Saturday, December 22, 2012

Business Lesson 'Impossible'

I generally don't watch a lot of reality TV, (I really prefer NCIS reruns) but I do have a couple reality of shows that I record on the DVR and watch religiously, Restaurant Impossible and Bar Rescue. Both of these shows follow the same format: an expert comes to a failing business and, in a fixed amount of time, resolves all of the issues with the appropriate  TV drama. The entire 2-5 days process is then edited down into a neat and riveting 1 hour package. While I don't pretend to think that I could gain significant expertise on any industry based on a 1 hour reality show (nor should you believe that you could either), these shows do provide some interesting insights

Here's my analysis of each show

Restaurant Impossible 

Businesses Type Fixed: Single Location Restaurant
Primary Product: A meal served
Primary Financial Issue: Food cost
Common Problems: Poor financial management, poor kitchen management, poor  personnel supervision
Common Management Issue (almost every episode): Owner/Manager doesn't understand the the restaurant business

Bar Rescue

Businesses Type Fixed: Single Location Bar
Primary Product: A good time for adults
Primary Financial Issue: Liquor cost
Common Problems: Poor financial management, poor bar management, poor  personnel supervision
Common Management Issue (almost every episode): General Manager (may be the owner) doesn't understand the bar business.

Other Observations:

While a bar and a restaurant may seem similar and may provide the same products (food and liquor), what the customer is buying is very different. In one case it's a meal served to you at your table, in the other case its a social environment and atmosphere. In the case of a restaurant the food is a critical component, at a bar  the atmosphere is critical.

On both shows usually the employees know what the problems are, but the managers won't listen to them.

Some Lessons Learned

1. Understand the business you are in. In just about every case, the person running the business never ran a business of the sort they are trying to run. They are completely lost as to the basics, not because they are incompetent, but because they have no idea what to do. Just because you are a customer of a business doesn't mean you can run it.

2. Solicit feedback from, and listen to your employees. Your employees usually know a lot about whats wrong with a business.

3. Understand the key drivers of your business. What is your customer really buying ? What are your cost and price drivers? What should your staff be doing ?

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