By Bill Alles, Owner, Churchill's Steakhouse, Spokane, Wash. 

After many years of working in the hotel industry, in 2007 I decided to open Churchill's Steakhouse. Despite pretty steady business from the beginning, the restaurant got off to a rough start: First a mechanical failure that led to a flood, then burst fire sprinklers and a second flood, and to top it off, a neighboring business caught fire in 2008 and the damage pretty much gutted our building.

After the fire, I thought about giving up. I was insured, but I knew it would take a lot of work and energy to reopen. Since I still needed to pay back loans I had taken out to fund the restaurant's opening, my only good option was to reopen and try to turn a profit. Here's how I used this unfortunate event as an opportunity to rethink the business and come back even stronger than we started.

Finding the right niche 
When I opened Churchill's there were no fine dining steakhouses in this region, so I was trying to provide people with the kind of dining experience they would otherwise only find by going to a big city. I designed it to be a high-end, upscale restaurant. I purchased high-quality wool carpeting, the best tile work, large chairs that provided privacy, and fine china and crystal. I bought a grand piano, which was used for dinnertime music. And we served only USDA Prime Midwestern beef.

After the fire and before I got to work rebuilding the restaurant, I talked with my customers and others in the community to find out what changes they wanted to see. I was surprised to find out that my instincts were off-target: people weren't looking for such a formal (and pricey) environment. I knew I didn't want to compromise on the quality of the beef or dining experience; at the same time, the new Churchill's needed to appeal to a wider group of people -- especially young people.

A revamped restaurant 
We had to replace virtually the entire interior of the restaurant after the fire, which provided an opportunity to make things more casual. I ditched the expensive wool carpeting and elegant chairs for polyester carpeting and less formal seats. We got rid of the grand piano in the dining area and instead put an upright in the lounge.

It also occurred to me that we could make better use of our lounge, which is downstairs from our main dining area, to reach out to a younger crowd. So we introduced a secondary menu with lower-priced options, so that people could come to Churchill's without spending $30 or $40 for an entree.

We spent a fair amount of energy developing our Facebook page in order to market the lounge. Once a week or so, I'll announce a promotion for the lounge on Facebook. For example, we might have $7 burgers one night. Forty or 50 people will fill up the place and buy drinks and bring in friends who haven't been here before. We've developed more regular customers this way, and especially in the younger demographic.

Making the most of Prime beef 
Launching the lounge menu has helped us make much better use of the Prime beef we purchase. We cut all of our steaks in-house, and we've always used the trim to create ground beef. But before the fire, we had a difficult time finding a good outlet through which to sell that meat. We ended up packing up the ground beef in the freezer and waiting for occasions when we could find a use for it -- say, making Swedish meatballs for a party's hors d'Å"uvres.

After the fire, we had to get rid of the thousands of pounds of ground beef in our inventory, which would have otherwise spoiled. We ended up donating around 2,500 pounds of USDA Prime hamburger to the Salvation Army and other charities. That made me think that under normal circumstances, we should be able to find a better use for that ground beef.

So as we attracted more customers to the lounge, we also tried to sell more burgers, which weren't listed on the restaurant's primary menu. Now the burgers are one of the most popular items on our new lounge menu, which has led to higher profit margins on our beef. If I buy a strip loin that costs $110, I calculate my costs on that based on the number of steaks I can get from it. The pieces that I don't use for steaks can be ground to hamburger. The burgers become highly profitable items, because all I'm doing is adding a bun and French fries.

Before the fire, the restaurant's gross annualized revenue was about $2 million. In 2010, we brought in $2.2 million. But the change to our cost of goods is even more significant. In 2008 our food costs accounted for about 40% of sales; now we've reduced it to near 30%. Our reinvented menu now uses our resources more effectively.

Churchill's is still a young restaurant, but I feel like success is much more attainable now that we've found an approach that is more popular and more profitable.

Bill Alles has worked in the hotel and restaurant industry for 32 years. Before opening Churchill's he worked as a hotel general manager for 6 years. 
-- As told to Zack Anchors

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