One of the more difficult business turnarounds for any crisis manager is a troubled restaurant. The main problem is the existence of a fine line between a restaurant that needs some attention and a restaurant that has reached a critical stage, putting it in eminent danger of closing its doors permanently.
Most of the factors contributing to a business’ distress are related to the economy. For instance, more economically feasible staff levels can lead to an overworked staff putting in longer hours. Further, since the economy is affecting almost everyone, there is always the likelihood of a waiter/waitress going through personal issues and taking out their frustrations on the patrons. Even the slightest things, like an unclean restroom one busy night can be the kiss of death to a restaurant, but if the main problem is in the kitchen the restaurant might already be too far in trouble to be saved. These can all be contributing issues. Getting a crisis manager involved early on can be the difference between closing the business and continuing to serve customers through these tough times.
One mistake owners of almost all troubled businesses make – and restaurants are no exception – is they think they can handle the problem themselves, or that an industry expert is the next best option. Restaurant owners often look to food service industry insiders for advice once they realize there is a problem with the business, when the expert they really need is an experienced crisis manager. An experienced crisis manager doesn’t need to be a restaurant expert because he already understands the business issues all troubled companies face. A crisis manager can quickly identify the problem areas and stabilize the restaurant so that it has the best chance to survive. Right now, and really almost all of the time, the big problem areas are sales, cash flow and debt service. Each of these problem areas have both causes and solutions a crisis manager can address.
Not too big, or small, to fail
Restaurants of any size can find themselves in trouble, particularly during these challenging economic times. Small restaurants are particularly vulnerable because they don’t have the resources of a chain restaurant. With that in mind, here’s a short list of several well-known restaurant chains that hit some turbulent water over the last couple of years: Dave & Busters, Denny’s, O’Charley’s, Perkins Family Restaurants and Sbarro. For smaller “Mom and Pop” restaurants, a troubled business could have even more dire consequences. Some individual restaurateurs have used not only their personal property, but even their homes as collateral against bank loans to meet daily cash flow needs. For these small business owners, the cost of failure is very high.
The two critical issues at play when a restaurant finds itself in trouble are that the stakes are extremely high and time is very limited. This is particularly true if a personal guarantee or a home has been pledged against the restaurant’s bank loans. It doesn’t take many days and nights of limited sales to make it impossible to pay the daily bills from food and beverage suppliers, much less meet payroll as well.
When a restaurant reaches this tipping point, it doesn’t need a food service expert – it is too late for that option. It’s not about improving efficiency, expanding a menu or remodeling a dining area. When a business is in danger of closing its doors, the problem calls for a crisis manager. Someone who has experience helping businesses in trouble can come in with fresh eyes and out-of-the box thinking to make some of those tough decisions that need to be made in order to save the restaurant. More importantly, an experienced crisis manager has been through it before with other troubled businesses and will help provide clear decisions during this stressful and uncertain time.
It is important to bring in a crisis manager as soon as it’s understood the restaurant is facing serious business trouble. The sooner a crisis management expert is engaged, the more likely the business can be saved. If for some reason, however, the business cannot be saved, a crisis manager can help protect the owner – and his or her family – from the financial brunt of the closing, and separate personal wealth from business obligations. For restaurants it’s a very slippery slope from one bad night serving customers to nights of empty tables and a panicked atmosphere. Before the restaurant reaches that point of no return, bring in a crisis manager to improve your chances of getting back to serving a full house every night.
For more information contact:
Nat Wasserstein, JD/MBA/CFE