Updated: Oct 13, 2018
For years the sector has ridden the high times, rolling concepts out in cookie-cutter fashion, reaping the rewards of launching in new markets with limited competition, chasing landlords who make you jump through hoops, and batting-off meeting requests from financiers who want a slice of the action.
It’s a stark contrast to today. The investors have closed their cheque books for the most part, landlords continue building schemes that sit with empty sites and offer bigger sweeteners to secure a deal, and brands are closing sites. We all know this story, we’ve read it in what seems a daily flow of articles in the business pages of national newspapers.
I hear a lot of negativity about certain brands that are closing sites and taking drastic action to right themselves. Almost every senior executive I speak to tells me they are struggling right now, with ownership and debt structure the key differentiator on whether they need to take drastic action or not.
But what went wrong and what can we do about it? I’ve been asked this a lot recently. I’m sure we all have our own ideas and, let’s get this straight, I’m not a financier so I’m no expert on debt or structuring businesses. I know a thing or two about customers and brands, so that’s where I come from when starting to answer this question.
If you flip your thinking to that of a customer for a second, I think we can find most of the answers.
You live in an area where there were one or two great restaurants you visited for celebrations amid a plethora of middle of the road independent pubs and restaurants, many with poor retail standards and inconsistency. Suddenly the national groups start arriving with a design that sparkles and better retail standards. It’s new and different. You try it. You like it. You go back. It’s consistent. It may not be as good in terms of food as the local, but it’s consistent. That consistency means you won’t be disappointed and feel you’ve wasted your money. It’s an important factor if you don’t go out often.
On top of this, you may not even realise this is a national chain. I’ve sat in focus groups for a 60-site operator where the whole group of ten thought it was a local concept.
Another new brand comes, the cycle continues. You try out something new. Tens of these new concepts come and you need to start choosing between them. The brands don’t change much, for the most part they don’t do specials and provide offers to keep you coming back. You spot the concept elsewhere on your travels, figure out it’s a big group and it loses a bit of the magic. As that restaurant group grows, the retail standards are bound to slip with a fight for the best managers and an inability to put existing managers into those sites, recruiting new staff and not training them as effectively as possible.
In the meantime, those independents that have survived have realised they need to get better – and have. The pub groups have seen the huge competition posed by casual dining and now work with their operators to drive retail standards. Finding better lessees and supporting multi-site operators to grow and take better units.
Suddenly there is more competition and more choice for those customers. The only difference is these venues have individuality and, in some cases, feel more casual. Let’s face it, for a long time pubs were our casual dining. I think what we are seeing is customers choosing individuality over consistency again.
What does that mean for us as a sector? It means we have to act. We have to revolutionise. It means we have to do more to make less.
In QSR and fast casual, the cookie-cutter approach may work better as what you’re paying is lower and the time involved in your experience less. In full service, many of the occasions people are coming to your restaurants for warrant an experience – whether a date night, a birthday or even a catch-up with friends.
I ask many leaders in our sector what their favourite places are to dine and I don’t think I’ve ever heard a group restaurant mentioned. Ironic, hey? Where is the pride?
It’s at this point brands have a choice – they thrive or survive. I know full well financiers will want to cut costs and concentrate on margin. Many tactical marketers will up the discounting as we have seen.
I was with a well-known founder of a large group this week who agreed that at times like these we should focus on providing better value and taking a hit on margins across the board, not pumping offers.
We need to go back to basics and create experiences. We need to invest heavily in training, in our sites and in developing interesting initiatives to get people coming back for a reason other than a discount.
I’ve presented to more than 200 business leaders in the past week. I asked all of them if they were making cuts, nearly all of them were. I asked the same group if they have a clear document outlining their brand. Fewer than 10% raised their hands. If you haven’t clearly defined your brand, how can you go about refining it or even starting to decide what you will do next? How can you get your people behind your vision and on the path to growth? The first step on the journey of revitalising your brand and putting your company back into growth is getting everyone aligned and working to the same vision. It needs to be a vision of thriving – even if you feel like you are barely surviving.
Speak to your people and customers, know your competition, develop a strategy, and work together to achieve it. There will be places to make cuts in your business – but make sure they are in the right places.