Once upon a time, you created and launched your new restaurant. Maybe it was 2005… or just 2015… or maybe you inherited your parent’s restaurant that they created in 1985. Maybe it was sexy or maybe you were the first ones serving fresh pasta…or maybe you were the first to offer health insurance to servers. Regardless, you started with a bang, but for the past few years, sales have been eroding. First slowly, then faster, until you reach some level of panic that spurs you to action. What do you do? Add catering? Change the menu? Add a patio? Give it a fresh coat of paint? Change uniforms? Increase wages? Renovate the façade? Each of these – or a combination – amounts to refreshing your existing restaurant in the hopes of reversing the negative trend. Unfortunately, no amount of money thrown at a solution seems to pull you out of your tailspin, and the ground keeps getting closer. Maybe it’s time to stop trying to fix what you have and completely change the concept.
Very few restaurants achieve “institution” status in a community – that legacy diner or favorite burger or pizza joint that has been there “forever”. A chef friend of mine is from Mamaroneck, NY and he once took me to his childhood-favorite pizza restaurant, Sal’s Pizzeria. Inside, Sal’s is nothing special if not tired. The staff ages seem to range from mid-teens to late 60’s (or maybe that guy was 75?). The pizza is pretty good but nothing especially unique. Just good old-fashioned NY-style pizza, made with love in a location that has served the community since 1964. My friend has fond memories of growing up nearby and heading to Sal’s for a slice after school or before a Met’s game or to nurse a hangover. Perhaps it’s the memories that keep him going back. Perhaps, for his – and his neighbors’ – taste, it really is the best pizza in the world. Regardless, Sal’s has managed to defy the odds and remain continuously successful for 60 years.
In Washington, DC, on the corner of P St. and Wisconsin Ave. in Georgetown, is a small, patinaed restaurant called Martin’s Tavern. It serves unfussy, hearty, classic favorites, so by no means is it a food innovation mecca. Billy Martin owns and runs it. His father’s name was Billy, and he ran it after taking over from his father, Billy, who created and launched it in 1933 (yes, that last Billy did play for the NY Yankees but isn’t the former Yankee’s manager). The current Billy is approaching retirement and is probably considering stepping away from the business he grew up in. Succession could be a source of worry, but he (and the rest of us) are in luck because his son is also named Billy who will probably carry the torch for the next 30 years. The booths in Martin’s Tavern have stories to tell – like booth #3 where John F reportedly proposed to Jackie, or others where historic congressional power deals went down, or where presidents dined with their families.
The secret ingredient in both Sal’s and Martin’s is not so much the food or the service but the way it makes people feel, whether reminiscing over their history or someone else’s. Longevity begets longevity in a sort of self-refreshing eddy. The trick is to create memories…and it’s hard to know if your restaurant will achieve that magic. You can spend all you want on a new restaurant, but you can’t buy history or relevance to a community. If your restaurant is getting old sales are declining, and it hasn’t achieved neighborhood “institution” status, chances are it’s on its way out. Tweaking it to revive its former glory may be futile and may only buy a little more time. As you squeeze costs and beg for sales, time eventually runs out and there isn’t much left to sell. You often don’t know it’s the end until it is, and you’re forced to close. What happens? Some newcomer, flush with cash and a fresh concept, swoops in, guts the place, and re-opens it as a completely new restaurant that thrives! Well…why can’t you do that?
Here are five reasons why changing your whole restaurant concept may be a smarter use of resources than burning money trying to fix what you have.
- It will cost less than starting fresh somewhere else. When you think about starting over, after so many years in your business, it might give you an ulcer …like imagining starting over with a new round of children after your first round has just finished college. But if you had a new baby, your experience would surely make you a better parent. You can fix what needs to be fixed but skip what you know you can skip. “Gutting” that space means something different to you than it does to a newcomer because a newcomer might truly scrape everything out of it while you will know precisely what can be saved and what truly needs to go. You also know what throughput issues you want to resolve in the new design.
- You already have the lease. Having an existing relationship with a landlord can save a lot of time and money because you’re not searching for a new location, and you can potentially renegotiate your lease to solve some past pain points. Even though you may not like each other, spending your money to renovate their space will sweeten even the sourest of tenant/landlord relationships. Your goal is to create a new money-making machine and likely to create something to facilitate an exit from the business.
- You know the market. If your existing restaurant was ever successful, then you have valuable intel on what made it so. Even if your business is in decline, you know seasonal patterns, neighborhood demographic shifts, and vendors. You can tune your new concept to service peak seasons and shift your offering and labor to weather slow seasons. You will also already have negotiating power with your vendors.
- You know your competitors. You’ve seen where your business wins or loses as newcomers arrive to take your market share. You have a long history of customer complaints and requests and you’ve seen competitors come and go. You know where you’re vulnerable and where you’ve had success. Your old concept was created at another time…and times change. Launching an entirely new concept allows you to distill your competitors’ learnings with your learnings to create something that your customers really want.
- Your new creation can allow you to exit on top. Everyone talks about the early failure rates for startups but few talk about the shelf life for restaurants. There is no one formula, but even your hairdresser will venture a good guess regarding how long a restaurant will last in a given location. Your hairdresser will also tell you (and everyone else) when your restaurant is nearing the end of its life. When you create something new, you reset that lifespan. If you’ve created the right concept, it has lower debt than a newcomer would (because of the reasons above), and you’re profitable faster than a newcomer could possibly be. Profitable restaurants that are early in their lifecycle are attractive to buyers looking for a turnkey. Restaurants that are still depreciating their equipment and that are dropping money to the bottom line will sell for the value of their innards PLUS 3x or 4x their cash flow.
Creating a new concept isn’t easy and costs money. You may be too close to your operations to see opportunities clearly or you may have become blind to the issues plaguing your restaurant. Or you are afraid that you’ll repeat the same mistakes with a new concept. Get a fresh set of eyes to help you model your options and set the new course before you start winging it. The stakes are high when you re-concept so getting it right is critical. But, when you do, you create a new money-making machine and give yourself more options. That’s a smarter plan than depleting all your reserves trying to save what you have, then finally trying to sell those old ovens, tables, and chairs for pennies on the dollar.