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Restaurants come and go-sometimes with astonishing speed. What distinguishes the restaurants that come and stay? For starters, they continually delight their customers.
It is the best of times and the worst of times for the U.S. restaurant industry, as Charles Dickens might sum up the situation. While the fundamentals-sales growth and demographic trends-are better than ever, intense competition is suffocating even successful existing establishments. Nothing demonstrates the challenging state of the restaurant industry better than PepsiCo's decision to spin off its long-successful restaurant group to concentrate on its core businesses of beverages and snacks.
For those considering entering the industry today, the statistics paint an especially grim picture. According to a study conducted by Cornell and Michigan State universities, fully 60 percent of restaurants now fail within five years; one in four disappear before their first anniversary. When Brinker International CEO Ron McDougall called the 1990s "the toughest environment we've seen," he was speaking from experience. In 1996 alone Brinker threw in the towel on three concepts: Spageddies, Kona Ranch, and Grady's American Grill, due to subpar returns. A number of other large chains have since followed suit, littering the industry's landscape with failed or reduced concepts like Tomato Rumba's (Apple South), Hot 'N Now (PepsiCo), and China Coast (Darden Restaurants).
A Brief Introduction to "WOW"
This article is not about investment decisions or restaurant chains. It's not even about survival. It is about thriving in an intensely competitive marketplace because you have no other choice. This is imperative for independent restaurant companies in the 1990s, and more than a few have risen to the challenge. In this article, I'll explain why I believe my company, Old San Francisco, has thrived in this environment. Old San Francisco is a 28-year-old chain of four high-volume steakhouse restaurants in Texas. Founded in 1968, the restaurant is widely considered one of the earliest casualdining theme restaurants, a segment that is now popular and extremely crowded. Our Gay 90s (that's 1890s) environment, replete with period antiques and the famous "girl on the red velvet swing," was created to entertain visitors at the World's Fair in San Antonio with a slice of legendary Americana. Today, after more than a quarter-century in the business, it is sandwiched between two...