Episode 61 – How to Conduct Your Own Restaurant Rescue. Turning Around a Failing Restaurant

Welcome back everyone.

JAMES ELING: This is going to be really interesting, this is probably going to end up being a two-parter (LISTEN: How to Conduct Your Own Restaurant Rescue. Turning Around a Failing Restaurant PART 2) I think we’ve got a lot of ground to cover. This is something that I’ve spent probably twelve months thinking about these two podcasts because we spent a lot of time talking to restaurant owners all around the world.

What I’ve been doing is looking for the commonalities in people’s restaurants when they’re not going as well as they could be. And so, what I want to do is to enable you to come up with a self-first aid program that’s going to help you to get the restaurant that you always wanted. Because so many people we find aren’t running the restaurant they that wanted. They don’t have the business that they thought they would have when they started running a restaurant–and I think that that’s really sad.

What we’re looking at is a whole heap of little tiny incremental steps to build a business that is something you can be proud of. Something that you can get the financial return that you want and deserve. And a place that you can be happy turning up to work and working hard but not a ridiculous amount of hours. They’re the big things you’ve got to be getting the financial return for an acceptable number of hours. And far too many restaurant owners don’t get that and I think that’s really sad.

So, I’ve spent a lot of time doing research, spoken to a lot of restaurant owners and so we’ve come up with this methodology. It’s basically going to be a checklist that we can walk through we’re going to cover off on each of these ones today in detail. We’re going to go through all the areas that we’ve identified and then what we’re going to do is we’re going to circle back and we’re going to spend time doing an individual podcast on each of these areas. We’ll probably get experts in in the individual areas and delve into them about the basics that you can do to really turn your business around.  This is designed to be a Restaurant Rescue that you can do yourself, but you need to realise that your Restaurant needs to be rescued and you’ve got to want to rescue your Restaurant.  It starts with you! 🙂

Because the thing I find really interesting is that you look at someone who’s running a marginal business and they’ll be really bad at a couple of areas. And you think if you’re okay in this area your business will be so much better. And then they might have really great food but a whole heap of other areas let them down. They may be crushing it with marketing but the food is letting them down or they just can’t hold on to staff. All of these sorts of things–this is going to help you identify where the problem areas are. Work out where the low-hanging fruit is and then move on from there. 

We’re talking about rescuing a failing restaurant. Okay. So, the other thing that I’ve been really conscious of is and what you need to do is a $200,000 fit out.

Now, don’t laugh. I know people who do that. We’re talking about a restaurant probably about 12 months ago. We were trying to sell them a website, funnily enough, because that’s kind of what we do. And he said, “Well, you know, we’re going to actually rebrand. We’re going to come up with a whole new concept.” And I said, “Why is that?” He goes, “Because the concept doesn’t work.” And I was like, “You haven’t actually marketed. I think it’s a pretty cool concept. But you haven’t actually told people about your concept. You haven’t done anything to get the word out.” He did have the best restaurant that no one had ever heard of. But his solution was to go out and spend $200,000 on fit out which I thought was absolutely madness. When he hadn’t really tested the concept that he had. So, a lot of the solutions are designed to just cost you a bit of time.

What we want to do is front-load the process with the things that are going to start saving you time. So that you’re investing time in your business which you will get back in more time that you can spend on running your business rather than working in your business.

So, the concept is like Robert Irvine with Restaurant Impossible, you’ve got Jon Taffer with Bar Rescue, you’ve got Gordon Ramsey [‘s Kitchen Nightmares] as well. They all do these shows where they come in and some poor restaurant owner is up against the wall.

The first thing I think that’s really important in this process is to work out when you need to take a good hard look at what it is you are doing why you are doing it and how you’re doing it. Because a lot of these people they leave it to the absolute, absolute last safe moment and sometimes they go past that last safe moment where no one is going to be able to help you.

The great thing about these programs they come in with money they can do the fit out they can do all sort of these things but I think fundamentally it’s very confronting to the restaurant owners. That’s because I’ve seen John Taffer, Robert Irvine at the NRA show in Chicago. It’s interesting they say that they are very in your face because they need to be. They’ve only got three or four days that they’re working with the restaurant owner. There’s all of these patterns that restaurant owners built up and they need to smash those patterns down very, very, very quickly. Now, I think, so that’s good.  Then they come in with the money, they can do the fit out and all sort of that sort of stuff and that’s fantastic.

That’s a really great boost for the restaurant or bar but you also have the problem that, you know sometimes they rebrand it and they rebrand the restaurant you may not be aligned with. How difficult is it then walking into a restaurant that is not your concept? It’s not your name, it’s not the business that you wanted to run? You may need to rebrand that’s fine but what I’m thinking is rather than doing a rebranding that someone else has come up with why don’t you start thinking about that process. Why don’t you start thinking about the rebranding?

Now, how do you know that you need to do a restaurant rescue? I guess that that’s a really important question because we’re going to start asking some very soul-searching questions.

• Are you happy coming to work every day?
• Are you proud of the restaurant that you run? W
• When you opened the business, did you think that it was going to pan out like this?

I’ve spoken to a lot of people, I always wanted to run a restaurant all of my friends would come over. It’s interesting I spoke to one guy and he said, where have all of my friends said come over and A.) They we’re my mates so they kind of expected it to be for free and B.) They did go down to the beach while I was still waiting tables and working really, really hard on a Saturday. They were down the beach and I was working and they kind of thought that I done the dirty on them because I actually presented them with the bill. That’s not what I thought. That’s not how I thought this would be.  So, what is it that you got into and I think you need to go back to what is it you wanted to do.

Are you spending enough time with your family? Are you taking enough holidays? Are you drawing a wage that you deserve? How do you $100,000 a year in the restaurant industry? It’s easy, you take two $50,000 jobs and you do both of them. Sure, you’re working 80 hours a week but you’re earning $100,000. That could be you. That’s probably not right and the other thing is, it’s not sustainable.

There are some incredibly powerful people in the restaurant industry who can do that for five years. But 10 years, maybe 20 years but at some point, you’re just going to run out of oomph. And at that point, you’re no longer able to be able to do the work that you need to do. And if you’ve got a restaurant that’s not super profitable you’re not going to be able to sell it. You’re going to be giving that restaurant away. So, you need to think about it.

This is one of things that I see that a lot of people really get lost in that decision of I’m waiting for it to get better. Oh, okay, what’s going to happen? Well, we’ll get more people in. How is that going to happen? People, they live this little dream. This little fairy tale that that all of a sudden, the people are going to discover their restaurant and they’ve been running it for 4 years and they haven’t had a profitable month.  But something out there is going to change, something is not going to change.  You’re the one who’s going to have to change it. If it’s going to be, then it’s up to me. That’s what you need to be thinking about.

So, you first off need to make your decision that you’re not happy with the restaurant that you’re running. Yeah, you might be really happy with the restaurant that you’re running and this is still going to be a good podcast because you’re going to probably pick up some areas where you can increase profitability or work even less hours. But really, if you are working in a 60, 70, 80 hours and you’re not loving every single minute of it, then you need to change. Something needs to change. If you’re working those hours and you’re pulling less than someone who’s working front of house then once again something needs to change. There’s lots of legislations around minimum wages. Tragically, they don’t apply to business owners. So, far too many business owners are earning less than the minimum wage when you consider what they draw on weekly earnings divided by the number of hours that they work and yet they think that that’s fine. They think it’s fine for them to deliberately under pay their own wages when everyone else is drawing more wages than them.  That is madness. That’s certainly isn’t the way that you should be running the business.

So that’s the first thing, you need to decide that you need to make a restaurant rescue because far too many people just accept what’s going on as being the way that it should be and the way that’s it’s always going to be. You need to make the decision that you don’t want it to be like that.

Now, the next thing that I think is important to do is to write down the kind of business that you want.  What you’re going to do here is a restaurant gap analysis. So, currently the restaurant is turning over four hundred thousand dollars. I’m working 70 hours a week and I’m making 60 thousand a year. Okay, I would like to earn a hundred thousand dollars a year. I’d like to be working 45 hours a week and I would like the restaurant to be turning over six hundred thousand or seven hundred thousand. They’re some pretty hard numbers. What is it that you’re missing though? Like, why did you start the business? I really wanted to run a burger bar that was going to be renowned as the best burgers. Now, are they the best burgers? Now, I’m going to ask you to be really honest about this because this isn’t going to work if you’re not honest. If I had a dollar for every restaurant owner who said to me you’ve got to come in and try the food because it is simply amazing. I would probably have about $1154. I hear it every day. The food here is amazing. Like, is there a really a high correlation between the people who reach out to me for marketing help. They all have got amazing food or is it the fact that people just think that their food is amazing when in reality, it isn’t.

As you do your restaurant gap analysis, you’ve got to be looking at the hard numbers. How many hours do you want to work? How much money do you what to be making? What sort of business is it that you want to run? Then start thinking about the soft things. We want to be renowned for having the best Chinese food, the best burgers, I want this to be the best family restaurant in town.

Whatever it is, these are a little bit softer, they’re a little bit harder to quantify. I think they are more important. If your passion is making $100,000 a year. It’s going to be hard to market that, it’s hard to make that as being unique. If you’re going to get up in the morning to make this the best damn family restaurant in town, the place where people bring their family and they have a great time. If you want kids to leave with a smile on their faces. Or just that look from the Mom who’s like, “Thank God, this is the night that I don’t have to do the washing up.” If those are the things that get you out of bed, then that’s the thing that will make you successful, and you need something like that to hold on to during the dark times.

So, we’ve got some things written down and I think it’s important that you write these things down. They’re going to be your goals. This is what you want to start moving towards to. As we do our audit and we move through the areas, you’re going to start doing a restaurant gap analysis. Why am I working too many hours? Why do not have the revenue that we need? Why don’t people think of us as the number one family restaurant in town? The next thing that I think is really important to do is to start looking, create a list of all the things that are going wrong.

We’re doing a restaurant rescue, okay so, we can drop the lie that everything is fantastic and it’s a great restaurant. You know deep down that it’s not great restaurant. That’s fine. You know what 90% of restaurants are not the amazing, probably 99% of restaurants aren’t completely amazing. So, it’s completely fine. The second step is to actually make that admission. Right, we’ve got a problem. The food is ordinary, the place looks like a dump. Front of house, sometimes you just want to fire them on the spot because they’re so rude to your customers. Are you concerned about inventory? Do you buy a lot of steak but not sell a lot of steak? But not throw out a lot of steak, ah, that’s a weird problem. What’s going on there? What do you think the problems are?

Now, the process that I really like is to then go at your customers. Okay, so I’d like to create a business that’s like this. How do you feel, do we live up to our brand promise? Do you love the food, what’s your favorite menu item? Why is it that you come back? Go out and seek honest criticism–honest feedback. And when someone says, “I really love this!” That’s a little bit of information. When they say, “This doesn’t work for me.” Wow! Okay, thank you so much for sharing that. We’re going to try and work on that.

We do that in Marketing 4 Restaurants. All the time we’re reaching out, what can we do better? What the next feature that you want to see? How does this not work for you? What are your expectations around this product? This is how we’ve gotten to build a products that, FORBS (Free Online Restaurant Booking System) and FROLO (Free Restaurant OnLine Ordering system), are really robust and continually growing in more and more countries. It’s not easy to do that.

We’ve had some really long conversations and have been really frank with customers. With restaurants, we say, “You need to be able to do this, we need to be able to do this or we caused these problems when this happened.” You take that all on board you feed it back and through the team, through the process, you build a better product. This is what you need to be doing. If you’re not going to be honest with yourself then you’re not going to understand what the problems are.

Everything seems to be wrong in the Restaurant – What do I do???

Your menu is far too expensive. Your food is just no good. The service is awful. The food is great, but it takes 45 minutes to come out. So, you start this process with you, you write down what you think the problems are. Then go at your staff. Now, hopefully you’ve got some staff that you can trust and that you want to build the business with.

Sit down with them and, “So, okay, what do you think the problems are from your point of view? Tell me, if this was your perfect job where do you think we need to be going? What are the issues as you see them?” Do the same with your customers. When you think about the food, I think that one of the really important things to do is to know who your competitors are and go and have a meal there. How does the steak compare? How does the pizza compare? How are they getting it out from the kitchen? How does it taste compared to yours?  How busy are they?  Far too many times, people say, “Ah you know it’s been a really quiet winter.” Well, that’s interesting because you’re empty and the restaurant three doors up is full. So, they’re not quiet, there’s got to be something going on there. You’re missing one, at least one of the pieces. You’re missing one of the ingredients of your secret sauce. What is it that you need to do?

The menu is part of your Restaurant’s sales team

As we’re doing the sorting, the next thing, I think, that’s really important to do is to go outside across the road from your restaurant just spend 15 minutes there. Watch people as they’re going by. Are they going in? If they’re not going in, why aren’t they going in? Have a look at the place. Have a look at the other shop fronts of the other restaurants. How does yours compare? Watch the people as they go by. I think one of the interesting things, I did this with a restaurant owner once. He said, “You know a lot of people stop but very few of them go in.” And it was a very simple thing, he didn’t have a menu in the window. You couldn’t actually see what was going on in the restaurant. People are hesitant to go in and ask for a menu because then they might need to get up and leave. That’s why you have a menu in the window so people can make that decision. Your menu is one of your sales team.  It should be, you want to put it out, front and center in the window so that people can go, “Wow! that sounds really good. I’m going to have one of those.”

What is the appearance of the restaurant? Next thing that you want to do, is you want to come in and sit down.

• What does the restaurant look like?
• Watch your front of house staff. If it’s a small place, it’s going to be really awkward for them.
• Try and watch the flow of people coming in.
• When they sit down, what is it that they’re doing?
• How does the front of house staff cope?
• What does the place look like?
• How does it compare to your competitors?
• Is it homely?
• Does it look dirty?
• Is it not well cleaned?
• Have you got areas where it’s easy to see that it’s fairly filthy?

Now, one of the interesting things, when you watch an episode of Bar Rescue or Restaurant Impossible, always there seems to be just horrible, horrible filthy issues in some part of the bar or in the kitchen.

It’s really weird that it seems to be every one of them has some sort of horrific problem like that. This is one of those things that you want to be thinking about.

• What is the appearance of your restaurant?
• What is the cleanliness like?
• What is the toilet like?
• Do you have one of those kitchens where people can come in through the back door and walk through the kitchen?
• Is the kitchen clean?
• Are people going to be put off with the food that or just by the things that they see when they’re coming in?

A lot of people don’t understand what happens in the kitchen so they’re going to be extrapolating out from the things that they can see. If the plate that they get is dirty, well, if they haven’t washed that then they’re probably not washing a lot of things. If the table is dirty, well, what else is it that they’re missing?  So, you want to start thinking about the appearance of the restaurant and start writing the things down that need to be fixed. I think the really important thing is that here there’s probably not going to be a lot of things that you can fix very quickly because of the fact that it’s going to cost money.  I think, can you get some decent chairs from a secondhand place? Can you lease them? What is it that you can do to fix it up? Some restaurants do a really, really good job of a little bit of a makeover where they’ll just paint the restaurant themselves over a quiet time needing awhile for the fumes to sort of get out. You don’t want to be thinking about the 200,000-dollar makeover you want to be looking for the quick and easy things that you can do to make a difference.

Restaurant appearance is (almost) everything

I know one restaurant where they have this amazing sea motif all throughout the restaurant. So, there are mermaids, fish, sharks all painted on there. Those are really talented paintings or murals even. Now, the problem is that their specialty is Chicken Palmers. There’s very little seafood on the menu. The concept is really off. They would be much better off if they painted the walls because it is confusing, you come in there and it’s like, “Wow! this is just really weird.” What are those things that you can do, the quick and easy things you can do to the restaurant’s appearance.

Now, the cleanliness is interesting because it’s part of the culture. What is the culture like of your restaurant? If the place is not clean, it’s probably because you’ve got staff there who don’t clean. It’s not part of their culture to make sure that the restaurant is really clean. The culture is generally described as the way we do things around here and you’re going to see things like how do they greet people. Does everyone have a smile? Is everyone in the kitchen working together as a team? Do you have interpersonal issues within the team? In a company with a poor culture, that tends to happen more often because people aren’t focused on the big thing. As the leader of the organization, this is really your job to make sure that the culture is strong.

Is your vision your mission? A Restaurant Rescue needs a mission!

What’s the vision for the restaurant? If you want to the best family restaurant in the town then you need to be hiring people who are family people. You need to be hiring people who love kids. You don’t want someone who’s going to be looking down their noses at kids. That’s not going to work, that shouldn’t be part of the culture. Everyone needs to know that you want to be the best family restaurant in town. That will attract people who are family people to your restaurant. This is how you build a culture around it. You’ve got to have a vision around what it is that you’re doing. You’ve got to have values and you want to share them and reinforce them.

Now, having a strong culture is really important because it will ask you to do a couple of things. One, you’re going to hire the right people because of the fact that they know your culture. You’re going to know who you’re looking for. You’re not going to be taking anyone with just a pulse. You’re going to be looking for someone who, “Look at this person they’re really great family person. They light up when they tell me about their family and you know I can see them lighting up when they’re dealing with our customers’ families when they come in.” So, you’re going to hire better. Two, you’re going to retain those key employees for a lot longer because they are in a job that shares the same values. If they love their family and other people’s families, if they’re a real people person then they’ll enjoy working in your restaurant and they will stay a lot longer. You’re going to actually spend less money on hiring and training staff because your retention is going to be longer. Have you told people the kind of restaurant you’re trying to build? Do you have people who don’t share your culture?

Creating a great Restaurant culture

This is something that I learned probably 15 years ago. So, I used to run an IT company and at one point we employed probably about eight people. We realized that their culture was, “I didn’t like going to work.” This is how I know what it’s like. I didn’t like going to work. I found it stressful, I didn’t like the people that were there. And I just thought, “This was an awful job.”

Then one day, I woke up and thought, “This is my company.” And I sat down with my wife, Tina, and we agreed, “We really need to change the culture of the company.” I’m pretty slow and had actually completed an MBA at this point. It just took me that long to realize that our culture was so bad and that it was my fault to let it get to that.

So, we said, “Okay what we’re going to do is bring everyone around on the journey.” We’re going to provide them with a vision. We’re going to provide them with some values and we’re going to reinforce those values. In hindsight and probably at that point, we had two really good people in the team. I think, actually, just one. So out of eight people: that was myself and my wife, so obviously, we’re going to stay. We had one really good engineer. I would have been better off sacking, writing the names of the people down and just sacking the other five people over a period of 12 months.

We couldn’t sack everyone in a 12-month period. Straight up, we couldn’t have done that–that would kill the company off.  But what we should have done is just move through them very aggressively and said right, “You’re gone, you’re gone.”

And since I started to hire the people who were going to be able to help us to change. We should have been ripping it off like a band-aid rather than bringing people along on the journey and we had people who didn’t come along with us. They hung around for like four or five years, and it was only when those last people left that we could really say, “Yes, we have fixed the culture here.” The productivity doubled for the average engineer in our company.  It made a fundamental difference to the way to what we were able to do and how we are able to do it–really, really big difference. But we did it over a period of five years, when we could have done it over a period of 12 months.

So, one thing I always like to say is, hire slowly and fire quickly. It’s really important when you make that mistake and, you know what, we all make mistakes. I think that hiring people is really exciting because you get to bring new skills and new passion into your company. But it is like going to the casino because all of the time you’ll hire the wrong people. You want to be thinking about the people that you’ve got for the culture. Because the culture is the one going to make the really big difference in your restaurant because peoples passion, that’s going to be the difference between your restaurant and the restaurant just up the road.

So, then leading on from restaurant culture the next thing then is people. You’ve got to have the right people. Those people have got to have the right skills, the right training. Now, one of my favorite Jim C. Collins quote he wrote a book called Good to Great and he looked at a lot of companies that we’re successful over an extended period of time. He always talked about having the right people on the right seat on the bus.

How do you hire the right people for your Restaurant?

This was one of the things we found: So, the right people are the people who share your values and they share your goal. The aptitude to do, to work in the company, what you’ll find though is that some people are not sitting in the right seat. You’ve got the right person but they’re not on the right seat. And we found this in our company’s, we move people from being managers, we’ve removed that responsibility from them. We’ve promoted them up because they’re really good at their job we made them a manager and it was awful we then just move them back. We found the right spot for them. We always knew that they were the right people. we were always happy for them to come along for the journey. They wanted to come along on the journey with us, but we put them into roles which they weren’t suited.

So, I think you have to think about that, You have to play into everyone’s strengths and minimize their weaknesses. One for the tools that you can use with that is DiSC profiling. I think we’ve talked about that before. DiSC profiling is a really powerful tool. There’s lots of personality tests that you can do. What are the people’s strengths? Because the whole point of a team is that you want to minimize everyone’s weaknesses and maximize their strengths. If you don’t have the right people and you need to fire them.

The next thing that is really important for the team is: Do they know what it is expected of them?  Because one of the things that can be frustrating for a staff member is when something happens and they don’t know what to do. They’re not empowered to do, but it only gets them frustrated because they haven’t fixed the problems. There’s another problem that I have to fix. And that’s like, “Whoa, hang on a sec there.” Have you actually empowered this person to be able to deal with this problem? And often the case is no, they haven’t.

Can a person in the team define what a successful day is for them? Because that often isn’t the case. Do they have the right training to be able to do what it is that you need them to do? The perfect example of that is the restaurants in Queenstown where they have a huge transit through population. As a consequence, they had often trained people who haven’t got front of house or back of house skills. Because they don’t have those skills, a lot of the restaurants there need to put a training program in place.

Now, some of them, the training will be: This is how you do it and it is over in five minutes and if you blinked you’d miss it. Other places are saying, “You know we have to invest in this person. We’re going to give them a whole day’s training or two days training.” Make sure that they’re comfortable with it. They find that the staff hang around a lot longer and it may only be for a season. This may be a part of your thinking in your business plan: how you’re going to attract staff. So, they’re going to invest a huge amount but they invest a little bit more than the other restaurants up and down the road. Able to retain this staff longer. They’ve got staff who are more engaged with them.

SUMMARY

So, I think we’ve probably covered enough for one podcast today. I’ve probably given you a few things to think about. The most important thing is to have a think about is whether to do a restaurant rescue. Are you happy with your job? Your hours? Your mission in life, the big thing. and the pay packet that you’re getting at the end of the day?  Are you being fairly compensated the pressure of running the restaurant? If the answer is no, then you probably have to run a restaurant rescue.

So, you need to be really, really honest. Write down all of the things that are wrong. Go out to other people, your staff, your customers and find out from them what it is that they think the problems are. Be really honest about how you think the restaurant is functioning.   Do that audit. Have a look at the appearance and then start moving through so when we talked about the appearance, cleanliness. The cleanliness of the restaurant. if it’s not clean enough then maybe you are starting to look at the culture. What is the culture like? What are you doing to build a culture? Are you getting people who share your mission and your values? And you don’t have to have Michelin values but I’m going to tell you I think it’s really important that you at least think about it because it can be a powerful tool in hiring and retaining staff. And creating engagement with your employees. What is the team like? have you got the right people on the team? Do they have the right skills? Have they got the right training?

So, there are some things to start off with. We’re going to be back next week with the next episode (Episode 62: Restaurant Rescue: How to turn around a failing Restaurant – PART II) in this podcast where we’ll be going to be talking about, well six more things. We’re going to talk about processes, systems, your business plan, KPIs, finances, the menu and we might talk a little bit about some marketing.

So that’s it. I hope you have a really busy day.  Well, talk to you real soon.  Bye.