Grady's Not-So-Good Times
Whenever a chain gets acquired, or a new management team gets put in place, questions arise about what the new leadership could be planning. But perhaps the most important question is whether they understand the concept they're taking over.
There's a lot of data that can help you understand a concept: customer feedback, brand equity, financial statements, menu gap analysis and other forms of market research. But successful brands typically have something special about them - something that might not be readily apparent to an outsider relying on numbers and figures. As such, a major task for new leadership teams is to identify these traits and find ways to leverage them. At the same time, new leaders often come in with their own ideas to elevate the brand, ramp up growth and cut costs.
In some cases, these fresh ideas are necessary, particularly when the brand in question has lost its way and the acquisition or leadership change is done to right the ship. But in other cases, like when the brand in question is an up-and-comer, these fresh ideas pose a risk; they may unintentionally chip away at or remove altogether the special features responsible for the brand’s success. Such was the case with Grady's Goodtimes.
Grady’s Goodtimes was started in 1982 in Knoxville, Tennessee, and the casual-dining concept checked all the boxes: high-quality, scratch made food; friendly service; a comfortable environment; and a great value. The emerging chain was more than promising, and Chili's acquired it in 1989.
But Chili's parent company Brinker International would go on to sell the chain in the mid-1990s, and not for good reasons. Unit volumes has plummeted by well over a million dollars, and expansion was no longer financially justifiable.
In seeking to understand why the chain faltered, there’s no shortage of possible factors. Brinker International changed the name several times; they switched ingredients and altered preparation styles; confused by the concept’s unique culture, they did away with it. And it led to a death by 1,000 cuts; a series of decisions and cost-saving measures had diluted what was once special about Grady's.
In 2008, Carl Howard was hired to serve as CEO of Fazoli’s, an Italian limited-service chain from Kentucky. By Howard’s own admission, the brand was then dying a death of 1,000 cuts.
Fazoli’s was founded in 1988, when Italian was seen as the next big cuisine. In fact, Brinker International was actually on the hunt for an Italian concept at this time, before stumbling upon Grady’s Goodtimes.
Fazoli’s then grew incredibly quickly, surpassing 400 units for a brief period of time. But the growth wasn’t sound: new restaurants were adding to system-wide sales, but existing units struggled to grow same-store sales. Eventually, the brand started closing units and seeking ways to cut costs.
But a couple years into Howard’s tenure, the chain was reversing course.
So, how did the brand survive? It changed just about everything.
Fazoli’s added higher quality food and spent six figures upgrading its classic breadstick. It also brought back an hourly position to deliver these breadsticks to dine-in customers. It enhanced its tableware and décor. It became more experimental, exploring opportunities with new service models and locations, critically examining which worked and which didn’t.
The success story reads like a typical ‘death by 1,000 cuts’ case study, but in reverse. Instead of cutting a labor position, management added one. Instead of opting for more affordable ingredients, Fazoli’s invested in higher-quality fare. Instead of sticking with the status quo for the sake of convenience, the chain innovated and wasn’t afraid to learn from its mistakes. And amid these initiatives, Fazoli's was able to recapture what made the brand special.
Consumers mostly recognize the changes made by restaurants, whether that be Fazoli's investment in higher-quality products or Grady's decision to use more affordable ice cream. And while cuts might improve things from a cost or margins perspective, they don’t contribute to a better customer experience and they have the potential to remove aspects of a concept that are critical to its success.
In other words, if a move is not improving the customer experience, the best you can hope for is that the customer doesn’t notice. Because if they do, you may be in trouble.
And even if they don’t, you may still be in trouble - at least that’s a lesson Lane Cardwell takes from the story of Grady’s Goodtimes.
To learn more about Chili's acquisition of Grady’s Goodtimes, please listen to our corresponding podcast episode with Lane Cardwell, who gives his firsthand account of what went wrong. Or, check out our highlight video covering the acquisition.