Recession Survival Kit for Growing Chains
Operators share advice and experience for small restaurant chains on taking on the sluggish economy head-on.
By Maya Norris, Managing Editor -- Chain Leader, 5/1/2008 12:00:00 AM
Whether you call it a recession or merely an economic slowdown, the operating environment has taken its toll on restaurant chains. Soaring energy costs, increasing commodity prices and tighter credit markets are eating into sales and margins. Chain Leader spoke to some operators about growing in the midst of an economic downturn, including areas they are cutting back in and what they are still investing in.
Kenneth Pendery, CEO, First Watch, Bradenton, Fla.
We've made a concerted effort to control our corporate G&A expenses. We always watch it very closely, but we're obviously watching our pennies this year.
And we're going to build less restaurants this year because we just don't want to spend the money after a couple of years of very high occupancy costs and very high construction costs and going into what is perceived to be a tough economic climate. We didn't want to be out there opening as many new restaurants as we had done in '06 and '07, which was 25 new restaurants. So we're probably going to open anywhere between five and seven new restaurants this year. We probably won't get any franchised restaurants open. We'll get some franchised territories sold this year. We'd like to get anywhere between two and five territories sold this year.
Larry Whitty, president, Happy Joe's Pizza & Ice Cream, Bettendorf, Iowa
The efficiency side of people is what we're trying to pursue. We're actually paying people more. We're paying a better rate for more efficient-working and good-work-ethic people, and it's paying off. The sales have maintained or slightly increased. They're not negative, which is good chainwide. And we're finding that we're using less man-hours to get the job done.
Jeff Harvey, president and CEO, Burgerville, Vancouver, Wash.
We're still investing in our strategy to grow this company. Our intention is to accelerate that growth. So we, in the last year, have invested in a prototype process to design new restaurants—a new restaurant concept—so that we can roll them out on a very efficient basis. We're now moving from that design phase into the implementation with the intention to add some restaurants this year.
Barry Gutin, CEO, Cuba Libre, Philadelphia
We focused on reducing on our food costs through better utilization and reducing waste, better menuing. An example is we have a new arepa slider appetizer, which has several different types of meats, which are byproducts of other recipes that go in corn arepas.
We're also reviewing our decision-making when it comes to menuing and pricing and promotions. Very often you get excited by promotional vehicles and don't make a decision with the short- and long-term profit motive clearly in mind.
We're not cutting back on our marketing. I can't say that we're increasing it. As other people cut back their marketing, we get a larger share of voice, so our marketing becomes more effective. We're trying to keep top-of-mind awareness and build our profile in the national press, and often this is very important to us as we're an expanding concept.
We're trying to cut costs by reducing turnover, but you have to invest to do that. So we've been investing in people and training and training tools, new manuals and doing things to make the job experience better. Invest in the people who are doing the work out in the field in the restaurants touching the customers.
Gary Beisler, president and CEO, Qdoba Mexican Grill, Denver
These are the times people will react in one way: by raising prices or cutting portions or doing something to make their economic model look better. This is the time to deliver the most you can to the consumer on price value, atmosphere and service. It's counterintuitive to me as an operator to say, well let's cut labor because things are bad. The last thing you want to do is give poor service. Good operators stay the course.
They have to weather the storm and not try to take it out on the consumer. The consumer is getting beat up on every front. If we give them another reason not to come because we're raising the prices on them, too, you may lose that guest not for the next couple of months, you may lose them as a guest forever. And our key would be, give them what we can give them at a fair price, high quality, great price value and keep them coming through the bad times, and they'll remember you when the good times are back.
Billy Downs, founder, bd's Mongolian Barbeque, Ferndale, Mich.
We're designing a new prototype; we're just trying to reduce our overall investment cost so that our return on investment is higher. And then with that new prototype, we're trying to look for efficiencies in labor, where we can offer the same things to the guests with less man-hours in the future.
But have we designed a new program? No. We're trying to utilize the program that we already have in place, which is making sure that every guest makes a terrific bowl of stir fry and that they have a great experience. So it's just managing and intensifying the system that we have in place.
My one piece of advice would be to stay focused. Figure out what works for your brand and your business, or if you're a smaller operator, just what is it that works for you, and stay focused on that because a lack of focus means you could spend a lot of money now, and that could hurt you.
Check out veteran operator Fred LeFranc's dos and don'ts for riding an out an economic storm. Read "You Can Succeed in a Recession."
