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Tom Donaldson, president and CEO of Edo Japan from Calgary, photographed on June 29, 2011. (Chris Bolin/Edo Japan)
Tom Donaldson, president and CEO of Edo Japan from Calgary, photographed on June 29, 2011. (Chris Bolin/Edo Japan)

Acquisitions

Edo Japan owner fixed the company, then bought it Add to ...

When Tom Donaldson went looking for a business to call his own, the long-time restaurant executive didn’t try to start his own brand or cook up a novel new recipe to sell to hungry consumers.

He took a leadership role and an equity stake in Edo Japan, an existing fast-food franchise with menu items his wife would rave about after trips to the local mall. The Teppan-style cooking business was struggling, but Mr. Donaldson eventually turned it around, and then purchased it outright from its founders and other investors in 2006.

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Calgary-based Edo Japan has more than 100 locations in food courts across Canada, mostly in the West, and it is celebrating its 35th anniversary. Mr. Donaldson has received awards for his entrepreneurial acumen, even though he claims not to be “a typical entrepreneur.”

“I’m not an inventor,” he says. “The ones who start from scratch are generally inventors, idea people, but they aren’t managers.”

The business landscape is filled with entrepreneurs such as Mr. Donaldson, who decide to buy into the title instead of starting from scratch. A lot of them go this route because they don’t have an idea, they don’t want to take the risk with an untested brand, or they don’t want to go through the complicated process of trying to raise money and get all of the necessary government approvals for a new venture.

Some have started their own businesses in the past, but they don’t want to go through it again.

“More experienced entrepreneurs tend not to want to start one again. They like to find one that is doing okay, but they make it do a heck of a lot better, ” said Jesse Rodgers, director of the Creative Destruction Lab at the University of Toronto’s Rotman School of Management. He also founded TribeHR, a business software company acquired by NetSuite in 2013.

Mr. Rodgers said some entrepreneurs simply don’t have the cash to buy a business that’s already up and running, but he says he believes it can be “way more attractive to go into something that already has revenue and you can built and shape.”

Lori Bacon decided to buy her mother’s swimwear company, SwimCo, along with her husband and brother, because it was a business they were familiar with, and it was ripe for expansion. Her mother, Corinne Forseth, started the company as a hobby in 1975, when Ms. Bacon was a kid participating in the local swim team.

Ms. Bacon joined her mother’s company after graduating from university in 1981 – it was still a mail-order business – and helped build out half-a-dozen stores in Western Canada.

Her mother decided to retire 20 years ago, and Ms. Bacon, husband Dave Bacon and brother Steve Forseth have since expanded SwimCo to 22 stores across Western Canada and an e-commerce site. Ms. Bacon says she loves the swimwear business, and she bought it because it was “a venture you can see.”

“I like being able to create something tangible and then put your own personality on it,” says Ms. Bacon, adding that starting a company means having to come up with a winning idea and then developing the structure.

“It addressed our creative needs … I didn’t think about going off and doing something else and going that [startup] route.”

For Derek Archer, buying restaurant franchises seemed like a logical career move to fulfill his entrepreneurial drive, after having worked in the business since he was a teenager growing up in North Vancouver.

Mr. Archer didn’t have the money to start his own place, but he partnered with well-known restaurant entrepreneur Scott Morison to open the first Browns Socialhouse in North Vancouver in 2004, which is now a chain with more than two-dozen locations across Canada.

Mr. Archer currently owns three Browns locations: one in Red Deer, Alta., and two in North Vancouver, including the original location. “I wanted to be part of building something from the ground up, even though it wasn’t my idea,” Mr. Archer says.

“Franchising is a great way to get into business … You are minimizing so much risk by jumping into a community.”

Mr. Donaldson’s journey with Edo Japan was a bit more challenging. He joined the company 15 years ago, when it had 102 locations across Canada, the United States and Australia, a good menu, but low unit volumes. He said many of the franchises were on the verge of closing. Mr. Donaldson saw a chance to revitalize the brand through better marketing and by focusing the operations in Canada.

He closed 60 underperforming locations over 10 years, retreated to Western Canada, and began to rebuild the business by redesigning the stores, while sticking to the same popular menu items. He also changed how the name was pronounced to “e-do” from “ed-o,” because it was what Canadians had come to call the restaurant.

Mr. Donaldson had an agreement with the founder and majority owners, a Japanese Buddhist minister and his wife, that he could buy the business once he proved it could be transformed into a money-making venture.

“The rewards of being an entrepreneur are significant,” whether you’ve built the brand or bought into it, Mr. Donaldson says. “It’s the personal feeling you get from doing it and the relationships with people … That’s corny as hell, but it is what it is … . It’s rewarding from a financial side and it’s rewarding not to have to answer to anyone else.”

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