Survival Tactics for Restaurant Chains
Restaurant chain operators attending the 6th annual Chain Leader LIVE conference discovered some good ideas for thriving in a bleak economy.
By David Farkas, Senior Editor -- Chain Leader, 11/13/2009 8:52:00 AM
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"Leadership should create energy, to win, not just to survive as a business," announced former Carlson Restaurants Worldwide CEO Richard Snead during a speech at Chain Leader LIVE, held in Denver, Oct. 28-30.
Easy for him to say.
Snead, who left the Dallas-based restaurant company last spring, is now a restaurant industry consultant. The executives who remain in the trenches were struggling with a serious consumer pullback. A recent report from AlixPartners LLC, for example, shows that the average per-meal spend has dropped 20 percent, to $11.49, and it's only going to get worse. "Expected average spend in the next 12 months is projected to drop 3 percent as consumers shift more to meals under $5," noted the report, which included data from 1,000 consumers.
Snead, however, didn't shrink from explaining how to summon such energy. He advised the group to do what you say you'll do, balance capability with capacity and be a tenacious problem-solver.
No Problem
Examples of problem-solving were in abundance during two dozen operator presentations, which ranged from marketing to menu development to cost-cutting. On the branding panel, moderated by Chain Leader blogger and longtime restaurant marketing executive Karen Brennan, Fazoli's CEO Carl Howard described the metrics management used to measure and then halt "migration," as he put it, away from the aging Italian fast-casual concept. The strategy including updating Fazoli's menu and decor.
New marketing, Howard said, focused on heavy users. But officials discovered new menu language was an issue. "'Pesto' was stretch," he added, so Fazoli's calls the sauce "creamy basil." Nonetheless, research showed a "more sophisticated user" has been attracted to the concept's remodeled units.
During the same session, marketing consultant John Ludwig gave a detailed analysis of how 68-unit Smokey Bones Bar & Fire Grill attracted younger, hipper customers by re-energizing the brand. Tactics included a more food-friendly bar area featuring small plates; an iPhone app that allows servers to instantly enroll customers into the chain's loyalty program; and a Web site that prompts visitors for a zip code and then introduces the hostess at the restaurant chain's nearest outpost.
Political Ally
Former restaurant operator and current Denver Mayor John Hickenlooper took the stage to describe the struggles he had raising money to open (and name) Wynkoop Brewery, Colorado's first brewpub, in 1988. Rent in the historic J.S. Brown Mercantile building was dirt cheap, he recalled, but that was because the site was far off the beaten path.
He finally held a contest to determine the restaurant's name. Hickenlooper, who eventually opened several brewpubs across the country, added that everything he learned about running a big city came from his years as a restaurateur. "There's often no money, too many demands on your time, and someone always wants something," he said.
Richard Satnick joked that his former career as a primatologist helped him understand the restaurant business--in particular Portland, Ore.-based Laughing Planet Café, which he founded in the early 1990s. Satnick was part of the Emerging Concepts panel featuring four small chains, each of which had latched onto a current trend. In the case of vegetarian-friendly Laughing Planet, it is healthful, locally sourced foods.
"Laughing Planet Cafe became a chain by accident, but it's growing strongly through counter service, convenience and speed of service," Satnick said.
The points of difference for San Diego-based Burger Lounge, another emerging restaurant chain, are grass-fed beef and a commitment to the environment (it is a certified green company), said founder and CEO Dean Loring.
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CEOs of each concept, including Bill Post of Roti Mediterranean Grill and Ron Lynch of Tilted Kilt, agreed their biggest challenges in 2010 will be that of raising equity and hiring talented people.
Local Sources
To help kick off Chain Leader LIVE, three Denver-based concepts offered attendees popular menu items, including Qdoba's smoky-sweet, mole-inspired Ancho Chile BBQ sauce. Spicy Pickle offered sub sandwiches, and Boston Market passed out dense chocolate brownies. The CEOs of Spicy Pickle and Boston Market, Marc Geman and Lane Cardwell, respectively, worked the crowd.
Indeed food was never far from attendees. After attending breakout roundtable sessions on social marketing, finance and leadership, conference-goers headed to the Sponsor Networking Lunch, where they sampled several innovative foods (edamame hummus, for example) developed by the conference's sponsors.
Later that afternoon Chef Elise Wiggins of Denver's trendy Panzano took attendees through a tasting exercise that demonstrated the startling effect of flavors. The group separately sampled cayenne, honey, proscuitto, mascarpone cheese, a fig and truffle oil. Then attendees sampled them together as a hors d'oeuvre.
People Matters
In a panel discussion on people, Golden Corral Vice President of Human Resources Judy Irwin described how the goals of her department support the chain's business direction. That leadership is crucial to her department's success, she maintained: "HR issues start with the CEO's priority concerning people."
Debra Fox, vice president of training at The Palm, advised chains to invest in recognition programs, making sure employee contributions are mentioned in newsletters. Raising Cane's Chief People Officer Rodney Morris described "Cane's Love," an HR program that focuses on respect, recognition that employs "defined metrics."
Later, three CEOs offered a view from the top. They agreed that in this operating environment, management must take a long-term approach, using tight financial controls to ensure survival. One method of controlling costs is to hire a lease-negotiation specialist to make sure your company is getting the best rent deals possible.
But beware of pricing issues, warned CEO Jeffrey O'Neill of Einstein Noah Restaurant Group during the CEO Panel. Noting it was tempting to raise prices to maintain margins as sales dropped, he said traffic could suffer. O'Neill said his company would only raise prices to cover inflation. Kona Grill interim CEO Mark Bartholomay said the chain is determined not to compete on price alone. "We haven't taken a price increase this year," he added.
High prices in an era of value-driven deals is a bad idea, agreed Greg Dollarhyde, CEO of Birmingham, Ala.-based Zoes Kitchen. He joked that customers are "tired of spending $15 to get a real fork at restaurants." The former CEO of Baja Fresh added that Zoes Kitchen has real forks because it's "a higher level fast-casual concept."
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| Check out www.chainleaderlive.com for photos, videos and highlights from the 2009 Chain Leader LIVE, plus recaps of previous events and information on next year's event. |
Adios
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