2016 has turned ugly for a large number of restaurant chains with dramatic sales declines, store closures, rising bankruptcies, and the eventual rotation of the C-suite. Unfortunately, it appears that this pattern in the restaurant industry will not end in the near future.
In this first installment of a series exploring turnaround strategies, we will review examples of the most dramatic way to increase sales at your restaurant chain. The ability to develop a successful strategy to add additional revenue channels can drive the business far above any other program.
Are You Mathematically Wasting Your Time?
Often, when we are working on restaurant chain turnarounds, we run into brands stuck inside their own box. They have tried various initiatives within the confines of their current business model with little or no success. These programs are usually targeted at an already successful daypart with heavy transaction counts. This strategy automatically creates a barrier to success due to challenges around the ability to serve more orders through the current service model and physical plant during that time frame. Examples include:
A casual dining brand with lines out the door at dinner tweaking their top selling pizza.
A fast casual brand packed at lunch adding a new cheese to the assembly line of their create your own burrito concept.
A quick service coffee brand that can hardly keep up with orders in the morning offering new single origin Hawaiian beans.
Yes, product quality and innovation are important. In fact, at times they can actually be revolutionary which we will cover in a future installment of turnaround solutions. However, will it get you a 10% or 20% leap in sales?
If your brand is at capacity in the daypart you have targeted with product/menu initiatives, it will be mathematically challenging to make that leap. If you are able to achieve increased consumer visits at that level, it could produce an opposite financial effect in the months to come unless you have also addressed your throughput issue with some sort of technology, equipment or service innovation. Long waits for tables and food can easily turn guests away never to return.
Focus On Sustainable "Exponential" Value
Leadership at restaurant brands need to ask themselves if these kinds of time and resource consuming initiatives will really create exponential value for your brand? Will they significantly increase sustainable transactions and sales? Will they attract new investors/franchisees to help accelerate brand expansion? Or, are these programs going to produce down, flat, single digit incrementality or short term false positives through discounting and limited time offers. The “Limited” in Limited Time Offers is generally self defining from the start. Should your team be focused on creating “limited” results, or sustainable exponential brand value?
One of the opportunities we look for when we receive an assignment to help craft restaurant chain turnarounds is revenue channel expansion. We look outside their current business model to find new sales streams that will significantly improve the brand from a continuous sales, transaction share, brand awareness and unit growth perspective. When you can successfully execute a disruption to your current structure that delivers all four, you are able to grow the value of the brand with exponentially accelerated results, significantly improving the overall valuation of your enterprise with long term sustainable growth.