CHANGES IN U.S. RESTAURANT CHAINS – ALL THE MOVING PARTS

Over the past 80 years, some large restaurant chains have materialized in the U.S., including Bob’s Big Boy, founded in 1939; Shakey’s Pizza, founded 1954; and The Ground Round, founded 1969.

The thing that these three large chains have in common is that they once were large and thriving; today they are shadows of their former selves.  The Shakey’s empire was once comprised of 350 restaurants; Ground Round, 219 stores; and Bob’s, 210 stores.  Today, Shakey’s has 60 restaurants; Ground Round, 22; and Bob’s, 121.  But they are all putting forth significant effort to make come-backs.  Thus far, Bob’s has been the most successful in that regard.

It’s instructive to look at how they started and where things fell apart for these companies.  So, let’s take them one at a time.  Shakey’s, which started in Sacramento, CA, was the first franchised pizza chain and built its appeal on being festive, the frequent site of such events as birthday parties and little league banquets.  However, a combination of failing to keep their “eye on the ball,” so to speak, brought competition in the form of cheaper competitors and disenchanted franchisees.  Thus, by the late 1980s they had dropped to a mere 40 locations.

In the case of Ground Round, it’s said that “timing” was a primary cause of its near-demise – it had its heyday in the 1980s by building a reputation for juicy hamburgers, in a pub-like atmosphere with unlimited popcorn and peanuts.  But McDonald’s offered a lower-price alternative – which I’d say is just a handy excuse.  Because, the more likely reason is that the restaurant chain, which was owned by Howard Johnson’s in its early years, broke with Johnson’s and went through a series of ownership changes, resulting in a bankruptcy filing in 2004.

From its early days, Big Boy Restaurants took on various names, depending on regional location (always with “Big Boy as part of it and the logo of the chubby teenager in red-checked overalls).  But, as is often the story, as competition increased and consumer needs changed, the Big Boy restaurant’s family-owned executives were slow to react to those changes.

Now, in today’s environment where competition is even greater, there are serious efforts by all three companies to revive the brand and reenergize the chain.  For Big Boy restaurants, part of that effort is to rely on the emotional pull of the icon.  The chain, now owned by NRD Capital, operates 95 company-owned stores and another 26 that are franchised.  There are 55 locations in the Cincinnati area and the owners have opened a museum there, asking customers to lend the museum memorabilia from a former era – bowling bags, baseball hats, cigarette lighters were among the many items contributed.  They have also updated the large fiberglass icon of Big Boy that sits out front of all the restaurants and have tweaked the menu to ensure that it is filled with both items that cater to a yearning for the old, as well today’s tastes.  And, they tell us that the “brand is growing slowly but it takes time to bring back nostalgic customers while also attracting a younger crowd of fans.”

Shakey’s is experiencing much the same kind of effort, based on the fact that they believe that “customers never lost their fondness for Shakey’s”.  And its owners, Jacmar Companies, brought in a new management team in 2012 that has assisted efforts to attract new customers.  They market the fact that the restaurants use quality ingredients like fresh dough and creative toppings like garlic shrimp.  And, they tell us that “comparative store sales have been positive for five consecutive years.”

Ground Round received a new lease on life in 2004, when its remaining franchisees bought the brand and franchise rights and formed a cooperative that has steered the brand’s direction with the owner-operators having a say in all decision making.  The group has overhauled its stores to provide a sports bar on one side and family dining on the other and has changed the colors used inside as well as the menus so that not only are burgers sold but also grilled salmon, flatbreads and salads. In recent years, the company has shed stores that were underperforming and added new ones that perform well.  Sales have climbed at many of the remaining stores.  And, they’ve started to use a new prototype building with store openings in Vermont, South Dakota, and Ohio.  For the future, they tell us that they “Need to keep up with the trends, be more nimble, and actually serve food that looks like the picture in the menu.”

Sounds like good advice, all around:  ALL THE MOVING PARTS:  ONE PART OF AN ENTERPRISE EXISTS IN RELATIONSHIP TO ALL THE OTHER PARTS.

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