Friday, January 11, 2013

What a difference a CEO makes

Succeeding a company founder can be tricky. Push for too much change and you look disrespectful of the entrepreneurial god who built a storybook success out of nothing. Leave too much unaltered and you seem like a timid caretaker without a thought or conviction of your own. Indeed, why the hell did the board even bother to hire a big gun like you?

That’s not a question with J.J. Buettgen, the Darden Restaurants and Brinker International veteran who recently assumed the top job at Ruby Tuesday from founder Sandy Beall, one of the most forceful personalities ever to pass through the business. Fewer than 45 days after taking the scepter, Buettgen has made changes that any observer would term stunning. With dramatic action needed, he did nothing less than reverse a key strategic initiative of the larger-than-life Beall.

In case you missed the news, Ruby is backing off one of the industry’s most ambitious diversification efforts of recent times. Betting that some Ruby Tuesday locations had grown too old and creaky to continue operating under that brand name, Beall had decided to explore potential replacement concepts as well as new growth vehicles. But Buettgen clearly doesn’t believe that’s the way to go.

In one fell swoop, he’s closing the 13 units of Ruby’s homegrown seafood concept, Marlin & Ray’s, and the single-store Asian venture, Wok Hay, that started as a fast-casual format and evolved into a dinnerhouse likened by some to P.F. Chang’s.

For Sale signs were hammered into the front lots of the two Truffles Grill polished-casual restaurants that Ruby operated as a franchisee.

Already scrapped was a plan to develop franchises of the Jim ‘N Nick’s barbecue chain.  The concept was viewed as something that could be retrofitted into struggling Ruby Tuesday units, but a one-unit test changed Beall’s mind.

The parings leave Ruby Tuesday with its namesake brand and one of the most celebrated ventures in the fast-casual sector, Lime Fresh Mexican Grill, slugged by some as Chipotle 2.0.

Buettgen’s dramatic actions underscore that diversification has seldom worked for an extended period for restaurant companies. McDonald’s had one time gobbled up brands like they were M&M’s. Now it consists of its namesake powerhouse.

Ditto for Wendy’s, Burger King, Taco Bell and KFC, to name just a few of past diversifiers.
Right now, Bob Evans is looking to spin off its Mimi’s brand to be a single-concept company again.
The notable exceptions are Darden Restaurants, whose brands range from Olive Garden to Seasons 52, and Landry’s, which owns more brands than Lady Gaga has outfits.

It reminds me of a recent conversation with Fred LeFranc, the chain veteran who now leads a team of consultants and concept doctors who collaborate under the name Results Thru Strategy.

I’d asked him if there were any common remedies for the wide variety of turnaround situations he’s hired to address. He surprised me by explaining that the revival strategies are never cookie-cutter, but the problem is often the same.  Somewhere along the way, the concept lost whatever made it special and appealing in the first place. The operation had drifted away from what had brought it success.
Diversification, it seems, can super-charge that blurring process.

Certainly Buettgen is betting that the distractions have hurt Ruby.

Now we just have to see if he’s right.

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