State of the Union (Options at the Macaroni Grill) - 15 Nov 2008

No, this is not a post about the current state of our country,
politics, or the stock market. We all get more than enough of that on
the nightly news, and frankly, I'm burnt out on that. It's time to get
back to my real love, writing about the restaurant biz.

I
posted many months ago about my former employer, Brinker International,
and their troubles trying to unload Macaroni Grill. When I worked there
as an Assistant Manager, we were given stock options at a
pre-determined price. If I recall correctly, my first options were in
the $24/share range, and at the time they were selling for around $26.
But, I never bought any. The next year, there were some I.R.S. changes
in the works, so we were offered options at around $32/share on a
smaller amount of shares. At that time, shares were selling for around
$30/share, but there were rumors of an impending stock split. Again, I
didn't bite. The next year, Brinker changed their whole bonus/perk
policy and only offered stock options to those who were General
Managers and above. Boy, was I pissed, even though I had never taken
advantage of the previous offers. Many did, though, and many are now
hurting financially.

Alas, it was the beginning of the end for
me anyway, for they restructured the whole bonus policy and other
things, too. I was on the way out the door, but I was still kicking
myself for not buying stock when the getting was good. Some other
managers had bought their maximum amount and were sitting on many
thousands of dollars of potential profit. I used to look in the stock
section of the Business pages of the newspaper religiously, if only for
the purpose of berating myself for not taking advantage of the stock
options. But that was years ago, and I had lost all curiosity about
what was happening with Brinker stock when I left the company.

Last
week, while going through the paper during lunch, I had the crazy idea
of looking up how the stock was doing now. Now, I knew things had
changed quite a bit in the last few years, but I was shocked when I got
to the list. Brinker stock is now selling for just over $8/share. OMG!
I can't imagine how outraged I would be if I had bought my maximum
amount years ago. I called up all my old management friends and asked
them if they had any stock options they had acted on. Out of six that I
called, only two had bought the options. One had bought the options but
sold them a few years back at a tidy profit to buy a house. The other
is still holding onto them, hoping a sell of MacGrill will drive up the
price.

Back when I was a manager, I used to speak 'not so nice'
about the shareholders. "The shareholders" was always the excuse our
District Managers used to use when another round of penny-pinching was
implemented. When I started, if you broke the 20% labor cost threshold,
you were doing well indeed. Then 19%, then 18%, all the way down to 16%
when I left. Managers were required to cut staff to skeletal levels and
to step in and do the work instead. Between bussing tables, hosting,
food running, prep work, and many other tasks, managers had no time to
manage anymore.

It was a downward spiral that has put a lot of
chain restaurants in a precarious position. Not only did labor costs
have to go down, so did food cost, maintenance cost, smallwares cost,
etc. Suddenly, offering quasi-first-class experiences while dining out
became second consideration. House-made became
frozen-in-a-plasic-bag-inside-a-cardboard-box. Three table sections
became "How many tables can you take?". Hostesses became an option.
Bussing was added to the servers list of things to do. Along with
expediting and food running.

Until shareholders of restaurant
stock realize that this business is for the long term and not for big
dividends every quarter, publicly owned restaurants will always suffer.
Overworked managers, servers, and cooks will not increase the value of
your stock. It will only get you a lower class of employee who will put
up with the bull-shit. And you know where that leads...stock at a 20
year low.