He’s Back for Seconds

John Martin is probably somewhere on Pacific Coast Highway this morning, roaring toward Laguna Beach on his 1993 Harley-Davidson lowrider--a drive the former chairman of Taco Bell Corp. makes every Sunday when he’s in town.

“Being on a bike is like skiing, where you get that feeling of total freedom,” he is fond of saying. The excursion conjures up images of risk-taking, rebellion and showmanship--traits that helped make Martin one of the biggest names in the restaurant business.

In his 13-year career at the wheel of the Irvine-based Mexican fast-food chain, Martin garnered a reputation as a visionary, using unconventional methods to build Taco Bell into a global powerhouse. A little more than a year ago, Martin all but dropped out of sight after stepping down from the company, the storied career ending on a sour note.

Now he’s taking another big chance.

With the millions he has earned, the 52-year-old Martin is creating his own restaurant empire. In the last six months, he has taken control of a tiny chain of motorcycle-themed cafes, announced the launch of an upscale restaurant company and become chairman of the struggling Diedrich Coffee chain.

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The new ventures are helping re-energize one of the restaurant industry’s legendary figures. They also are helping Martin move beyond a series of setbacks in his personal life, including two drunk-driving arrests and the breakup of his third marriage.

“The chance to start with a clean slate is a wonderful thing,” said Martin, reflecting on his new business endeavors. “And this is the chance of a lifetime, to start with a clean canvas and paint something really beautiful.”

Martin has surrounded himself with an impressive cast of talent. Along for the ride are former Taco Bell marketing whiz Tim Ryan, who is running Diedrich; Orange County restaurateur David Wilhelm, who is developing eateries for Martin’s Pacific Restaurant Adventures; and Bill Prather, a former Burger King and Hardee’s executive who is overseeing Newriders Inc., a restaurant and publishing concern.

All face major challenges if they hope to live up to Martin’s lofty expectations.

The 38-store Diedrich chain is trying to return to profitability after an ill-fated out-of-state expansion. It operates in the shadow of Starbucks, which has more than 1,500 locations worldwide.

Pacific Restaurant is trying to break into the fickle upscale-dining segment, and it’s doing it in locations where several others have failed.

The biggest risk of all--Newriders--is the one likely to consume most of Martin’s time. Its fortunes are tied to motorcycles--Martin’s overriding passion since college.

Newriders was a small-time operation when Martin joined the company as a director last summer. It owned two biker-themed Easyrider Cafes, in Fresno and Myrtle Beach, S.C.

“The franchisees had a neat little place but didn’t really know what they were doing,” said Martin, who’s now Newriders’ chairman. He’s put the brakes on any expansion until he can refine the concept. Among his concerns: a slowdown among themed restaurants, including two Harley-Davidson Cafes that opened in New York and Las Vegas.

To better focus and build Newriders, Martin brought in Prather, with whom he worked at Burger King in the 1970s. He has since added four of Prather’s restaurants and is buying Paisano Publications, which owns 12 magazines and the “Easyrider” name, which it licenses to franchisees and others.

Martin plans to meld Newriders’ concept with the Easyrider name to capitalize on America’s growing interest in motorcycles. It would start with restaurants and expand to dealerships and rental agencies.

“If you want to know where to build a [biker] restaurant,” he said, “look at their subscription list.”

It’s that kind of broad thinking that Martin used to make his mark on the nation’s restaurant industry.

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Time and again, Martin went against conventional wisdom when it came to confronting challenges. When labor costs got too high, he shrunk Taco Bell’s kitchens and contracted out much of the food preparation. When competitors’ prices rose, he whacked them at Taco Bell and made up the difference in volume. When sales stalled, Taco Bell’s advertising agencies came up with memorable campaigns.

Not all of Martin’s ideas were hits. A taco vending machine never proved commercially viable. Neither did a low-fat menu called Border Lights. And not everyone was enamored of Martin, particularly some of Taco Bell’s franchisees, who said their profits fell when menu prices were cut and sales declined because the company expanded into airports, schools and other nontraditional locations.

But Martin’s eye for the big picture and showy events, combined with a sense of bravado, seemed to always overshadow his mistakes.

In 1993, Taco Bell began sponsoring a big charity golf tournament that attracted professional players and celebrities and raised more than $1.2 million for Hoag Memorial Hospital in Newport Beach.

The next year, Martin all but declared that Taco Bell was moving to Texas, a prospect that had lawmakers such as Gov. Pete Wilson and titans like Irvine Co. Chairman Donald Bren begging him to stay. The company won a multimillion-dollar package of tax breaks from the state and a nearly 50% discount on rent at its Irvine headquarters.

In 1996, at a franchisee convention in Las Vegas, Martin blazed through the grand ballroom of Bally’s casino to the podium on his Harley, heralding his return to the helm of Taco Bell after his heir apparent left the company.

“John is an entrepreneur in every sense of the word,” said Andrall Pearson, chairman of Taco Bell’s owner, Louisville, Ky.-based Tricon Global Restaurants. “He is a risk-taker, is creative and has a deep passion for the restaurant business.”

Nowhere was that more apparent than at Taco Bell. When Martin took over in 1983, the company had 1,500 restaurants and $600 million in annual sales. When he walked away in October 1996, it was the nation’s fourth-largest fast-food chain, with more than 25,000 points of distribution and $4.5 billion in sales.

His methods even captured the attention of Harvard Business School, which in 1992 dedicated one of its ubiquitous case studies to Taco Bell’s cutting-edge strategies.

Martin said he learned to think creatively from his father, who was a stockbroker at Goodbody & Co. in Detroit. The two frequently took morning walks together when Martin was growing up in the 1950s.

“He taught me two things: curiosity and how to reason,” Martin said. “As I grew up as a kid, all we did was look at things and ask why, and he would always take the time to frame things in the larger sense.”

Martin put that reasoning to work in 1994. Looking for something to succeed Taco Bell’s low-price menu, which was rapidly running out of gas, he hit upon what seemed to be the ultimate fix for the fast-food industry: food that was low in fat.

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Part of the idea came from a low-fat diet Martin was on, one that he said helped him shed 50 pounds. But in developing the Lights menu for Taco Bell, Martin broke a basic rule of the restaurant business: Don’t introduce a new product until it has been fully tested.

For Taco Bell, the test period on a new product runs anywhere from six months to a year. The menu test, conducted in the Seattle area, lasted less than three months.

“The results were so good we thought, ‘Well, gee, why wait?’ ” Martin said.

Waiting probably would have uncovered what would prove to be the menu’s fatal flaw. The number of ingredients on the food production line of a typical Taco Bell went from 22 to more than 30. “In fast food, that’s huge,” Martin said.

In retrospect, the results were predictable. The time it took to prepare an average order went up, from less than three minutes, to five minutes and 10 seconds. After an initial surge in sales, the delay eventually proved disastrous to an operation that does the bulk of its sales in less than two hours over the course of a day.

“If you’re at maximum capacity, a good restaurant can do $900 in sales an hour,” Martin said. By nearly doubling the food-preparation time, “you’ve just cut that down to less than $500 an hour.”

It didn’t take long for that trend to surface in the company’s financial reports. Sales and operating profits at Taco Bell’s established restaurants fell markedly in the three quarters following the menu’s introduction. The company pulled the plug after 13 months.

“We should have stayed in test market longer,” Martin said. “To me, that was the greatest sin. It was never a consumer acceptance problem or a sales problem.”

Impatience is one of Martin’s managerial shortcomings, said Ryan, whom Martin coaxed out of retirement to run Diedrich.

“John pulls the trigger very quickly,” Ryan said. “He goes on instincts, and in the restaurant business you need to fully develop new concepts before you launch them. Sometimes that takes more time than he’s willing to live with.”

Martin said the failure of the Border Lights menu did not cost him his job at Taco Bell, as has been widely reported.

“I had two goals when I got into this business,” Martin said. “One was to be president of a company by the time I was 35, and the other was to get out of the corporate rat race by the time I was 50.”

He achieved the former, but missed the latter by about two years. By his own account, his final years at Taco Bell became increasingly stressful as it became more difficult to top his most recent feat.

Like many CEOs, Martin worked 80-hour weeks, with more than half that time spent traveling around the country. In an unusually candid interview with The Times in 1994, he talked about the pressures of being a corporate chieftain.

“The hardest thing about being a CEO is that all you deal with is bad stuff,” he said. “The organization digests and processes the good stuff. So most of my time is spent on things that are broken, that are controversial, that aren’t good.”

The stress may have begun to take its toll in 1993.

In April of that year, Martin was arrested by Laguna Beach police for allegedly driving under the influence of alcohol, according to court records. His blood-alcohol level registered 0.22%, nearly three times the legal limit. The charges were reduced to reckless driving, and Martin received three years’ probation.

Nine months after the conviction, Taco Bell named PepsiCo financial whiz Kenneth E. Stevens president, with the intention of grooming him to be Martin’s successor. Martin said the move had been in the works for some time and was not related to the arrest.

But two months later, on Aug. 20, 1994, Martin was again arrested on suspicion of drunk driving after crashing his Mercedes 600SL into the center divider on MacArthur Boulevard near John Wayne Airport. His blood-alcohol level registered 0.19%, more than twice the legal limit, according to court and police records.

The Department of Motor Vehicles revoked Martin’s driver’s license and Martin protested by filing a civil suit. He said in the suit that the DMV’s action was based on evidence gathered by police that was flawed by how the blood test was administered and processed.

Martin’s attorneys argued that his blood-alcohol level was below 0.08% at the time he was detained but rose beyond that level by the time the blood test was conducted. They said in the suit that Martin had consumed only two glasses of wine just before the accident.

Noting in the lawsuit that the loss of his license would cost him his job, Martin hired a forensic toxicologist in a bid to discredit the handling of the blood test. A DMV hearing officer sided with the police, and Martin’s license was suspended for one year.

“I would say that I’m human and, like all humans, I’m fallible,” he said. “Clearly it was a mistake. In this business, I think you take things like eating a lot of food and drinking a lot wine for granted. I don’t take it for granted anymore. . . . I absolutely learned from it.”

The second arrest came two months after Martin married his third wife, Stefanie Mayer, who at the time was a 28-year-old hostess at Bistro 201, an Irvine restaurant that Wilhelm owned and Martin frequented. The two were married on Mauna Lani Point in Hawaii in June 1994.

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In a foretelling observation, Martin noted that his high-pressure lifestyle made living with him difficult. “I can’t imagine why anybody, with the schedule I’ve got, the stress, would want to be with me.”

The couple separated after two years and two months and she filed for divorce in September 1996, citing irreconcilable differences.

Martin declined to discuss the relationship.

Nowadays, Martin is focused on the one constant female companion in his life: 17-year-old daughter Elizabeth, a junior at Mater Dei high school in Santa Ana.

Martin lives only a mile from his daughter, whom he said he sees every Sunday and talks with several times a week. Last summer she worked as his secretary for several weeks.

“She did just great, just great,” Martin said. “She’s really interested in the restaurant business, and she’s always quizzing me about how a particular restaurant is doing, how a deal is going. It was wonderful having her every day. . . . We got to spend a lot of time together.”

For Martin, that beats the corporate rat race any day.

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

John Martin: A Resume

Age: 52

Residence: Irvine

Personal: Divorced, one daughter

Education: Bachelor of arts degree, Middlebury College, Vermont

Career ladder:

1997: Chairman, Diedrich Coffee, Newriders and Pacific Restaurant Adventures

1996: Chief executive, PepsiCo casual-dining division

1983: President, chief executive, chairman of Taco Bell

1983: President, La Petite Boulangerie

1979: President, Burger Chef/Hardee’s

1973: Manager trainee, regional training, district manager and head of European operations, Burger King

1970: Food service manager, Canteen Corp./ARA Services

1968: U.S. Army

1967: Manager, Der Wienerschnitzel

Boards

* Chevy’s Mexican restaurants

* FMAC

* Good Guys

* Newriders

* Williams-Sonoma

* Diedrich Coffee

On why Taco Bell’s “light” menu failed:

“We should have stayed in test market longer. To me, that was the greatest sin. It was never a consumer acceptance problem or a sales problem.”

On why it’s not always fun being the boss:

“The hardest thing about being a CEO is that all you deal with is bad stuff. The organization digests and processes the good stuff. So most of my time is spent on things that are broken, that are controversial, that aren’t good.”

Sources: John Martin, Times reports

(BEGIN TEXT OF INFOBOX / INFOGRAPHIC)

New Menu

Former Taco Bell Chairman John Martin is going in new directions in the restaurant business. His latest endeavors:

Pacific Restaurant Adventures

Headquarters: Newport Beach

Involvement: Chairman, majority owner

Business: Owner/operator of upscale restaurants

Operations: Owns Chimayo Grill in Newport Beach, manages Sorrento Grille in Laguna Beach, developing French ’75 in Laguna Beach, Chimayo on the Beach in Huntington Beach and Savannah Chophouse in Laguna Niguel.

Plans: Open five to seven more restaurants in Southern California during next three years.

Management: Orange County restaurateur David Wilhelm will develop and open restaurants; company is searching for a director of restaurant operations. Former Taco Bell executive Rudy Pollak is chief development and administrative officer.

Martin says: “Our dedication is to deliver a very superior level of quality that we don’t have a lot of yet [in Orange County].”

Newriders Inc.

Headquarters: Newport Beach

Involvement: Chairman

Business: Restaurants, publishing

Operations: Owns two Easyrider Cafes, four El Paso Barbecue eateries, Paisano Publications, the Agoura publisher of Easyrider and other motorcycle magazines

Plans: Build both restaurant concepts into national chains, expand into motorcycle-related industries, including dealerships

Management: Bill Prather, former operations chief of Hardee’s and former chief executive of Furr’s/Bishop’s cafeteria chain, is chief executive

Martin says: “The [Easyrider Cafe] franchisees had a neat little place but didn’t really know what they were doing.”

Diedrich Coffee Inc.

Headquarters: Irvine

Business: Retail coffee bars

Involvement: Chairman, 7% stake

Operations: 38 coffee bars in three states; coffee-roasting facility in Irvine

Plans: Return chain to profitability; expand presence with more stores, carts and kiosks; grow brand through franchising, licensing, wholesaling.

Management: Former Taco Bell marketing whiz Tim Ryan is chief executive; Kerry Coin is operations chief; Martin Diedrich is chief coffee officer.

Martin says: “We want to build on what is a good concept: a warm and friendly coffee shop with warm and friendly people.”

Sources: Companies listed

Times researcher Lois Hooker contributed to this report.