Franchise Update Magazine Issue III, 2011 | Page 24

Grow Market Lead

Case study:
Putting Sacred
Cows Out to
Pasture
And six other ways an aging restaurant
chain found prosperity in a recession
By Michael Branigan

H

aving survived five decades, including eight recessions, a bankruptcy, the closing of nearly half
its restaurants, a reputation-killing E. coli outbreak, and multiple ownership changes, Sizzler,
the original “American Family Steakhouse,” was on the mend
as it celebrated its 50th anniversary in January 2008.
Prospects for the venerable steakhouse were good, very
good in fact. For the first time in years, the executive suite
was stable. Having evolved from a failed buffet concept, Sizzler was now successfully competing in the casual dining segment against the likes of Olive Garden and Applebee’s. Sales
and profits were strong. Existing franchisees were making
money and investing in remodels and new restaurants, and
new franchisees were enthusiastically signing on and entering the system.
To say things quickly cooled off for Sizzler would be an
understatement.
Suddenly, gasoline prices spiked, hitting Sizzler’s middleclass guests right in their dining wallets. To make matters
worse, California—where the majority of Sizzler restaurants
are located—experienced the nation’s highest price run-ups.
Sizzler’s beloved CEO, on the job for seven years, was recruited to run another casual dining chain. The Australian equity
group that owned the brand announced Sizzler was for sale.
Next came California’s housing crisis, followed by the fullblown nationwide recession.
Restaurant industry analysts predicted the massively over-

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built casual dining industry would lose thousands of units and
that some well-known brands would disappear altogether from
America’s street corners and strip malls.
Faced with declining sales, increased costs, bad debt, and
unprecedented competition from far larger chains (some
spending in excess of $250 million in advertising), Sizzler’s
future was uncertain. To make matters worse, many franchisees were falling behind on royalty and advertising co-op
payments—the lifeblood of any franchise system.
With a depression potentially brewing and nationwide
de-consumerism on the rise, some within the Sizzler USA
system wondered if the brand could survive yet another blow.
If it were to be saved, every aspect of the 50-year-old business would need to be transformed and retooled—and fast.
Saving Sizzler USA:
Seven lessons from deconstructing and
rebuilding an American icon

The first eight months of 2008 brought continuous sales declines—some as much as 20 percent compared with the previous year. We had to apply the defibrillator paddles to the
brand’s heart and enter the age of re-consumerism.
The shock treatment worked. After those 8 months, Sizzler’s California restaurants experienced their first sales increases. Since then, Sizzler USA has posted continuous sales
increases, some in double digits, with only a single month
exception. During the same period, the restaurant industry as
a whole suffered consistent monthly sales declines of as much
as 15 percent, according to Knapp-Track, a widely watched
restaurant sales and guest count report.
The multi-million-dollar questions

The effort to save Sizzler began in June 2008 with the arrival
of a new president and CEO, Kerry Kramp, a highly regarded
restaurant executive and strategist. His priorities focused on
long-term investment and brand stability, and on spending
the necessary human and financial resources. In the first two
days of his new assignment, everything revolved around two
basic questions: 1) What will drive sales? and 2) What will it
take to improve profitability? This was a dramatic shift from the

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