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Boloco cofounder John Pepper eager to revive business

Boloco’s John Pepper at the Boylston Street restaurant with line cook Aracelly Haque. “My goal is to bring back the energy that has always been around Boloco,” Pepper said.
Boloco’s John Pepper at the Boylston Street restaurant with line cook Aracelly Haque. “My goal is to bring back the energy that has always been around Boloco,” Pepper said.Pat Greenhouse/Globe Staff/File 2014/Globe Staff

John Pepper is back at Boloco.

Pepper cofounded the Boston burrito chain in 1997, expanding it from a single restaurant to a business with $25 million in annual sales at 22 locations and a reputation for taking care of its workers.

But his tenure as Boloco’s chief executive ended abruptly in 2013.

Upset when a $15 million investment deal stalled, Pepper gave the company’s board of directors an ultimatum: Approve the deal or accept his resignation. The board said goodbye.

Now Pepper, who remained a Boloco investor, and other cofounders are again in control of the business he built.

They bought a majority stake from the private equity firm Winona Capital Management on Thursday.

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Pepper said he and the other cofounders now own more than 75 percent of Boloco but declined to provide financial details about the deal. Winona wished Pepper success when reached by phone Tuesday.

Patrick Renna, who had been promoted to chief executive when Pepper resigned, is now acting as chief financial officer. Pepper, 45, plans to serve as an interim chief executive until a new leader is announced by July 1.

“I honestly feel this was the right thing to do,” Pepper said. “I don’t feel overly ecstatic or anything like that. This is what had to happen, given the circumstance the company is in. If anyone can help Boloco survive and thrive, I’m the person to do it.”

Pepper said the burrito chain has “seen better days.” As growth stalled in recent years, Pepper said, the company was slow to reign in costs and focus on profitability. Sales fell and the company lost money in 2014, he said.

Two underperforming Boloco restaurants in Washington, D.C., closed late last year, and another on Newbury Street is slated to close this month, Pepper said. The chain now operates 20 restaurants.

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“You’re allowed to lose money when you’re growing because you’re investing in that future growth,” Pepper said. “When you cut off the growth, then the overhead costs have to match up and be less than the profits generated by the restaurants. That probably didn’t happen quickly enough.”

Pepper grew up in Cincinnati and is the son of John E. Pepper Jr., a former chairman at Walt Disney Co. and a onetime chief executive at Procter & Gamble Co.

After living in San Francisco for a period, the younger Pepper moved to New England to get his MBA at Dartmouth.

In 1996, he teamed up with Gregg Harris, Adam Liebman, and Jason Hutchinson, friends who had both lived in the Bay Area and shared a desire to offer quality burritos across the country. They opened their first restaurant on Massachusetts Avenue, across from Berklee College of Music, in 1997.

The name of the business changed several times and eventually became Boloco, short for Boston Local Company, in 2005. At the time, it had 10 stores.

As Boloco expanded it also become known as a rare champion for low-wage workers in a fast-food industry notorious for paying the bare minimum and relying on part-time employees.

In 2002, when the Massachusetts minimum wage was $6.75, Boloco paid its lowest-level workers $8 an hour.

Now, no employee earns less than $10 an hour. Boloco also provides many workers with health and dental insurance, 401(k) opportunities, paid time off, and English-language classes.

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But by 2013, Boloco’s steady growth had slowed, and Pepper sought new investors. Winona, a Chicago firm that had stakes in Petsense and other consumer brands, had purchased a controlling stake in 2007 and remained a majority owner.

The Boloco board and existing investors had approved a $15 million equity deal in 2013, Pepper said. But the deal fell through over issues about control of the company, he said, leading to his ultimatum to the board.

“I walked the proverbial plank, and sadly never got to get back on our boat,” he wrote in a memo to Boloco employees days after he resigned. “In short, our current owners accepted my resignation and rejected the deal. It happened very quickly.”

During his time away from Boloco, Pepper was briefly an Uber driver, started writing a book based on his business experience, worked as a restaurant technology consultant, and founded a new company with a product that allows employees to grade their co-workers.

Ani Collum, a partner at the Norwell consultancy Retail Concepts, said the break might have been a good opportunity for Pepper to step back, dabble in other businesses, and apply what he’s learned to Boloco. The company needs to hone in on its concept, provide a clear message to consumers and, in particular, make the menu less confusing to compete with newer companies, she said.

“Having that fresh perspective and being able to come back can be very invigorating for a brand,” Collum said.

Pepper agreed with Collum’s criticism of the menu and said he also plans to focus on the company’s mission of improving the lives of its employees.

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“My goal is to bring back the energy that has always been around Boloco,” he said, a company that “inspires and tries to do things differently.”


Taryn Luna can be reached
at taryn.luna@globe.com. Follow her on Twitter @TarynLuna.