– Thoughts on Strategy and Management

Baltic Sea with the Reric pier at dawn

The restaurant that refuses to grow

We are back from our summer vacation in Rerik, a small seaside resort at the Baltic Sea. Once again, I learned a valuable management lesson where I didn’t expect it. This year’s summer lesson is about growth.

Conventional strategic wisdom tells you that every business should strive to grow. Growth is essential. If you don’t grow, you’ll soon lack behind. During our summer vacation, we found the perfect proof for the opposite: the restaurant that refuses to grow.

They actually have scaled back a bit this year and they are fairly happy with it.

We have spent the summer in Rerik for the fourth year in a row. Accordingly, we have been to our favorite restaurant for the fourth year in a row. It is a small fish restaurant named “Steilküste” (steep coast). They are beautifully located at the steep coast.

Location of the restaurant Steilkueste in Rerik

Restaurant location on the steep coast – Image source: Google maps

From their terrace, you have an amazing view at the Baltic Sea. This location alone would be a good starting point to make a fortune with a restaurant there.

Baltic Sea with the Reric pier at dawn

What a view! The Baltic Sea with the Reric pier at dawn

However, they are very small. Much smaller than they could be. To my best knowledge, they solely rely on world-of-mouth marketing and repeat customers like us. They don’t invest in advertising, except for the small signpost at the main street. Of course, they don’t have a website or an official social media presence.

Their interior is furnished in a simple, a bit old-fashioned style. This is not the modern retro-style. It is just unchanged for many years, authentic and cozy. You may even recognize a little bit of the almost forgotten “charme” of typical restaurants in the former GDR.

They do even more in order to not grow. They limit their opening hours:

In such a small seaside resort with a limited number of places to eat, a good restaurant could probably open from lunch to late at night every day – at least during the summer season. Here is what the “Steilküste”-team does: They open at lunch time for about two hours. Than they open again at 5:30 p.m. for dinner. They do not have a fixed closing hour. They just put out the “Closed”-sign when they have sold their last fish. This is normally before 7:30 p.m.! If you want to eat there, you should be there in time!

However, they do one thing that makes sure they stay in business: They serve the perfect fish dishes!

  • Only fresh fish caught by the local fishers.
  • Every meal is freshly prepared – no microwave ovens!
  • No fancy dishes, just fried or steamed fish with fried potatoes, mashed potatoes or steamed potatoes an some fresh salad

In addition, they are very authentic and create an atmosphere you either love or you stay away. The owner is the “head waiter”. He hands you the menu, which is almost unnecessary. As soon as there are some guests in the room, he will stand up and loudly tell everybody, what fish they have today – or, if it is around 7 p.m., what fish they still have today:

“For tonight we have several pieces of filleted cod and zander which you can have fried or steamed, two cods as a whole fish and I still have three portions of plaice.”

It didn’t take us long to get into conversation with the owner. I guess he would never call this a strategy. Nevertheless, he actually has a clear strategy. It is a simple one, but it’s probably better thought-out than some other business strategies. This is what we learned:

  • The “Steilküste” is a very small family business. They are team of four (two in the kitchen and two for service), three of them are family members.
  • The business is highly seasonal. The main season is in summer from July to September.
  • The business is large enough to make a living for these four people year-round.
  • They could hire additional staff for the summer months, but they don’t feel very comfortable with that. They want somebody who really fits their team and their way of doing business. They would like this person to return to them year after year. Such people are hard to find.
  • They are not willing to compromise their quality – no microwaves. (They are right here: The quality of their food is their biggest asset.)
  • Their only seasonal waiter has left some years ago for personal reasons. After that, they carefully thought about their situation. In the result, they decided to limit their opening hours and the number of tables they serve to a level they all feel comfortable with on an ongoing basis.
  • They carefully monitor their sales levels. As the owner said, they are still on a level on which they can sustain their business for the future.

I was fairly impressed with these considerations. I had discovered a business that had found its optimum level of operations and had decided to stay there.

To be honest, I did not ask if they make enough money to set something aside for replacements and unforeseen events. Neither did I ask if they make sure to grow at least in sync with inflation.

Provided they do so, they are living proof that not growing can be a viable strategy:

  • In the case of the “Steilküste” restaurant, market conditions support a strategy of not growing. There is a stable and predictable market. Demand exceeds their capacity (at least in high season). The number of competitors is fairly stable and is unlikely to undergo significant changes.
  • They minimize costs of wasted food since they only buy as much fish as they can reasonably sell the same evening and stay open until the fish is sold out.
  • They don’t have to spend money on marketing and advertising.
  • They operate on a level they all feel comfortable with. Hence, they probably don’t have to worry about motivation and employee retention.
  • In case that some external event requires them to increase their sales, they can do so without much investment. They can extend their opening hours and buy more fish to serve customers later in the evening. They even have an additional – currently unused – guest room which they can reopen quickly. It should be possible to hire some seasonal and part-time staff, even if those don’t really fit their preferred culture.
in front of the Steilkueste restaurant in Rerik

Our daughter in front of the Steilkueste restaurant

My lesson from this story is the following:

Don’t follow the preachers of growth blindly. Growth is important and businesses should at least keep up with inflation. However, there are situations in which not growing can sustain your business for a very long time. You just have to check very carefully if this is really the case for your business. In addition, you have to constantly monitor your business figures and your market conditions. It would be dangerous to miss an external change that would require you to return to the growth path.