How changes at the top affect sales
Ten of the first 11 chains on the Top 500 sales ranking have announced a leadership change within roughly the last two years. What impact are those shifts having on sales?
For Top 500 chains in a high-profile turnaround situation, the answer is iffy at best. A change in the corner office did not halt a sales slide at Quiznos, Famous Dave’s or Cosi (with year-over-year systemwide declines of 23.9%, 7.2% and 5.9%, respectively).
But significant sales gains followed changes in leadership at Applebee’s (a 3.6% gain), and a free fall was halted at McDonald’s (1.1% increase), one of the industry’s most challenging turnaround situations, after the top job shifted to Steve Easterbrook.
The challenge is isolating the influence of one individual from a host of other factors, not the least of them being the economic backdrop and level of competition. But there’s no doubt the CEO is “crucially important” to a brand’s success, says Mark Kalinowski, restaurant analyst for Nomura Securities.
“If you have a strong leader with a bold vision who implements his or her strategy successfully, it can have a profound impact,” says Kalinowski. “Look at Starbucks [No. 2 on the Top 500 list]. When Howard Schultz took back the CEO reins a few years ago, things improved immensely. There’s no one who can steer that ship the way Howard Schultz could.”
Putting the right individual at the helm can please more than just investors. “They can really benefit the shareholders, but shareholders are not the only people who can benefit—the customer and the employees can also benefit,” says Kalinowski. “Their situations can also improve for the better.”
He also believes the right CEO can pull a chain out of the doldrums. “Look at what Steve Easterbrook is doing at McDonald’s—he’s been in the job less than a year and a half,” notes Kalinowski.
He also applauds Julia Stewart, CEO of DineEquity, the franchisor of IHOP and Applebee’s. Stewart took over in September as president of Applebee’s, which slipped out of the Top 10 on this year’s ranking, following the resignation of Steven Layt.
“Julia Stewart has a bold opportunity,” says Kalinowski. “She is someone who acts and acts and acts. She has all the right attributes of a CEO, in spades.”