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2 Restaurant Brands — A Recipe For Failure.

In a town the size of Bend, Oregon, three top restaurants closing within weeks of each other is big news. It’s a story that goes way beyond water cooler banter. Beyond the blogosphere. Beyond the business section of the local paper and into the annals of business school curriculum everywhere.

These are lessons worthy of any MBA program in the country.

The obituaries sounded all too familiar for this town, at this time: “Merenda’s demise was hastened by prevailing economic conditions.” “The bottom dropped out of the restaurant business. Everyone’s feeling the pinch.” “The seasonal nature of business in this town makes it very difficult…”

But the story goes way beyond recessionary economics and touches on many of the fundamental principles of branding. The restaurant business is littered with cases of meteoric success and dramatic failure. For whatever reason, it’s an inherently volatile business.

Prior to 2000, the culinary scene in downtown Bend wasn’t much to write home about. Some would say, non existent. So when Merenda opened in 2002 it generated more buzz than Steve Jobs with a doctor’s appointment.

As the Bend Bulletin reported, “Chef Jody Denton pioneered a renaissance in fine dining in Central Oregon.” But the Merenda brand wasn’t about the cuisine. It was about partying. The brand promise seemed to boil down to “good friends, good times.” It was a loud, raucous place where groups would gather and drink generously from an outstanding wine list. The vibe was more urban, the energy level more electric, than anything previously. Many nights you couldn’t hear yourself think.

Lesson # 1: Trendiness seldom translates into a lasting brand. Many of Merenda’s customers were only there because it was THE place to be. It was a superficial relationship, not a genuine bond. Success by association. When new restaurants opened the crowds thinned out.

Trendiness is a common problem in the restaurant business, fashion and high tech. The next big thing or hot spot is always right around the corner. So successful brand managers have to find ways to stay relevant with their past customers, or become relevant to a whole new group.

After five years Chef Denton got distracted. Just when Merenda neeed a little extra attention he opened another restaurant less than a block away. And his place called Deep never got above water.

Lesson #2. Brands need constant attention. This seems like a no-brainer, but many people dream of having a business that runs on autopilot and generates an endless flow of effortless revenue. That doesn’t work in any industry, much less the restaurant business. You have to mind the store.

In 2005 Cornell University published a seminal study on why restaurants fail. One of the surprising contributors was simply a lack of attention, time and effort by the owners. “Failure seemed to stem from an inability or unwillingness to give the business sufficient attention… The immense time commitment was mentioned by all of the survey respondents who had failed.”

At Deep, Denton was determined to create something completely different. As he told The Bulletin: “That’s been kind of my business model: finding what Bend doesn’t have and filling that void. I’ve always enjoyed the environment of a sushi bar. It’s always been something appealing, both from the restaurant’s and the chef’s standpoint.”

What he failed to consider was the customer point of view.

Lesson # 3: Differentiation doesn’t guarantee success. Being different from the competition is certainly important, but it’s not as crucial as being appealing. Tiny morsels of Kobe beef served on a hot rock for eight dollars a bite… That’s different! “Angry Lobster,” Monkfish pté, grilled yuzu and marinated, chopped maguro tataki were all impressively different. But not appealing enough to inspire repeat business by a large group of people in a relatively small market.

Bottom line: Deep was a high-end sushi place in a meat and potato town.

Lesson #4: All successful brands have a clear, well-defined concept that goes beyond the product. The Cornell study proved that clarity of concept is essential to restaurant success. “Perhaps the key finding was the focus on a clear concept that drives all activities… Successful restaurant owners all had a well-defined concept which encompassed an operating philosophy and business operation issues. Failed owners, when asked about their concept, discussed only their food product.”

Denton certainly had vision beyond food for both his restaurants. But the concepts behind Merenda and Deep were based more on Denton’s past experience and personal preference than on the realities of the local market.

There’s an old saying… “If you want to live with the classes, sell to the masses.” In Denton’s case, his restaurants served the classes. His high-end brands only resonated with a small segment of the population, and he didn’t reinvent Merenda when he needed to.

In the end, Denton’s concept for Merenda was not clear enough to sustain the business over the long haul. (Being first in the market isn’t a sustainable brand strategy for a single restaurant.) And the concept for Deep never had a chance. So both restaurants were shuttered, his investors came away empty handed, and there are two more empty storefronts in downtown Bend. Hopefully, the next restaurateur who comes along can learn a lesson from Merenda.