-A Taste of Failure

To Gorodesky, the reason restaurant owners lose their shirts is simple: "They don't know what's going on. They don't know how much money they made last week or last month. They never know if they made or lost money till the accountant does the taxes. There are still restaurants without computers! There are restaurant owners who say, 'This is our biggest July in years!' Because July had five weekends. And then complain about the lousy August, because it only has four weekends. There are restaurant owners who don't know what their food costs are!"

I've heard many times from restaurant owners that food costs should be 25 percent of the cost of the meal.

"You heard that from people who don't know their numbers," says Ron. "You can program any costs you want, but most successful restaurants are around the low to mid 30's. Steak houses run higher, up to 40 percent. Italian restaurants run lower, maybe 28 percent-pasta and pizza are low-cost items. I'll give you a taste of what we do. You can't use the name of the restaurant. It's one of the best in the city. Using my old theater analogy, it's Phantom of the Opera. It's great food. It's a tremendously well put- together show - sold out every night. You walk in the place, you get a feeling of enormous success. The owners call us in. We run the numbers. All that success just falls away. The place is a one-wheeled cart. One very wobbly wheel. Tremendous talent in the kitchen-and food costs over 45 percent! That's just an estimate, because things are so confused even we can't tell exactly. Unbelievable food costs. Unbelievable payroll. They've got four people not doing-not even beginning to do-the job of one.

"We take the numbers to them. We tell them, fire A and B and C, they're not doing anything. We'll give you a point-of-sale computer. Every time anybody orders a gin and tonic, a bottle of wine, a steak, the computer captures it. Nobody takes food home. Nobody treats their pals. You get a report every month-every week if you want-telling you what's selling, what's not, what's missing; what's your gross, your costs and, most important of all, your profits. You could do this without changing a single recipe, a single ingredient or supplier, without a single customer seeing a difference in food or service.

"They know I'm right. They get up from the table, walk away, loosen their ties. They come back and say, 'We can't do it! We can't fire A and B and C, they used to sleep with X and Y and Z. These people are our friends. We're making money,' they say. They mean they're scraping by. All this restaurant needs is one disaster, one bad year, and all of a sudden everybody'll be saying 'How could that place go out of business? It was always so crowded.' I love eating in-this place you can't name. It's a great restaurant. I hate talking about this. I hate ... thinking about all the things we could straighten out quick, easy. In a month! Listen, we got the money, that's not the point. This restaurant is one of our failures. I hate to fail."

I remind Ron that the bottom line is profits.

"I hate to fail," he says again. I begin to see why restaurateurs trust Ron Gorodesky. His background is numbers, but he's as driven as any chef I've ever talked to.

"Results!" he says. "We need to see results!"

-Pow! Pow!

"A lot of this job is riding around," says Ron. Ron drives, Derek Sylvester in the back seat. Derek is one of the nine employees of Restaurant Advisory Services. Like Ron, Derek talks quietly. Like Ron, he makes jokes about his own self-confidence: "Clients don't always agree with our recommendations. They're wrong."

"We get paid for being right," says Ron.

What makes Restaurant Advisory Services worth the $5,000 to $10,000 they charge to look at a restaurant in trouble? And how can they advise different kinds of restaurants? (They currently have some 200 clients.) I remember when I was a kid reading a biology book about ants. It said each anthill even of the same species is organized differently. Some are neat, some scattered and careless. The author, whoever it was, said maybe anthills acquire personalities of their own, that they reproduce again and again, no matter how many ants live and die in them. Restaurants have always seemed to me exactly like those anthills.

"Sure, every restaurant is unique. Every anthill is unique," says Ron. "The thing is, every anthill has the same job - find that picnic, get those
crumbs, make more ants. Every restaurant, not matter how it's organized, has the same job - make money. The anthill is up to them. A restaurant comes to us for an operations review. We want two years of financial reports - the real financial reports. We are not the IRS. You're spending this kind of money, it's stupid to lie to us. We take your numbers and reduce them to the Uniform System of Accounts for Restaurants. Ninety-nine percent of independent restaurants don't use it. Half of them never heard of it. They can't stand numbers."

"We get restaurant owners asking us, 'What is depreciation?'" Derek says, shaking his head sadly. "They're financial illiterates!"

"Okay, first we standardize the numbers, then we crunch them," says Gorodesky. "The numbers are not the whole story. The numbers tell us where to look. Salaries too low? You don't pay people fairly, they pay themselves. Some kind of skimming going on. Food costs too high? Management."

"We start with surveys," says Derek. "Surveys at the table, surveys on the street. We need to know what people in the area want, what they think about this restaurant, why they go there. It's important to have a focus, a signature dish, a personality. We did a steak house, which you can't name, and asked people what they thought of it. They said, 'Great chicken.' This is a restaurant in trouble. Or the restaurant's surrounded with office buildings. We ask office workers, What do you want? They say, 'A $5 lunch.' No use serving an $8 lunch no matter how good."

"Now," says Gorodesky, "we go to other restaurants in the area for a snapshot of the competition. We go to the restaurant that hired us. We eat breakfast, lunch and dinner there. We really, like, just stand there a lot. Look at the food, at the flow of service, how many steps the kitchen staff and waitstaff have to take. Go through a busy night and see the frustration level of the staff. Study people. You don't just sit down and ask restaurant managers, Do you have a training program? They'll give you the right answer: 'Of course we have a training program - five days.' When we ask questions, it's in a focus group after we've gotten to know them. Ask about a training program? Half the time they say, 'There isn't any.' We make it plain to everybody - they have two options. One, tell us the truth. Two, tell us what you think we want to hear. Pick option two - you won't have a job very long."

Do many people lose their jobs?

"Some people do," Gorodesky says quietly. "They don't have to. The staff gets nervous when we go into a restaurant. The general manager especially sometimes assumes he's going to be the first one fired. That's not the way we see our job. We can work with anybody who will work with our system. We have lots of general managers who stay on."

A pause.

"The bad guys hire us as hit men," says Ron. "It's more enjoyable for us when the owner isn't...isn't a ..." He shrugs.

"... a perfect prick," says Derek. "The perfect prick makes more in the short-term. But long-term, people don't like working for him, so they don't work as hard. Being a good boss is good business."

"People ask us, How can you come up with a plan to change a whole restaurant around? And we say, We've been doing this so much that, frankly, we're experts," says Ron. "Our solutions don't come out of a textbook. We know because I've been doing this for 11 years. My staff has its own experience. This isn't one old guy who used to run a pretty good restaurant. This is a company that, no matter what your problem is, has probably seen something like it. Nothing is really a surprise in our report. People know where they are. They need somebody to tell them. And 50 percent of the time, they say, 'It's your idea, make it work.' We move in for what it takes - two, four, six months to turn the place around. Then we ride off into the sunset. Happy if the restaurant manger fits into the system."

A pause.

"When he doesn't ..." Ron pulls an imaginary gun from an imaginary holster and aims it at my head. "POW! POW! POW-POW-POW! You're dead."

Can restaurants in trouble afford to spend $10,000?

"We're expensive, but nothing's more expensive than losing money," Ron says. Ten thousand dollars seems like a lot to a small restaurant. But if we can shave three point off your food costs ... Let's say you gross $70,000 a month. One point is $700, three point makes $2,100. You get your money back in five months. And you're open 12 months a year. And there are places where we save lots more than three points. Of course, every restaurant doesn't hire us. There's a lot of egomaniacs out there, embarrassed to ask for help."

I will get to see three restaurants that Restaurant Advisory Services has worked with. It's hard to imagine any trio more different. Tierra is a new chef-owned restaurant on the Main Line: expensive, elegant and aggressively new cuisine. The Mad Batter, in Cape May, is a landmark now being run by the founder's son. The Pressroom, in Lancaster, is a pasta/pizza/grill replacing a haute cuisine French restaurant.