Few growing restaurant chains ever hit a home run with every location. Even grade-A sites on paper can turn into dogs once in the ground for a host of reasons. That’s when having Steve Pettise’s phone number comes in handy. Pettise, founder and principal partner of Golden Spike Resources Group in Los Angeles and a foodservice veteran who has worked for several restaurant companies during his career, helps operators renegotiate better lease terms with landlords.
What’s the biggest mistake that chain operators make when they realize they have a bad location?
Thinking that they can solve their problem internally, that the real estate department can extricate the company from the site.
Isn’t that what the real estate department does?
Not really. Renegotiating a chain out of a bad location is not the real estate department’s expertise or strength. They are offensive players whose job is to expand the chain by finding good locations with manageable leases and [moving] on to the next site. That’s all they do. We are defensive players who deal with the landlord when the unit’s performance, due to market conditions or changing demographics or some construction project nearby, make it difficult for a unit or units to cover lease costs and succeed.
FAST FACTS EDUCATION: bachelor’s degree, Drake University, Des Moines, Iowa; graduate school, Northwestern University, Evanston, Ill.EXPERIENCE: director of marketing for Carl’s Jr.; vice president of marketing at IHOP for 14 years; two-unit Baja Fresh franchisee.HOBBIES: golf, skiing, active in the Rotary Club International
Who exactly are “we,” and what do you do?
Golden Spike Resources Group is a strategic planning and marketing firm for multiunit chains, and our particular strength is reviving businesses in bad shape that are saddled with bad leases. I’m usually called in by and work exclusively for the chief executive officers who are interested in making sure their marketing is right and that they can renegotiate bad leases. I’m allied with resource partners who are some of the most brilliant people in the world when it comes to real-estate modeling and lease negotiation, so that when we present our case to the landlord, they understand fully what’s at stake.
Name a couple of happy customers.
Buffet’s Inc. and Famous Dave’s BBQ.
Why would a landlord want to renegotiate anyway?
Because if we can’t solve it, shutting the unit down could be the next option, and you can’t make money with a vacant space. So it’s better to figure something out.
Why do growing chains have these problems?
Because they’re growing chains. There are cycles in the life of restaurant chains. A brand that has five units and then grows to 30 stores might hit 100 faster than it can handle. Each of those growth spurts is kind of a danger zone where change undermines management’s expertise. The guy you hired at 10 units is not the same guy you hire at 100. Now we jump from a 100 units to 500 or 1,000, and you basically have the same management team but you don’t have the development plan, executive expertise or systems in place to deal with this growth. If you look at the history of the restaurant business, it’s in those cycles—when management expertise hasn’t kept up with unit growth—that companies get in trouble.