Lane Cardwell

It is normally about this time in an industry slowdown, like the one we are experiencing, that you see some of the old self-destructive behaviors start to appear.  You can almost picture the restaurant executives sitting around the conference table discussing another bad quarter when someone says, "Sales are still soft.  We can't take any more price.  Our costs are still increasing.  We need to start engineering some costs out of our products."

For those of you new to the industry, that is restaurant-speak for "Let's see if our customers are dumb enough to keep coming if we give them less quality, and charge them the same."  The answer, of course, is that an alarming number will quit coming.  Naturally, it doesn't happen all at once so the chain seldom will draw the correlation between less quality and less customers. 

 

With the fewer number of customers coming in you have to go back to the well again and make further cuts in quality to "make" some money.  And so it spirals down.  What I have seen in the past is that it is tougher to add quality back than to take it away.  Why?  The impact of a cut on costs is provable.  It's a leap of faith that better food and service will yield you more customers.  Unless you have been down this road again.

 

For those of you tempted to "make money" off of quality cuts as a long term strategy for hitting your numbers, I have the names and phone numbers of several reputable private equity firms who might be willing to buy you at a discount and then do the right things themselves.

 

Cutting quality to improve profitability is not The Next Big Thing.  In fact, it could be your Last Big Thing.

Industries: Expansion, Operations