CharlesWayneCT, this is what I was referring to in my earlier post to you:
It has to do with the difference between gross sales and net profit. When Cain took over Godfathers, it was bleeding 8 million dollars/year in net losses. After Cain turned it around, it was showing a 2 million dollar/year net profit.
One of the things he did was to close about half the stores that were responsible for most of the losses. So, yes, it was the 5th largest in gross sales, and it went to the 11th largest; while going from an 8 million dollar loss to a 2 million dollar profit.
(Just as a side note, he managed to close half the stores while cutting staff by only 20%. Quite remarkable, really.) He turned a bloated, dying corporation into a lean mean fighting machine.
1,247 posted on Saturday, November 05, 2011 10:40:45 PM by lonevoice
Godfather’s only “bled” a loss for a couple of years, and they certainly expected to turn it around.
And certainly, being able to maintain profit is better than having losses. But we aren’t talking about a 2-year window here. He ran the company for 10 years, and was on the board for another 6. And during that time, other CEOs managed to make profit and grow their business in exactly the same field that Cain was in.
I’ll let you read through my long-winded post on the subject before I comment further. As to the “staffing”, you have to remember that a lot of the stores are franchises, so you can cut them and it doesn’t change your headcount.
On the other hand, please think about the logic behind the statement “he managed to close half the stores while cutting staff by only 20%. Quite remarkable”.
The staff exists to manage the stores/franchises. You are saying he cut half the stores, but only got rid of 20% of the support staff. Isn’t that a bad thing? Isn’t the idea to get rid of 50% of the staff, but only have to close 20% of the stores? (I have no idea if those numbers are correct, I’m just using your numbers). The point of a company isn’t to employ as many people as possible, it is to get as much out of each person as possible.
And last point — most companies get into profit trouble when they expand, because new stores cost money and don’t have the income yet. The easiest way to regain profitability is to close the stores that are bleeding you dry. That is not remarkable, it is the FIRST step in a turnaround, and the easiest. What you want from a turnaround artist is to do that with as few cuts in stores as possible, and to then get new stores under a better controlled structure that makes you money while growing your revenue.
There is pretty much no way to spin a loss of 6 places within a market as a sign of good leadership, over an 18-year period.