Voice of the Restaurant Industry
Some big, and not-so-big, parts of the restaurant industry’s history have been in the press lately. A&W (probably my favorite restaurant as a child, back in the Paleolithic Era) has been sold -- again -- after experiencing little or no visible change or updating in the past decade or so; Friendly Ice Cream, which was restaurant of the town square for a couple of generations of small-town New England citizens, has filed Chapter 11 after a years-long struggle with aging facilities and changing demographics; Souper Salad, an early pioneer in the “healthier alternatives” buffets, has similarly entered bankruptcy after visibly tiring; and RealMex, a collection of Mexican food-themed brands assembled to become the first national-scale company in that genre, has joined them in bankruptcy protection, another victim of the high fixed costs imposed by a combination of high debt and lease expenses.
Each of these, and several other “heritage” brands in similar shape, are evidence that continued reinvestment is necessary to keep brands fresh and relevant, not only because of increasing competition, but because it’s essential to give the consumer reasons to keep visiting. Sometimes that requirement for continued reinvestment is best executed by staying “true” to the brand’s heritage; at other times, it may mean a total reinvention of the brand -- a sort of voluntary destruction and replacement in order to stay relevant (or recapture relevance).
I’d be willing to bet that at least two of these entities have a good chance at a long future, once some of the past operating or capital mistakes are erased through bankruptcy. We’ve all seen, by now, that it’s hard to kill brands once they become sufficiently established in the consumers’ mind. [Witness the recent resurrection of the Bennigan’s brand.] It’s not impossible, however, and I’d also be willing to bet that at least one of these companies will cease to exist in the next five years, whether because the owners and creditors are unwilling or unable to come to a capital structure resolution or because the brand’s been so damaged that it’s not worth the reinvestment cost to revive it.
Maybe it’s the beginning of the baseball postseason, but as I look at these companies, and some still-vibrant competitors, I’m reminded of Satchel Paige’s comment: “Don’t look back. Something might be gaining on you.” (Thanks to the web site http://www.satchelpaige.com/quote2.html for confirmation) It’s sound advice for people, and for businesses. As we mourn Steve Jobs’ death, and marvel at the company he built, please notice that he set this example, never letting things rest, but constantly improving and replacing even when his customers didn’t seem to ask for such changes and his competitors weren’t pressing. The reason to reinvest isn’t just because someone else did it; it’s because it’s like vitamins, or flossing, or exercise -- you might not notice at first if you skip it, and your customers might not notice either, but by the time you do notice, it’s a lot harder to recover. And not all the reinvestment will work as planned; to use another Satchel Paige gem, “You win a few, you lose a few. Some get rained out.” But never forget the end of that wonderful epigram ... “But you gotta dress for all of them.”