Rick Ghio knew that Anthony's Fish Grotto, the restaurant he co-owned with four relatives, had a problem. From the tiny 11-seat diner that his grandmother, Catherine Ghio, had founded 50 years ago, Anthony's had grown into a multiunit, family-owned seafood restaurant and retail operation.

Since 1990, however, the San Diego-based business had been in a slump. Customer counts had declined. Sales figures had reached a plateau. Ghio and co-owners/cousins Craig Ghio, Phil and Beverly Mascari, and Pauline Gaus tried a variety of remedies to reverse the declining figures. "We put more items on the menu; we took ones that weren't selling off," says Ghio. "We replaced managers. We remodeled and changed our wallpaper and paint. We formed a director of sales position to attract banquets. We changed advertising agencies."

The result: "Nothing worked," says Ghio. Anthony's endured five consecutive years of six-figure losses. And then things really got bad.

"Our new advertising agency suggested we hire a consultant," Ghio continues. "That was not what we wanted to hear. And then the consultant told us, 'I would really recommend starting with a blank sheet of paper and building a whole new company.'"

In the ever-changing marketplace, restaurants periodically need to update their concepts if they want to continue to compete successfully. Sometimes a simple decor change or a revised menu is all that is needed. Often, though, operators must perform radical surgery.

Changing a restaurant's concept involves two essential tasks: defining the underlying problems and correctly addressing them. Changing a concept takes time and money. It may mean alienating regulars who liked the restaurant the way it was and possibly admitting that you as the owner don't have all the answers and need to seek expert advice. But once restaurateurs revise their concepts, they will most likely find that the changes usher in a profitable new era.

Warning signs

The first step to changing a concept is to recognize that there is a problem. There are usually clear signs that a concept isn't working: falling sales, lighter foot traffic, fewer visits from repeat customers. Anthony's revenue problems were well documented. Sales had also declined at the Alps Chalet in Niagara Falls, New York, and new, tough competition in the form of chain establishments meant that things wouldn't get any easier for the casual family restaurant.

Like those at Anthony's, the owners of the Alps Chalet decided to introduce a concept makeover on the eve of its 50th anniversary. "There was a bit of complacency by us in the past," says Chris Churakos, who co-owns the Alps Chalet with his wife, Lisa.

But restaurateurs don't have to wait for declining sales to push for a concept update. High employee turnover is another warning sign, as is a restaurant that feels "tired." "You can almost see the graying," says Rob McEnany, executive vice president of Levenson & Hill, an advertising agency in Dallas that has worked with several restaurants in the past. "Perhaps the restaurant experience is tired and low-energy. With a fresh concept you can feel the energy."

Lethargic management is also a telltale sign, according to Edmund Michalski, a restaurant consultant based in Williamsville, New York. "One of the things that's most important is if I can fire up the owner's energy level," he says. "If they have no energy to embrace the changes, there's nothing else I can do."

A combination of those factors forced Furr's Bishop's, a 101-unit cafeteria chain based in Lubbock, Texas, to make a change. Loyal customers made fewer return visits and younger consumers — the children and grandchildren of its loyal customer base — were choosing other restaurants. Young consumers were turned off by the chain's dated feel, according to Danny Meisenheimer, vice president of marketing for Furr's, and the company had to change to keep up with the times.

More than a new coat of paint

It's one thing to decide that a restaurant's concept needs refreshing. But what are the root causes that lead to a tired concept and diminished sales? A fresh coat of paint is almost always required to update a restaurant's concept, but a new look alone may not take into account new consumer attitudes or changes in residential housing trends in a restaurant's neighborhood.

To find out the underlying causes of a restaurant's decline, Michalski recommends that operators survey customers for their opinions about the establishment, as well as research the competition. "We'll perform some mystery shopping during various times of the week to determine the customer's experience," says Michalski. "I also like to see what's happening with the competition-their strengths and weaknesses and how their menus and prices compare with the client's."

Michalski also personally inspects clients' restaurants to look for operational problems. For example, when he visited Alps Chalet three times he discovered that he wasn't charged for $13 worth of menu items.

Since he comes from an advertising and marketing background, it's no surprise that McEnany focuses less on operational and training issues and more on customers' perceptions. "The single most significant mistake that we've run into is consumers generally look for novelty in a restaurant experience and often that is missing," he says.

After extensive market research, Furr's Bishop's recognized that it suffered from an image problem. The cafeteria segment that Furr's Bishop's belonged to was not perceived positively by younger consumers. "This wasn't about us and our competitors," says Meisenheimer. "The segment just stood still for years. That's why the cafeteria segment had matured and had declining guest traffic in recent years."

In the case of Alps Chalet, new competition in the form of restaurant chains didn't tell the whole story. In fact, the entire market — Niagara Falls, New York — had grown tired. "Twenty years ago this was a thriving metropolis with 100,000 residents," says Chris Churakos. "Now we have 50,000."

Anthony's Fish Grotto, however, could not "take comfort" in being part of a struggling market segment or market. No amount of paint or polish would cover up the fact that Anthony's needed a total concept overhaul, a process that involved linking its past with its future. In the meantime, there would be a great deal of resistance from loyal customers and staff.

Evolution or revolution?

When a restaurant has operated for 50 years, it's no surprise that certain aspects might need a touchup or two. One clue for the Alps Chalet came when the servers forgot to charge Michalski the $13. "They were good people; they just didn't have computerized equipment to track all of their orders," says Michalski.

So Michalski recommended that they use a new point-of-sale system to ensure accurate ordering and charging. He also helped the owner update his concept, design a new logo and restaurant and banquet menus, and more importantly, correct the pricing structure. The latter two changes came after Michalski finished examining the competition. "He found a pancake house nearby that was selling steak for $10.95, and we were selling it for $8.95," says Churakos. So Churakos ordered a finer cut of beef, raised the price $2 and added a less expensive sirloin steak. Time-consuming regular items like roast beef and breaded pork chops became occasional specials.

Churakos also reactivated the restaurant's dormant fireplace as the centerpiece of an interior redecoration. Outside, he had a patio built for grilling. Nightly entertainment was added, as was a computerized direct-mail system to reach customers.

Since the Alps Chalet completed its concept makeover in February 1998, sales have risen 30 percent, and enthusiasm among the entire staff grew. As for loyal customers, one wrote a note about the renovations to Churakos that read, "Your dad would be proud of you."

Furr's Bishop's so-called "brand-restoration program" involved more than paint and wallpapering, as Meisenheimer put it. "Is it evolution or revolution?" he asks rhetorically. "In our case it was evolution. We did take some chances, but they were informed ones."

Most important, Furr's wanted to bring the essence of its brand to life for younger consumers, yet still connect with older ones. "We were known as dark, old and closed in," says Meisenheimer. Furr's eliminated as many interior walls as possible for clearer sightlines and a more attractive atmosphere. Natural lighting was introduced, as were more natural interior paint colors and cafe curtains. On the exterior, warehouse lamps were added to arouse interest from passersby. "We wanted to create interest in the dining room, instead of treating it as just a big room," he says.

Research also showed that branding in the beverage department was extremely important, so Furr's worked with Coca-Cola to create a new self-service beverage area complete with canopies, gooseneck lighting and other Coke-related nostalgia. "That increased our beverage sales," says Meisenheimer. "The old beverage system was uninviting."

On an operational level, Furr's made it easier for customers to get additional helpings by eliminating its old reorder window and introducing buffet spreads. It also spent a week retraining staff companywide to create a consistent level of service.

All of those changes were made more than a year ago at Furr's Dallas and Austin, Texas, markets — and with no advertising. "We chose those markets, because we don't have great scale in them and because we wanted to see how they would do in competitive markets," says Meisenheimer. "Right now we're extremely happy with the results and we're rolling out the changes to our other units."

If the answer for Furr's was evolution, the answer for Anthony's Fish Grotto was revolution. Anthony's consultants, Rudy Miick of Miick & Associates in Los Angeles, and Victor Pinedo of Corporate Transitions International, suggested that the owners eliminate their traditional top-down management strategy and recreate every department using teams of owners and employers working together as equals. That managerial change frightened some but invigorated others. "I liked the idea, because I thought the things we were trying weren't working," says co-owner Beverly Mascari. "We bought into it, but it was really almost scary."

Rick Ghio was more than a little skeptical, however. "I said, 'You've got to be kidding me,'" he recalls, laughing. "It was very difficult to give up control of the company and entrust employees who may not be with us in the future. How do we know that their ideas are ones we'd like to see in our company?"

The answer to Ghio's question came in the form of a mission statement that he and his fellow co-owners prepared before they created teams. "We put down on paper those beliefs that are so near and dear to our hearts that we wouldn't compromise on them," he says. The mission statement also included a vision of what Anthony's would look like in 2005.

For example, Anthony's concept team was charged with the mission of creating the concept for the first new Anthony's to operate under the new teams management plan. The concept team started by recalling that Catherine Ghio always loved the world-famous grottos of her native Capri, Italy. "That became the focal point of our discussion," says Ghio.

The concept team decided that the theme of the new Anthony's in La Mesa, California, would be like dining in an underwater cave full of vibrant colors and bright shimmering light. "It's an aquatic, casual-dining experience," he says. With that decision made, the team directed the new restaurant's designers to create the right theme that included waterfalls and sea animals jutting out of the walls — a combination of old values and cutting-edge design. The new design helped attract baby-boomers with children — a segment that Anthony's had not had luck in attracting before the concept was updated.

The team concept and mission statement helped in other areas, too. The bar team wanted to add televisions to the bar to attract sports fans, but Ghio and his relatives, referring to the mission statement, said no. "We are not a sports bar," says Ghio. "That doesn't fit our concept." Meanwhile, the savings team figured out ways to cut costs on linens and china, and the server team created a waitstaff schedule that satisfied all 40 servers at one unit, as well as management. "When management controlled the schedule, it never worked," says Mascari. "The satisfaction of working in teams is incredible once you have participation."

Anthony's management even opened up the operation's books to the staff. "It was a bold step," admits Mascari. "At first, it was Greek to them." Today, every worker knows how Anthony's sales compare with prior years. "Then they said, 'How can we save money?' " she says. "So they thought of little things to help, like scraping the sides of our salad-dressing containers to save on salad dressing."

As a result of the change in corporate culture, the new employee-run Anthony's enjoyed a 20 percent increase in same-store sales this year — and guest counts are up. "La Mesa has exceeded our expectations," says Ghio.

Embracing change

It's never easy to change a restaurant concept. During the process, operations are thrown into confusion and loyal customers may leave for good. But overhauling a restaurant's concept may be essential to the operation's continued success. As Rob McEnany says, "Repositioning is not an unusual thing — and it happens to virtually every mature concept."

Edmund Michalski says concept change is not only normal — it is often necessary for the operation to reach its full potential. "Without renovation and renewed energy installed, the business most likely would have gone under," he says. "Renewal helps it to go on to see the next 50 years."

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