The Restaurant Group chairman Debbie Hewitt has given a scathing account of how Frankie & Benny’s became a troubled brand for the group.
Hewitt did not mention former chief executive Danny Breithaupt at all during a call to the media or in the group’s H1 update this morning but said the group’s dwindling like-for-like sales were down to internal “own goals” rather than increased competition.
She said the group had failed to use customer insight and had made harmful decisions in menu development and pricing. She also said the restaurants were ill-equipped when it came to technology.
However, she said she still felt confident that there would be a further rollout of Frankie & Benny’s and insisted there would be no conversions of existing Frankie’s sites to other brands.
She revealed that the 33 sites to close included 14 Frankie & Bennys, 11 Chiquitos, three Coast to Coast, two Joe’s Kitchen, two Garfunkels and one pub.
Asked what the priorities were for incoming chief executive And McCue, Hewitt said: “The very first one is to get to know our customers. He needs to get into the businesses and understand what our customers buy and why they do so, why they stay and why they go to the competition.
“The second is our people. When we’ve shared with our people the results of our strategy review they say – ‘well, we could have told you that’.
“I want him to take what he has learnt from our customers and our people and influence priorities for the next stage of the strategy review.”
On the review conducted in Frankie’s, she said: “Disappointingly our issues have been the result of our own internal decision-making. Over three successive years we’ve pushed our prices up too high. We’ve compounded this by removing some of our more popular value offers such as fixed price lunches from the menus.
“Secondly, in an effort to innovate in our menus –which was not in itself wrong – we failed to test the new authentic menu as a concept before rolling it out across all the 250 restaurants and unintentionally took off a lot of favoured dishes and its unsurprising that led to a hit in our like-for-like sales.
”Finally, as a result of the complexity of those new menus, we created significant operating problems in our restaurants, which led to a fairly inconsistent level of service. These were three internal decisions which hit our like-for-like sales, which increasing competition took advantage of.
“In spite of these own-goals the Frankie & Benny’s concept remains very well loved, especially by families but we lost the edge on value, menu and great service.”
Hewitt said testing was underway on new pricing and marketing and £6m was being invested in technology across the estate. On the latter she said: “We were quite behind the curve. Our staff were doing a great job with very little help from technology.”
Asked why the management had previously been quick to blame the competitive landscape, Hewitt said: “It’s very easy when you’re running a business day to day to assume that – especially when you read in the press about lots of competition coming into the market place – that that’s what’s causing the problem.
“What’s happened here is that this is a business that has been run very instinctively and what this research has drilled down in a very data-driven way to get the customer insight which has helped us understand exactly what the customer thinks of what has happened. We’ve been able to track very closely what actions we took in the business and when that had an impact in declining covers. Once you start to lay that out in a factual way, you can see very clearly what we did and what the reaction was.
“We’ve also substantiated that with some qualitative research and when you talk to customers who know and love the Frankie’s brand they’ll tell you – it’s too expensive, we’re not quite as keen on the menu as we were and the service has got a bit inconsistent.”
On the reasons for impairing 29 sites, Hewitt said: “When we first looked at the sites that were underperforming, we had a fairly clear view that if it wasn’t meeting its cost of capital then it was an underperforming site. What we then did was overlay the lessons from the strategy review and that highlighted that the 29 – although they were underperforming we felt more confident that if we applied the lessons learnt from the strategy review, we could make something of these sites.”
Hewitt said the group was not moving away from its core locations of retail parks, adding: “One of the hypotheses was that retail footfall was a big problem for us and should we really be on retail parks? The research has borne out that overall we are positively exposed to good retail parks and the locations work for us.”
The next phase of the operating strategic review will focus on the remaining Leisure brands: Chiquito, Coast to Coast, Joe’s Kitchen and Garfunkel’s.
She said: “Culturally we have found that this is a business that has not used customer insight as effectively as you would hope to make its decisions. You’ve got to imagine that some of the things that have happened in Frankie’s may well have happened in the other brands. So we will be looking at price, menu and service standards across all our brands. Frankie’s is a great example where we had lost our focus in our heartland – which is families. We will be testing rigorously what our heartland is in our other brands and making sure they are sticking to it.”
On the concessions business, Hewitt said: “Concessions is a very successful business. What I have learned very harshly from this review is delivering outstanding customer service is essential and we need to do that across all our brands. However, expanding the concessions is very much part of the agenda.”
