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Restaurant redux

Damon\'s Grill tries for a comeback


Damon's revealed a
new, more efficient prototype. Two units based on the prototype will open next year.

Carl Howard apologized after struggling to say words such as “casual” during a recent conversation. He had 16 stitches in his mouth from surgery the previous week to rebuild a gum line that had been damaged by excessive teeth grinding—a common sign of stress.

Howard’s anxiety is understandable, given his job: CEO of Columbus, Ohio-based Damon’s Grill. The 41-year-old has been tasked with rebuilding the brand and reversing the company’s long-suffering fortunes. “No one in leadership doesn’t have a lot of pressure,” Howard said. “More than anything, I want this brand to succeed. I’ve staked a lot in coming back.”

Howard has spared little in what amounts to be a major overhaul of the brand, with changes possible on everything from the design of its stores to the fonts on its menu. One year after its sale to Charlotte-based commercial developer Alliance Development Group Holdings, LLC, Damon’s has closed numerous underperforming stores and whittled its debt down to a fraction of what it once was.

Damon's CEO Carl Howard

A large team of consultants has been hired to work on issues such as the menu, brand identification and store design. There are only three sacred cows not open to change: The company’s barbecue ribs, televised sports on big-screen TVs and its name. “You have to give the new owners credit for tackling the problem with the comprehensiveness they’re doing it with,” said Dennis Lombardi, executive vice president of food service strategies for retail design firm WD Partners.

Damon’s was founded in 1979 as a small chain that served barbecue ribs and onion loaves in restaurants with big-screen televisions—think a somewhat quieter version of a sports bar.

In the early 1990s it was one of the fastest growing casual restaurant chains in the country and had more than 140 locations by 2001. That was the year that “Grill” was added to Damon’s name and its menu expanded. Yet the result was the opposite of what was intended. Sales slid, the company closed stores and by the time Alliance bought the company last year it was down to just over 100 locations.

Today it has 86, and although Howard said no further closings are planned, he “wouldn’t be surprised” if more are closed in the Midwest over the next 12 months.

“We kind of lost our way,” said Howard, who is in his third go-round with the company. The 41-year-old spent 12 years at Damon’s and as a franchisee before leaving in 2002 to run a Mongolian barbecue chain in Michigan. He returned as Damon’s chief operating officer in 2004.

Howard says that Damon’s suffered from a multitude of problems. Many of its restaurants were in states like Indiana and Michigan that suffered in the recent recession or were in older locations that lost business as new retail areas opened up. In addition, the company lost its unique niche as a destination to watch sports as technology improved and got cheaper, allowing more competitors to buy fancier big-screen televisions.

In some ways, the franchise just got old. “I like everything fresh and new,” said Mike Robertson, vice president of operations for Damon’s Eastern Carolinas, Ltd., who has been working with Damon’s franchises for nearly 20 years. “Franchises expire. I haven’t been to a motel more than three years old in five years.” Robertson’s own company, which has five restaurants and another under construction, shut down one North Carolina location five years ago after its nearby mall closed.

Lombardi said Damon’s problems were common. “It’s happened to other chains along the way,” he said. “They don’t continue to evolve the brand in terms of consumer preferences. The menu gets out of sync. Décor gets old. Sales drop. They try to make up for it by cutting labor, then service starts to falter and you end up in a downward spiral.”

Now Damon’s finds itself forced to evolve all at once. Before changes could be made, however, Howard said the company needed a buyer. A search was started shortly after he arrived in 2004, but finding the right buyer took 18 months, much longer than anticipated.

Allied bought the company in April last year. Former CEO Shannon Faust left and Howard was promoted to CEO—but only after the company agreed to give him the autonomy necessary to make significant changes.

The first step: Get rid of debt. When Allied bought the company Damon’s had $40 million in debt. “We had to fix our liquidity issues,” Howard said. The company moved aggressively to retire that debt, selling some locations and real estate. It also sold some company operations. Today the company is less than $6 million in the hole. By Jan. 1, 2008, he expects the debt will be down to $2 million.

With the debt largely paid, Damon’s hired Chicago-based restaurant consulting firm Technomic to gather information on why the brand was underperforming. It hired Lombardi of WD Partners to analyze the data.

In one instance, consumers gave Damon’s low ratings on its variety despite a comprehensive menu that included a dozen appetizers, six entrée salads, build-your-own-combos and build-your-own-burgers and chicken, in addition to traditional ribs. Lombardi’s take was that the items weren’t “craveable” enough to keep customers from drifting to other casual restaurants or even fast-casual and fast-food places.

Damon’s then hired San Francisco-based The Culinary Edge to overhaul the menu. “We’ll still have ribs,” Howard said. “Everything else is open to change.”

Another problem: The projection TVs required the stores to be dark so customers could see the screens. Today’s plasma and LCD screens no longer require dim bulbs. Damon’s developed a smaller, more efficient prototype to address complaints about the décor.

Damon’s plans to open two new company locations based on the new prototype in early 2008. One will be in Columbus. “We have high hopes,” Howard said. “It will have higher sales per square foot and higher profit per square foot.”

These new locations will also have a new corporate logo—though still the same name—along with menus and descriptions that look different. Even the fonts could change, after Charlotte-based identity consulting firm Addison Whitney analyzes Damon’s brand identification.

Once Damon’s has made its changes, Howard said the company would begin growing the brand again. It doesn’t anticipate adding many—if any—new franchises in 2007 but could add 10 to 15 new stores in 2008.

That’s something that Mike Sabatini wants to see as a franchisee. Sabatini, a CPA, bought 19 franchises from Damon’s, mostly in Ohio, with his daughter Michelle. And he plans on adding more himself. “I don’t think you can double it overnight,” he said. “Maybe Starbucks can do that. But I see no reason they can’t add 10 or 15 locations a year. I’m hoping that of those 10 or 15 that we’re two or three of them each year. We’ve got our eyes on several spots.

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