Anatomy of a Turnaround (Part I)

For those interested in the anatomy of turnarounds, I occasionally run into documents and emails that I wrote during our most challenging years. Here’s one where I essentially “called the ball”… we were moving into crisis. Of course, sales were still growing, profits at the restaurants were strong, but our day-to-day activities and over-the-horizon plans didn’t resonate with me. I saw a sinking ship, and often felt like we were the orchestra playing on the Titanic. The hardest part was that everyone on our team was so busy… overwhelmed, really. We were working hard, not smart. And we were disorganized. I had been in full control of the operations of the company for over 15 years at that point, so the only place to put blame was on myself. That said, without getting the team on the same page, I was useless.

So here was my attempt to get back on track.

January 31, 2013

Team Boloco,

Many of you will recognize this memo from October 1.  Unfortunately, four months have passed, and little has changed in our actions, but our situation has worsened.  We’ve had many starts and stops.  I will repeat below a lot of what you read in October.

And most importantly, in October I was willing to, and did, listen to alternative plans that the team felt would provide an equal or superior outcome to the one I proposed here (altered somewhat now based on current circumstances).  In the end, those plans never materialized, but time marched on.  In October, it wasn’t so clear that we were moving into a crisis mode.  Today, it is crystal clear.

At some point in the coming weeks, after many cuts (salaries included) and significant vendor term renegotiations, we will come dangerously close to running out of money.  Less than $30,000 is scheduled to be on the books, and please recall that our floor is $400,000.  I have learned over the years that I am able to sense an outcome long before it actually takes place.  I remember looking at our current activities in late 2009 and through 2010 and even into 2011 and feeling very comfortable saying that we had things moving in such a way that sales would most likely rise, and that we could count on it. Starting nearly a year ago, I was less comfortable saying that.  Today, I am so petrified by what I see and hear every day in our restaurants, that I almost feel I have to apologize to our supporters and friends of mine who visit on a daily basis in advance of their actual visit – my confidence is that low.

In fact, and to be as blunt as I can be, I am 100% positive that we are headed towards failure should things not change immediately and drastically. And therefore, things will change. Quickly.  And significantly.

In October, you will recall that I had been thinking long and hard about what “levers” we have at our disposal, or “switches” we could pull, to effect truly positive change for Boloco, to improve our results quickly, to allow us the right to earn a seat (ie. raise big $$) at the “big boy” table.  I mentioned that we had tried so many things over the years, and of course we’ve tried even more things in the past 4 months. We’ve made many important incremental improvements that have yielded stronger results than ever before.  And yet, we’re still falling short on so many levels, primarily having to do, I think, with our standards of execution as well as our lack of discipline and follow-through as a team and as individuals on the things that matter most.

I often question my own judgment (as I’ve learned over the years, thankfully, many other leaders do… I always felt it must just be me), and feel almost guilty when I feel things are going in the wrong direction when others around me are trying to stay positive.  But, as you know I’ve had a growing sense of difficult times to come for many months – over a year even.  At a seemingly increased pace (more stores = higher velocity = makes sense) this team continues to run into the same difficulties and challenges as we did years and years ago, almost all within our control.  And today, versus 4 months ago, they are hitting us harder than ever. They are driving down operations and support team morale.  Lots of efforts are being made to “hold people accountable”, to change behavior, to fix everything.  Mistakes and now slow speed of service (ie. inadequately trained team members and managers) are most definitely the top culprit.  Dirty restaurants are becoming the norm.  And communication from support and even amongst support team departments is abysmal.  We are all bumping into each other at every step of the way, questioning who does what, stopping short of best-in-class systems and team development and everything else required to get to where we need to be. Even when we have it right at one store, we’re off on another.  We have widely varying levels of performance at the store-level.  We have widely varying expectations on performance and contribution at the support level.  This is a crisis.

With that explanation/rant complete, my objectives at the restaurant level are as follows, and no different than before:

  • Meaningfully and immediately raise standards of operation in all stores for the duration of F2013 by creating a temporary title, “Uber” General Managers (UGMs), and moving all current Regional Managers and certain support personnel into this new position.
  • Cultivate (but enforce) real mentorship of the remaining GMs (many currently in place) by the UGMs and give the UGMs a stake in the success of their GM(s).
  • Determine who in this company, both GMs and UGMS, are really up to the task… who has the heart and desire to do what it takes to make this company as great as it can be. Who can check their ego at the door today for the sake of the business tomorrow, put their heads down for a specified period of time tied to clear objectives, and make greatness happen – providing a leadership and performance legacy for those who follow to emulate.
  • Increase same-store-sales sales by 7% in balance of F2013 based on incredible energy and effective, innovative LSM (local store marketing) programs that will result in each restaurant as a result of these personnel upgrades. UGMs to coach GMs and TLs on how to build LSM programs from the “inside-out”.
  • Get to 20%+ average unit-level profitability.   This will vary by store, and UGMs/GMs will be expected to meet their specific plans to contribute to the 20% average.  They will be expected to hold the firm belief that hitting 20%+ AND providing dazzling service go hand and hand, and can also be accompanied by 7%+ same store sales growth.
  • Implement systems and procedures – insisting on discipline and compliance as the only way to get there – consistently across all stores and thereby be prepared for rapid growth in 2014 and beyond, plus franchising. Think of trying to fly an airplane without systems and procedures… yes, it could be done successfully most of the time. But…
  • “Topgrade” all restaurants with better-developed crews and TLs – get that bench going while earning that 20% and building sales. Master the interviewing process as a team; ensure the culture of over-servicing customers and over-communicating with each other is 100% embedded throughout. This, by the way, IS our culture.
  • Food: Develop cadence of ingredient improvement, recipe enhancement, in-store training and re-training, and concept evolution 2014+.
  • Training: Revolutionary Training Program, including Hospitality, to be rolled out April 1, 2013.
  • Tech: Build back-end of customer service and relationships to best in industry, loyalty, etc. Consider owning more or all of our back-end, and less reliance on multiple 3rd parties.  Move IT to profit center by working with other like-sized businesses.
  • Marketing: Develop and implement tools for self-service LSM, focus on brand-building, systems, face of the company, store-level events.Maven program expands to Restaurant Marketing Mavens (part of crew), and Campus and Community Maven program is rebuilt from ground up for break-through impact across the organization at the restaurants.
  • Finance: Automate data entry, integrate POS/Accounting, become 50% more efficient than today. Work closely with IT to accomplish.
  • Bold HR: Get to $13 in ‘13 by 9/30/13 while achieving 20% RL EBITDA, through EOT (earned over time), etc.

Make no mistake.  This is a crisis.  There are no more warnings.  This was not the plan.  I honestly thought we had put the right team in place to avoid coming to this moment. But for any number of reasons, including my own failures to perform as needed, we are now in this moment of incredible clarity where everything is on the line.  Like I said a few weeks ago, we will succeed.  It’s just a matter of when and who will be part of the team who leads the charge.

With gratitude for what has been done, and especially the unquestioned efforts being made by all of you, but more importantly excitement for what is to come… and for all of us to find happiness and fulfillment in all that we do – whether it be here at Boloco or somewhere else.