E Restaurants: What Has To Be Fixed In 2019?

We have made it to a new calendar (fiscal) year. There were a number of gotcha moments through the year, which reinforced what happened in the prior year, the prior year before that, and on. We all hope to learn life and business lessons, but things often happen through the year that prohibits us from addressing those issues. Sunlight is always the best disinfectant. In hopes of a better year going forward, here is my top three list of What Has To Be Fixed in 2019.

Need Number One: the dynamic between founders and the need of the future development of their brands has to be worked out. To see this, we only need to look at the 2018 drama at Papa John’s (PZZA) and John Schnatter. Founder driven caustic statements and behavior happened over time, was then discharged; he then sued the board; the brand became immersed in the no-win political drama, battered the brand reputation and reliability; and saw sales and same-store sales falling sharply, upset franchisees, store closings, reduced royalties, extra ad fund spending etc. The founder problem was like a freight train moving down the tracks; we all knew it would hit the car on the tracks eventually.  To a much lesser degree, lesser founder turnover kinks could be could be seen at Chipotle (CMG, Steve Ells) and Starbucks (SBUX, Howard Schultz).

I don’t know exactly how long a founder should remain, but like in other professional organizations I’ve worked, perhaps at a mutually agreeable point, founder could move to an ex-office role for 2 or 3 years to assure continuity. Of course, what stock they have is what they have. There are wonderful management consulting, executive search and other management experts that can advise on what the right point may be.

Need Number Two: Do More Than Talk About Cutting Down on Employee Turnover. The people availability problem is at all-time highs but few companies are addressing it systematically. Restaurants all mention people problems and the difficulty it poses but it’s hard to detect those who really address it. For example, generally only Darden (DRI) and Starbucks (SBUX) are noted “best to work” award winners. Turnover in multiunit supervision, corporate staff, unit management and store crew levels have to be addressed separately with linkages analysis. I note historically over the decades that turnover begets new waves of turnover. I have a hard time believing in the 2019s that if a new District Manager. comes into position, that all or even many of the DM’s store general managers have to be replaced or should leave. The same for a new CEO coming in. If that is so, then our leadership is the only personality based and that is sad after the last century of management science advances.

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Disclosure: I have no position in the stocks mentioned, nor plans to initiate a position.

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