Scott Barnett & Associates Blog
People, Revenue, Place, Profit: Structuring Chain Restaurant Success

February 18, 2021
My first appointment as a CEO of a restaurant chain was, it seemed to me, because nobody else wanted the job; the company was failing. Admittedly it was not the most auspicious of circumstances, but it was a trial by fire learning experience that I pivoted into a success. In a nutshell, here's what I did:
I created my own framework for leading the company by listening carefully to other C-levels at the conglomerate and adjusting their management approach to my own strengths as a leader.
Creating a Framework for
Chain Restaurant Success
The Rusty Pelican Restaurants, a Southern California-based upscale seafood chain, was facing real trouble when I started as CEO. The company was at the tail end of several years of conceptual neglect, over-management of costs at the expense of the customer and poor personnel decisions.

Rusty was a semi-autonomous subsidiary of a larger restaurant chain conglomerate. There were other CEO's, whom I met within days of my appointment. For my first few weeks on the job, it was the classic fake it till you make it. The others likely sensed that - nobody smells blood in the water faster than a school of sharks. One of them took me aside for a little lecture.

Each of the subsidiary Presidents were jockeying for the "first among equals" position. Thus, exercising their experiential power by giving me a lecture was one way to get ahead. Using a whiteboard, he drew a diagram with four circles at the top. Inside each was a title - Profit, Customer, People and Physical Plant. In the least condescending tone he could summon, he explained:

"These are the four areas of how I manage my time. Profit is always first and all decisions about cost management come from there. The customer is second…"
I would learn later that separating the wheat from the chaff when it comes to advice is a key aspect of any CEO's job.
I intuitively knew this guy had a giant ego and I recognized that our interaction was a way for him to leverage his own standing. Yet, I also knew that I desperately needed a framework for chain restaurant success. Could there be a kernel of real value in his pontificating?

The answer was yes. He had a decent basic idea but, in my opinion, his construction was all wrong. Though I was prepared to use his methodology as a guide, I believed it had to play to my strengths as a manager and a leader. I also knew that if the customer came second, there better be a damned good reason. He did not appear to have one.

I reordered his list for chain restaurant success to align with my abilities and goals:

  1. People - identifying, developing and retaining people who excel in their jobs.
  2. Revenue - the function of decisions made about positioning, food and service, value perception, location and more.
  3. Place - the location, look and feel of the site's physical space.
  4. Profit - the outcome of managing the above three intelligently and putting into place cost-saving structures.
#1 People
I considered myself more than proficient in business but there were others on my team nearly as good or even better. I really wasn't the best on the team at a number of things except for one where I excelled:
I was really good at identifying, developing and retaining good people. Consequently, my framework had to reflect that. People would be the first and most important circle in my framework.
#2 Revenue
In consumer businesses generally and the restaurant business specifically, the most important metric by a wide margin is same store sales performance. Moreover, in my decades in the restaurant business I had seen predecessors try to primarily save their way to prosperity- a fool's errand in my industry. A restaurant's sales are largely a function of its positioning, food and service, value perception and location.

Revenue was a function of all of the decisions made about those and a myriad of related issues. It would be almost a co-leader in my process and no lower than second.
#3 Place
I commit management heresy by not placing Profit at number one. To those who know my management style firsthand, it should come as no surprise that Profit does not even rate number three. The location, look, feel and continual development of a consumer business' physical plant are of paramount importance to its success.

All of that is amalgamated into what I call Place and it's number three in my division of decision making.
#4 Profit
Profit is the ultimate report card for any business. If all three of the above are being considered in an intelligent manner, profit should come. But it does not happen on its own.
Like all good businesses, the best restaurant chains manage the pennies.
It comes with the territory and is essentially a given. But the smartest operators structure it rather than manage it. They create procedures that eliminate money-wasting possibilities, like weighing and tracking waste to cut food costs. Additionally, they make non-compliance to these methods difficult, if not impossible, to ensure the whole team is on board.
The end of the story is that I was able to turn Rusty Pelican into a profitable business and use the revenue in part to create and expand the Bubba Gump Shrimp Company Restaurants. If you are interested in learning about how to structure your restaurant for success, or turn around a flagging restaurant,
reach out to me today.
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