What’s Going Wrong at Sizzler?

The owners of Sizzler, Collins Food Limited (ASX: CKF) announced recently that they were planning to close a number of restaurants in the new financial year, citing declining sales (-9.3% in FY14 and -8.5% in FY15). They also announced that they no longer saw Sizzler as a growth prospect in Australia and would not be investing any further capital in the business.

Coincidentally, about a week before this news broke I went to Sizzler with my wife and two young kids for the first time in about 10 years. As any parent of young children knows, there aren’t many restaurants you can go to without worrying that their behaviour is drawing the ire of other patrons, particularly once it gets close to their bedtime.

What an underwhelming experience it was; I was disappointed from the moment I walked in until the moment I walked out. My firm is all about helping businesses create and execute strategies to reach their full potential, so the situation got me thinking: what exactly is wrong with Sizzler’s business model? How did an iconic brand of family steakhouses lose their way, and how they possibly address the decline?

Here’s three issues I identified over the course of my meal:

1. Failure to reinvent to suit changing expectations

One thing that struck me as I walked into Sizzler was that it was exactly the same as I remembered it. Sure they’ve made a few tweaks to the menu, but it was mostly the same as it was 10 years ago, except for the prices which have certainly kept pace with their more modern and innovative competitors. In the meantime we’ve had somewhat of a culinary revolution in Australia; spurred on by TV cooking shows, globalisation, immigration and population growth, Australian diners are becoming increasingly sophisticated and are expecting much more from a restaurant experience.

More importantly, the feel of the restaurant was very dated. They had the same faux-woodgrain panelling, beigey-pink tiles and unstylish food stations; all the finishes that were modern in the 90’s but nowadays look tired and neglected. Even the logo hasn’t changed for many years. It’s no wonder people aren’t excited about Sizzler like they used to be.

2. Obvious cost-cutting in all the wrong places

Let’s get this out in the open: the food at Sizzler is rubbish. It’s pub food, cooked by untrained teenagers, using ingredients that are obviously acquired at the cheapest possible price without any thought to quality.

I ate something called a “Swiss Grilled Chicken”, which is optimistically described as “A juicy, tender boneless chicken breast topped with bacon, Swiss cheese and fresh, homemade tomato salsa.” Not exactly a difficult thing to get right, you’d think? Apparently it is if you’re a Sizzler cook (I refuse to call them “chefs”). What I received was a thin, dry piece of chicken, topped with a shiny piece of plastic “swiss” cheese, a tiny salsa that was about as fresh as the décor, and approximately 3.5 undercooked chips.

The salad bar was no better; salads like “Prawn and Cashew Nut” and “Chorizo Pasta Salad” were obviously misnamed as there was no sign of either prawns or chorizo. The Bolognese sauce and taco beef were about 5% mince and 95% gloop, and the pasta was an overcooked mess.

This lack of attention to quality is unforgivable for a chain of 25 stores that are owned by one of the biggest names in Australian takeaway food. They should have the buying power and know-how to bring in and prepare superb quality produce, particularly at the prices they charge.

Other than the food, the service was also something which had obviously bore the brunt of cost-cutting. A gaggle of undertrained teenagers reminiscent of McDonalds employees scurried around in an entirely directionless manner, oblivious to the needs of their (few) customers; when we were seated neither cutlery or napkins were provided, and we spent a good few minutes attempting to get the attention of one of the staff. The food stations, particularly the dessert station, were filthy with the spills of previous patrons, and the stacks of supplementary cutlery and plates were constantly running empty.

3. Wrong-headed front-of-house model

Sizzler’s pay-up-front model is doing them no favours. Most notably, they’re missing out on a whole lot of revenue from sales of alcoholic drinks throughout the meal; the only place you can buy beer, wine or spirits is from the front counter when you first arrive. Same with side dishes like calamari, chips or chicken wings.

This might seem like a small change, but put it in context: if each of the 25 stores earned an additional $300 in revenue per night from extra alcohol and side dish sales, across say 350 days of the year, that’s an extra $2.625m in revenue.

How could management address the decline?

Sizzler’s management has a number of key points they could work with to effect a change in their fortunes.

Firstly, a large portion of the Australian population has fond memories of meals at Sizzler in the 90’s. This is one key market market that Sizzler needs to focus on recapturing; they need to really think about exactly who that market is, and focus on giving them what they want now and continue to revise this in the future as the needs of this market change.

Secondly, Sizzler must refocus on the innovation that served them so well in the past. Think about their past innovations; cheese bread is still a perennial favourite, as well as the make-your-own nachos and soft serve bar. A return to that culture of innovation, of creating fun, family-friendly food experiences would not be difficult. How about make-your-own burgers, or gourmet hotdogs? They could also build on or modify past innovations to make them more appealing; things like Cheesy Toast Steak Sandwiches or decorate-your-own ice cream birthday cake using the dessert bar. A valuable resource here would be direct feedback or suggestions from their existing customers – letting their customers have input into the menu.

Thirdly, they need to refresh the tired brand and invest in a complete redesign of their store layout. A trip to any decent restaurant or even fast food outlet nowadays reveals a fresh, modern brand and layout that changes at most every 5-7 years. Sizzler’s brand identity, fit outs and store operating model are the same as they were 20 years ago, and they’re paying a dear price for their complacency. A design firm needs to be engaged ASAP to give the restaurants a makeover – maybe they should find out who McDonalds uses!

Finally, they need to refocus on sales growth, not cost-cutting. Stop serving cheap plastic cheese, prawn-less prawn salads and for heaven’s sake employ some waiters and cooks that are equipped to do their job! Look instead at ways to increase your sales, via growth in customer numbers (see previous suggestions) and an increase in the amount spent per table, like making it easier to buy alcohol and sides throughout the meal.

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