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When chains come to town

Of the many day-to-day problems facing Steve Theofanous, co-owner of the Around the Clock diner, competition wasn't one of them.  Fifty miles northwest of Chicago, his town of Crystal Lake was undergoing a population boom a couple years ago, and the handful of indie restaurants in the area were all too happy to feed the new arrivals.

But then a sign rose above the treetops. It said Applebee's. Then another: Chili's. Bakers Square. Outback, T.G.I. Friday's, and Corner Bakery. Hot dog chain Portillo's came next, and a 400-seat Barnelli's rose right next to that. Adding insult to injury, Bennigan's set up shop right across the street.

Eager for something new, his customers flocked to the chains.

"Every time a new chain would open, everyone would say, 'there goes Around the Clock's business,' " Theofanous says.

So Theofanous decided it was time for a grand opening of his own—or, more precisely, a grand re-opening for his 29-year-old, family-run restaurant. If newer concepts with fresh looks and fresh food were siphoning off his customers, he reasoned, he'd need to best them on every point.

"I've got a loyal clientele base," Theofanous says. "But I knew I needed to be better than the competition to keep them coming."

He shut down the restaurant for three days and essentially gutted the place. In went a new HVAC, wallpaper, lighting, and carpets. He updated the servers' uniforms, and even laid down a new coat of blacktop for the parking lot.

It didn't end there. Theofanous next hired a guest-relations consultant who ran a full-day seminar for his workers, and another to revamp his menu. With the help of his brother Fano, a computer technician, he installed a system to gauge which menu items were selling and which offered the best margins, then weeded out his menu accordingly.

Finally, he dug into his pockets and bought billboard space, radio spots, and newspaper ads. All played up what set Around the Clock apart from the chains—an in-house bakery and all-night hours on weekends, to name two —and came up with a tagline that touted both the restaurant's heritage and its fresh face: "One of the area's oldest is now its newest."

In the end, it had all cost him $100,000. But his customer counts began to climb again. Last time he did the math, business was up 10%.

Chris Miosi, who manages the Bennigan's across the street, isn't surprised. "They were here first," he says. "So they've been able to develop good rapport with customers."

But surviving took more than that. Because the coming of the chains also meant the leaving of Theofanous' own employees. Halting the defections meant coughing up more money for back-of-the-house staffers. Servers weren't complaining, in large part because their guest-relations training had boosted their tips. "Initially, there was a real fight for staff," Theofanous says. "But we created a better work environment."

While the chains have pushed him to improve his operations, he tries not to fixate on them. "We always believed our biggest competition is ourselves," Theofanous says. "As long as we maintain a level of excellence, we'll continue to do well."

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