Ed Doherty is the founder and president of Doherty Enterprises Inc. of Allendale, N.J. The company operates 57 Applebee’s franchised units in Long Island and northern and central New Jersey, as well as 20 Panera Bread bakery-cafes on Long Island, three Chevys Fresh Mex units, The Shannon Rose Irish Pub, and soon El Pollo Loco in North Bergen, N.J.
How does this downturn compare with others you’ve experienced?
It is the most difficult one I’ve experienced since 1993. The Northeast and Mid-Atlantic had not been hit as hard as the rest of the country throughout most of 2008, but it got considerably tougher in the fourth quarter of 2008. I think 2009 will be worse with unemployment in New Jersey and New York at a 16-year high, Wall Street layoffs affecting the Tri-State area and home values declining.
What do you see as the biggest challenge for restaurant franchisees?
Financing is No. 1. Obviously, no financing is available at reasonable costs. Therefore, franchisees need to make sure they meet their financial covenants because financial institutions are looking to put loans in default and there is no alternative financing available.
Where do you look to finance new projects?
We anticipated the economic downturn and the tightening of the credit markets and refinanced our company in December 2007. We were concerned then and were trying to intentionally stay six months ahead of the real crisis. This refinancing gave us the capital to continue building in 2008, 2009 and 2010.
What are you doing to increase the top line?
There are only two ways to increase the top line: attract more guests and wow them when they come in so they want to come back more often. We are attracting more guests by providing more value.… I disagree with the chains that coupon, basically it is a one-time offer. Guests need to know there is consistent value, so they don’t have to worry whether or not they can find another coupon.
FAST FACTS BIRTHPLACE: Brooklyn, N.Y. EDUCATION: bachelor’s degree and MBA in marketing from St. John’s UniversityAGE: 62PERSONAL: married; three childrenHOBBIES: travel, golf, wine collecting
What steps are you taking to hold costs in check?
Without reducing labor or reducing the amount of food on the plates, it is hard to reduce costs. We have a phased plan, at the ready, for holding costs and will take action as we review quarterly results. One of the first actions we took is that my seven direct reports, our senior vice presidents, all volunteered not to take a salary increase this year in order to give raises to our managers. We are also going back to our vendors and asking them to sharpen their pencils and wherever possible cut some costs for us so we can both continue to be profitable.… Lastly, in 2008, we created a new position, director of purchasing.… He did an amazing job in 2008, so we are ahead of the curve as we move forward into 2009.
What advice do you have for franchisees?
Be in your restaurants, and by this I mean not just the operators, but the franchisee himself or herself needs to get out there and speak with guests, see how things are going and be involved. If you need to discuss the comments and make changes with your teams to better serve your guests, do it! This will allow you to stay current and continue to provide great food, great service in a great atmosphere and your guests will come back more often.