Why Most New Restaurant Concepts Peak and then Fade

A former colleague and younger friend called me and asked me to give him a reference for a Director of Operations position. He revealed that this new chain concept was well funded and was positioned to be the next "hot new trend".

I love hearing about new start up concepts as throughout my career I have been involved with several, authored their training and operations manuals, directed operations, designed programs to increase sales and enjoyed the growth phase where you can apply your entrepreneurial skills.

What I enjoyed the most was the opportunity to add expertise and wear many hats; you just can't take the entrepreneur out of some of us! The thrill of fast expansion, the opportunity to experience new challenges, develop new skills and feel as if you add value is always infectious.

In a way, I envy my friend and I was glad to give him that reference, but I thought I would warn him about what was to come. Often the mountain high you have during growth turns to a thrill ride down the slope to the bottom.

Being a student of the industry, I have thought about why concepts peak, struggle, fade and in many instances become a shadow of their former selves.

In the late 90's I worked as a project manager, store opener and training store manager for an Iconic chain with lines out the door and sales that were mind-blowing. For a couple of years, we grew, and I was there for the opening of store #1000. Today, there are less than 300 units left and, in many states, you would be lucky to find one. It was a wild ride and an experience I will never forget. One day it all came crashing down and it was fast........

Recipe change, outsourcing of products that were once made fresh, addition of complimentary/competing items and complication of physical service offerings all contributed. Two franchise groups selling back to the corporation and pressure from the shareholders caused most of the decline. In the name of "efficiency" a labor matrix was implemented which cut allowed labor hours in half. Hours were based on transactions versus time to properly service and prepare the food. The purchase of a beverage was equated to a $20 meal in hours allowed and soon customer service suffered, the wait was longer and there were many mistakes on orders.

In the end, sales declined as did the lines and revenue. Managing down a business is never a great idea and this was a textbook case of just that. I won't linger on this concept except to say that the slope to the bottom of the mountain was steep and the landing was hard.

I told this story to my friend as a warning of what is probable, but there are other things that contribute to not only the downfall of restaurant chains but even single restaurants. Obviously, proper capitalization, focus on food cost, labor and fixed costs is key, a proper business plan and great leadership are obvious factors. But there are some criteria I believe are key to continuing to grow, expand and stay relevant; we all know the chains and concepts that have failed to do this, and they are all around us. They are not quite as clean and inviting and the food is not quite as good as it was.....service level has declined.

Here are my observations of other key factors w (primarily chain concepts) fade or fail:

• Lack of understanding of the changing market...tastes change and listening to you customer comments are key!
• Failure to innovate and keeping current on the latest products & trends....are your customers coming in to see what's new? Is there anything new???
• Managing by percentages....would you rather have a 20% profit on $10,000 in weekly sales or would you rather have a 15% profit on $15,000 in weekly sales? Think about what it takes to get to that next level (volume), it might be pricing, or it might be making smarter purchasing decisions.
• Managing DOWN is a downer and reacting to a short-term trend in the name of competing with last year's numbers might be over-reacting. Ride the Wave and react at the right time.
• Refreshing your image as a chain is so important and we see this often only happening when many operations are run down. Your image is your brand whether it be a renovation, new uniform standards for your team, customer service, speed of delivery of food or just clean sparkling glass and fixtures.
• Training is key and not just "follow Susan and you will learn the ropes" approach. Set the standards and training process and stick to it, refreshing it as the workforce and the industry changes.
• Make your place fun and engaging to retain the best team members. Incentivize your team; rewarding them will make them excel.
• Empower your team and don't micro-manage just manage what you need to for your team to feel trusted and valued. "Catch them doing things right not wrong"!
• Make your place fun and engaging to retain the best team members. Incentivize your team; rewarding them will make them excel.
• I live by the statement of "Treat every guest as if they are your only guest!" It is not a cliche, it's reality. What wouldn't you do if you only had one customer? Think about it! We build our business one customer at a time.

Being on the other side of the equation now, managing in foodservice sales, after so many years in the retail food and restaurant industry, I look at how we can help individual restauranteurs to thrive, innovate and save costs. We are consultants who create a win-win for both our company and the customer. It is rewarding to help folks who are in an industry in which I spend many years. My goal is to help entrepreneurs and even those we service in chain concepts thrive!

I've probably gone on too long here but as I explained to my friend that he would be in a position to influence the growth of his new exciting brand and he could help his new company avoid the Peak to Fade scenario.

Watching the rise and fall of restaurant chain concepts over the last few decades is not enjoyable at all. It seems to follow a pattern, but some rebound and become a little closer to their Iconic self. For my friend, his experience and expertise will hopefully guide him through the ups and downs! Good Luck Charlie!!!! I know you will thrive in your new position.