One of the hottest restaurants to hit town closed its doors after not making it to the five year mark. The Century Grill, a restaurant that did $8,000,000 in its first year and attracted all the socialites filed for bankruptcy. There are probably many reasons that it closed but one of the reasons was its lifecycle. Lets have a look at lifecycles and what operators must do to ensure that they do not end up in the same position as the Century Grill.

The Century Grill management recognized almost immediately after opening that they had hit a home run. The who's who of Vancouver dined regularly and the restaurant and bar were packed every night. The trendy crowd had found them but management recognized that this crowd would depart when the next "trendy" restaurant opened. When the "trendy people" left, the "wannabes" would fill the restaurant but would spend less money. Once the "wannabes" left, who would come? Management new the answer was probably not enough people to support the overhead, and that is exactly what happened. The instant success of the restaurant created a very short lifecycle.

Rule #1: If you have an operation that is trendy, be prepared to sell when the money is pouring in and you seem to be able to do no wrong. Bars are especially sensitive to this "trendy" lifecycle and can have a life span of two years! The ultimate goal of any business should be to sell it so sell high.

Rule #2: Renovate, Renovate, Renovate. Depreciation expense is not a balance sheet account that allows you to pay less tax. Depreciation is a legitimate expense freeing up cash so that you can replace assets as they deteriorate. Carpets wear out, equipment dies etc. To continue to attract your customer base there needs to be a freshness to your operation. Freshness shows the customer you are trying and gives them a reason to come back. In most restaurant operations, a major renovation should be done every five years, seven at the most. Save your depreciation and get ready to renovate.

Rule #3: Eventually, all businesses die a natural death. It may be hard to believe but McDonald's will not be around forever. It will, one day, become extinct. Maybe not in our lifetime but one day it will disappear. Woodwards Department Stores, Eaton's and Cassidy's are but three well known businesses that have recently closed. Be prepared to sell before your business closes. There is no glory in going down on a sinking ship.

Rule #4: Lifecycles can be extended. By putting a great deal of effort into an operation, a lifecycle can be extended. A change in concept, addition of new areas such as an outdoor patio and paying close attention to the markets demands can extend a lifecycle greatly. It is a great deal of hard work but the reward is that you may have the opportunity to go through a second lifecycle.

When business is great and the sky is the limit, start looking at how you can reinvent your business. Success today does not necessarily mean success tomorrow. Pay attention to your lifecycle and you will be able to extend it dramatically.