How to rescue a failing restaurant in 6 months17 Apr 2016, by Kamron Karington in Audio, Expert Interview
Those are the opening words from a book suitably titled: “The Six-Month Fix – Adventures in Rescuing Failing Companies” by Gary Sutton. It is a sobering look at a lifetime of fixing and saving failing businesses.
I put Gary in the hot seat and asked him: “If I asked you to step in and rescue a struggling pizzeria - what immediate steps would you take to turn things around?” Gary’s response to that question was very telling. “Struggling? It needs to be bleeding badly. Too many owners put up with struggling for decades. But when cash-flow is gone, debt is piling up and panic has set in – that’s when a turnaround can begin.”
Listen to Adventures in Rescuing Failing Companies with Gary Sutton below...
Cash makes you stupid. “You tend to make imprudent decisions when flush with cash.” Gary’s seen many businesses expand on the success of the original location – only to go completely bankrupt by overextending. These businesses had success more from their location – than the product concept. When they went up against competition outside their trade area – the new location ate up all the profits from the main store.
Stop the bleeding. “It’s difficult to sell your way out of trouble without cutting hard costs first. Two things that make a failing business incurable... a bad lease and too much debt.” Costs creep up over time. A look at the books will identify ongoing bills that you didn’t used to have in the beginning. Cutting your tail off an inch at a time cause more pain than just whacking it off at the base. Get rid of all excess costs at once.”
Make what sells. “You’ve got to change something, you can’t just complain. You need to eyeball your menu and look for your most profitable items. Get rid of any underperforming entrees.”
Nudge value up. “You can’t discount your way out of bankruptcy. Promote package deals, up-sells and add-ons to boost profits on each sale. And sugarcoat price increases. Sure it costs a buck more – but it has more toppings now”
Specialize or die. Gary has rescued many businesses that thought they were all things to all people. “When you specialize you get better at what you’re doing. When you have a broad offering you’re not very good at any of it. A byproduct is waste – as more food spoils or is served past its prime.”
Raise pay and cut benefits. “Younger employees would rather have the cash. Run periodic promotions to stimulate productivity.” Garry found frequent small bonuses worked better than occasional large bonuses. He’s a big proponent of small bonuses delivered with a smile and a pat on the back. “Random reinforcement is stronger than continual pats on the back which come to be expected. Reward the employee in front of the entire crew.”
Gary says “Turnarounds are best accomplished by an outsider who is detached from the emotional connection to the business. Someone who can kill the sacred cows. And if you decide to tackle the challenge yourself – use these words as your guide: The function of a business is to create money, not consume it.”