Lane Cardwell

The Demise of Grady's

I am tired of feeling depressed about the things that are impacting our industry today: soft sales, rising commodity costs, higher labor costs, and the unavailability of capital for growth or remodels. Rather than wallowing in today's problems, I thought that I would revisit old mistakes and horror stories. I can think of no bigger horror story than my involvement with Grady's American Grill while at Brinker International.  Almost monthly I use some element of Grady's as an example of how you can lose a good concept by trying to make it a "better" concept. This is the story of the unintended demise of a wonderful restaurant chain.

Grady's Goodtimes was started in Knoxville, TN in 1982 by a talented and experienced team of restaurateurs. The Regas family had been in the restaurant business since 1919. The sons of the founders, Bill, Frank and Gus Regas, had been involved with the five-star family restaurant, The Regas, since they were children. Dave Thomas, the Wendy's founder, learned the restaurant business as a teenager working side by side with the Regas'. Bill Regas is a former president of the NRA. This was not an inexperienced group.

Joined by a younger generation of restaurateurs, including Mike Connor, Rick Federico, and Grady Regas (Bill's son), they developed Grady's Goodtimes, a concept that many compared in look, menu  and quality to Houston's. The concept made everything from scratch, used high quality ingredients, served big portions, had high quality buildings and design, spent an extraordinary amount of time building a corporate culture based on "better and different", and had one of the most highly motivated groups of employees I have ever encountered. The servers oozed pride and knowledge. Eating there was a delight.

By 1988 they had six restaurants that were averaging just under $4 million per unit. The chain was attracting the attention of a lot of people in the industry and Brinker decided to make it their first acquisition in 1989. Everyone was happy.

Almost immediately, trouble began. It started with the name. The Goodtimes part of the name was questioned and then changed to Grady's American Grill. Then the name Grady's was changed to Regas Grill. Then the name was changed back to Grady's American Grill. Only a big company can afford that many new pole and building signs so quickly. The customer was confused. The employees were demoralized. Growth continued.

At the same time that the name was changing, the bedrock of the concept, it's focus on scratch cooking and premium ingredients was under scrutiny. Why did we have to use Haagen Dazs ice cream? Wouldn't a cheaper ice cream be good enough? Why did we have to use fresh ground beef, steaks and chicken? Wouldn't frozen be cheaper and almost as good? Why were we grinding horseradish root for the prime rib? Why were we making croissants, chocolate bar cakes and cheesecakes in each restaurant? Couldn't we use cheaper ingredients on the cheese toast that came with salads? Why did we need to make fries from fresh potatoes instead of using a frozen product? Why were the portions so big? Couldn't we save money by serving more "normal" portions? We made all of these changes and more. Growth continued.

After the first cut in quality, the employees could no longer go to the table and state "everything is made from scratch in the back." They had to remember what was still fresh and what was frozen. They quit making any claims. Mike Connor, the original president of Grady's, quit and several key members of management followed him. They said that they had set out to create a high quality concept, not try to figure out how to have one that masqueraded as a high quality concept. Brinker put one of their key employees into the concept as president. Growth continued.

With so many changes the concept was in search of an identity. We couldn't quite nail a definitive positioning statement. With the many cuts to quality to "improve" profitability, and the sterilizing of the old corporate culture that was steeped in pride and service, there weren't many elements that were unique anymore. Our ad agency worked overtime to try and help us figure out what we had become, and what we could still be. Growth continued.

Along the way, the average sales per unit of the concept continued to fall. From just under $4 million at the time of the acquisition in 1989, the concept was averaging about $2.4 million per unit by 1995. This was below the level needed to justify the cost of a new unit. The decision was made to sell Grady's. Out of 52 units, 10 were closed and 42 were sold to Quality Dining in 1995. They made a valiant effort to revitalize Grady's, but it was too late. Quality Dining closed and sold Grady's units along the way. Some became Smokey Bone's, some became P.F. Chang's, others became independent restaurants across the country. I am not aware of any Grady's being operated today as Grady's. I could be wrong.

What did we do wrong? Obviously, just about everything. We didn't appreciate the essence of what we had acquired. We meddled in a concept that we didn't truly understand. We took things away from the customer and from the employees, and didn't give them anything back in return. But most of all, we didn't appreciate the power of a culture that made staff and managers proud to be working in a Grady's.

During my first experience, my server told me that this was the first restaurant that he had ever worked in and he didn't think that he would ever be able to work in another restaurant after Grady's. "Once you've worked for the best, it would hard to work for someone else. It would just be a job."

Let me end by saying the first thing that I always tell Bill Regas, the original Grady's chairman, whenever I see him or talk to him on the phone. "Bill, I am so sorry."

Posted by Lane Cardwell on November 6, 2008 | Comments (31)