What Happened to Joe’s Crab Shack?

On June 6, Ignite—parent company to Joe’s Crab Shack and Brick House Tap + Tavern—filed for federal bankruptcy protection. Their total debts were listed at $197.3 million and their assets totaled $153.4 million.  As of August 16th, several locations have shut down immediately and without warning to employees or guests. According to Consumerist, approximately 41 restaurants have closed across 19 states including Alabama, California, Florida, Georgia, Kansas, Illinois, Indiana, Maryland, Michigan, Minnesota, Missouri, Nebraska, New Jersey, Nevada, New York, Oklahoma, Texas, Utah and Virginia. The judge stated that the bankruptcy will not approve any kind of compensation for employees.

The bankruptcy plan stated that Kelly Companies had acquired both holdings for $50 million and that all 112 Joe’s Crab Shacks would remain open. But, on August 7, Landry’s Inc, the original owner, became the owner once again when U.S. Bankruptcy Judge David Jones approved their bid of $55 million to buy both brands. Landry’s Inc is home to 500 restaurants, hotels, casinos and entertainment venues with restaurants that run the gamut from the likes of The Chart House, Claim Jumpers and Morton’s Steakhouse. Tim Fertitta, Landry’s founder and CEO, bought Joe’s Crab Shack back in 1994. It was one restaurant in Houston, Texas that soon grew into 120 locations. In 2006, it was sold for $192 million to a company that later became known as the Ignite Restaurant Group.

 

A Lesson in Forward Thinking Policy or No Policy at all

In 2014, Joe’s Crab Shack took one of its first punches when the nonprofit public health group Center for Science in the Public Interest (CSPI) laid claimed that “Joe’s Crab Shack is a nutritional shipwreck of a restaurant chain, ruining expensive seafood with cheap, industrially produced trans fat designed to simulate butter,” per CSPI’s executive director, Michael F. Jacobson. Several of their dishes were found to have dangerously high levels—one’s that corresponded to the American Heart Association’s recommended limit…for one week. Unfortunately, their menu read: “We use zero trans fat oil.” Oops. Surprisingly, no class action lawsuits developed.

As many of you probably remember, In November of 2015, Joe’s Crab Shack Became the first major restaurant chain to drop the practice of tipping servers. They claimed this “forward thinking policy” would result in an improved team environment with a less competitive edge and greater longevity. The server’s hourly wage was increased. Eighteen restaurants took part in the no-tipping test concept which lasted about six months, until both customers and employees complained loud enough until the company realized they were either ahead of their time, or sorely mistaken.

Then, in January of 2016, one of their Georgia restaurants failed its health inspection for the second time.

More bad press awaited them when, in March of 2016, the NAACP demanded a public apology from one of their restaurants in Minnesota where a photograph of a lynching was embedded inside one of their tables as decor.      

 

What Went Wrong?

Most restaurants can manage a few oops here and there, but there seems to be a running theme and one that was summed up by a past employee when speaking to the AmNews, “Management did not listen to customer or worker complaints.”

Communication is the heartbeat of any restaurant. You can tell when the lines are working because of the seamless flow that guest’s experience. And that comes from listening as much as talking and having effective training policy and procedures in place for every aspect of the business. Maybe Joe’s Crab Shack can take a lesson from Gilbert Amelio, a onetime CEO of Apple, “Developing excellent communication skills is absolutely essential to effective leadership. The leader must be able to share knowledge and ideas to transmit a sense of urgency and enthusiasm to others. If a leader cannot get a message across clearly and motivate others to act on it, then having a message doesn’t even matter.”

 

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