Right—and wrong—ways to close for good

It’s a headline-grabbing story that, unfortunately, is not all that uncommon: “Restaurant X abruptly closes, no warning to employees or guests.” Among the latest to receive negative press for unexpectedly leaving people jobless: Ryan’s Buffet and Ruby Tuesday. While just slapping up a sign on the door might be a penny-pinching tactic for a broke concept, the backlash that follows besmirches the names of the brand, the parent company and the individual operator, experts say.

But the result of having to shutting down doesn’t have to be a tarnished reputation. Restaurant Business spoke with industry experts and operators who have closed restaurants to learn about the best practices for skirting the public outcry and avoiding a black mark.

“Chances are, an operator knows a good few months in advance that closing might be a possibility,” says Arlene Spiegel, founder and president of Arlene Spiegel & Associates, a restaurant consultancy in New York City. Whether closing for personal reasons or issues with finances, landlords or lawyers, the operator should be prepared for the questions that will come in.

Rick Van Warner of Parquet Crisis Management, based in Orlando, suggests preparing both internal and external communications as soon as shuttering is a real possibility—not when emotions are running high during a closing. “Although it is typically not practical from a risk standpoint to notify employees in advance of a closing, this is no excuse to not communicate,” he says. 

Whether it's months ahead or the night before, don't avoid the meeting. This is where an operator can control the message and do up-front damage control, but it's surprising how many operators skirt around it. When Max & Erma’s closed 13 stores in January, members of the senior leadership team were at each restaurant to deliver the news and provide every employee with a severance agreement.

Sometimes, legal reasons prohibit operators from informing their staff well in advance; other times, it’d be unwise to give too much notice, for fear of the staff jumping ship. But the whole team needs to be informed. Van Warner suggests having managers reach out to employees without sharing the subject of the meeting. And afterward, reaching out to any current staff who could not make it, he says.

When it isn’t a legal or financial issue forcing a quick close, operators have more time to spread the word. “It became a balancing act of who to tell when,” says Doug Sohn, who closed his famed Hot Doug’s sausage concept in Chicago about two years ago. For him, the key was informing staff before news broke—and asking them not to tell.

Sohn says the hardest part of closing was knowing that he was impacting the livelihoods of people who worked for him. So he built it into his closing strategy to provide staff with three-months’ salary and a bonus after the close, and everyone stayed. 

"A common mistake is not providing at least some severance or assistance to those who have lost their jobs," says Van Warner. But not all concepts are in the financial position to offer bonuses. Bob Evans Farms displaced 1,100 employees when it closed 21 restaurants in April. CEO Saed Mohseni said in a statement that other stores would attempt to absorb the employees, and those who couldn’t be reassigned would get severance packages. “Doing whatever possible to make up for the lack of notice sends the signal that the owners care about their people,” Van Warner says. Sohn, for example, also let employees know that if anyone needed a reference or wanted him to call around on their behalf, he was happy to do so.

At the least, Van Warner says operators should be ready with answers to questions about where employees can pick up their final paychecks, severance or outplacement assistance, opportunities for transfer, and any benefits or COBRA available.

A simple “Closed” sign in the window is not enough; guests want answers, too. In addition to thanking them for their patronage on a prepared sign, provide information on what will happen with gift cards and coupons, directions to the nearest locations if the brand still is operating and a guest relations phone number for additional questions, says Van Warner. 

But operators can think beyond the sign. Celebrity chef Tom Colicchio used Twitter to announce that he is closing his Colicchio & Sons restaurant right before Labor Day. “Big thanks to our loyal fans and our amazing team,” he tweeted. The next day, Colicchio followed up with another tweet informing the public that all employees were offered positions at his new concept, Fowler & Wells, opening in September.

As important as it is to inform staff, it’s equally crucial to let suppliers know of an upcoming close, says Spiegel—and something operators commonly flub. Timing is a balancing act, though. Tell a supplier too far in advance without being transparent about who they can and cannot share information with, and risk word getting back to yet-to-be-informed employees or the media. 

“Call every one of the account managers that you’ve been working with,” Spiegel says—and keep in mind it might be a terminated employee who has been the regular point of contact for that supplier. Operators making the call need to be ready to answer whether or not they plan to reopen as well as how they plan to tie up loose ends. If the restaurant is shuttering because of financial problems, let the contact know if the court has appointed a receiver to manager bank accounts. While the big suppliers have insurance to cover these losses, she says, it is good practice to let them know of any payment plans.  

While Sohn closed because he wanted to, not because he had to, he “didn’t comprehend the sheer amount of scrutiny and publicity and questions and mayhem that would result,” he says.

Instead of going on the defensive, Sohn and others advise taking an open and sincere approach to any communications. “Owners and managers need to be contrite, apologetic, grateful and express appreciation for the support they’ve received over the years,” says Spiegel. Whenever possible—be it with employees or guests—transparency is crucial.