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Acquisition Talk

The restaurant industry has been on a march toward consolidation. In the last three years, Nation's Restaurant News has reported over 100 mergers and acquisitions, including over 30 in both 2019 and 2017 and more than 40 in 2018. Already this year, Yum! Brands acquired The Habit Burger Grill; Chopt' Creative Salad Co. purchased Dos Toros; Engage Brands became the new owner of Boston Market; both Granite City Food & Brewery and Krystal have been bought out of bankruptcy. And then there's Fat Brands, recently floating the idea of an acquisition.

Acquisitions are often announced with a sense of positivity. Struggling concepts will be given a new opportunity. Emerging brands will be given more fuel to grow. And in these times, brands will be given a lifeline to get through the coronavirus pandemic.

So perhaps it’s a bit negative to recall the story of Grady’s Goodtimes when discussing acquisitions. But it’s a terrific story, and even better when Lane Cardwell tells it.

To boil it down, a great company (Chili’s) bought a promising concept (Grady’s Goodtimes) and the result was not good (AUVs down by well over a million dollars, and Grady’s was offloaded a few years later).

After the acquisition, Chili’s changed a lot about Grady’s, detailed in our article and podcast, Grady's Not-So-Good Times. But what’s so interesting is where the dominoes started to fall, according to Lane Cardwell. The concept made everything from scratch, even grinding horseradish root in house for the prime rib. Once Chili’s took over, that changed. It would be much easier to buy it prepared.

The decision changed much more than the prime rib. It disrupted the culture. Employees no longer advertised that everything on the menu was scratch made, something they used to be proud to tell customers.

We feel this is an important reminder about acquisitions because every concept has its own "horseradish root" - a seemingly small aspect of the brand that punches above its weight in terms of importance and will have an unexpectedly large impact if changed.

Many new leadership teams will work to find these traits, and it contributes to successful acquisitions. But history suggests that not all buyers will do this.

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