Michael Aronovici has spent over 30 years in the restaurant industry, owning and operating brands such as Pizza Hut in Quebec and the Cultures restaurant chain. For the past decade, his work has focused on advisory engagements for U.S. and Canadian restaurant and investment groups. He recently discussed what this work entails, providing insight into the daily tasks and challenges of an advisor in the industry.
Advisory Engagements
A typical engagement for Aronovici rarely starts with a clear brief. Instead, clients often approach him with a symptom, such as shrinking margins or a strained franchise system. The initial weeks are spent determining the root cause of the issue, which can be different from what the client assumed. Aronovici emphasized the importance of accurate diagnosis in determining the subsequent course of action.
As an advisor, Aronovici’s role is distinct from that of a brand owner. He is brought in to solve a specific problem, create a plan, and then hand it over to the operator’s team to implement. This requires building a plan that can be executed without his direct involvement, focusing on the client’s team rather than his own presence.
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Margin Improvement and Menu Repositioning
Margin improvement involves meticulous analysis of cost of goods, labor scheduling, portion specs, vendor contracts, and waste. Aronovici noted that most gains come from small corrections rather than a single big idea. For example, a restaurant group might be losing margin due to inconsistent portioning across locations or outdated freight terms.
Menu repositioning is a combination of food and math, involving an examination of sales data, production costs, and guest perceptions. The goal is to create a menu that the kitchen can execute consistently at a reasonable margin, rather than one that simply looks good on paper. This may involve removing items that drag down kitchen efficiency or repricing dishes based on production costs.
Supply Chain Optimization and Expansion
Supply chain optimization in the restaurant industry often means bridging the gap between contractual agreements and actual store-level practices. Aronovici has seen groups with good vendor agreements lose money due to inefficiencies in product movement from distribution centers to stores. He looks at order frequency, minimums, spoilage, and whether purchasing decisions match store needs.
When assessing expansion plans, Aronovici starts by evaluating the economics of a single unit. If the unit is not viable on its own, expanding to multiple locations will only multiply the problem. He then considers real estate costs, labor supply, local competition, and the brand’s existing footprint. Expansion plans often fail due to overextension geographically rather than poor city selection.
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Engagement Selection and Packaged Goods
Aronovici is selective about the engagements he takes on, looking for groups with a capable operating team in place and ownership prepared to act on the findings, even if they are uncomfortable. He believes that advisory work is most effective when there is a specific problem to be solved, rather than a team that needs to be built from scratch.
There has been an increase in requests for packaged goods work, as restaurant groups seek to expand their brands into grocery stores and generate revenue independent of seating capacity. This work involves different considerations, such as production partners, shelf-life, retail pricing, and distribution relationships, which can be unfamiliar to restaurant operators.
The hardest part of Aronovici’s work is often getting organizations to change their habits. While analysis can identify areas for improvement, implementing changes to kitchen practices or purchasing behaviors that have been in place for years can be challenging. This is where the real work happens, as changing behavior is more difficult than conducting the analysis itself.