A Pizza Restaurant Survival Kit: How an inexperienced restaurant owner overcomes her business challenges

Teresa is a 25% shareholder in an Italian restaurant in Hong Kong. She is a retired bank employee and invested her savings in buying 25% into the restaurant.

Unfortunately, the manager that the owners had recruited left suddenly in late 2019. The restaurant was in debt but still operating at a profit.

The First Challenge

Teresa offered to take over as manager even though she had no experience in the food and beverage industry. She kept the restaurant profitable with revenue of approximately HK$1 million per month (US$130,000). Then in 2020, the COVID-19 pandemic changed everything – causing lockdowns and thus necessitating a change of business model.

The Second Challenge

Teresa needed help and advice, especially as her husband, a retired ferry captain, had no experience in the business. In mid 2020, her friend suggested she contact her Trusted Advisor, living in Singapore.

He was a very experienced guy, which made her nervous to talk to him.

However, he was happy to receive Teresa’s call and listened to her story, asking her three simple questions:

1. What are your objectives and for the business?
2. How about your cash runway – how long can you survive?
3. Is there a market for your product in these economically challenging times?

He then described 5 critical elements of business growth:

1. Make sure that your product is viable
2. Increase the number of customers
3. Increase the number of transactions from each customer
4. Increase the average price of each sale
5. Increase the operational efficiency of each process in the business

They agreed to speak again in two days after reviewing a questionnaire that the Trusted Advisor sent her to help assess her business – like a health "check-up."

Two days later, she called the Trusted Advisor (actually she called him her supercoach) again. This time they held a long video call together with Teresa’s staff, where they summarized:

1. The sales of the restaurant were stagnant, mainly because of the Covid-19 pandemic.
2. They had a content marketing plan (mainly based around Facebook ads), but it was expensive and not very effective.
3. The cash reserve would be exhausted within six months, so Teresa, her partners and staff were in trouble.??

Short term solutions?

After reviewing the questionnaire that Teresa had filled in, the Trusted Advisor suggested some short-term solutions – her called these his ‘Band-Aid” recommendations:

The immediate focus was to increase the short term cash flow, without increased the fixed costs. She was advised to:

• Sell off some of the extensive wine inventory, and;
• Renegotiate the lease to align with the current revenue of the restaurant.

The Trusted Advisor also suggested that she read the fine book by Robert Cialdini about Influence and Persuasion to give her some guidance about the importance of alignment and unity.?

However, these "Band-Aid" methods were not sustainable for long-term growth, considering that revenue growth was critical. His suggested approach was very different? from that of Teresa's accountant, who had suggested reducing staff costs.

The Trusted Advisor proposed using the "5 Ways Growth" Methodology.

Team Collaboration

He suggested that Teresa’s team set up a wall where they could stick yellow 6x4 inch “Post-It” notes. All the staff were then asked to write down one idea on how to grow the business on a separate post-it note.

The ground rules were:

1. That everyone had to participate, and each person had to place their post-it note on the wall themselves. There was no limit to the number of ideas generated by any team member. This helped staff have a sense of shared unity.
2. No idea is too crazy.
3. Teresa was not allowed to participate in this brainstorming session – this enabled the staff to feel free to express themselves.

The staff of 7 had put over 30 different post-it notes on the wall in about 45 minutes. The Trusted Advisor then asked them to arrange them into two major categories:

1. Impact to “bottom line.”
2. Ease of implementation

Teresa's task was to move the post-it notes around on a 2x2 matrix.

The staff enjoyed the experience of telling the boss what to do and where to place the individual ideas. Unfortunately, there were too many post-it notes, so they used a simple spreadsheet instead, rating each concept.

For the "ease of implementation" they used A, B, and C rating systems, where A is the quickest (during the next week).?

The dollar impact to profit was classified using a scale of 1 to 5, with 5 having the most significant impact. There were only four ideas with a 5-rating, meaning they were easy to implement and produced substantial results.

These four ideas were quantified and were projected to add HK$2,500,000 to the annual bottom line. This one-year potential growth was thought to be repeatable each year after that, making the five year value of these four ideas approximated HK$ 10 million for an investment of only a half-day brainstorming session.

Increase in revenue

Teresa's team assigned responsibilities for follow-ups and agreed to a timeline for the coordinated implementation. Over the next three months, the restaurant implemented the four highest-ranking ideas – and the good news was that their bottom line was more significant than 20% more than initially forecasted. The team still had 31 more ideas left to try, so they devised a plan to review them every quarter and prioritized one or two for implementation.

Then, in June 2021, the team reviewed five new ideas as part of their 2022 annual planning process after one year. Their original idea was reviewed and modified to fit the current economic conditions.

They asked the Trusted Advisor to help them with their annual review process. Teresa had asked him to advise her for the first six months of the implementation process during the previous year– the staff often used him as a mentor and now called him by his first name, Peter.

The new business model

Teresa’s restaurant had a very different style in 2021 than in 2019, with a more streamlined and digital approach, a more specialized menu, with an increased and active online community of customers and friends. This community became international, so Teresa and her staff were able to share their experiences with others from different parts of the world.

This methodology was very well accepted by the staff as they all had personal “buy-in” and were allocated personal responsibilities, which they are all welcomed. Teresa instituted a revenue-sharing salary adjustment for all staff as well, which led to a more structured and efficient organization structure.

In summary, the 5 ways methodology achieved the following:

1. Recognition and alignment of vision and goals
2. Identifying big critical ideas
3. Showed some “quick wins”
4. Generated enthusiasm and excitement in the team
5. Provided validation that the goals are achievable with an action plan

Contact Peter today at [email protected]