Monday, August 30, 2010

Private Equity firms more flop than flip in the chain restaurant sector.

A Danish Philosopher once said: “Life can be understood by looking backward, but must be lived by looking forward.”

It’s clear that number crunching accounts who once would buy / invest in a chain restaurant for two or three years, fund additional new stores then sell would reap large returns. From the late 70’s 80’s and well into the 1990’s it seemed a text book formula for success.

Companies the with the ilk of: Apollo Management, Bain Capital, Farallon Capital Management LLC. Newport Fidelity Holdings, Centre Partners Management LLC and Sun Capital I could go on and on. Had success, some a few I might add still do.

Loaded with MBA’s from tier one schools, investors were lining up to either join or start their own restaurant hedge fund. Crunching the numbers and focused on operational efficiency it looked as if that formula would work forever. One problem the customer moved.

When the economy turned restaurant companies focused on numbers only and operational efficiency stopped growing, shed units, lost per-store sales. The value of the original investment in fact in many cases began to shrink. Rather than flipping the chain for a profit, many hedge funds found it was required to inject additional cash! What was worst they could not sell some of the chains. That was not part of the plan!

Chipotle Mexican Grill, Dominos Pizza and Five Guy’s Burgers, each with a focus on the customer and with bold leadership bucked the trend. They opened new units, grew both the top and bottom line. If success leaves clues marketing, positioning with a focus on the consumer while evolving your brand just might be key to future success.

Full service, casual and quick casual restaurants can incorporate success attributes of the 5 P’s of food marketing. Hedge Funds might want to utilize Foodservice Solutions and its 5 P’s of grocerant fresh prepared food marketing; Product, Packaging, Placement, Portability and Price with a consumer focus with your next steps.

Since 1991 Foodservice Solutions of Tacoma, WA has been the global leader in consulting within the Grocerant niche for more on Steven A. Johnson and Foodservice Solutions visit or on Facebook at Steven Johnson or BING / GOOGLE: Steven Johnson Grocerants

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