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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.

Key Numbers To Watch In Your Restaurant Business

restaurant-businessTo build and maintain a successful restaurant business, you need to constantly keep your thumb on its pulse and know how fast its heart is beating. You need to be checking the key numbers.

Obviously, your cash registers and your accounting system will provide you with some very important information. That’s the good news. The bad news is, knowing how you did last week or last month may not be a very good indicator of where your restaurant sales will be next week or next month.

Any type of financial data that you can get from the accounting system is known as “lagging” indicators. These indicators tell you what happened. They won’t tell you much about what is about to happen. However, they are still important.

Here are the most important numbers you need to monitor:

  • Weekly sales, total per week/day and also by the hour (you can then create a simple Excel chart and see weekly and daily peaks and valley and also be able to identify over-staffing & capacity issues)
  • Weekly profit (Many restaurant owners mistaken “gross” for “net” and assume that the more gross you have the more money you make. Well, as the song goes, “it ain’t necessarily so.”)
  • Weekly payroll
  • Product group contributions (the percentages of your total sales attributed to drinks, entrees, appetizers, and desserts)

If you manage your restaurant business by relying just on the lagging indicators, you could be looking for trouble. It’s akin to driving a car by looking in the rear mirror all the time.

If you want to have a way of predicting how your restaurant business is going to do in the near future, you need to implement and track a few “leading” indicators.

  • The total number of VIP Club members
  • The number of new VIP Club members added to the list over the last period
  • The number of Birthday Club members on the list
  • The number of catering sales calls made (if you do catering)

Some of the leading indicators are much harder to measure. They tend to be “soft” and qualitative, rather than “hard” and quantitative like the lagging indicators. After all, how do you measure the morale of your staff and how much they enjoy working at your restaurant? How can you confidently know that this week they were greeting guests more cheerfully than a week ago?

Well, these are certainly harder but not impossible to measure:

  • You can use comment cards and evaluation forms that customers fill out at the request of your staff.
  • You can hire a mystery shopping company or — better yet — turn you best customers into mystery shoppers.
  • You can talk to the staff regularly and fill out a simple form at the end of the day, and then tabulate the results weekly and monthly.

There you have it.

Now, let’s get to work and start keeping track of the important things in your business.

The list of indicators above is very short. However, if you implement just half of these indicators in your restaurant business and consistently track them, you will be in the top 5% of the most successful restaurants.

5 Key Principles Of Restaurant Marketing

1. Marketing has to pay for itself (it’s never an expense, it’s an investment)

restaurant-marketingThe whole idea of a “marketing budget” is wrong. Most restaurants define it as a percentage of their sales. Wrong, wrong, wrong!

If you had a reliable and proven way of investing $20 and getting back $30, how many of these $20 bills would you invest? I hope you answered, “All the $20 bills I could get my hands on. And also all the $20 bills I could borrow!”

Good! Then why would you cap your marketing at some — largely arbitrary — number?

A-ha! You probably do that because you are NOT sure if a $20 bill invested in your restaurant marketing can reliably and predictably bring you back $30 or $15 or any money at all.

And if that’s the case, you need to radically change the way you approach restaurant marketing. There is always a way to measure and know how much money each marketing campaign is generating for you.

2. If it ain’t broken, break it (to give a way to the new and better)

In many locales, we see restaurant chains move in and independents wane. And it is believed that this happens because the chains have more money in their corporate coffers and because they get better discounts from the distributors.

These are largely not true. On both counts (and I’ll leave this at that now and cover this topic in the future articles.)

However, the main reason chains are generally more successful than independent restaurant is because they always break what’s not broken. They constantly test new menu items, tweak their pricing, adjust their internal processes and marketing campaigns. And once they find something that works extremely well in one locale, they roll it out to all of the other stores.

Most independents we know abhor change. Aside from new paint on the walls every 5-7 years and the new menu covers every 3-5 years, most independent restaurants are frozen in time. Which brings us to the next point.

3. “The world doesn’t need another restaurant” (and it’s your job to prove them wrong!)

I first heard this phrase from Bill Marvin (a.k.a. The Restaurant Doctor). Maybe he’s the one who coined it, or maybe he’s heard from someone else, but this is the one that you need to make your mantra.

I have two very big questions for you:

  1. What makes your restaurant unique and special?
  2. Why should I, a customer, come to your restaurant versus all the other options I have (including doing nothing)?

If you can’t answer these questions well, the world certainly can do without YOUR restaurant. Think about it.

4. Restaurant business ain’t easy (however it can be simple if you follow the right formula)

Do you have an operations manual? If not, why not? How often do you and your staff refer to it?

For how long can you afford not to be AT your restaurant? Is that one day? A week? What about a month?

If your business depends on your being there all the time, you don’t have a business. That simple.  What you have is a job. And nobody wants to buy a job, especially yours.

5. The biggest asset in business is relationships (and it’s better than cash because it can be turned into cash over and over again)

You may be in love with the equipment you have in the kitchen. Or with the building you’re in. Or with all the furniture and fixtures that you have purchased and installed. Or maybe you love your recipe book and the beautiful menus that your graphics designer created for you.

This is all good. However, all that has very little to do with the real value of your business.

What you need to be in love with is your customers. You also need to be a freak about maintaining an up-to-date list with all their contact information as well as birthdays and other important dates in their lives.

It’s the new era in restaurant business, the era of Relationship Marketing. We have arrived. If you have been slow in getting on the bandwagon, you need to do that now.

Running Restaurants: Preparing for 2009

Congratulations!

restaurantThe fact that you are a reader of this site, puts you in the top 20% of restaurateurs who are not satisfied with the status quo and are constantly looking for new ways to offer greater value to customers, make better food, provide greater experience, and create a bigger legacy in their restaurant business.

We are proud to have you here with us. Thank you for coming back to Restaurant Commando for restaurant business and marketing advice.

Are we the only people in this business?

Of course not.

There are many great teachers out there that make it their mission in life to help more restaurants become successful.

There is no shortage of charlatans and magic-bean dealers either . And sometimes it isn’t easy to tell the latter from the former.

Running Restaurants is a resource we trust. Heck, we even contributed some of our content to them in the past! And it’s about time you discovered them too.

This week they have a special offer that is not to be missed. See it for yourself at  http://www.RunningRestaurants.com.

If you were wondering, we are not making a red cent recommending these guys. No kickbacks, no commissions, and no “under the table” deals.

The reason we are getting behind this offer is glaringly simple: We want to make sure that you, the restaurant owner or manager on a quest to more restaurant knowledge, can get your hands on some critical information. This new knowledge may make your 2009 a whole lot better than 2008 was (even if it was pretty good to begin with).

You’ll notice many additional bonuses for joining Running Restaurants within the next few days, some of them from us. Jaime, the guy behind the website, also confided to us on the phone that has more surprise goodies waiting for you on the other side.

If you’re reading this message after December 17, 2008, you’ve missed out on the uber-special deal and the bonuses. Lest that stop you. If you’re serious about creating more profits and more success in your restaurant, you need to take a close look at Running Restaurants.

Stupid Restaurant Marketing: Shift Happens

Unless you’ve spent the last year or so in a cave, you know there are some major economic changes underway that are making restaurant business — or almost any business for that matter — a lot harder. Shift happens, you know.

One way where this shift is apparent is TV. Did you notice how many infomercial-type ads have now replaced the old stupid commercials with dancing pop cans and talking dogs? And we are not even talking Shopping Channel or QVC anymore. This is “normal” TV, like CNN or Fox.

Apparently, very few restaurants are catching on. Here’s just one example that is oh-so-typical.

Last weekend, my son played in a hockey tournament in London, Ontario. The management of the sports complex hosting the tournament has figured out a way to generate some revenue by offering sponsoring opportunities to local businesses.

Great idea.

Bad execution. On the part of advertisers.

This is a picture of the banner for a local pizzeria.

Tony's Pizza

I bet Tony (or whoever owns that pizza business nowadays) spent a pretty penny to get that rink named after them and to put a beautiful banner up. Here’s the issue: I fail to see how they can even hope to get any restaurant marketing results this investment.

Let’s imagine I’m at the rink, I notice the banner and I decide to get a pizza. This is not an inconceivable thing to happen if I’m a parent who has just spent the last 3 hours after a long workday at a cold hockey rink watching a bunch of young Wayne Gretzkys skate around and try to get that puck with a little stick. Cooking is the last thing I’d want to do tonight and pizza would be a Godsend.

Well, there are at least several problems that I wouldn’t be able to overcome as a potential Tony’s customer:

  • Since there is no phone number mentioned on the banner, how am I to call them and place an order?
  • There is no indication of where this place is located either. An address would be very helpful, or better yet, a small map to tell me if that pizzeria is on my way home. None of that is present.
  • How about the business hours? Some hockey practices extend into a very late evening. I wouldn’t want to veer away far from my route and come to the place only to see the “Closed” sign on the door.
  • And, oh, wouldn’t it be nice to know about the delivery option? After all, what can be better than calling the pizza while your kid is changing up and pulling into your drive way just as your pizza has arrived?
  • And last (which should probably be first), why should I order from Tony and not some other national and heavily-advertised pizza brand whose jingle and the phone number are engraved on every kid’s brain? (Nope, sorry, being in business since 1961 — or even 438 B.C. is not it. Nor is the claim of being “famous”.)

If you spend any money on restaurant marketing, make sure you give this marketing a chance to pay you back in new and repeat business.

Restaurant owners like to complain about all the things that they have tried and that didn’t work. If you listen to that chorus, nothing ever works. Advertising doesn’t work. Rink sponsorships don’t work. Newspaper ads don’t, and radio doesn’t either, to say nothing of the Yellow Pages. This doesn’t work, that doesn’t work.

And almost invariably, when you take a closer look, you see a poorly executed ad that is a variation of Tony’s Pizza banner, committing all the same restaurant marketing mistakes.

I’m sure Tony (or his successors) are totally convinced by now that local sports sponsorships don’t work. Yet this problem is of their own making. Their business is going to suffer. They will probably withdraw their backing next season. And everyone is going to lose:

  1. Tony’s because they’ll have fewer customers.
  2. The rink because they will lose a sponsor.
  3. Parents who will have to cook now on a night when it’s the last thing they’d rather do.
  4. The kids who’d rather have a pizza.

It’s time to get serious about your restaurant marketing. Almost any advertising media can be made to work. Just like any advertising media can lose you a lot of money if used recklessly.

Review your restaurant advertising and put yourself into your customers’ shoes. Are you making it too hard for them to give you their money?

Recession-Proof Restaurant Marketing Plan (Musings On How To Drive Restaurant Sales When Food Is A Little Hard To Sell)

restaurant-ownerWhenever you talk to a restaurant owner these days, it’s almost invariably a story of how hard it is to be in the restaurant business. And after a while, it may seem like restaurateurs have been dealt the worst possible deal.

Yet I’m here to say (and this may offend some restaurant owners reading this) that us the foodservice folks had it relatively easy when it comes to restaurant marketing, in comparison to many other industries.

(Please read on before you get all pissy with me; I promise to give you something very profound today, a restaurant marketing approach nobody ever shared with you.)

Let’s do a little experiment. (You can do it in your head. Or you’re welcome to try it out in real life.)

Imagine: You’re at a party and someone is asking what you do. You have to scream the answer to be heard over the loud music. And as you open your mouth, the band suddenly stops playing and everybody gets to hear it as you yell out:

“I SELL IN-SU-RANCE!”

Whoops… You probably have never seen the room clear so fast.

A very similar reaction could be expected if you decided to pose as a used car salesperson, realtor, mortgage broker, or lawyer.

Now, what if your answer was, “I run a restaurant”?

People would react to this a lot more favorably. Some would actually approach you to introduce themselves and ask about the type of cuisine you offer, the hours of operation, and the location of your restaurant.

What does this all have to do with restaurant marketing?

See, many professionals had a very hard time selling their services even in a good economy. Your food has suddenly become harder to sell. Well, wouldn’t it make sense to:

Learn from the best who know how to sell what’s hard to sell!

If you observe the most successful insurance agents, used car salespeople, realtors, mortgage brokers and lawyers, you’ll notice that all of them do the following three things:

  1. They hustle to get new business;
  2. They invest in the relationships with their clients and prospects;
  3. They implement formal and deliberate referral systems.

New times require new approaches. And the biggest breakthroughs are going to come from “stealing” successful marketing methods from outside the restaurant business.

You could be saying now, “But most restaurants don’t do this type of marketing!”

Heck, yeah!

That’s the point.

Little Johnny, Restaurant Marketing, and Fed Bailout Package

Little Johnny, Restaurant Marketing, and Fed BailoutOur educational system does a poor job of preparing Little Johnny to become a successful restaurant owner.

Little Johnny gets a good mark every time he gives a memorized answer (the only possible “correct” answer) to the teacher’s question.

Little Johnny doesn’t get a good mark for asking the right question in the first place. The kind of question that may have more than one correct answer. Or the kind that cannot be answered today (but it’s essential that you keep asking it because if you do, the answer will one day find you — and that will be the day of a major breakthrough in your business).

Henry from Nova Scotia is asking,

“How am I going to compete in this economy?”

This is a very good question.

Because the question that most other restaurant owners are asking right now is, “How is my restaurant going to survive in this economy?”

And it is my utter hope that the question Henry is really asking is, “What can I do today to win in this economy?”

You see, much as a sports team that plays “not to lose” has absolutely no chance of winning, a restaurant that is just trying to survive is certain to go under.

You gotta play to win!

The restaurants that are going to win are the ones that demonstrate the following traits:

  • They work on the basics every day and, no matter how slightly, they consistently outdo their competition.
  • They treat their regular customers as kings and queens, create good reasons for them to come back, and have a process in place of turning first-time guests into regulars.
  • They have created several reliable and measurable ways of attracting new restaurant customers.

And since we’re talking economy here, it’s important to understand what this whole Fed Bailout deal really means to you as a restaurant owner.

Here’s the skinny:

There are issues in the economy that have not been created overnight and it’s going to take time to get them undone. Most likely, we are yet to see the worst of it. What the Bailout Package did was prevented the really bad things from happening to us really fast. It gave us more time to fix our businesses so as we could come out on top, no matter what the future holds for us.

Here’s what Napoleon Hill wrote in the 1930’s:

THE “depression” was a blessing in disguise. It reduced the whole world to a new starting point that gives every one a new opportunity.

And this could be your new opportunity.

Little Johnny asks straight questions that everyone else finds awkward or is afraid to ask. Maybe it’s time you did a Little Johnny on your restaurant business:

  • “How can this crisis be an opportunity for me and my restaurant business?”
  • “What can I do right now to insulate my restaurant business and customers from the competition?”
  • “How can I make my restaurant truly unique and special?”

See how this works?

Next time, I am going to explain why you don’t have to be 54 times better than the next restaurant to make 54 times the money they do.

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.