How many restaurant companies can file bankruptcy in any given week? Sadly, not a riddle. The US reality over the last two months has been four or five. Major restaurant chains are filing Chapter 11 for restructure, a smaller handful are filing Chapter 13. Why?
The companies filing are not small. And, filings are predominantly in two segments with a concerning third:
- Casual dining, full service
- Fast casual
- QSRs
Identifying the cause
For those companies closing, the filings are close to identical: same reasons, stories and excuses. The short list is:
- Poor performance post pandemic
- The classic excuse is short staffing; let alone “good” staffing
- Poor guest frequency blamed on menu pricing
- Vendor pricing
- Distribution challenges
- The crushing reason: almost every case is overleveraged financing, e.g., deep debt
Pay attention that fingers point anywhere but the C-suite. Further, as named, cause or result: bad financing rises to the surface, and being overleveraged shows up like a tsunami.
By the time the press releases go public, the spin and sell off attempts are rampant.
Does any of the above surprise you? It doesn’t surprise me.
Four issues are very real, none is simple or easy.
- No market difference: QSR menu pricing is as high as both casual dining and fast casual segments.
- Pick up/carry out is a post pandemic trend that’s not going anywhere but increasing
- The economy is seen with different eyes to the public. Wall street and the DC beltway have a different view from those buying groceries, going to restaurants in every town America.
- How about belief systems, old habits in decision making, and financing models that serve only the leaders at the highest levels.
Solutions
So, what do we do as FCSI consultants? What is it going to take to change the business model? Where does our FCSI ethical standard show up in the modeling?
Who or how many of us have a “new model?” And, what might sound like new is already tried and true. Sadly, there’s still little room to hear what might sound radical.
So, is there a new model? I mean more than, “Let’s get rid of employees. AI or robotics, tech is going to solve all.”
Certainly, tech is part of bold new ideas and solid solutions. Regardless, we’ll still need inspired humans that think, feel, create and produce.
Back to our focus as FCSI consultants; do our ethics mandate leading the charge? A small step might be:
- Excellence in each position is defined as behaviors
- Interview systems find staff members willing to step up. They’re out there.
- No blame to part time staff for being part time, new designs support part time.
- Training be experiential and refined to deliver excellence in each position.
- Fiscal health is obvious and apparent. And that if not, this is step 1of fiscal management.
What comes first, bad performance or being overleveraged? Is overleveraged bad performance? Some of us would say yes.
Regardless, at the deepest level, who wins in an overleveraged company? Maybe the founder, maybe the C suite… not likely anyone else walks away healthy.
Let’s be part of the facilitation that’s going to change the existing model.
Questions? Comments? Please share: rudy@miick.com ; my direct line: 720-641-7565
