Question

Your start in the pizza business came in the eighth grade, when your father opened the Village Pizza restaurant. After graduation, you entered the construction business, building homes for more than a decade. But, then, something drew you back. So, you took the family recipes and started your own restaurant, Nick’s Pizza & Pub (far enough away to avoid competing with Dad).

Your goal was simple: to build a fun, family restaurant. Nick’s Pizza & Pubs—there are now two—have 26-foot high, floor-to-ceiling stone fireplaces, stuffed bears and moose, “antler chandeliers,” huge aquariums separating the bar and the restaurant, and wood everywhere—oak floors and huge beams recycled from century-old barns. And they’re huge, each seating 320 guests. On a Friday night, 1,500 customers will eat at Nick’s, most waiting an hour for their tables, while having a drink and eating free peanuts at the bar. Those 1,500 customers will eat 600 pizzas, and carryout customers order another 200. Why do they come? Beyond the great pizza, they come for the value. A medium cheese pizza is $11; soft drinks are $1.75, with free refills; and the popular Italian beef sandwich is under $6.00. Nick’s is really affordable, especially for a sit-down restaurant.

With things going so well, you decided to open three more restaurants in the next five years. Unfortunately, the recession changed your plans. Guest counts dropped by 20 percent, or 100,000 people per year, decreasing revenues by nearly $1 million. On top of that, your managers were having difficulty controlling costs. Each week, they conducted a physical count, comparing food inventories (tomato sauce, flour, cheese, beef, liquor, etc.) to the previous week, and then adjusted for this week’s sales. But beverage and food costs were still above goal, 22 percent of revenues for beverages and 20 percent of revenues for food. The problem, as you discovered, was your management, all hired externally because of their extensive experience at established well-known restaurant chains. Their idea of leadership, learned in the “command and control” cultures of other restaurants, was telling people what to do. So, they had someone else put in the inventory numbers, and when the numbers came out wrong, they didn’t dig deeper or ask questions to discover why.

In the end, with costs up, revenues down, and lending standards tightening, the bank didn’t approve the new construction loans. So rather than expanding, your immediate challenge is to fix and grow the two Nick’s restaurants that you’ve got. Frustrated with your managers, you gave responsibility for reducing costs to a 24-year-old who had worked for you since she was 16. She fixed the problem in four weeks by discussing the problem with the kitchen, wait, and bar staffs, who suggested immediate solutions to reduce costs.

Sensing that she was onto something, you pulled together the staffs in both restaurants to make a financial presentation that showed in detail how and where Nick’s was earning revenue and incurring expenses. After answering their questions, you asked for their help on three key issues: pay, hiring, and training.

1. Of course, everyone wants to be paid more, but with costs being an issue, are there ways to pay people more but link those increases to the company’s profitability and workers doing their jobs better and staying with the company longer? If so, how?

2. Next, because hiring talented workers is key in the restaurant business, how should Nick’s redesign its interview and selection process to do a better job of finding and keeping the best kitchen, wait, and bar staff? What is it about interviews that doesn’t work and should be abandoned? If so, what should be done instead, and why?

3. Finally, at most restaurants, training is simply shadowing experienced workers to see what they do. So, what could be done at Nick’s to improve training that would help them do their jobs better and to continue learning and improving over time? If you were in charge at Nick’s, what would you do?

Answer 1

If I'm going to be in charge of Nick then I'm going to take the following actions:

A merit-based recruiting and selection process to employ our restaurant company with the best candidates. We perform screening test based on skills and aptitudes, group discussion and personal interview with work aspirants and pick the merit holders.

In terms of income, incentive package and fringe benefits, we shall have a favorable climate.

I will be implementing the learning organisation's strategy. This will help us in addressing our business challenges and in the industry being best in the restaurant business field.

Deals on pricing would be my highest priority. I'm going to sell the pizza, beer, and other foodstuffs that are in high demand on the local market.

I will provide our loyal customers with the highest quality of food packaging delivery, with durability, best packaging materials, flavor and immediate responsiveness.

I will launch a mobile app with all the specifics of our service, a regular deal corner, a loyalty system, online payment and purchases in real time, order monitoring, customer reviews and ratings. This will allow us to cut costs and provide world-class survivors with real-time customer engagement via app.

Our goal is to improve the low-cost sales. When significant savings are made, credit score will be improved with timely payment of EMIs as a result of which we can take advantage of new loans for expansion.