"If they didn't have such an abrupt closing, someone might have had time to swoop in and buy the company. But it opened a window for the franchisees to step up and do it themselves," explains Crawford, who was voted president and CEO of the new Ground Round Independent Owners Cooperative, a title he still holds. "We paid $2 million from our own pockets and financed another $3 million. In April 2011, we made the last debt payment. Now we own the company outright and have no risk of bankruptcy and no debt."
Franchise brands go belly up for many reasons: bad food or service, a bad concept (remember the peanut butter cafes?), a stale look or an aging menu. Financial mismanagement, neglect or an ineffective growth strategy that brings on too much debt can also sink a franchise system.
But not all bankrupt restaurant franchisesdeserve such a fate. In fact, some brands have enough mojo to revive themselves. "If a restaurant had a terrible reputation, franchisees may want to start over," says Ron Paul, president of Chicago-based Technomic, a food-industry consulting and research firm. "But if there's still equity in the brand, they might be better off sticking with it. If the brand is still strong, if there's consumer acceptance, if the unit economics are good and it has a point of differentiation, it can still work."
That's what Sizzler CEO Kerry Kramp found. The steakhouse chain filed for Chapter 11 bankruptcy protection in 1996 after competition from buffet concepts took a bite out of its market share. Sizzler tried several comebacks, but by 2008 the 54-year-old company had dropped from a peak of 650 units to fewer than 200, and its parent company put it on the auction block.
That's when Kramp got his hands on the brand. "When I came onboard, we were down 8 percent in sales, we were trailing our industry peers and had no strategic plan," he says. "I thought, either we go to a full-service model, or we embrace the brand's history."
Opting for the latter, Kramp brought in Dennis Scott, one of the founders of HomeTown Buffet, to play with the menu. "I consider him a food genius," Kramp says. "He went through our menu archives and found our original steak seasoning, our cheese toasts and other classics. He really embraced Sizzler's history and dove into our food."
Scott also trimmed the menu by 25 percent and returned Sizzler to its roots, bringing fresh-cut meat into the kitchen and dumping the steam tables and kettles that were being used for reheating. He brought in things like measuring spoons and knives that had disappeared from the kitchen over the decades and embraced real food, made by hand. Kramp says the new menu has great taste and color, with modern updates like hot wings, Asian slaw and Greek salads, and plenty of items that hearken back to the classic Sizzler.
The problem was that the new Sizzler was still physically the old Sizzler: old, dark, unpadded booths; low light; and cramped layouts. So Kramp embarked on a store redesign, introducing cushions, illuminated ceilings and bright fabrics to the décor.
His efforts seem to be working. In the units that have had the makeover, same-store sales are up, and after suspending franchise operations in 2008, Kramp is now actively seeking franchisees, hoping to open five to 10 new units in the next two years. He believes Sizzler can grow by 50 stores a year in the near future, and he hopes to capitalize on the soft real-estate market and the empty fast-casual buildings that now dot shopping strips throughout the country.