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7 Restaurant Business Predictions for 2011

As we bring in the new year, we are going to take on a risk of predicting what the near future has in store for the restaurant business. While we want to be right in our analysis, we hope that some of these predictions don’t come true as they mean it will be harder for a restaurant owner to make money and to keep the money they make in their restaurant business.

Restaurant Business Prediction #1: Daily Deals

With the success of the Groupon business model, more and more entrepreneurs jump on board and start their own versions of “daily deals”. Unfortunately for Groupon, they don’t have a “secret sauce” to help them defend their turf from the onslaught of this new competition. (However, their market is far from being saturated). Fortunately for a restaurant owner like you, there will be even more Groupon-like marketing options available to you.

Whichever “daily deal” or “group coupon” company you decide to work with, remember that they are in the business of making a profit for themselves, not for you. (The same is true about newspapers, TV, Yellow Pages, and any other advertising media). It is your number one job to make sure your restaurant business turns a profit.

To make a Groupon campaign work for you, be organized and prepared. Here are some quick tips:

* Have enough food and staff to serve any increase in business
* Don’t go with it unless you can at least break even on every check (because if you’re losing money, you can’t make it up on volume; any repeat business is the gravy)
* Train your staff to handle the “moochers” just like your best customers (to minimize the risk of getting bad reviews on Yelp, UrbanSpoon and other review sites)
* Train them how to do upsells and how to collect customer contact information table-side (to have a chance to follow up with them and invite them back)
* Get first-time guests on your email newsletter
* Enroll them in your VIP Club or Birthday Club
* Have a follow up / bounce back campaign thought out and in place to bring the new guests back in

More information on how to work with Groupon and other “daily deals” companies is available here.

Restaurant Business Prediction #2: Local Search and Geo Targeting

The Big 3 search engines (Google, Yahoo, Bing) keep coming up with new and better ways to deliver geo-targeted results. Local small businesses (especially those in the hospitality and foodservice industry) are where it’s at when it comes to providing a better user experience to an online user.

A few years ago, the Internet was thought of as a “global information super-highway” that allowed someone in England to check on the status of their shipment from China to a client in Canada. While this is still true, the Internet has changed into an everyday tool to help a local mom decide which cafe she’s will stop at when she takes Little Johnny to his soccer game or which movie she’ll go to on a Tuesday night with her girlfriends.

Independent restaurant owners are generally slow to embrace marketing technology. Many still don’t even have a website. And now just having a website for a restaurant business is no longer enough: It has to be optimized for local search. Get on this now before everyone else and their dog is on there. Early adopters will make the most money.

Restaurant Business Prediction #3: Mobile Marketing

The new waive of Internet users no longer use a computer to go online. They can — and do — go online from their cell phone. They call them now “smart phones” and even that is a bit of a misnomer: It’s anything but a phone. Chances are, your smart phone has more smarts than your 3-year old computer.

What does this all mean to a restaurant business? It means that if you were late to hop on the train called “website” and “email marketing”, then the new train called “mobile marketing” is going to choo-choo away from you even faster. Build a mobile version of your site and do that now. Google has been reported on some occasions to NOT show “traditional” sites in their mobile search at all, so the sooner you get there the more you will benefit.

And as you are collecting your patron’s emails and mailing addresses, it’s time to start collecting their cell phone numbers too.

Restaurant Business Prediction #4: Inflation and Higher Food Cost

The currency is being created out of thin air by The Fed and all the other central banks around the world at an unprecedented speed. As more currency (not to be mistaken with “money”) enters the circulation and starts chasing the limited supply of goods, the inflation kicks in. Where the inflation will be the most visible is the price of gas, utilities, and the food cost.

I’ve met restaurant owners who purchased their business several years ago and “inherited” everything — staff, menu, decor, pricing, clientele — from the previous owner. They are not ready for these fast-pace chances in their business costs. As the inflation get bigger and faster, food cost management will become a matter of survival and not just a “best practice”. Be ready to tweak recipes, portions, and menus much more often than you have in the past.

Restaurant Business Prediction #5: More Regulation

The governments of all levels are broker than broke. Incessant hand-outs, giveaways, and bailouts require more currency coming in in the form of taxes. While the federal government can ask The Fed to print more dollars, local or municipal governments don’t have that option. Their response is going to be more regulation, strict enforcement of bylaws, permits and licenses, more bureaucracy, and the complete abandonment of reason in their dealings with local businesses. A story comes to mind of a businesses owner who answered the door to find there two IRS inspectors serving him a notice to pay $0.04 in back taxes plus $200 in fines. Brace yourself up for more insanity.

Restaurant Business Prediction #6: Brand Management

Yelp, TripAdvisor and a multitude of other review sites have the power to both put your on the map and to destroy your business. Your restaurant’s brand management is likely to become your headache or at least a priority in the coming year. If you’ve taken the time to build a VIP Club and turn your guests into raving fans, they will become the army to defend you from blackmail campaigns by an unscrupulous vendor or competitor. Also, if you thought mess ups in your dining room were costing you a lot, now they can cost you the entire business.

Restaurant Business Prediction #7: Social Media

Love it or hate it, social media is here and it’s here to stay. Facebook is already responsible for one click out of every four in the US and they are growing bigger. The “ugly duckling” Twitter may not appear very elegant but it has produced solid marketing results for a number of businesses. Foursquare is consistently growing its user base in many metropolitan areas. And lest we forget YouTube that gets a comparable amount of traffic to that of the big almighty Google.

While many early attempts to use Social Media in restaurant marketing were primarily experimental and didn’t produce any long-term results, these tools are now going mainstream and we are likely to see a number of reliable and repeatable marketing tactics to emerge. Become a friendly and smart user of social media and you will increase your trips to the bank.

Don’t Be A Restaurant Owner

Restaurant Owner vs Strategic Business OwnerSteve in Florida is writing…

Hello, I am based in Miami and have been following the <type of concept> that seems prevalent in CA and almost non-existent here in South FL. I am a business person who is seeking to open such an establishment … I do not have experience in the food industry but would be “passionate” about starting this kind of concept here in FL. With this said, would you happen to have any advice in starting things up (other than the usual stuff such as money, etc.)… I’m looking for investors yet but more importantly… looking for some “wisdom” from veterans of the biz who have been in the “trenches”.

Thanks,

Steve

Okay, Steve. Congratulations on having a dream that is big and a passion for the restaurant business that is contagious.

As for the restaurant business “wisdom” piece, here’s a little something I want you to take to heart. (And it applies equally to those who are just starting out and to those who have been running a restaurant for decades.)

Here it is:

Don’t be a restaurant owner.

Be a Strategic Business Owner.

I could — and one day I will — write an entire book on this subject. Until then, here’s the “skinny” for you, the 9 traits that make your restaurant success more probable (those in the right column):

Restaurant Owner Strategic Business Owner
Tactical Strategic
Spends most of the time working “in” the business Spends most of the time working “on” the business
Assumes better food and service will cause customers to beat a path to his door Has a marketing plan in place and creates special reasons for customers to come back
Thinks “everyone” needs his food and “everybody” should want it Has a clear picture of “ideal customer” and knows exactly what these people want and don’t want
Considers the equipment in the kitchen, the furniture in the dining room, and the building the restaurant is in the biggest assets his restaurant has Knows that the customer list is his business’ biggest asset, is a freak about adding more customers to it all the time, and follows up with them relentlessly
Can’t see any other way to make more profits in his restaurant other than sell more food His mind is open to creative ways of adding more value-added goods and services that customers happily and eagerly buy
Is focused on building a “transactional” income Is focused on building a “relationship” income
Tries to win in the marketing game all by himself Is always on a lookout for profitable joint venture opportunities with other local businesses
Owns a job Owns a real business

Some of these may appear cryptic. Many may seem to fly in the face of the “restaurant marketing” common sense.

So they are and so they do.

We’ll expand on these in our future newsletters. Until then, print out this list and post it in a place where you’ll see it often. The more you read these, the more sense they will make to you. And the better you understand them, the greater your chances will be of creating a successful and profitable restaurant business.

Grand Opening? Soft Opening?

grandopening

Lori, a reader from Florida, says she’s opening a restaurant (congratulations!) and asks this:

“What is the best to open this restaurant? Grand opening or soft? Have heard arguments for both…”

Well, let’s see…

The arguments for either one are missing the point. It’s not one versus the other.

Doing just the soft opening is silly. It like saying, “Well, let’s see if this whole restaurant thing is for me. If enough people find out about me, I guess we’ll keep on cooking.” You quit before you’d started. And when you did start, you did it with a severe handicap to your competition.

On the other hand, starting out with a bang and succeeding in attracting a lot of people fast could be as bad. Your kitchen may implode on the very first night. The logistics get intricate and the sparks fly when you have 50 four-tops sitting there for 2 hours waiting for their plates to come out. Ugly.

The correct answer is, you need a soft opening followed by a grand opening 3 or 4 weeks later. The soft opening gives you a chance to work out all the logistical kinks, train the staff, tweak the menu, and really understand who you want to attract as a customer. This way you are in a position to hit a home run on the night of the grand opening.

That’s why soft opening first, then grand.

Also, the idea that there can only be one Grand Opening for a restaurant ever is totally, utterly, absolutely false. You can — and should — have as many grand openings as you want and need. Once it gets too repetitive, you can call them “special events”.

And this is when the calendar becomes your biggest friend.

Which is what we cover in depth in the Instant VIP Clubs course.

Restaurant Marketing Formula

Restaurant marketing is simple. Not easy — just simple.

Yet it may not always seem that way. Flipping through the pages of an industry magazine or listening to some “guru” talk about all the things you need to do every day — on top all the other stuff you’re already doing — can be frustrating.

There is no end to marketing and business management approaches, tricks, and techniques. The worst part is that oftentimes the new trick you learn will conflict with another one that has been working for you just fine. And when that happens, the big question is, where do you start? And most importantly, what actions will give you the biggest bang for the buck?

The answer to these questions is easy to find if you know the Restaurant Marketing Formula:

F + R + M = $$

Anything you do or will ever do to generate more profits in your restaurant business can be described by this simple formula.

F is your first-time guests.

R is your repeat or returning guests.

M is your profit margin.

That’s all there is to it:

F + R + M = $$

Let’s now look at each element in the formula in greater detail.

F: First-Time Guests

Many marketing books and seminars will get you focused on the “F” in the formula. Buying Yellow Pages ads, doing Val-Pack coupons or Internet marketing — all these methods address the “F” in The Formula. While it’s important to keep doing things that help the “F,” this is the hardest point to improve and typically the most expensive one to deal with.

You may make very little profit — or no profit at all — off your first-time guests. And that is okay, as long as you’ve got the other parts of The Formula right.

If you’ve been in business for a little while, chances are you’re getting enough first-time guests coming through your door to build a sustainable business.

R: Returning Guests

These are the people who dine at your restaurant regularly. Getting your existing customers to come more often is a lot easier and far more profitable than trying to find new guests. If you are like most restaurant owners, you have yet to realize the full potential of the R in The Formula. Creating a VIP Club, a membership program or a newsletter are great ways to dramatically improve the “R.”

Here’s the big issue with the “F” and the “R” in The Formula: Before you work on them, you need to get the basic business economics of your restaurant right. Otherwise, increasing the “F” and the “R” will only suck out your profits faster. If you’re losing money on every check, you just can’t “make it up in volume.”

M: Profit Margin

In the restaurant business, profit margins are thin and fragile. Any unwise marketing or business decision can completely wipe out your profits. A small shift in your staffing or food costs can significantly impact the amount of money you make from every check.

“M” is always the right place to start. You need to measure and manage the profit margin of your restaurant business, and you need to do that consistently and regularly.

Here at RestaurantCommando.com, we will provide a lot of tips, ideas, and tools to help you improve your restaurant’s bottom line. We’ll review this formula many times, and show you how to apply it to your business to create more bottom-line restaurant profits.