Monthly Archives: April 2013

Restaurant: Impossible — When a Do-over Becomes a Don’t-over

When a business is flagging and a fix is needed, one option is a so-called make-over – changing the value proposition in some fundamental way.  But whether it’s a new coat of paint or a full shock treatment, it needs to be done thoughtfully – – even the most brilliant plans require consistent execution, cultural buy-in and consideration of the existing audience.  We naturally illustrate this complex business concept with a reality TV show.

RobertIrvine

Viewers of Food Network’s Restaurant: Impossible are familiar with the premise:  Robert Irvine, the heavily muscled and overbearing ex-British Royal Navy chef (think BCG consultant with no quadrant charts but much bigger arms), is given $10,000 and 2 days to fix a failing mom-and-pop restaurant, usually with some loyal customers but mostly declining sales.   Using a time-tested recipe of fast-track remodeling, menu conversion, come-to-Jesus chastising of waitstaff and awkward family interventions, liberally seasoned with shouted bullying, he ‘helps’ the owners open a new version, to unanimous (although not always articulate) acclaim of the capacity-straining first night patrons.  Voila!  Happy tears and promises to stick to the plan.  Using  a solid executional game plan, these restaurants look transformed and set for future success.

Each episode’s epilogue boasts about resulting increased business; these stories are catalogued on the FN website.

But does everyone really live happily ever after?  I snooped around and discovered that the show’s final scene is not necessarily indicative of the longer-term outcome.  There are numerous breakdowns in food, consistency, and service.

Nicholson FEP

Using Yelp.com reviews of a few transformed restaurants, here are some typical comments.

Show Claim:  “Since Robert left, sales have increased 85%“.  Typical review: “The food is just as bad as it was prior to Robert’s makeover.  The menu is no longer one page.  They are book style, dirty, and sticky.   As far as the wait staff they need to go. Final thoughts…don’t go.”

Show Claim:   “Business is up by $30,000 following the renovation”.  Typical review: “…you can see where Robert’s team did their magic for decorating, but it ends there!  Tables have paint chips/scuffs and look kind of crappy…floors weren’t swept, waitress wasn’t at desk when we walked in and had to wipe off our table prior to us being seated!  I think we could have gotten food just as good if not better at a bowling alley!  I will not be going there ever again!”

Show Claim:  40% increase in YOY business for first 2 months.  Typical review: “I would return for the wings but everything else was pretty average.”  Note:  Restaurant CLOSED.

The point:  without an organizational commitment to faithfully execute the plan, all the planning in the world can be for naught.

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In addition, a number of the owners subsequently brought back some of their restaurant’s traditional featured items, which Chef Irvine had cut from the menu – – and they did it based on customer demand.

Testimonial from one makeover recipient who needed to make his own adjustments:

“We had to bring back our beef cannelloni, even though that dish is frozen,” said John Meglio of Meglio’s Italian Grill and Bar in Bridgeton, Mo. “Chef Irvine kept telling us that we needed to make more fresh food, and that makes perfect sense. But what he didn’t know is that people here have been eating frozen pasta from this one supplier in St. Louis for the last 50 years.

Meglio continues: “The food was good; it just didn’t fly.  You make too many changes too fast and all it’ll do is upset people.  And the changes upset people to the tune of not coming back.”

Cannelloni

Another owner was aware of the need to balance current and future customers.

He recruited his brother, a chef, who took a look around and issued a dire prediction in the wake of the initial publicity.

“He said, ‘You won’t have time to build a new reputation, and in the meantime your old customers won’t like what’s happened and will leave,’ ” Mr. Queisser said. “And he was right. Ten or 12 weeks later, it was like the lights went out.”

There is a well-done account of this from the NY Times.

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In fairness, some of the made-over restaurants clearly have benefited.  But it’s clear that without both excellent executional follow-through and attention to customer acceptance, the best-laid plans from the best consultants in the world will be as stale as yesterday’s Tiramisu.

JCPenney, Fresh and Easy, Webvan: “Did someone remember to tell the customer how brilliant we are”?

OK, that headline is a bit harsh.  But so is the world of retailing – – no matter how high-concept and inspired a new retailing idea is, if it doesn’t integrate the core consumer in the development process, there could be trouble.  We will respectfully dance on a few graves and illustrate with 3 cases.

BordersQuote

Case 1:  JCPenney.  By now we all know that Ron Johnson flew a bit too close to the sun, banking on his reputation and the obvious hubris gained during his successful run at Apple.  He applied the Apple Store model (where the stars were ultimately the products) to JCPenney, with an immediate switch to an everyday pricing approach (since reversed), and store remodels including branded mini-boutiques.  All, famously, without testing.  The result:  a disastrous $4 billion sales slide, imploding stock price, his ouster and most recently JCP looking to the capital markets to secure another $1 billion in operating cash.  Ouch.

30-OFF-COUPON-CODE-JCPENNEY-CLEARANCEJCPenney - WSJ

—> Diagnosis: Less brilliant, more tone-deaf.  The plan counted on consumers to see things Ron’s way:  “Hey! JCP now offers reliable low pricing all the time, so you can trust us!”  The catch:  consumers apparently liked the way they already shopped – -they were used to buying on deal, and there was not much merchandise at JCP that couldn’t be bought elsewhere.  And elsewhere is apparently where consumers went.

Case 2: Tesco’s Fresh & Easy Neighborhood Markets.  British supermarket giant Tesco announced it will shutter and take a $1.5 billion write-down on its F&E chain, after cumulative losses exceeding $1 billion and 5 years after noisily entering the California market. Fresh & Easy, which famously touted its in-depth consumer research, opened smaller format (10,000 sq. ft) stores and promised “convenience, fresh produce and tasty prepared foods”  (LA Times).

Fresh N Easy

FreshEasy PB&Pickle

—>Diagnosis: They didn’t walk the talk.  Rather than truly adapting to Americans’ shopping habits, Tesco essentially imported its own model and assumed that customers would do the adapting.  A few examples of British norms that didn’t make it here: pre-wrapped produce (heavy on the watercress!) and pre-packaged sandwiches (but no fresh deli), fewer familiar branded products in favor of higher-priced private label, and a policy against couponing.

According to respected researcher The Hartman Group“We believed then, and said it repeatedly in the following years, that Tesco had an innate desire — an arrogance if you will — to do things their way rather than make adjustments that catered to the needs and expectations of American shoppers. Despite Tesco’s vaunted success in the European marketplace, the resulting retail experience in Fresh & Easy was artificial, sterile and increasingly without a relevant proposition.” (bold added)

Case 3:  Webvan.  The mother of all examples of misjudging the consumer.  Founded in the late 1990s by Louis Borders (of bookstore fame), Webvan was an online grocery retailer offering delivery within a 30-minute window.  Funded by Silicon Valley venture capital, Webvan hired away the president of Andersen Consulting (now Accenture) and was heavily capitalized ($1 billion for warehouse infrastructure, plus vans, computers, etc.)  By 2001 Webvan was bankrupt (although subsequently bought by Amazon, where it exists in a much smaller form).

webvan truck webvan stock price

—> Diagnosis: Webvan management and investors incorrectly assumed that consumers would immediately adapt to their genius.  Grocery buying is very personal, an ingrained habit, and expecting large numbers of people to abruptly abandon what they’ve been doing for years was naive at best. In the heady days of the dot-com bubble #1, funding was fast, and it was big (Borders himself said “It’s $10 billion or zero“.  He was right).  So the inclination was go big or go home, leading to huge advance spending, astronomical traffic expectations, and a spectacular flameout when consumers didn’t sign up as the financial pro formas had assumed.  By one estimation, Webvan would have had to sign up two-thirds of the tech-savvy households in the San Francisco area.  This is probably one of the best examples of misjudging (or conveniently ignoring) consumer input, breathing one’s own exhaust, as well as the adage ‘Easy come, easy go’.  A short, fun post-mortem can be found here.

Are New NCAA ‘Play-Out’ Exhibition Games the Real Madness?

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You may have already heard that late Sunday night the NCAA abruptly announced the biggest change to the NCAA Division 1 Men’s Basketball tournament (‘March Madness’) since at-large teams were first allowed in 1975 (previously only one team per conference was invited).

The short story: on Final Four Sunday, April 7, the day before the Final, there will be now be 3 so-called ‘Play-out’ exhibition games between former No. 1 or No. 2 regional seeds that have been eliminated (including Ohio State, Indiana, Duke, Kansas, Georgetown and Miami; specific matchups and times to be determined).  These games carry no official significance but clearly will have strong fan appeal.  CBS will schedule these games so as to not interfere with the Academy of Country Music Awards broadcast, which starts at 8pm EST.

March-Sadness

NCAA officials explained these changes as an effort “to satisfy the unexpectedly strong recent demand among NCAA Basketball’s rapidly growing fan base, particularly internationally”.  It is no secret that March Madness has evolved into an enormously popular event.  Even President Obama took time from his schedule to weigh in.  In addition, the event’s female viewers, already 48% of the audience, make up an increasingly ardent fan base.  Still, satisfying new fans is not at the center of this decision.

The real motivator is much simpler:  Money.   Turner Sports and CBS, seeing early tournament exits by most of the more popular top seeds, are exploiting the networks’ unsurpassed ability to create more hours of high-quality entertainment.  Advertisers have already signed on, and since the participating schools were offered a generous share of the revenues, gaining their participation was relatively simple.  Only former No. 1 seed Gonzaga declined the offer, due to a conflict with a Tech N9ne concert in Seattle.

BBall Money

This is a sad example of short-sightedness, laying bare the craven quest for TV ratings that we now see is the real driver behind many of the sporting world’s decisions.  Unfortunately, it is a severe body blow for the integrity of NCAA Basketball and big-time sports.  Clearly, the theory goes, while everyone loves a Cinderella, you still don’t really expect huge numbers to tune in for Wichita State, right?  So, why not just bring in the biggest names for a curtain call?

Here’s why –  in this era of sports free-agency and seemingly limitless payrolls and budgets, it’s important to remember that the unexpected can and does happen – – with talent, grit and maybe a little luck, on any given day, David can slay Goliath.  Hence the excitement for FGCU and Wichita State.  They’re the real reason we tune in to March Madness, even if they do destroy our brackets.  Diluting the event with meaningless games just for spectacle will only cheapen the NCAA brand while overshadowing the teams deserving of our attention.

So, a message to the NCAA, CBS and Turner Sports:  you’ve got a jewel in the current March Madness (as long as the field doesn’t expand) – and it’s exactly what people are looking for — as is.