Sara and Bill ran a typical “Mom and Pop” coffee shop/diner; a steady if unspectacular business. But Bill and Sara encountered lots of folks who figured they, too, could run a successful restaurant just because they enjoyed eating out.
Background
Sara and Bill ran a coffee shop/diner in a Sacramento Valley town. They opened at 6 a.m. and closed at 10 p.m. Sara was hostess and waitress supervisor; Bill cooked and managed the kitchen. It was a typical “Mom and Pop” place with loyal customers and a cheerful hardworking staff of ten, a steady if unspectacular business. But Sara and Bill encountered lots of folks who figured they, too, could run a successful restaurant just because they knew good food and enjoyed eating out.
The Situation
Sara and Bill’s first restaurant was located on the site of an earlier restaurant that had failed. The bought the real estate, the kitchen fixtures and the furniture. They redecorated, hired a staff of experienced waitresses, and reopened under their own name, McDruids. They developed a steady following of faithful customers who enjoyed the plain food and the cheerful and efficient service.
Using The Profit Process, together we developed a series of key performance indicators to keep the business sound financially. The business was a success. Visitors were impressed at the vitality and enthusiasm that was always present.
During the first year, Sara and Bill received several offers from customers to buy the place. Often the offers came from people seeking to move from the big city and open a business in a small, quieter town.
Finally, Sara and Bill got the offer they could not refuse. They sold the business and its real estate. They recouped their initial investment in the down payment and received a note secured by the real estate. Sara and Bill had more than doubled their investment. But like many entrepreneurs, they faced that nagging question --what to do next?
The Solution
Within three months, the McDruids spotted another failed restaurant in a small valley town. They followed the own success: they bought the business and its real estate, then refurbished the restaurant and staffed it with cheerful, efficient waitresses. Once again they set into motion the whole process of new décor, new waitress uniforms, and the system of key measures identified in The Profit Process. Predictably, in a few months word spread about the good service and the volume rose. And, just like clockwork, satisfied customers began asking Sue and Bill if they wanted to sell. One offer was too good to turn down; they sold the second restaurant. As before, their investment was recovered in the down payment and they took their profit in a note secured by the real estate. Now they weren’t just in the restaurant business. Now they had two notes producing a revenue stream.
The Result
During 17 years, Sara and Bill bought, refurbished and sold fourteen restaurants. They even bought one of their own restaurants back from a buyer who failed because of bad management. They were no longer in the business of running a restaurant; they developed restaurants and sold them at a profit. In their early 50’s Sara and Bill retired on the income from those mortgage notes.
Commentary
The McDruids had worked hard, but their success was more than a matter of hard work. Initially, they saw themselves as just doing what they knew how to do cooking
and serving food. But then they recognized the value of their approach to restaurant development and the process that made it a success. They had developed a successful business model and it became a vehicle for creating value and wealth.
The ability to recognize an added-value opportunity differentiates the businessperson from the entrepreneur. It takes vision to see beyond the mundane tasks of running a day-to-day business. In a business with one of the highest failure rate, Sara and Bill nailed down an effective process.