The problem with gathering that wealth of information, however, was that it could be expensive. And LeFranc's top-level staff was lean. He had cut headquarters by about 40%, down to just himself and seven administrators. He didn't like the top-down model anyway, since he felt it stifled initiative and had contributed to the company's troubles. Instead, he wanted managers to become de facto CEOs of their restaurants, using the information they collected to plan and measure their performance. LeFranc would reward the managers based on cash-flow results. For some, the bonuses would push a $55,000 annual salary up to $80,000.
To get his program running, LeFranc taught his team to not just read but also analyze an income statement, not something restaurant managers commonly do. He also put his managers through a time-management course designed by Stephen Covey, author of The Seven Habits of Highly Effective People, and had them set goals for both the company and their own careers. He trained the chefs as well, since they were responsible for food and labor costs in the kitchen. Many of them had worked their way up from entry-level dishwashing jobs. "We had to teach some of them how to use a calculator," says CFO McGehee.
Gazelle's software could find out where the customers lived and shopped and how much they earned and spent. LeFranc was blown away by the technology.
Change didn't come easy. LeFranc brought in management consultant Nancy Bross to teach the managers planning and goal setting. "All I got were blank stares," Bross recalls. In LeFranc's first year, turnover among managers hit 85%.
A few of his employees, however, welcomed the new regime. One of the bookkeepers at the former commissary was a young man named Roger Ortiz, a self-taught whiz at Excel spreadsheets. Impressed by Ortiz's work, LeFranc promoted him from his $10-an-hour job tracking food supplies and trained him as a financial analyst. With McGehee's help, Ortiz began crunching all the numbers that increasingly were letting LeFranc sleep well at night.
LeFranc provided all his managers with personal computers and DSL lines in the restaurants so they could feed data quickly to Ortiz. The managers began tallying revenues, expenses, and guest counts daily, entering the figures into spreadsheets. Each Monday morning they E-mailed the spreadsheets to Ortiz, who then imported the data into his master Excel files and created a report that ran to 40 pages. He broke out year-to-date figures for the entire company as well as for each restaurant, did comparisons between year-ago results and the company's plan, and charted the effect of marketing promotions. On Monday afternoon Ortiz would ship the report to all the managers. (LeFranc plans to have Ortiz post the reports to a shared server soon so that managers can access the reports without E-mailing them back and forth.)
The system of data sharing had some unintended but beneficial consequences. The managers at two of the biggest restaurants began competing hard against each other to post the highest results. And LeFranc started holding monthly meetings for all managers at which they explained their results to one another. All were accountable, most notably to their peers.
The welcome mat
The burning question for the newly self-directed team, however, was whether it could ramp up sales in a company that had been tainted by bankruptcy. The task was particularly hard because of what LeFranc admits was a bad decision he had made early on -- keeping the company name. "I didn't go there because it was such a radical change," he says ruefully. So the team went forward with larger signs and a sporty logo featuring the tarnished moniker.
After the bankruptcy filing, the company's sales had dropped 8% to 10%. Then, in the fall of 1998, when LeFranc reduced the menu from 60 to 30 items to lower food costs, sales dropped another 7% within four months. (Since he had turned cash-flow positive during that time, he was sacrificing sales for profits.)
To get his customers back, LeFranc had to find out who they were. So he turned to Gazelle Systems, a Newton, Mass., company he had come across at an industry convention in 1997. It had just four employees at the time, but LeFranc was blown away by its technology. Gazelle could develop a demographic profile of the restaurants' customers -- where they lived, where they shopped, and how much they earned and spent. The software company could determine whether the customers were married or single, male or female, parents, or sports fans. It also could find out how frequently they visited Louise's and how much they spent. Although large retailers and catalog companies relied on such information, no one, to LeFranc's knowledge, had ever applied such data-mining technology to a restaurant.
Gazelle downloaded customer-purchase information from the restaurants' point-of-sale (POS) system and then matched it with in-depth demographic records in data banks that marketing companies offered for sale.
Gazelle's data helped LeFranc overhaul his marketing approach. With maps pinpointing where his customers lived, for example, he could target specific streets with promotional material. "Instead of doing a direct mail of 495,000 pieces, we door-dropped 20,000 pieces," LeFranc says. "For a third of the cost of the mailing I got double the response." The number of "trials," as new customers are called in the industry, rose.
The CEO had learned that 54% of his customers were women, which prompted him to put lighter fare on the menu -- salads, pastas with light sauces, and vegetarian dishes. He began to offer seafood dishes designed by a well-known Maui chef -- sea bass with white-bean tomato salad, and salmon on a bed of garlic mashed potatoes with pineapple-cilantro salsa. LeFranc calls such food "California Italian."
