The Decline of Long John Silver's...What Happened?

[Music] long john silver it's the name of a pirate from the novel treasure island but more importantly today it's the name of the largest quick service seafood restaurant in the united states in fact i can't even name any others like it they used to control about two-thirds of their market but today that's more like one-third partially because some of that share has been taken away by mcdonald's and popeyes and many others that have been growing their seafood sales their number of locations has been fluctuating between 1000 and 1500 over the past few decades but today it's more toward the lower end of that range if you're not familiar it is a unique restaurant they're nautical theme it's the thing that's always stood out to me when you walk in there's pictures of waves and fish and if you're lucky it'll be one of those big wooden steering wheels that you see on a ship oh and there's always this bell by the door you're supposed to ring it when you leave if you were happy with your experience despite standing out in the industry it has been bad times for long john silvers as i said market share is down locations have been closing also sales have been unstable the public's perception could be better part of me is amazed that they still exist actually i thought this was weird i went to their website and on the homepage there was a statement that said yes we still exist which i can't imagine is a good sign i wouldn't say there's been a good period for them going back 20 30 plus years in 1998 they even filed for bankruptcy yet they do still exist so i want to talk about how they grew so large and what's been going on over the past few decades the roots go all the way back to 1929 when jerry letterer opened a small hamburger stand called white tavern shop in the small town of shelbyville kentucky with a population of about 4 000 people given the state of the country the great depression leading into world war ii it probably wasn't the best time to open a new restaurant but it held up the small simple setup actually worked well during the depression it turned into a chain and grew to 13 locations but then during the war there were food shortages and labor shortages and it forced him to close most of them so after the war things weren't looking too good but he did see opportunity to best take advantage of it he chose to switch things up a bit a couple of things here he renamed his company jericho based on his name jerry and then he started an entirely new restaurant under jericho's ownership called we're not at long john silver's yet this one was called jerry's five and dime it was actually somewhat pioneering and that it's specialized in selling roast beef sandwiches now when i think of roast beef sandwiches i think of arby's but jerry was over here selling them a full 17 years before arby's even existed but yet again jerry was having trouble with his restaurant he seems to believe it was because the 15 cents he was charging for the sandwich was too much i'm skeptical of that because when arby's opened they were charging 69 cents and even when you account for inflation i just don't see 15 cents as being unreasonable maybe it had more to do with their size or quality but either way after about a year the lack of sales caused jerry to give up on the roast beef and switch over to a more conventional menu focusing on hamburgers the way i see it hamburgers are boring and sort of the easy way out i think you are more likely to achieve a certain level of success because it is a safer food but everyone else is doing it so your chances of breaking out and becoming something big are much lower the switch did prove to be successful enough i say that because over the next 15 years he opened six more of them in 1963 jerry died from a heart attack and this man named warren rosenthal took over things he had been with the company almost since the beginning starting as a restaurant manager and eventually working his way all the way up to ceo when jerry died he became the new president and owner of jericho much like jerry's roast beef attempt decades earlier in 1969 warren rosenthal saw an opportunity for a new type of fast food restaurant this one would specialize in seafood and it is exactly what you're thinking they opened it in 1969 in lexington kentucky and called it long john silver's up until this point everything i've talked about has ranged from failure to moderate success but this was their first true breakout success i mean everything was finally coming together for jericho fast food restaurants in general were expanding like crazy and here they had a version of one that stood out from most of the others the unique idea attracted attention from the public and this is important they had the resources and experience necessary to fill that demand they had experience from the restaurant business franchising specifically and actually had cash on hand because they recently became a public company within a couple of years there were hundreds of long john silvers and by the end of their first decade in 1979 there were over 1 000 of them it just continued they kept growing throughout the 1980s easily becoming the largest fast food seafood restaurant in the united states without anything that i would consider to be a major change that is until 1989 at that point they were approaching 1500 locations darn near a national brand but there were concerns about the company's future increased competition meant that fish was becoming more available to the public either through similar fast food restaurants or companies selling frozen microwavable stuff through the supermarkets but then at the same time the cost to acquire some of the fish that they were selling was rising which resulted in lower profits on top of that the economy in general was on a downturn the combination of all of it caused their stock price to go down which sparked a series of events that led to the sale of the company in fact i'm gonna go ahead and call this the start of their decline so my first reason for it would be their 1989 leveraged buyout this was when a group of executives from the company got together with a couple of investment firms and took the company private for the first time in 20 years they did it through a 620 million dollar leveraged buyout meaning most of that 620 million dollars was funded through debt that was added to the company itself these new owners appointed new leaders that started making changes to the business right away i wouldn't say particularly harmful changes either the biggest one was probably placing a stronger focus on long john silver's restaurants and here's what i mean by that the previous owners were nervous about putting all of their eggs into one basket they did have 75 to 80 percent of their eggs in the long john silver's basket but they also had a few other baskets representing different restaurant chains that they had started over the years but now they simply said we are all in on long john silver's so they started selling or closing all of those other baskets i kept that basket metaphor going on for a bit too long didn't i oh well the point is by 1991 long john silver's was 100 of their business and they even went as far as to change the name of the company from jericho to long john silver's restaurants now they did become a private company so i don't know the exact numbers but i would say that they were doing well throughout the 1990s reportedly hitting record sales numbers and continuing to open more franchises but that debt just made everything so much harder here's my guess as to what happened that buyout added a crazy amount of debt all at once which is overwhelming but then they did sell off about a quarter of the business you know those other baskets the proceeds from it helped keep them afloat and pay off some of it but soon after it became clear that it wasn't sustainable they were paddling hard but it wasn't enough to keep them from drowning in debt see i'm using a swimming metaphor this time because well you know in 1998 they filed for bankruptcy reporting 457 million dollars in liabilities with only 329 million in assets resulting in negative equity which is never good the head of the company at the time made statements suggesting that the sales and the profits were both growing but the debt proved to be too much the following year they were bought by the company that owned a w not much really happened there but it did bring the two brands together three years later in 2002 a w and long john silver's were bought together as a 320 million dollar package deal by a company that became known as yum brands and that's my next reason because they never did particularly well under their ownership i don't know if they ever really knew what to do with it or were fully willing to figure it out they tried this thing where they would combine locations between restaurants more often than anything else it was paired with an a and w it doesn't seem to have worked very well i think one of the coolest things about long john silvers is that nautical theme but then when half of it is an anw it sort of ruins the illusion and there are other issues with it too but overall the combined locations are not thought to have been the most profitable locations overall the number of long john silver's locations ended up dropping every year they were part of this company over 1200 when they bought it was down to less than one thousand when they sold it marking the first time they had under a thousand locations since the 1970s in 2011 they were sold to some franchisee leaders and other investors a very similar thing happened with a w at the same time because yum brands wanted to place a bigger emphasis on their larger more successful brands my final reason explaining their troubles is the health value of their food now i realize most fast food restaurants could be doing a little better in this department but i fear long john silvers may be one of the worst most of their sales over the years have been from deep fried chicken or fish and hush puppies which is essentially a deep fried ball of cornmeal it has been a constant struggle for them to shift toward more healthier foods they started by introducing some grilled and baked items in the early 1990s which did go over well but then in 2013 the center for science in the public interest declared their big catch meal the worst meal in america i'll read off some of these for one meal it had over 1300 calories at 3 700 milligrams of sodium 19 grams of saturated fat and the real issue was 33 grams of trans fat which evidently is more than 16 times the american heart association's daily maximum amount they were given that negative title and it got a lot of press which was not good for the public's perception of the brand from there they went on a bit of damage control and a few months later announced that they were eliminating trans fats from their menu altogether as i always say this has not been a full list of the reasons for their decline but they are the ones that i perceive to be the most impactful there are these new turnaround efforts in place including redesigning uniforms drive-throughs the restaurants themselves there's new items on the menus some of which are trying to be healthier alternatives you can now get a grilled salmon or green beans on the side there's a new logo i like their old fish better but the new one fits in better with their new more serious branding i think these efforts are designed to make them seem more fresh and updated while at the same time distancing themselves from all of those troubles in the past let me know in the comments what do you think of long john silver's i imagine many of you don't think too highly of them so if that's the case what do you think of these turnaround efforts are they fixing the issues or not at this point i can only describe this as decades of trouble so i'd say big changes need to happen also do you agree with my reasons for their decline or are there other major reasons that i failed to mention run down buildings lawsuits maybe you just don't like people ringing that bell all the time i'd like to hear what you have to say thank you for watching

Channel: Company Man

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Id: 8gs2UuMFYwI

Length: 11min 53sec (713 seconds)

Published: Wed May 20 2020