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Conventional wisdom that isn’t either.

Monday, April 13th, 2015

think againConventional wisdom often spouts off about razor-thin margins in the restaurant business. Our industry is perennially found on the list of the least profitable businesses, and media accounts are filled with information on how unprofitable restaurants are compared to say, law firms.

In their 2015 Issues and Advocacy Agenda,  the National Restaurant Association leads with this, saying, “Restaurants are largely small business operators, with razor-thin margins.”

But “razor thin margins” can be used as an excuse, like telling yourself how hard the business is over and over again. That can easily become self-fulfilling prophecy, and victim talk. If you have that mindset, you are not going to reach your full potential.  However, if you believe you can collect the resources and knowledge to support a very successful business, and then proceed along that path, you are going to say to yourself, “Razor-thin margins? Not at my restaurant!”

Razor-thin margin talk comes from analyzing an average of all restaurant numbers.  But people don’t start businesses to be average.  Regrettably, some end up being average, or below average, but nobody has that intention. In an industry where there is a low barrier to entry, the best businesses, professionally managed restaurants, are not responsible for everybody else.

So . . . do you think that razor-thin margins, negative cash flow or declining profits occur at restaurants that:

  • have great guest relationships?
  • are managed professionally?
  • set goals and hold themselves accountable?
  • update offerings with the latest craveable food and drink?
  • select great locations where are highly visible?
  • recruit employees they are proud of, treat them well  and earn their loyalty?
  • have timely information about key performance indicators?

Those restaurants, like our best clients, have growing and strengthening and increasing profit, cash flow and margins.

What do you want your margins to look like?

 

Trust, but verify.

Friday, February 20th, 2015

Count with MatchesThis other day there was a meeting on my schedule, but instead of meeting with me, my colleague was meeting with the police. Our meeting had to be cancelled because the person I was going to meet was dealing with the fact that their long-time, right-hand person had been exposed for embezzling a considerable sum of money over a period of years.

This is not the first time I have heard similar stories.

Another client had a controller who claimed the necessity for “getting in touch with restaurant operations.” That meant working the closing shift at their highest volume unit every Friday. It turned out that the sole purpose of working those shifts was to adjust the numbers at the unit level so the considerable sum they were stealing would not be needed to balance the books. This went on for years before being exposed.

At still another independent restaurant group, we received a signed consulting agreement and anticipated developing the capabilities of this well-regarded, three-unit restaurant group. Instead, we got a follow-up request to cancel the deal. When the owner requested the funds for our fees be transferred from the company’s money market account, it turned out there was no money in the account – it had been stolen by the bookkeeper.

I had my own brush with this, albeit in a lesser way when I was operating. One of my store controllers figured out the perfect crime. Take all the money in the safe at the end of the evening on Saturday, bet it on the Cowboys, have the money back in my safe by the time we opened for business on Monday, and keep the profit. I think you can guess how that one went. Not well for me, the controller, or the Cowboys.

I believe people are born with basic goodness. But I also know that a lot of things can happen along the way that can change people or their behavior.

It is important to protect yourself with the basics. Everyone must be cross trained. Everyone must go on vacation and have someone sit in their seat when they are gone. Controls must be instituted. It is a good idea, no matter how big or small your business, to ask frequent, random, and detailed questions about both significant and mundane income and expenses.

I don’t want to alarm you. We have clients who frankly are so concerned about protecting themselves that they decide to withhold information from managers who could use it to advance the good of their restaurants. Like with all things, it’s important to find the right balance. Protect yourself, but don’t spend so much time and energy protecting yourself that that is all you do .

PhotoCredit: PhotoPin

Grow at your own pace. But GROW!

Tuesday, February 17th, 2015

GrassGrowth.

It is the impetus of capitalism. So how do you know you are growing at the right pace?

Every restaurant company we work with has a growth plan and a growth strategy. There is no one out there standing still that we know of. That is a function of the mind of the entrepreneur and the fact that economic indicators are positive and there is plenty of opportunity out there.

I know one company that has committed to so many new sites that they plan to use cash flow to supplement the capital they have raised for expansion. They think they can wait to spend the money to handle major operational issues until after the new units are open and profitable. Their people are working hard to keep up with the pace, but many feel they could be doing it better if they were growing more carefully. Whether you call it under-capitalized or short sighted, this is a recipe for disaster. The best business, when faced with this scenario, would simply slow down expansion commitments and reinvest in their existing organization.

Conversely I know of a restaurant group that has been talking about its next location for years, but they have not moved forward to signing a lease. Although they announced a growth goal to their management, they have not achieved it. Their people are beginning to wonder if they are working in the right company. Great improvements have been made to prepare for growth: in management, finance and systems during this time. But they are stuck while competitors are expanding, taking good locations and growing market share.

Whether your organization more closely resembles the first story or the second, you probably appreciate that there is a fine art of growing at optimal speed. The best companies build infrastructure and capability, and then set aggressive but realistic expansion goals – the kind that create excitement! They stretch the system just enough to test it, but they don’t stretch resources. They stay flexible.

Which one of these companies is yours closest to resembling?

What adjustments will you make to strike a balance?

Millennials: Confident, connected, open to change.

Tuesday, February 10th, 2015

GENERATION NEXTI recently moderated a panel discussion entitled “Beyond Craig’s List: Finding and Keeping the Best People.”  It was presented in Austin at the Summit for Texas Independent Restaurateurs, a conference created by the Texas Restaurant Association. A few months ago, I mentioned it to an editor of a national restaurant industry trade publication. He told me, “I’m so tired of hearing about millennials. If you could cut through he B.S. about millennials, that would be great.” Actually he didn’t say “B.S.” I edited that here for public consumption.

Millennials.

More has been written about them than any other generation. They are the largest generation in American history. So there’s a good chance you’re feeling you have heard it all about them and there is nothing to add.

A panel of millennials took the stage after my panel. Their summary?

“We are not lazy, we are not unmotivated, and we do not feel entitled. We are collaborative, inclusive, and we want to be approached though our own communication tools, specifically social media.”

And then they mostly talked about their own businesses and their own lives, which made me laugh on the inside, because they did not deny being the Me Generation.

That’s when it hit me.

My whole career, from the start decades ago to last month’s blog post, “Don’t just Do Something, Stand There,” I have been promoting my belief that the absolute best way to run an organization is for management to include associates every step of the way. The reasons for that are many; but the general concept is centered upon one fact:

As a manager, you have a choice:  do it yourself – include and teach no one; or utilize the expertise of your team, make your life easier, and learn to spot and develop talent. Maybe I have just been ahead of my time.

OK, so millennials want me to contact them through Snapchat and Twitter. I get that. I am of a different generation. I once got a Facebook message from someone who wanted to buy my house. That surprised me. But beyond the communication channel, the fundamentals are the fundamentals.

Include people, be an open book, let them know what is going on, ask them to collaborate on solutions. You don’t have to use their advice, just consider it. People get excited when this process starts, continues, and is sustained. That goes for the tens of millions who are currently 18-34, the millennials, and everyone else.

I think I just cut the B.S. If you are not living this today, think about what you can do to shift into inclusive mode right now. There is another generation coming next, and we don’t know what they’re going to want or how we will be communicating to them, but I guarantee you participation will be a big part of it.

Don’t just do something . . . stand there.

Thursday, January 22nd, 2015

Stand There.Management is not about doing things, it’s about growing people and leadership. If you call yourself a manager and you find yourself in the doing mode, stop.

Julie Dickson, the managing director of Black Sombrero in Lismore, New South Wales, Australia recently wrote me.  That’s right . . . she operates a “Taqueria and Tequilaria” in a small town in Australia. She had read something I wrote for RestaurantOwner.com and found my blog.

“I swore that after the first time, I wouldn’t be a cog in the machinery,” she said. “But instead I would take the step up to ‘drive the bus.’ Well, my nature, and the workload prevailed, and I tried to do both.  It’s now time, with the new year upon us, for me to get better at managing my team. Thus, my Google search.”

So basically the tequila and taco purveyor in New South Wales is doing something that all of us are doing every day.  Julie, a second-time serial entrepreneur is seven months in to her latest venture.

Management is not about doing things.  A good example is the simple act of answering questions. Inexperienced managers have a bad habit of answering questions immediately when asked. This, of course, is not so wise.  When we answer questions, we neglect the opportunity to give the employee the chance to think for themselves. Without teaching people or giving them the guidance to work it through, they will be forever frozen in time like a certain Disney princess, instead of growing and reaching their potential.

I just left a client’s managers’ meeting where we appointed a team of three kitchen supervisors to make a recommendation on how to solve a specific issue.  After 15 minutes with the entire management team, we realized we had better things to do with that precious time together than solve this department-related issue. As soon as we got up from the table, however, one of the owners reflexively came up with a solution, thereby voiding the opportunity for that team of three to collaborate.

Unfortunately, they acted directly against their self-interest. I invited them to make  2015 the year of letting employees come up with suggested solutions to their own problems:

“When they present their solutions, you can either help them  improve their critical-thinking skills if you disagree, or celebrate their genius if you agree.”

Matthew’s mantra, “what’s your recommendation?” helps all the Julie Dicksons around the world and it will help you.

The high cost of weakness.

Monday, January 19th, 2015

Weak SpotsThe best companies make strengths out of their weaknesses.   If you want to get the most from your business, you really don’t have any choice.

Yesterday I was on the phone to a frankly excellent customer service department of a consumer electronics company.  The phone was answered quickly, the person who answered was smart, funny, and helpful.    Without naming the product, I will tell you that it is a great gadget that I love which my wife bought for me a year ago.  The only problem is that it keeps breaking. The manufacturer is about to send my third one under the terms of their warranty.

“You have a great product,” I told the representative at their call center. “But its durability is poor. “

“I am being recorded,” he answered, practically winking to me over the phone. “ So all I can say in response to that is ‘how dare you, sir!’”

Then he made the keystrokes to send my second replacement unit.

I have no idea how much it has cost this company to keep replacing their product. But I am not going out on a limb to say the costs are high if I bought one unit and received three over the course of a year.

When I first researched their product I read reviews that complained about quality issues, but raved about their technology – calling them the leader in their category.   It is clear they know they have a quality issue.  I trust they are taking steps to correct it

It is not unusual, in fact it is the norm, for a business owner to know where the weak spots are.  It is not always the norm that they are doing something about it.

What are the weak spots in your organization? What are you doing about them?

How much is it costing to allow the weaknesses in your organization to continue?

Nothing grows in the deep end.

Tuesday, November 19th, 2013

DrowningRecently I discovered a number of entrepreneurs and business owners who hired managers and threw then into the deep end of their pool.

When they started to drown . . . they fired them.

That’s a poor strategy for a swimming teacher or a cruise ship line, and it’s not a very good one for a business owner or leader.

The best business people don’t make the mistake of projecting their own skills and talents on other people.  Smart leaders realize that if everyone they hired had all of their own good qualities, they would be running their own companies — not looking for a job.

There’s a good chance that the entrepreneur or leader has risen to that spot because of their natural talent, drive, education, upbringing or a combination of all four.   Talented people may not have these attributes, but they are still smart and able to learn. Business leaders often make the assumption that all people are like them and don’t need very much development in order to be great.

Effective leaders realize that their organization’s true strength comes from taking people with good experience, intelligence and raw talent, and developing them to be great.  Often they get to show people that they can be more and do more at work and in life than they ever dreamed they could.  That feels great.

Once a company is stocked with people who have been developed others will duplicate that process. They spot those who could be developed, and provide a continuous flow of talent to an organization.

And the people who got fired?  Our hope is they land in a more nurturing and supportive environment, where they can be developed.

Know any of those people?

photo credit: Luis Hernandez – D2k6.es via photopin cc

Want to know more about the industry? Ask the suppliers.

Wednesday, May 15th, 2013

Restaurantville magazine coverGrowing sales? Growing units? Every entrepreneur I have ever known thinks about these things every day. And it turns out the people who sell to them are thinking about the same things on their behalf.

In the B to B world, vendors and suppliers come to know a great deal about the people they serve. For 2013 we focused our annual Restaurateur Issues and Challenges Survey on Texas Restaurant Association Allied members, the companies that supply restaurants. The survey is performed in partnership with the TRA. We asked the suppliers what they saw as the biggest challenges for restaurateurs, and what came back was:

  • growth of same store sales,
  • finding real estate for new units, and
  • obtaining necessary financing.

You might find this to be counterintuitive, expecting fundamental topics like training of staff, recruiting management, and preparing for the Affordable Health Care act provisions to rank higher, but they did not.

Details and analysis of the survey have been published in the Restauratnville Magazine Spring Issue in the article Focus on Growth 2013.

Top business people are thinking about not only growing current sales but also building more stores. They believe that they are in control of their own future despite the daily dose of negativity that is amplified by the media echo chamber. We see that with our clients, negotiating new leases, building new restaurants, and in many cases having the privilege of choosing investors and banks. Since our clients tend to be established restaurateurs, they are having an easier time raising capital than the average operator in the industry.

Some restaurateurs, especially independents, have opportunities to use all the tools the industry has perfected to grow sales within the four walls. Also, they continue to be educated about marketing, a topic that is often misunderstood. When they improve their organizations and learn how to harness this power, guest counts increase and per person averages increase.  Since those are the only two components of revenue, their life becomes easier and more enjoyable as revenues increase.

The power of accelerating initiatives.

Wednesday, April 10th, 2013

GDRA LogoFor the third time in the past fifteen years, Surrender turned it’s organizational development expertise to the staff and board of the Greater Dallas Restaurant Association (GDRA).  Matthew Mabel and his team applied the same methodology, tools and coaching techniques used in their hospitality consultancy for clients like Original Pancake House and i Fratelli.  In fact, it was some of the same individuals who had utilized Surrender’s expertise in achieving their corporate goals who agreed that the same technique would be useful for the GDRA to accelerate many of their initiatives.  Read more here.

Mabel said, “The GDRA does a fantastic job of supporting our industry on a regional level.   Having been a board member and executive committee member, it is great to have the opportunity to be able to help them create a better environment for each team member and group to work at the top of their game.”

Your Brand: Socially Relevant or Virally Damaged?

Wednesday, April 3rd, 2013

 

Social Media Cupcakes

photo credit: Cakehead Loves via photopin cc

Top companies are developing precepts about what content does and does not go on social media.   These guidelines are outgrowths of training and culture.  Beyond the basics of decorum, restaurants with a more defined culture are much better at knowing what fits on social media vs. what will cause their brand to deteriorate.  So if your culture is vague or misunderstood, the time to correct that is now.

Of course we know that customers use social media to promote restaurants.  Emily Babich of the Dallas Business Journal recently covered that story:  Restaurateurs Know Where Their Bread is Buttered.

It’s a dream of all business owners that their employees would also take to Facebook, Twitter, Pinterest, Instagram and Reddit and promote their workplace.  But it’s the nightmare of all business owners that these same people could go online and damage a brand, customer relations, and for that to go viral to the point that everyone across the country is texting, tweeting and IMing about it.

I discussed the subject recently with Ron Ruggless of Nation’s Restaurant News for his article, Social Security: Employee Education, noting that social media policies are essential to brand protection.  I was reminded that the best companies avoid being a viral joke by ensuring that their people know what the brand stands for and what is both permissible and consistent with their culture.

Think of social media as a big table that exists outside of a restaurant’s dining room.  Just like at the tables where they serve guests every day, employees either represent the brand well, or they don’t.  It’s going to be a lot easier to motivate guests to increase frequency, spending, or both when every impression is a good one – no matter where the impression is made.