Food Chains - the Decision to Discontinue

The Decision to Discontinue

(FOOD CHAINS)

The article makes it clear that our economy is still not where it needs to be. I was shocked by some of the restaurants on the list of closing because of low sales and bad managerial decisions. The range of restaurants on this list ranges from high end to low end restaurants which means it's not all about money. Managerial decisions paly a big part in the success of a restaurant or any business because you must make smart decisions with the way you roll out new products and how you will introduce that new product to the public. In most cases restaurant owners own multiple places and must decide on whether to close a struggling restaurant or sink more money into it which takes money away from the successful places stopping growth in the thriving restaurants.

When product, department, branch, territory, or any other segment of a business starts generating losses management may consider discounting or eliminating the product. The management of those chains must make decision on whether to discontinue a segment or a product or in this case close a restaurant because of low or no revenue. For, example let's take the high end restaurant Ruth Chris Steak House and there trouble. Believe me the food is great and the atmosphere is wonderful but management has a decision to make about the price of their food. In this rough economy do they lower their prices which will inherently cause a decrease in the quality of food or do they ride the economy out and hope when things turn around the public will have more money to spend at a high end restaurant. Those are the critical choices that must be made because the wrong choice could damage their brand because in both because if the prices are lowered quality is sacrificed those high end customers are lost forever, but if they stay course can they survive.

On the other end let's look at Denny's a low end restaurant and the decisions that were made by management. Even though Denny's is on the verge of going out of business they are doubling down on their investments by choosing to do an expensive and aggressive advertising campaign and opening up more restaurants with new menus. The problem with their strategy is it will be very expensive so they have less room for error if something goes wrong.

In both cases management made decisions that will either improve the business going forward or expedite the closure. Management has to consider a multitude of factors before they make a final decision but it is important once they make a decision stay with it because if you begin to wobble the company's credibility will be hurt which will hurt their finances because investors do not like uncertainty.

REFERENCES

Reimer, M. (2012, June 06). Bankruptcy