This is the final installment of a three-part celebration of the industry's top turnaround stars. You can read the first installment, on Popeye’s Cheryl Bachelder, here, and the second, on Ruth’s Chris’ Michael O’Donnell, here.
Under the cobwebs in some business school’s library is a volume entitled, “Standard Procedures in Restaurant Turnarounds.” It’ll be covered with an inch of dust because anyone who’s spent time in the business will know the prescription: Expand your menu to draw new customers while tapping wholly new sources of revenue like catering.
Rare is the executive who hasn’t thought along those lines. Scarcer still is the one who was able to make the plan work.
So meet James D. White, the CEO of Jamba Juice. You might not know him, or of him, because he’s kept a low profile. But he’s quietly engineered what may be one of the most astounding turnarounds in foodservice.
White took over the chain in late 2008, as its glitter was starting to wear off. It’d drawn considerable attention, from consumers as much as the industry, as a “lifestyle brand”—a Starbucks that sold cold drinks instead of hot ones.
That’s great for a niche brand. But the concept’s limitations were becoming evident. It actually sold a liquid meal replacement in a cup—a relatively high-ticket smoothie that takes a considerable amount of time to finish, if you can consume it all. To say it’s filling is like referring to Lady Gaga as kind of different.
Jamba wasn’t where you’d stop for breakfast, lunch and dinner, day after day after day.
The chain’s management was addressing the problem by adding a smaller-sized serving and adding breakfasts you could suck up through a straw.
Enter White, who, significantly, was recruited from the grocery business, not another restaurant chain. He’d developed proprietary brands for the Safeway supermarket chain.
White quickly came up with a strategy. If you’d stopped any attendee of the Restaurant Leadership Conference and asked them on the spot for a plan, you’d have gotten almost the same thing:
--Cut expenses
--Expand the menu to bolster traffic
--Focus on service
--Emphasize franchising
--Expand overseas
--License your name to food products.
Fast-forward to the present. The chain now features products as diverse as soft yogurt and steel-cut oatmeal. Breakfast wraps are being tested in more than 200 stores.
Jamba’s memorable name appears on retail products ranging from trail mix to toy blenders. G&A costs were cut by more than 14%. Its franchisees include tennis superstar Venus Williams. “And we have zero debt on the books,” White told investors two weeks ago.
As far as we can tell, White didn’t log any time at Hogwarts before joining the restaurant business. He has no pact with the devil that we’re aware of. Nor is he using some special ray gun.
Yet he was able to execute a plan that stymied other chains, of all shapes and sizes. There’s no magic to it. Indeed, the difference was as simple as drinking a smoothie through a straw: He built a team and instilled a culture that enabled the strategy to work. The “how’s” were details that management could supply because of its experience and insights.
White provided the leadership to make the thinking and execution possible.
It sounds like an easy formula. But as Vince Lombardi famously said, You can use my playbook, but you still have to beat me on the field.
Showing posts with label restaurant turnarounds. Show all posts
Showing posts with label restaurant turnarounds. Show all posts
Friday, September 2, 2011
Wednesday, August 3, 2011
Ruth's O'Donnell: Making a plan work
This is the second installment of a three-part celebration of the industry's top turnaround stars. You can read the first installment, on Cheryl Bachelder, here.
The turnaround at Ruth’s Chris didn’t start out with a bang. It was more of the resounding-thud variety.
Like a lot of high-ticket concepts, the expense-account chain was kneecapped by the Great Recession. In February 2009, comps fell 23%. And that was after it’d rolled out a cut-rate deal to pull customers back. For a mere $39.99 per head, guests were treated to a three-course meal that included shrimp or a six-ounce fillet.
By Ruth’s-ian standards, it was a Dollar Menu. But the headwinds were too strong. Trade-offs to the discount lowered Ruth’s check average without drawing an offset in traffic. In short, it looked as if the concept was just discounting to customers it would’ve drawn anyways.
At the rate of decline, said CEO Mike O’Donnell, units would each lose $1 million in annual sales.
The next tactic didn’t work so well, either, or at least not at first. The chain put the spotlight on the flattop-grilled steaks and other entrees that had long been its signatures. They were grouped together into a special Classics menu. Customers would recognize the items, but not the prices, since they were lowered to a traffic-stimulating level.
Then came one of those smack-your-forehead moments. To hold down costs, Ruth’s simultaneously cut its advertising. So it had a deal, but no way of telling patrons about it. Guests were already in the unit when they learned of the special promotional session.
It didn’t look good for Ruth Fertel’s brainchild. But O’Donnell proved why he’s one of the toughest execs the industry has ever seen. His lengthy resume included stints during some of the roughest times at Champps, Sbarro and Ground Round. He’s also been fire-hardened by working at such operations as Outback and T.G.I. Friday’s. This is no crème puff.
He stuck with the Classics deal. Today, it accounts for about 30% of Ruth’s sales, which are on the rise. Traffic was up 3.3% in the second quarter, with a 2.4% rise in the average check, yielding an average sales increase per store of 5.8%.
Meanwhile, O’Donnell diversified the chain’s prices. A bistro menu put more affordable choices in front of customers, who could now return even if the company wasn’t picking up the tab.
He also pushed for group business, which had fallen like a stone. The installation of a satellite communication system provided an extra reason for businesses to hold their meetings at a Ruth’s, with banquet service included. In the second quarter, group sales were running 16% above the tally of a year earlier.
Now O’Donnell is trying to work the same program with Ruth’s secondary concept, the Mitchell’s dinnerhouse chain. The home office is diversifying the menu. While the Ruth’s brand is testing TV advertising, the smaller Mitchell’s operation is experimenting with radio.
Still, O’Donnell isn’t crowing about his company’s recent achievements. During a conference call with financial analysts, he was asked where the turnaround stands.
“Our everyday user continues to show improvement. Our business-to-business experience shows improvement,” he said. “So we think that as long as the economy continues or the higher end of the economy continues to do reasonably well, we will continue to track in that regard.”
I wouldn't bet against him.
The turnaround at Ruth’s Chris didn’t start out with a bang. It was more of the resounding-thud variety.
Like a lot of high-ticket concepts, the expense-account chain was kneecapped by the Great Recession. In February 2009, comps fell 23%. And that was after it’d rolled out a cut-rate deal to pull customers back. For a mere $39.99 per head, guests were treated to a three-course meal that included shrimp or a six-ounce fillet.
By Ruth’s-ian standards, it was a Dollar Menu. But the headwinds were too strong. Trade-offs to the discount lowered Ruth’s check average without drawing an offset in traffic. In short, it looked as if the concept was just discounting to customers it would’ve drawn anyways.
At the rate of decline, said CEO Mike O’Donnell, units would each lose $1 million in annual sales.
The next tactic didn’t work so well, either, or at least not at first. The chain put the spotlight on the flattop-grilled steaks and other entrees that had long been its signatures. They were grouped together into a special Classics menu. Customers would recognize the items, but not the prices, since they were lowered to a traffic-stimulating level.
Then came one of those smack-your-forehead moments. To hold down costs, Ruth’s simultaneously cut its advertising. So it had a deal, but no way of telling patrons about it. Guests were already in the unit when they learned of the special promotional session.
It didn’t look good for Ruth Fertel’s brainchild. But O’Donnell proved why he’s one of the toughest execs the industry has ever seen. His lengthy resume included stints during some of the roughest times at Champps, Sbarro and Ground Round. He’s also been fire-hardened by working at such operations as Outback and T.G.I. Friday’s. This is no crème puff.
He stuck with the Classics deal. Today, it accounts for about 30% of Ruth’s sales, which are on the rise. Traffic was up 3.3% in the second quarter, with a 2.4% rise in the average check, yielding an average sales increase per store of 5.8%.
Meanwhile, O’Donnell diversified the chain’s prices. A bistro menu put more affordable choices in front of customers, who could now return even if the company wasn’t picking up the tab.
He also pushed for group business, which had fallen like a stone. The installation of a satellite communication system provided an extra reason for businesses to hold their meetings at a Ruth’s, with banquet service included. In the second quarter, group sales were running 16% above the tally of a year earlier.
Now O’Donnell is trying to work the same program with Ruth’s secondary concept, the Mitchell’s dinnerhouse chain. The home office is diversifying the menu. While the Ruth’s brand is testing TV advertising, the smaller Mitchell’s operation is experimenting with radio.
Still, O’Donnell isn’t crowing about his company’s recent achievements. During a conference call with financial analysts, he was asked where the turnaround stands.
“Our everyday user continues to show improvement. Our business-to-business experience shows improvement,” he said. “So we think that as long as the economy continues or the higher end of the economy continues to do reasonably well, we will continue to track in that regard.”
I wouldn't bet against him.
Wednesday, January 20, 2010
My pick for Best Turnaround Story
If Kona Grill’s past year had been recorded in 3-D, people would be bailing out of “Avatar” to catch the more engrossing tale.
The story could’ve been lifted from a Hollywood western: A frontier boss decides he’s going to make his own rules, public be damned. In this case, that includes selling a million shares of stock to his father at a sweetheart price to raise working capital after cutting the staff. Meanwhile, the easterners on Wall Street worry about how this range lord is running the ranch they’ve staked. Shots are exchanged, albeit verbally, when they ask for an accounting during a routine phone chat with management. You could almost hear the derringers being cocked.
Enter our hero, his white hat almost glistening. Marc Buehler, best known as the marketing sure-shot who deftly used his spurs at Applebee’s, is brought in as the new honcho to fix the muck-up that the 24-unit chain had become.
He starts assembling a posse to run off the fusion concept’s problems. Because bar business is essential to Kona, Buehler recruits Rachel Phillips-Luther, a former hand at the Chammps and Fox & Hounds sports-bar chains, to serve as vice president of marketing and brand innovation.
The appointment came after one of the last key figures from the last regime, an operations specialist, had been sent galloping into the sunset.
If you want to go get a refill on the popcorn, I’ll wait.
Yesterday, Buehler showed what kind of firepower he intends to put behind Kona, a concept old enough to need some updating. This time his lariat fell on Larry Ryback, president and chief operating officer of Dean Vlahos’ Redstone American Grill, one of the most popular and admired concepts at the high end of casual dining. Ryback is serving Kona, characterized by Buehler as “polished casual,” as senior vice president of operations.
Now comes the hard work of proving the viability of Kona, a decidedly quirky fusion concept. Its signatures include a sushi bar, a 2,000-gallon aquarium, a hopping bar, a menu that stretches from pizza to noodle dishes, and 40 made-from-scratch sauces. “We have a saucier in every restaurant,” Buehler recently boasted to investors.
Buehler has suggested that those idiosyncrasies will serve Kona well by differentiating the brand from other casual concepts, or what he calls “a sea of sameness” featuring “a lot of brown food on plates.”
Yet he also notes that Kona is popular with consumers aged 21 to 35, hardly the older, more affluent customers sought by other upscale concepts like Seasons 52. Checks average $24, and units are typically running “north of $4 million” in annual sales, says Buehler.
With only 24 restaurants, the chain also lacks the marketing wherewithal of competitors. Those stores are also scatter-gunned across 15 states, so even pocket marketing is a challenge.
Instead, Buehler says he’ll rely on social media and word-of-mouth. His revised team is in the process of forming a new loyalty marketing program, a club for “Konavores.”
He also plans to blaze new opportunities for Kona in catering, delivery and takeout, while opening only one restaurant in 2010.
The job has to be a daunting one. But the dramas leading into it have made this one of my favorite turnaround efforts to watch.
After all, would the Na’vi dare to combine sushi with calamari, meatloaf and a swimming-pool sized aquarium?
The story could’ve been lifted from a Hollywood western: A frontier boss decides he’s going to make his own rules, public be damned. In this case, that includes selling a million shares of stock to his father at a sweetheart price to raise working capital after cutting the staff. Meanwhile, the easterners on Wall Street worry about how this range lord is running the ranch they’ve staked. Shots are exchanged, albeit verbally, when they ask for an accounting during a routine phone chat with management. You could almost hear the derringers being cocked.
Enter our hero, his white hat almost glistening. Marc Buehler, best known as the marketing sure-shot who deftly used his spurs at Applebee’s, is brought in as the new honcho to fix the muck-up that the 24-unit chain had become.
He starts assembling a posse to run off the fusion concept’s problems. Because bar business is essential to Kona, Buehler recruits Rachel Phillips-Luther, a former hand at the Chammps and Fox & Hounds sports-bar chains, to serve as vice president of marketing and brand innovation.
The appointment came after one of the last key figures from the last regime, an operations specialist, had been sent galloping into the sunset.
If you want to go get a refill on the popcorn, I’ll wait.
Yesterday, Buehler showed what kind of firepower he intends to put behind Kona, a concept old enough to need some updating. This time his lariat fell on Larry Ryback, president and chief operating officer of Dean Vlahos’ Redstone American Grill, one of the most popular and admired concepts at the high end of casual dining. Ryback is serving Kona, characterized by Buehler as “polished casual,” as senior vice president of operations.
Now comes the hard work of proving the viability of Kona, a decidedly quirky fusion concept. Its signatures include a sushi bar, a 2,000-gallon aquarium, a hopping bar, a menu that stretches from pizza to noodle dishes, and 40 made-from-scratch sauces. “We have a saucier in every restaurant,” Buehler recently boasted to investors.
Buehler has suggested that those idiosyncrasies will serve Kona well by differentiating the brand from other casual concepts, or what he calls “a sea of sameness” featuring “a lot of brown food on plates.”
Yet he also notes that Kona is popular with consumers aged 21 to 35, hardly the older, more affluent customers sought by other upscale concepts like Seasons 52. Checks average $24, and units are typically running “north of $4 million” in annual sales, says Buehler.
With only 24 restaurants, the chain also lacks the marketing wherewithal of competitors. Those stores are also scatter-gunned across 15 states, so even pocket marketing is a challenge.
Instead, Buehler says he’ll rely on social media and word-of-mouth. His revised team is in the process of forming a new loyalty marketing program, a club for “Konavores.”
He also plans to blaze new opportunities for Kona in catering, delivery and takeout, while opening only one restaurant in 2010.
The job has to be a daunting one. But the dramas leading into it have made this one of my favorite turnaround efforts to watch.
After all, would the Na’vi dare to combine sushi with calamari, meatloaf and a swimming-pool sized aquarium?
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