You Can Succeed in a Recession

Small restaurant chains must build their organizations from the inside out.

By Fred LeFranc, Guest Columnist -- Chain Leader, 4/30/2008 2:57:00 PM

Fred LeFranc, president of Results Thru Strategy

Small restaurant chain operators face different challenges than large companies as the country enters into a recession. To grow during an economic slowdown, small chains need to build their organizations from the inside out.

START WITH YOURSELF--MANAGE YOUR FEAR, STRENGTHEN YOUR RESOLVE

Take a good hard look at your personal, psychological, emotional and intellectual state. Don't operate out of fear. Leaders who exhibit fear are punching holes in the bottom of their boat. Your team will follow you if you provide a clear vision of where you want to steer your business.

Take the time to articulate your vision and plans in a brief paragraph. Memorize it and practice saying it so you can repeat it without thinking. Then go to your team and repeat it incessantly. Say it with passion and a smile, and watch them follow you. Suggested reading: Play to Win by Larry Wilson.

BRAINSTORM WITH YOUR TEAM

Use this time to meet with your employees and engage them. Share your results with them and how they are relevant to them. Many owners are afraid to disclose their financial results, but they should be comfortable sharing guest counts, check averages, food cost, sales/labor hour, operating expenses, etc. In other words, speak in the currency that your employees understand. I suggest you read Jack Stack's groundbreaking book, The Great Game of Business.

A great exercise is to break your team into two groups. One team focuses on ways to build sales, the other on saving and controlling costs. Use the financial information you have shared as the basis for measurement and goal setting. Believe it or not, your home office staff and restaurant employees know what to do. Your challenge is to empower them, listen and reward them. Use the recommendations suggested in the "Line-by-Line Laser Focus" section below.

Spend 30 minutes brainstorming with no negativity. Then spend 30 minutes filtering through their ideas, picking at least two or three in each area. To make the goals concrete and achievable, refine them using the S.M.A.R.T. goal method: They should be specific, measurable, attainable, realistic and time-bound.

Post the goals in unit kitchens or office area for home office staff with metrics to follow their progress. Talk about them daily.

Reward employees by either sharing the savings they achieved with them or throwing a small gathering to thank them after the goals are met.

LINE-BY-LINE LASER FOCUS

Take the time to analyze your cost categories. Balance your long-term goals when making decision against short-term gains.

Do not cut quality or service to your guests. This becomes a self-fulfilling prophecy. Even if you think that your guests will not notice, your employees will.

Food Cost
* Analyze your menu mix.
* Take off the slow movers.
* Re-engineer any menu items that need to stay on the menu but have high food cost.

Labor Cost
* Analyze your shoulder periods, before opening, between shifts and closing for wasted labor hours.
* Post sales/per-labor hour results for all servers and have a target that everyone shoots for.

Supplies
* Using the brainstorming format above, motivate employees by giving them responsibility for specific cost areas. You'll be surprised what they will do for a small bonus and big recognition.
* Servers can watch utensils and napkins, dishwashers and cooks can watch plates, bartenders can have glassware cost, and server assistants can watch linen, cleaning supplies and repairs.
* Be creative with your team by engaging them in controlling costs. A great idea I once used was to glue all the key breakable items on a board with their costs notes in bold numbers. This gave the team great awareness and reduced operating supply cost by 15 percent!

CREATE AN ADVISORY BOARD

Leaders and business owners need help from other experienced leaders. Don't be afraid to ask for help. Many people will gladly give their time to small companies even without pay. There is a tremendous payoff one receives in helping watch a company grow and knowing you were a part of it.
If potential advisers require payment, use stock options as a way to compensate them so you can conserve cash.

Determine the functional areas you want advice in. Some include real estate, capital and finance, strategic planning, human resources, community involvement, marketing, and construction and development.

Once you organize and form your advisory board, have them sign a nondisclosure agreement, schedule your meetings and start using them to assist you.

Meetings should take place four to six times a year. Send them financial information three to four days prior to the meeting. Use an agenda. Meetings should last three hours throughout the year, and the annual meeting for next year's plan might be slightly longer.

Take board members out to lunch or dinner--this is the environment where some of the best ideas come out. Remember that the extended reach of a professional advisory board is invaluable as you grow your business.

REAL ESTATE

Many large chains are busy closing unprofitable locations that don't work for their cost structure. These locations can be an excellent opportunity to enter a market for a local operator. If you've been planning ahead by attending local International Council of Shopping Centers conferences or meeting with the local real-estate communities, you might be able to get into a location for very little cash, a favorable lease and even free rent, which will give you cash for the opening. Your new advisory board can help you with these types of transactions.

PURCHASING

There are very few activities that will yield you cash faster than to negotiate lower prices or delivery fees with your vendors. Assuming you pay your invoices on time, this is a perfect opportunity to solidify vendor relations. They are feeling the pinch as well and will reward a good customer.

Invite vendors to company events and share the celebration. I have always invited my top 10 vendors to our holiday and summer parties. We celebrated our managers and vendors with awards and prizes at the same event. It makes your vendors literally part of your team. Do not underestimate the power of having your key vendors witness your company's team spirit and enthusiasm. It is a powerful force when they review their accounts, and they will always remember that they won a vendor of the year award.

Nothing replaces great food and service at your guest's table. However, the strategic and competitive nature of our industry has new rules in order to thrive, not just survive. These ideas can serve as a starting point for small companies on how to capitalize on the opportunities in a shifting economy.

Fred LeFranc is the president of Results Thru Strategy, a Charlotte, N.C.-based consultancy that helps restaurant companies implement strategies that deliver long-term sustainable success. A veteran operator, LeFranc has served as chief executive of several restaurant companies including Flat Rock Grille, Ruby's Diner, Louise's Trattoria and El Torito.

Check out the advice other operators have for small chains on taking on the sluggish economy. Read "Survival Kit" in the May issue.