What do you do to recover from a major misstep that had a significant cost?
I was talking to a peer who works with a restaurant in my neighborhood. The original owner created a successful business but was getting older and wanted to step down. They transferred the ownership to an adult child and their spouse. The new owners refused to put in the same amount of time to keep the business successful as the original owner. So they took short cuts that impacted quality.
So with the reduction in quality, the profits declined because people noticed the difference and chose to go elsewhere. Now my peers business model was focused on compliance and not as a “Trusted Advisor”, so they were historians and not working with either owner in the strategic planning for the business, focusing on the state and federal reports only.
The new owners were talked into changing the business model from a comfortable ethnic neighborhood restaurant to a “Sports Bar” with an attached restaurant, by a liquor distributor. They never contacted their CPA to discuss such a radical change to their business model. That just was not the type of relationship they had. So they took the distributor at his word that profits would roll in after the change.
This change happened a few years ago, I never really frequented the restaurant so I had no idea if it was a successful change of not, my peer never told me, either due to confidentiality, or maybe he lost them as a client. But I was in there for a pick-up order a few months ago, the quaint restaurant was gone, there was a huge horseshoe bar in the main room with a single large television at the open end of the horseshoe. The bar had two customers, while the owner occupied one end and was doing paperwork in the open, the restaurant had a couple at a table and that was it for a Friday evening, granted it was early, but the Cubs were playing. We were the only takeout order, I know this since they did not ask for my name when I stated I was there for a pickup. The food we received was mediocre by all opinions, we will not be back.
I don’t know how they will be able to really prosper under these changes, bars are expensive to run the liquor license alone have a high cost. Sports Bars can make money, but you typically have multiple screens throughout the bar for all of the different sport venues playing simultaneously. You make your money on the volume of a packed bar. A few customers here and there don’t make up a lot of volume.