want access to all of your stores, and I am going to guarantee that we will buy flour from you. Costco said okay, sounds good. How much flour do you guys need? I said one bag a month.

That was exactly their reaction.

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