Restaurant Turnaround Is Brutal But Necessary
Restaurant Turnarounds Are Brutal But Necessary
Restaurant Turnaround aka A Controlled Train Wreck
As restaurant consultants we see similar scenarios on a daily basis. You borrowed money from the bank, you took delivery of vendor products, you used employee’s time and services, you set up shop in your landlord’s building, you are using the utility company’s products and received money on behalf of the state. You are now legally obligated to pay for it all.
You have no defense except to plead poverty which holds no value unless you are intending on entering bankruptcy protection. You cannot pay for the goods, money and services you took and it is doubtful that there is any FFE (furniture, fixtures and equipment) that has not already been secured by one of the parties involved and owed funds.
Every third party company from whom you procure goods and services or for whom you collect monies on behalf of will have its own methods and processes for collecting what is owed and the level and scope of their enforcement practices will vary on a case by case basis. Bank accounts and payroll accounts liened for their entire balance, credit card monies held back, keepers and sheriffs collecting your daily receipts, foreclosure actions, ‘pay or quits’ and even an investigation into your own personal assets are some examples of enforcement policies you can expect in difficult circumstances.
This can be followed by multiple lawsuits, some with pre-judgement writ of attachments which allow seizure of your monies in advance of your court date. In many cases, we see owners and operators ignoring some of these writs and in these cases, the writes will automatically turn into judgments. Collections actions can move very quickly and once initiated, can spiral out of control almost immediately, as you continue to lose leverage, if not given proper and urgent attention.
The number of restaurants we have walked into that have a “lawsuit pile”, many of which owners have no intention of responding to and many with default judgments already in place, is startling. Quite possibly you are behind in your payroll and sales taxes – both of which have a trust tax element that you can be personally liable for – to add to the list of problems.
As a restaurant consulting firm that focuses on restaurant turnaround, we have our handbook, our contacts and our defenses which are based on a healthy mix of legal statute, experience and commercial savvy. For each debt, there is a specific plan to settle, offer in compromise or stipulate – but the ability to use such defenses is directly proportional to the time we are brought in and how long these challenges have been known. Bring us in early and we have much to share. Bring us in late when things are at their most critical point, and the options available to you will be dramatically reduced.
There is nothing we can tell you that could possibly prepare you for a turnaround workout – especially one with so many moving parts, so many legal challenges and so many areas that need urgent attention. The job is not a pretty or indeed a painless one – but it is one we are well versed in.
Half way through the turnaround you may feel like it is getting worse and no doubt this is because there are so many issues that have to be confronted head on. Burying your head in the sand is not an option any more if you want to save your venue. Unfortunately we have to address the issues that can no longer be ignored, make plans for the debts that are otherwise liable to foreclose and face every issue with strength. Equally, we bring a fresh pair of eyes and independence to assist in solving issues with third parties, whether or not they are bodies with whom we have an existing relationship.
We are not brought in to sugar coat difficult problems; we are brought in to ascertain how to fix them. As such, the key to facing this difficult ride is understanding that we are navigating an existing disaster with you and attempting to manage an already out of control vehicle. Clearly our turnaround services team is called in because your restaurant is not sufficiently profitable, if at all, which will have been the major cause of the problems.
This means that in addition to urgently managing the debt, we equally have to bring your restaurant into profitability so that we have positive cash flow to work with, buy time and gradually pay the historic liabilities – as well as ensure an infrastructure is in place for a successful future. We have to continue paying for today’s operational requirements and ensure the level and quality of service does not suffer – even when you are faced with a workforce who are not sure they will receive their paycheck and are therefore hard to motivate.
You will know, at times like these, that a train wreck is only moments away and all we are attempting to do is manage and control, advise and engage, direct and resolve. With all our planning, experience and contacts, the process is never easy: There is no magic wand to resolve issues of this nature. It is never pretty and is a difficult path for any operator to watch. We cannot turn everything around overnight, there will be more problems before there are less problems and they may, perhaps, be worse than those you are currently experiencing. You hired us just before or in the middle of that train wreck and at times, things get worse before they get better. We can contain the issue but stressful events can and will happen, so the key is being ready with a plan to handle these and move on. Swiftly.
A turnaround is one of the most brutal experiences a restaurant owner can be a part of. There are no guarantees of success and the challenges should never be underestimated; but through the pain and challenges the restaurant will emerge, over time, in an improved, profitable, stable and managed state with our help. Restaurant consultants performing turnarounds or workouts are the last line of defense. This is what we do, this is what we know and this is where we excel and this is why we have the client list we have and are referred into tenuous and tough situations nationwide.
We know the pressures, we know the problems and we know how to handle them. Taking in a consultant may feel like a leap of faith but in every area of life, one looks to experienced parties to guide us. This is what we know, this what we do and we will catch you when you fall. Because we have the experience.