Lessons from a Burning House: Saving a Company in Crisis, Part I

When there’s a fire, call the fireman.

The Crisis

A few years ago, a popular chain of restaurants found itself at a defining point in its history.

The company filed for protection under Chapter 11 of the Bankruptcy Code following a detrimental legal judgment and the termination of its President. These, in addition to a feuding board, were the final pushes that landed the company in a crisis, but fortunately there were still members of senior management who were committed to seeing all or part of the company survive.

Thus, GGG was brought in to see the chain through the crisis and evaluate alternative restructuring solutions.

First Put Out the Fire, No Matter the Cost

If, God forbid, there’s a fire in your house, you don’t finish the laundry and the dishes before grabbing the dog, the baby and the family jewels and getting the heck out. You either put out the fire or call the fireman and get the heck out!

As the firemen at this conflagration, it was our job to stop the fire and save whatever we could. By working with the company to secure a Debtor-in-Possession loan, which is a line of credit in bankruptcy, we were able to make some tough moves to put out the fire and allow some of the company to survive.

We advised the chain regarding the closing of unprofitable locations that were burning cash. We needed to squash those fires in order to get the best bang for the few bucks the company had left. In a town fire, this is like letting part of the town get eaten by flames in order to effectively protect the main square from the inferno. Although this was difficult for everyone, letting go of parts of the company allowed the core to survive.

Assume the Worst to Protect Yourself

In any restaurant or bar business, you need to focus on the costs of your food and alcohol. This not only applies to sourcing from your supplier at the lowest fair price but also locking the back door to your establishment.

No matter your business, always watch the back door.

It seemed that this restaurant’s managers thought the best about their teams, but too many employees proved them wrong. When we investigated, we found food and liquor in dumpsters behind numerous locations. Employees were putting things outside during their shifts and coming back later to pick them up.

“Glad that doesn’t apply to me,” you might be saying if you’re not in the restaurant business. But it does!

No matter your business, always watch the back door.

People in all professions find creative ways of draining the company’s resources for personal gain. Be proactive in protecting yourself before harm comes to your business.

It’s never fun but you have to assume the worst. No one wants to imagine that his house could burn down, and theft was hardly the only reason why (though the theft at the corporate level was even more grandiose!) – but that doesn’t stop you from having a fire extinguisher, knowing where the valuables are, and, if you’re wise, running a family fire drill bi-annually.

Think about how people may take advantage of you and put policies and practices in place that minimize the possibility of abuse to your organization.

The second and third parts of this series, available in upcoming weeks, will explore the creative process of solving major problems and how to do so in a crisis situation.

Have you ever caught theft happening at your establishment or somewhere you worked? What was happening and what did you do?

2 thoughts on “Lessons from a Burning House: Saving a Company in Crisis, Part I

  1. Pingback: Making Your Own Puzzle Pieces: Saving a Company in Crisis, Part II « The Turnaround Authority

  2. Pingback: The Regrets of “Too Late,” Managing a Company in Crisis, Part III « The Turnaround Authority

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