Bad Business

I'm always amazed when people make bad business decisions. Not that I'm the best business person in the whole world. But sometimes people just make decisions that seem so obvious to me to be wrong. And bad business at the same time.

For example, I know a guy who opened a new restaurant. It was built in the shell of another restaurant that had a reasonable amount of business, but had gone out of business nonetheless. So I guess the new owner thought that the area was known to have a restaurant, that people would come to the new restaurant if it shared enough of the good menu items from the previous restaurant, and he hired a bunch of the servers from the old restaurant who would bring back their regular customers.

Except that he didn't address some of the reasons that the other restaurant had closed. He didn't do much advertising, for example. He didn't point people to the new restaurant. It was in the same place, yes. But many of the stores that had led to the old restaurant weren't there anymore. The mall as a whole has been getting less business. Given this economy, that's not a surprise. And all the more reason to let people know about a new business. So yes, some of the regular came back. But not all of them. In the time between restaurants, they had found other places to go. They didn't automatically switch back. Maybe they found the other restaurant was ultimately more satisfying. Maybe they were just in a new pattern and too lazy to change again. And maybe they just didn't know that the new restaurant was there. If they didn't have another reason to go by the space, how would they have known? Bad business.

The restaurants in the area have all started offering a happy hour, when none of them did before. Seems like a good business decision. Bring in more happy hour traffic and make more money overall. But if you offer half price drinks, then you have to bring in double the business to make the same money. That's the simple math of it. And if you do it for most of the evening that the restaurant is open, then you will ultimately make less money. Bad business.

But this particular restaurateur didn't think about that. Instead, he's expecting to make the same sales he used to make. Even though the prices are lower when the business is greatest. And he's open fewer hours. Bad business.

Am I the only one who recognizes that this is bad business?