This post is written for all of the MBA students who have gone through the Beijing Sammies Business Case.

As much as I  would love to help you (cheat) by adding some comments to the questions, that would be wrong. wink

Follow up info…

So… what happened next

I exited Sammies end of 2003, post SARS.  (SARS kinda makes question #4 an easy one. No. Don’t invest!) Then, the new owners ran it into the ground in 10 months.

What or how that  happened is the topic here.

I recall at least four main operational mistakes were made that lead to the end of Sammies.  Before those,  I would comment that the person brought in to run the business was an excellent at ‘operations’,  but a poor ‘builder’. The general rule is that a company requires 2 kinds of people to grow; the entrepreneur who has the vision to build (focusing on the what and why of the business) and the operations person who focuses on the who and how to accomplishing the vision.

I was the builder, who also acted as the operations person.  Over the years I did have a number of operations managers but never found one who could be that real partner.  (Not finding that partner was one of my major mistakes.) ANYHOW….

So the  new leader was solid with operations, cutting costs and tightening processes, but not such a good builder. So let’s go over the mistakes.

Mistake #1

The Central Kitchen was a large 2 storey complex (500 smq / 5000sqft) and one of the first things he did was squeeze everything into the first floor and planned on renting out the 2nd floor.  Not a terrible idea, but he began this endeavor before actually securing a tenant for the 2nd floor. So, with Murphy’s Law in full effect,  once everything was moved, he found a tenant… for the 1st floor and began the process of moving everything up the 2nd floor.

Note: he just took over a company that had gone through SARS and if you read the book and hear about My Black Monday, you will know there were other difficulties too, so having to put effort into moving everyone down stairs and then back up stairs in the first few months is NOT where resources and energies should have been spent.  Not to mention how disruptive it must have been to the already shaken staff  (new leader in the house, yo).

Focus on reducing cost – I get that and on it’s own that mistake could have been overcome.

Mistake #2

Right out of the gate and while the up and downstairs circus was going on, the new leader opened 2 new locations… on the cheap… in horrible locations.  It was not a good sign when I got a call from the new guy bragging that he could open 2 locations for less than the price of me opening one.

Needless to say the locations were “dogs”, that amounted to nothing in terms of revenue, were a waste of resources and cheapened the Sammies brand.

Strike 2. But again, nothing fatal and something that could have been overcome.

Mistake #3

This mistake was the worst and one,  to this day, I  do not understand how such an experienced restauranteur could have made it.  Some background info – In addition to running Sammies the new guy was also responsible for 2 other restaurants: an Italian place and an Indian place.

They envisioned the Central Kitchen to be the Central Kitchen for all of these  restaurants.  Good idea. What I thought they would do was, using the Beijing Sammies call in number, be able to tell the loyal Sammies’ customers that you can now get Beijing Sammies and the Italian Brand and the Indian Brand all in one convenient number.

They didn’t do that.

Instead, they mashed all the brands under the Sammies name. Yeah…

Imagine calling in for a Deano Spambeano and get offered a chicken tikka masala.  Needless to say the brand got massacred.  That mistake on it’s own is what kills restaurants.  Seeing it happen to Sammies, just made me cringe.  I could see they were heading off a cliff.

Mistake #4

So what does the investor do after seeing the new guy make mistake after mistake? He takes him out and brings in his wife.  His wife is a local lady who runs his other China business (a sourcing company). They do a good job and she is very capable running the operations for this business.  Please note that this business deals mainly with Chinese suppliers and dealing with Chinese suppliers is NOT a role for a soft and fuzzy person.

Like I said, she did her job well, but that style of operations did not fit with what the Sammies employees were used to. After a while the staff got sick and tired of being treated in this new manner and decided to strike back.

I have said before and for anyone who has experience in China, you will understand that there is no way you can follow all the rules.  Either the rules change  all the time or they are unclear or they can be interpreted in different ways… anyway you slice it, it is easy for someone to walk in and point to where you are doing something wrong. Sammies employed a government relations person specifically to deal with this aspect and she did a great job.  We didn’t have any troubles while she was employed.  The new boss let her go.

Well, with the staff unhappy and looking to fight, they found something and took action.

Quickly thereafter, Sammies was closed.

So sad, too bad.

R.I.P.

Beijing Sammies

1997 – 2004

You made a damn good sandwich!