Eat your heart out, New York.

While New Yorkers have been deprived of New York Fries for years, the french fry that originated in the Big Apple has become a mainstay in Canada thanks to Jay Gould.

Gould, who founded the Canadian operations for New York Fries with his brother Hal in 1984 after sampling the fries in the original New York location (since closed), has seized on a Manhattan idea and built it into one of Canada's largest fast-food franchises with 176 stores across the country.

With the New York Fries business sizzling, the enterprising Gould has complemented his product offering with the recent launch of a new potato product, Crisp Cut Potato Chips.

Ken Kerr, Business Edge
Jay Gould, president of New York Fries, says the move into selling bagged potato chips is a logical brand extension.

For a Toronto entrepreneur with a New York state of mind, it's just another chip off the old block.

1. Did you have New York Fries for lunch today?

"I did not. Should I have said yes? I often do, but I wouldn't advise anyone to eat New York Fries for lunch every day."

2. Are you from an entrepreneurial family?

"I would say yes. My father (John Gould) was in the outdoor advertising business. He died at a rather early age and we sold that business to Jim Pattison (the Pattison Group) in Vancouver. My father was very well respected in business for fairness, and we learned from his demeanour and his approach."

3. What was your boyhood dream?

"Like all people, at a very early age I wanted to be an artist and paint billboards, but that sort of vanished when the reality of that effort was exposed to me. I sort of fell into the restaurant business on an idea. I wasn't doing a whole lot when I was 21. I was working for a finance company in Vancouver, processing loans to unqualified borrowers."

4. How far did you go in school?

"I went to Bishop's University in Quebec, but I only lasted one year there. I had a lot of fun there. I played football and met some great people. But that was the year that my father died. While I would not use that as an excuse for not continuing school, I decided at the end of the year that I would go back to school only when I had something specific that I wanted to learn. And while perhaps there probably have been a few things I should have learned, I have not since returned."

5. What was your first business venture?

Ken Kerr, Business Edge
Jay Gould shows off a standard tub of fries and the new BBQ-flavoured chips at the New York Fries' corporate outlet in Scarborough.

"It was the Cultures franchise, which was a yogurt version of soft cream (stores). My mother (Marcia) thought it was a good idea after seeing it in New York. My brother Hal had done a fair bit of research and homework on the idea. At the time, I returned from B.C. at Christmastime and I was a pair of hands and eyes and ears to proceed with seeing if it was a good idea or not. We ended up opening our first store in London in May of 1977. We also built a menu around yogurt, adding date and bran muffins and a variety of salads. We opened to a very solid customer base and we sold it 10 years later (for about $10 million) to Steinberg's (Inc.) in Montreal in the belief that they had the infrastructure, the wherewithal and the buying power to take it from the 60 restaurants we had at the time to 600. But that company (Steinberg's) was sold and Cultures sat languishing a little bit after that."

6. How did you get the idea to start the Canadian franchise for New York Fries in 1984?

"My brother (Hal) and I went to the New York Fries in New York and we determined that a premium product like that had legs. This place had a lineup and was in an obscure location (in Manhattan). It was doing very well. When we sold Cultures in 1987, we bought the rights to New York Fries. By that time, their original (only) store had closed. I think it (buyout) was about $600,000 in Canadian funds. It was essentially buying futures."

7. Why aren't there New York Fries stores in New York or the U.S. for that matter?

"The retail landscape is littered with Canadian failures south of the border. As similar as we appear in obvious things such as language and lifestyle, there are many differences in the retail business in the U.S. As a small example, a two-million-sq.-ft. shopping centre in the U.S. might have 110 stores and in Canada that same footprint would have 210 stores, meaning, of course, that the shop space is much smaller. But that also means that there are many more shops. Instead of two shoe stores, there would be four. Generally speaking, I would argue that the traffic in Canadian shopping centres in general is much higher, partly weather induced. We have tried going into the U.S. We had a few stores in Michigan and one in St. Louis. But we decided long ago that unless we had an appropriate and seasoned partner that was well capitalized and might possess territorial rights to other food-service operations and therefore the infrastructure for it, we would not go back (to the U.S.) with a ma-and-pa type of operator."

8. What's the cost of a New York Fries franchise?

"If we had any to sell, a new store would be about $175,000 or $185,000 for the franchise fee. We're doing a little international stuff further afield (there are stores in Korea, Australia and the United Arab Emirates). We are still looking for different venues here in this country where it might be appropriate. One relatively new outlet for us has been major movie complexes and across Canada we now have probably 40-odd units in big Famous Players complexes. It's a natural fit there. There are airports we'd like to get into, so there are still avenues to explore. We also want to leverage the brand into some other products that are legitimate on their own, but would also help get the product into your home."

9. You've just start marketing potato chips. What convinced you that you could be successful in such a competitive market?

"The brand extension is a good fit for us. It's logical. If we can produce a quality product in a competitive climate, I think it is a competitive market but it is also a very large market. It's a potato product, the company that is producing them for us (Naturally Home Grown Foods, based in Maple Ridge, B.C.) cooks in trans-fat-free sunflower oil, which is what we use in our stores. There are many complementary business philosophies between them and us. And we think it's got legs. We have roughly 12 million customers a year coming to our counters, so there's an opportunity for us to put something into their hands and onto their coffee tables. And it meets the criteria of a premium product, and if it enhances the brand as we think it does, then we'd be crazy not to try and sell our customers something else. We have two other flavours of chips (besides barbecue chips) sort of waiting in the wings. Beyond selling potato chips in our own stores, we'd like to get into the grocery store and convenience store channels."

10. Who owns New York Fries?

"It's just my brother (Hal, who is in the real estate business) and I."

11. What have you learned about franchising and what makes that system work?

"Franchising is a form of financing. I look at it almost as a form of going public without actually going public. It's a way of using other people's money to grow the business. On the positive side, an owner-operator - because he has a vested interest in how the unit operates - is going to do a better job than hired guns nine times out of 10. There's no ego attached in buying a french fry stand and spending that much money on it. You either think that the product is right and you can do something with it, or you don't. For those reasons, we've attracted a top-quality group of franchisees. The average franchisee in the system owns three stores."

12. What's the key to success for the franchisees?

"It's all about the quality of the product. At our franchise meetings, we've had franchisees looking to get top-quality potatoes at a lower price, but we've never had anybody coming in looking at the company to buy cheaper potatoes or cheaper oil because they know, ultimately, what side their bread is buttered on. If our fries aren't head and shoulders above the competition, which is right beside where we operate, we're out of business. It's that simple."

13. Have you considered taking the company public, perhaps through an income trust structure?

"We have considered it. I think the reality for us is that the amount of money consumed in fees, be it legal or brokerage fees, is a disproportionate percentage of the proceeds. I'm not sure we're big enough to bring those fees down in terms of a percentage of the overall deal. One of the concerns I have is that when you look at a lot of them (income trusts) in the hospitality industry, you wonder sometimes where the company ... has the incentive to grow. If all the honey is being hived off at the top, what's the incentive to add new properties and grow if most of that royalty income, or in our case royalty income from franchisees, is going to the income trust? What's in it for us? There are some attractive sides to the income trust. But, as the old adage goes, there's no free lunch. It does come with its own baggage. So it won't happen, at least not in the short term."

14. How have the low-carb and low-fat diet fads impacted your business?

"It's hard to quantify, but we're having a banner year this year in terms of sales. You'd have to be living under a rock in this country not to wake up to the media pasting that the hospitality and fast-food business in particular has been taking. Much of it is legitimate and some of it, I think, is unwarranted. We're very sensitive to that because if we weren't careful and we weren't concerned about remaining relevant to our customers, we could just as easily be the poster child for everything that's wrong in your diet. We started using sunflower oil last year that has no trans-fat in it and no cholesterol. Six months after that, we actually downsized our portions. We knew that by doing that we would lower the size the customer buys. We decided not to overfeed our customers and perhaps leave them wanting at the end of the day. It reduced our average cheque and here we are now with our sales across the chain up close to six per cent. If you are cutting back on the amount of fatty foods you eat ... perhaps you're not going to waste that opportunity on ordinary or lousy products. I think that is a marketing window and an opportunity for New York Fries."

15. Yet, it's obvious that french fries aren't exactly a health-food product.

"We have been in the business for 21 years of selling what I think is a better-quality product than exists in the marketplace. We didn't invent the french fry and we frankly don't represent much of a dint in the overall consumption in this country of that product. If we pick up some market share, great. Over the last number of years, the incidence of french-fry purchases in this country might have reduced as much as 10 per cent. Our sales don't reflect that. So it's coming out of somebody's hide. And it might be because Wendy's has added a salad and McDonald's has apples in their Happy Meals instead of fries in some cases. But we serve a product that people are going to buy one way or the other. I choose to think that ours is a better-quality product. It's fresh, we leave on the skin where all the vitamins and proteins are housed in a potato, and we cook in sunflower oil. While I wouldn't recommend it as a daily diet, it is a perfectly natural and perfectly good product."

16. Are you looking at other opportunities in the food business?

"Yes. But you may not like that one either (laughing). We're close to opening up a new fast-food business and we're not quite ready to go to market with it. But it will have, as part of its offering, our fries. It is a new venture but still very much in the food-service business and, quite frankly, in the same sort of vein as both New York Fries and, I would argue, Cultures."

17. How would you describe your business philosophy?

"As for the business itself, I truly believe that there is always room at the high end and, while I haven't tested every other form of business, I believe that there is a better mousetrap out there and there is a willingness to pay for it. In the business that I'm in, the market is maturing. Many of the Baby Boomers have advanced from the typical fast-food operation to want something that is better quality and they're prepared to pay a couple of bucks more for something done the way they would like it. Beyond that, I've been able to attract good people, whether they're here in my office or the franchisees. And I'm fully aware that that has made the business. It's not me. I think occasionally I've got a decent idea, but I've got great people who can help formulate those ideas and help execute them. So, if I've had any talent in the past, it's being able to attract people, play ball with them and play fair."

18. How do you reflect on your career in business?

"Things have gone very well for me. I feel fortunate and I can't emphasize enough that it's because I've got some really great people around me. That's it in a nutshell. There's no way I could do it myself. It's way past admitting that I'm lazy. It's just that I think that somebody who likes it is going to do a much better job at it than me."

19. So what's the catalyst that drives you to continue as an entrepreneur?

"There's a fun side to it. A new idea, something as simple as this potato chip, is kind of fun. There's a marketing side to it. We think we've got the best chip out there. I have no interest in producing another also-ran in the business. If I thought it wasn't as good or better than anything on the shelf, we wouldn't do it. And if taking that approach has its challenges, then that's what makes it interesting to me. I like new challenges. I like new projects. And fortunately I've had enough challenges over the years to keep me interested."

20. Ten years from today, where will you be and what will you being doing?

"I'll be on the dock. Or on the first tee. But I've never planned even three to five years ahead. I have no intention at this stage of going away and frankly would have a difficult time planning anything concrete more than 12 months out. So I don't look forward to retirement. It's not a goal of mine. Having said that, I fully intend to enjoy myself, too, if that's in the cards."

JAY GOULD

* Title: President/owner, New York Fries.

* Born/raised/age: London/Brantford/51.

* Education: Bishop's University (did not graduate).

* Family: Wife Janet, two sons.

* Career: Gould has been self-employed in the fast-food franchising business since age 21 when he launched the Cultures chain with his brother Hal. That company was sold in 1987 after it had grown to 60 stores. Gould acquired Canadian rights to New York Fries in 1984 and bought out the New York company in 1987.

* Accolades: In 2002, Gould was the recipient of Foodservice and Hospitality magazine's Pinnacle Award as entrepreneur of the year.

* Moonlighting: Gould is a board member of Domino's Pizza Canada Ltd. and on the advisory board for Canada's Foodservice and Hospitality magazine.

* Boyhood idol: Elvis Presley.

* Drives to work in: 2005 Mercedes Benz CLK convertible.

* Favourite author: Robert Ludlum.

* Pastime: Golf.

NEW YORK FRIES

* Owners: Jay and Hal Gould.

* Profile: New York Fries is a french-fry franchise offering premium fries through a chain of 176 stores in Canada and nine other outlets in Korea, Australia and the United Arab Emirates at shopping centres, movie theatres and theme parks. The company has been operating in Canada since 1984.

* Latest: New York Fries recently introduced a new potato product, barbecue-flavoured Crisp Cut Potato Chips, to be sold at its stores.

* Stat: It takes 600 grams of raw potatoes to make one 150-gram bag of Crisp Cut Potato Chips ($3.25).

* Claim to Fame: New York Fries was recognized as one of Canada's 50 Best Managed Companies in 2000, 2001 and 2002.

* Website: www.newyorkfries.com

* Head Office: 400, 1220 Yonge St., Toronto, M4T 1W1.

* Phone/Fax: 416-963-5005/963-4920.

(Gyle Konotopetz can be reached at gyle@businessedge.ca)