Business Profile: Dan Scoggin'; Gray-haired philosopher of the restaurant business; 'Finds 'courtesy control' a key to continued success

By GAIL COLLINS, UPI Business Writer   |   Sept. 2, 1984
share with facebook
share with twitter

NEW YORK -- The turning point of Dan Scoggin's life, as he tells it, came in 1971 when he was sitting in a restaurant in Memphis contemplating his career running the East Coast container division at Boise Cascade.

At 35 and deep in a midlife career crisis, Scoggin waved his hand at the Tiffany-and-hanging plants restaurant around him and declared his intention to quit corporate life and 'do something -- even something as stupid as this.'

The restaurant was TGI Friday's, the prototypical 'fern bar' chain that Scoggin now heads.

With more than 90 restaurants grossing $230 million annually, TGI Friday's now claims the highest per-unit volume of any American chain. At 46, Scoggin likes being called the 'gray-haired philosopher' of the restaurant business. After a rocky patch in the mid-70s, he found what he says are the secrets to long-term success in the industry, and he packages them into little nuggets of wisdom for his employees' edification.

There is, for example, the 'four walls' lesson, which holds that the success of a restaurant is determined only by what takes place inside, and not the dining trends and economic storms raging without.

'Ourindustry is huge -- $144 billion in sales, compared to $98 billion for the auto industry,' he said. 'Yet the industry is very unsophisticated. We never think beyond the next concept.'

There was the age of the limited menu steak house, Scoggin recounted, when restaurateurs somehow convinced themselves that meat, salad bar and boiled vegetables was 'what people are going to want 'til the millennium.'

When the singles bars came along, he continued, 'everybody jumped on the trend. Get some finger foods, hang up a fern, buy some Tiffany lamps. That was going to carry us to the millenium.

'Now the new hot trend is gourmet hamburgers,' he said. 'This $144 billion industry is jumping on to the next hot concept. What's wrong is not the marketplace. What's wrong is us.'

Friday's has hung onto its singles-bar decor, although Scoggin insists proudly that the flooFeal brass, and the hanging plants real ferns. Instead of redecorating with each trend, Scoggin said, Friday's has decided to identify its audience and adapt to their evolving tastes.

'The baby boom people are a third of the population and a lot more in spending,' he said. 'Can we follow them through on an ongoing basis? Of course we can.'

The first TGI Friday's was founded in New York by Alan Stillman in 1965, when wood floors and stained glass made for a trendy environment. He franchised additional restaurants in less cosmopolitan areas, with the idea of marketing 'a big city concept to small cities.'

Scoggin, who had spent 11 years at Boise Cascade, was restless in a company he said had grown too big for the entrepreneurial spirit. 'You start getting averaged in. The death knell was when behavioral scientists came in, and started making operating decisions.'

The son of a chef, Scoggin himself had no background in the food business, but felt that 11 years of entertaining Boise Cascade clients had at least given him some experience with restaurants. He got the franchise for eight big cities Stillman did not regard as promising, like Atlanta, Chicago, Dallas and Houston.

'While we were building and preparing to open, we had no idea of Friday's potential,' Scoggin said. But the first restaurant in Dallas grossed $2 million in its initial year of business. 'After building one or two more Friday's we knew we could stamp out 50 of them.'

The new restaurants were, with 230 seats, larger than the earlier models and designed in a multi-tiered fashion that allowed diners on one level to watch the action in other parts of the establishment. He got the idea, Scoggin admits, from New York's famous Maxwell's Plum.

Scoggin bought out Stillman, who still owns the original New York restaurant, and proceeded to expand until 1975, when his restaurants began to skid in the wake of the oil boycott.

'My three key restaurants, in Dallas, Houston and Atlanta, plunged in volume from $60,000 to $30,000 a week,' he recalled.

The restaurant personnel told him the problem was overcrowding in the fern bar trade: 'We had three competitors, now there are 30.' His business advisers said it was just the nature of the business: 'There's a life cycle for restaurants. You can't run forever.'

The theme in all the explanations, Scoggin recalled, was: 'They went thataway -- it's not my problem.'

Hoping there was a better answer for his business woes, Scoggin started traveling the country, looking at both successful restaurants and restaurants that had prospered, then failed.

He found a 'common thread' running through all the sad stories: 'the success syndrome,' Scoggin said.'A place opens and for the first few months they're humble, courteous, kind. All of a sudden you come in and the bartender looks at you condescendingly and the waiters are saying: 'Get out of my way.'

'It's a common problem for every successful restaurant, including the ones we've opened.'

Now, TGI Friday's implements a courtesy-control system during the first 18 months of every new restaurant's life. 'We know it's going to happen. Sooner or later the employees start testing management to see how strong their commitment is.'

In his research, Scoggin also developed his theory about tracking the baby boomers' evolving tastes.

His audience, Scoggin determined, 'knows the difference between fresh and frozen,' so all TGI Friday's food is prepared fresh. 'These people also have ever-changing palates,' he said, 'so we went from 30 to 150 menu items.'

TGI Friday's chefs are trained, but they are not culinary wizards. Most of the responsibility for quality and consistency lies with the management, Scoggin said.

'We spent 12 years developing the kitchen, which is probably to the restaurant business what the 747 is to the airline business. Everything is pre-prepared and day-dated, so they know exactly what the shelf life is. We probably have the most complex food operation of any chain.'

TGI Friday's reworks its menus periodically, eliminating items it has been unable to execute properly. This October, for instance, chicken and dumplings will fade into obscurity -- an idea that worked well in the test kitchens but generally translated into chicken and lumps in day-to-day practice.

'We debugged the lasagna,' Scoggin said proudly. 'The eggrolls used to come out greasy, but now they're executed so well they're one of our most popular items.'

New menu items also show up as TGI Friday's tries to anticipate what its audience wants next. Right now, Scoggin said, 'the public is telling us they want pasta, better salads, soup.'

The baby boomers also would like things a little quieter, Scoggin said. 'They're telling us we're too noisy. We're going to retrofit the restaurants with noise reduction materials.'

Once he had implemented his quality control program, Scoggin said, the restaurants returned to their old profitability within 90 days. Every unit grew in real sales volume for the rest of the decade, and during the past five years the chain has experienced a 39 percent annual revenue growth.

With 90 TGI Friday's in operation, 77 of them owned by Scoggin's firm, the chain is looking for 'overlapping expansion vehicles' that will allow them to build more restaurants in the same cities without spreading themselves too thin.

First off the block was Dalt's, a chain with 'a 1940's look, with marble counters and tile floors,' Scoggin said. The menus focus on Americana, with milkshakes in the old metal shakers and carefully conceived hamburgers and french fries.

'We absolutely nailed the baby boom group square in the midsection with the concept,' he said. 'They love the ambiance.'

There are seven Dalt's in operation now, and Friday's is testing a new concept -- Fast Fridays. 'There was a void in the restaurant business -- between Dalt's and fast food,' Scoggin said.

Scoggin believes his baby boomers love fast food, but might be tired of burgers and fries and eager to pick up a spinach salad and quiche to go. 'It's a few minutes slower than fast food, but 30-40 minutes faster than a full service restaurant,' he said.

Scoggin and his associates sold most of their interest in the chain in 1975 to Carlson Companies Inc., a privately-held Minnesota firm. TGI Friday's went public in 1983, and is traded on the New York Stock Exchange.

Since then, Scoggin has gone public himself. An eager performer, he acts out the Friday's philosophies for financial analysts -- like the 'oyster' theory of the importance of atmosphere and the 'employee cloak' rule that holds waiters and waitresses should treat the clientele like guests, not customers.

'I go into great theatrics,' he said. 'I'm willing as a speaker to take risks. I got applause from the European underwriters in London.'

Related UPI Stories
Trending Stories