The post 20 Most Common Restaurant Marketing Mistakes appeared first on .]]>
Lacking a brand promise, brand personality, brand positioning and brand story weakens a restaurant. People like narratives, not corporations – and good marketing and PR tells a brand’s story. Personality makes a brand much more personal, and a story gives a marketing campaign, PR materials and the entire restaurant a starting point to build around.
With a strong story, everything created contributes to the same message, providing customers with a unified face they can become acquainted with. Creating formalized brand standards helps humanize and personalize a restaurant and make it more relatable for guests. A brand promise is important for establishing a pact with visitors that you will provide consistent service and food. All are essential elements of any marketing campaign.
Advertising should be based on a structured plan rather than on which sales reps did the best job. Develop a long-term plan with a set of comprehensive goals, then set a budget to plan the first campaign. Objectives should be realistic and measurable with clear standards and deadlines. Rather than setting a vague goal, such as “increasing brand awareness,” set quantified performance indicators such as “gaining 1,000 new Twitter followers each quarter.” Be sure to also track the impact that each marketing effort has on goals and profits.
What are the components of the campaign going to be? What are the goals the campaign is set to accomplish? When will the next campaign start? Are there seasons or holidays to structure marketing around? How much of the budget is going to PR and how much to traditional marketing? What social media networks are going to be used, and who is going to monitor those accounts? How often will posts be published on each? Each of these questions needs to be carefully considered and planned if you want to find success with marketing.
Another of the most common restaurant marketing mistakes is not being engaged in digital or social media marketing because it is intimidating or “too new.” The world is now online, and digital marketing and social media have become a vital part of any successful PR campaign. Most guests are on multiple social media websites, and they tend to form relationships with brands that also use these platforms.
A good rule of thumb for restaurants is to spend 40 percent of the total marketing budget on digital marketing and social media to establish those connections. Restaurants who aren’t doing this are ignoring a huge chance to increase profits and expand their customer base. As with other types of marketing, make sure to set a plan with short and long-term goals for your digital strategy. Read up on best practices, new developments and be sure to talk with a few experts.
Restaurants often think of PR as being overly vain or egotistical, but the reality is just the opposite. A media relations campaign, when done well, is subtle and almost invisible. Many consumers say they view traditional advertising as purely promotional, and PR as more trustworthy, since media relations focuses on cultivating articles about a restaurant, instead of creating self-promoting ads. Public relations is also more effective at engaging a restaurant’s audience on social media networks and other websites.
Being written or talked about by someone else not only makes an establishment stand out in the best way, it also helps boost staff moral and makes the team proud of where they work. Look for PR professionals who trained as journalists, as storytelling is one of the most important skills for good public relations. Most importantly, look for a PR company that specializes in restaurants.
While media relations seems like a relatively easy task, and many restaurant owners try to save money by running their own campaigns. At best, these efforts don’t take off, but at worst they can lead to a brand meltdown, like with Amy’s Baking Company, when owners Amy and Samy Bouzaglo took to their Facebook account and to create reactionary posts that were less than edifying.
When a restaurant receives a bad review or bad press, there is a professional way to deal with the crisis, and restaurant owners are more likely to lash out in frustration than an independent agency. A PR firm promotes your story, not your monetary goals, and has the skills and connections to help you receive positive press.
Most restaurants do not have a crisis communications plan in place, which could be disastrous if, say, nine guests who all had fish at a restaurant last night call today with severe food poisoning. Or if customer leaves a restaurant drunk and kills someone in an accident. Or a fight breaks out and someone is injured outside of the restaurant. Or even if natural disaster cripples the community.
It is vital to have a crisis communications plan in place for these moments, should they arrive, because silence from a restaurant can be catastrophic. PR and legal counsel should help compile a list of possible crises, and a list of who to call whenever such a situation arises. Natural disasters should be covered in the plan, from how to close and secure the premises to which charity undertakings a restaurant would like to participate in should a hurricane or flood occur. Hoping for the best but planning for the worst is never a bad strategy, particularly when stressful situations like these can become defining moments for a restaurant.
Many restaurants treat their websites as an afterthought. Deficient websites certainly hurt business, with 33 percent of customers visiting an eatery’s website before choosing a restaurant to visit for the first time. Company websites are becoming more and more important, and is now just as important as the menu when it comes to marketing. And, like the menu, restaurateurs should have complete control over the website. Guests realize this, and will judge a brand on the quality and effort you put into the site. This isn’t an area to cut corners to save money.
Make sure to invest in a good website design agency that has previous experience with restaurants. Have them create a virtual pressroom on the site and make everything about the site compatible with mobile devices. Desktop and mobile designs differ quite a bit, in part because of the screen size, but also because of how guests use each platform. People have different motives when searching on their home computer than when they’re on their phone. If they are at home, they are most likely doing research, while those using their phones are looking for a place where they can eat immediately. Mobile users need easy access to menus and directions above other information, so make sure to treat the platforms individually.
Often restaurants have not actively or sufficiently brainstormed methodology to drive word-of-mouth marketing and don’t use techniques beyond solid execution of operational basics. This goes back to PR, which focuses on word-of-mouth endorsement over self-promotion. There are many tools today to support word-of-mouth marketing, including social media sites like Twitter, Facebook, Instagram and Pinterest.
A great media relations campaign really helps – some PR campaigns even incorporate the occasional publicity stunt, which is great for generating chatter. Not actively brainstorming ways to drive publicity or setting a long-term plan for keeping the chatter going is a good way to guarantee the word-of-mouth will die out. A restaurant has to become something worth talking about.
Everything about a brand should tell the story, and successful restaurant narratives revolve around food. This extends further than many people realize and includes elements like using food colors on your menus and around your restaurant. It should be obvious looking at marketing materials and décor that they belong to a restaurant.
For instance, using bright orange stars or stripes in your campaign doesn’t say food, but swirling lines that are reminiscent of the shape of food, earthy tones and other organic colors do. Make sure to think about the purpose and story when making any decision about your restaurant, and use colors that make people hungry.
If programs to build a customer database are absent or lacking, then restaurants don’t know who their customers are. Marketing and PR both center on audience, and it is impossible to target an unknown audience. Once the target audience is defined, create a customer base. Unlike e-commerce businesses, restaurants get to see customers face to face – a definite advantage. This is a great opportunity to get to know the audience by talking to them or conducting surveys.
Use comment cards, verbal surveys or email campaigns to gather information and feedback from at least 10 percent of the consumers who visit the restaurant, start a loyalty card program and engage in follower outreach. Repeat visitors are particularly open to connecting, so consider focusing some efforts on the email list. Ask guests how they would prefer to be communicated with, and engage them instead of simply talking to them to help gather useful data. Figure out the best way to reach the target audience, then commit to staying connected.
Many restaurants view discounts as a great way to drive sales and attract new customers, but this idea couldn’t be more incorrect. Discounts can seriously deteriorate a brand and the way guests perceive the restaurant. Offering a discount gives visitors the impression that the food isn’t worth its normal price. When it comes to restaurants, discounts don’t even work in the short term.
A restaurant should strive to be known as a venue that serves delicious food, not the business with the best coupons. Guests who select a restaurant because of a discount are looking for a bargain, not quality. They’ll also start to believe that the food is typically overpriced. Save the the headache and don’t discount.
Marketing is all about making a brand more relatable, and thus more attractive to guests. One excellent way to do this is by aligning the brand with causes, such as non-profits, that are involved with individual issues and the community. People who believe in those causes will automatically view a brand more positively, and it will become more relevant to that entire group.
This is one of the quickest ways to appeal to a huge customer base while racking up karma by paying it forward. Aligning or partnering with charitable organizations also helps make a brand more appealing to guests in general, as this is not seen as a profit-driven move. Give a little and enjoy the returns.
Overlooking relevant audience segments, like kids, dog owners, Millennials and special interest groups, prevents restaurants from reaching their full potential. Target marketing efforts to reach specific segments of the audience. For example, place a water bowl for dogs outside of the restaurant and create an album on the website of canine visitors to target dog owners. Or offer free WiFi to be seen as a place to study or hang out – a great idea if the restaurant is frequented by telecommuters and students. Even coffee houses that offer open-mic poetry nights and bars with live music target specific customers.
A marketing campaign gets much more powerful when it is specialized, and targeting these individual markets will serve much better than casting a wide net and hoping it captures multiple audience segments. Research customers, decide which groups to focus on and attract, determine which circles are popular in the community and figure out the best platforms and methods for reaching each individual sector.
Marketing and PR should be applied inside the restaurant as well as outside and on the Internet. Segmenting marketing efforts like this is referred to as zone merchandising, and is one of the main areas many restaurants neglect. The inside of each establishment should be split into zones, including the lobby, front counter, bar, dining room, bathroom, and so on. Each zone has different opportunities for merchandizing. For instance, decals, easel posters and e-comment instructions are perfect in the lobby, while register toppers and brochures are ideal for the front counter zone.
When selling merchandise or promoting a brand in-store, make sure to have clearly defined zones and you structure efforts around the strengths of each area. Consider what guests will be doing in each space. For instance, they will be waiting in the lobby, making it a good place for written material, but tablets with promotional videos are more effective in the bathroom since people can’t read a pamphlet while they wash their hands.
Restaurants without loyalty programs or establishments that have frequency-building programs that are lacking lose otherwise loyal customers. After convincing a guest to visit the restaurant, the job then changes to convincing them to keep coming back. There are plenty tools beyond fantastic food that can – and should – be used.
Ask a PR agency how to create a loyalty program that is efficient and unique. Create a program that offers guests a service and grabs their attention. Use loyalty campaigns to figure out what the current purchasing behaviors are at the restaurant, and employ this research as a tool to manage customer relations in the future. Most importantly, remember to thank guests for their patronage.
All business is cyclical – whether looking at the year, month, week, or time of day. And even within a day part, there will be a cyclical pattern. It is far more costly to lift the valleys than to extend the shoulder periods. Happy hour, or other promotional programs, that focus on extending the shoulder periods rather than evening out sales valleys are going to be more successful. One of the most common restaurant marketing mistakes we see is putting too much focus on these valleys.
There’s a reason people don’t eat from 4:00 – 6:00 PM (though snacking patterns are changing this slightly). Just as it wouldn’t make sense for a water park to try to get more kids swimming in the middle of winter (and it makes more sense to run promotions to maximize sales during the summer time, like selling ice cream), restaurants should focus on pushing sales peaks higher, rather than trying to draw guests in during natural down times.
There are many opportunities that would be mutually beneficial between businesses, and restaurants that don’t seek these out are missing great chances for profitable partnerships. For example, hosting a reading for a local bookstore and allowing the bookstore to sell books during the event or sponsoring a local little league team can be beneficial to your restaurant as well as the other entity.
The bookstore’s event is improved by having food available, and the little league team will endorse the restaurant heavily, meaning family members and friends of the players are likely to patron the business. In both of these instances, partnering with another organization means splitting the cost of advertising and reaching a larger audience together.
There are many opportunities to increase revenue in the restaurant business, and often they don’t cost restaurants very much to implement. Opportunities such as allowing private parties to rent the entire space during off-peak hours, expanding into catering, selling retail items like T-shirts and stickers in the lobby or off-premises all bring in a lot of revenue for very little additional investment. Look for areas to expand into without a significant amount of money, and figure out how to distinguish the brand in these markets.
Comment cards are certainly a useful business tool, but research is more comprehensive and reliable as a whole. When making decisions regarding employees, menu and other aspects of your restaurant, give research on market trends and successful practices greater consideration than comment cards.
For instance, if there are 15 comment cards on which customers said they didn’t like one of your main items, but that item is still one of your top three best-sellers, it doesn’t make sense to change the menu. Conversely, if there are 10 comment cards saying the sides were excellent but they consistently aren’t selling, it might be the time to come up with some different options. Customer feedback is important, but the bottom line will often speak louder than these words.
Spending money on mass media advertising rather than new channels makes marketing less effective. New social channels and uses for the Internet are emerging on a daily basis. Social media platforms have gained impressive sway with customers just in the past decade, with 72 percent of all Internet users around the globe active on social media. For Millennials, these numbers are even higher, peaking at 89 percent.
A further 71 percent of these users access social media accounts on mobile devices. In contrast, only 23 percent of the American population reads print newspapers. Newer Internet opportunities and other digital marketing methods, including SEO/SEM, mobile marketing, publicity programs, technology-driven training and viral marketing, should be the focus of marketing efforts. The bulk of the PR budget should be directed to these campaigns instead of typical mass media commercials and ads to remain competitive.
If you enjoyed these most common restaurant marketing mistakes, check out our 20 Most Common Restaurant Service Mistakes, 20 Most Common Restaurant Design Mistakes, and 20 Most Common Restaurant Menu Mistakes, too.
The post 20 Most Common Restaurant Marketing Mistakes appeared first on .]]>
The post 25 Scary Things Keeping Restaurant CEOs Awake at Night appeared first on .]]>
These are not paper dragons (nor are they doomsday fearmongering). These are just a few examples of the real bear traps, trip wires, land mines, and hungry tigers waiting in the woods for restaurant CEOs these days.
There isn’t a restaurant in America that will be unaffected by the upcoming increases to minimum wage and new overtime rulings. Some will benefit while others will suffer. Most remain unprepared for what’s coming and ill-equipped to adequately address operational changes or build the sophisticated labor models to even understand the impact, much less apply the industrial engineering and analytical and forecasting tools that will be required to remain competitive in the future. And it’s not just a U.S. challenge, around the world other similar pressures on labor costs and management will command the attention of the CEO (Brexit, nationalization programs like Saudi Arabia’s Nitaqat, etc.).
One fifth of the cost of food is derived from the price of oil. So, while food and packaging costs are down a bit now, we all know they’re headed back up again very soon; and with it so too will the costs and impact to the P&L that CEOs need to explain away on calls with analysts.
They represent one third of the American population and are now the single most important restaurant demographic. Twenty percent of them will switch brands they’re loyal to in a hot second in support of a company with a (better) purpose (beyond profits alone), and half of them are in seek of employment with businesses that put ethics first. Forty percent of this finicky demographic orders something different every time they go to a restaurant. They’re twice as likely as Boomers to eat organic and 80% of them want to know how and where their food is grown.
Three out of four of Millennials prefer to spend money on experiences rather than consumer goods, so those marketing departments focused on discounts and promotions have it all wrong. And for all those thinking we’re in a restaurant recession, consider that 87% of Millennials will splurge on a nice meal even when money is tight. So, needless to say, Boomers and Gen Xers in restaurant CEO roles are staying up a bit later at night considering Millennials may be more than just an over-used buzzword; it may be part of their salvation (if they get it right).
A low unemployment rate is a great thing if you’re a politician claiming responsibility. But if you’re a restaurant chain CEO or head of HR, you know it’s a serious factor in plotting new unit growth, labor costs, and serving the guest. As unemployment rates lower – a good thing on many levels – it also means a draining of the talent pool and in many markets all that’s left is a puddle.
No one is safe these days from Twitter-fast news cycles and risks that come with everyone carrying a camera device looking for something shocking to post. It used to be an upset patron would tell 10 people, now they may Tweet 10,000 while still sitting at the table; or upload a 6 second Vine to validate themselves while simultaneously wreaking havoc on your brand in a viral flash. The failures of restaurants make for easy ratings (so you can be sure anyone looking for ratings is eager to find a foothold in your brand).
And it’s not just camera-carrying critics, ratings-craving reporters, and activist bloggers; activist investors are also setting their sights on the restaurant industry. Even one of the most successful casual dining restaurant (CDR) chains in the industry (Darden) was put through the wringer by Starboard; forcing dramatic changes on the brand and business. McDonald’s, YUM, Buffalo Wild Wings, Panera, Chipotle, and others are also under fire from activist investors. Any CEO staring down this barrel would understandably need a tube of Tums.
After years of taking share from grocery stores, they’ve finally figured out new ways to claw lost customers back. And it’s working. There’s a monthly yo-yo pattern in 2016 between restaurants and grocery stores for share of the American food dollar. Fast casual operators continue to grow at a rate double to quadruple that of QSRs and FSRs have for years on end. Expect fast casual 2.0 to kick in booster rockets and continue this customer migration from the big guys of yesterday to the new national brands of tomorrow (like Tender Greens, fast casual pizza players, etc.). The Ready Meal Kit industry (companies like Blue Apron, Hello Fresh, etc.) has come out of nowhere and already has 1% of the U.S. food dollar; and they’re only just getting started. Now with sophisticated (think Silicon-Valley-smart) and well-funded new delivery players (billions raised in the last 12-months to fund food delivery companies globally) there will be tens of billions in commerce and transactions shifting from traditional options (of dine-in, take-away, and drive-thru) shifting to delivery; reshaping the industry. We will soon see a lot more empty restaurants and a lot more delivery vehicles (having impact on future location strategies, restaurant layouts and equipment plans, and labor models).
The only way a new restaurant can open in the U.S. these days is if another one closes. The U.S. restaurant industry grows at around the pace of inflation and population (in some less saturated and mature markets, it can grow at a faster pace if it is taking share from traditional grocery stores as the U.S. restaurant industry did for many decades to reach the 50/50 split we see today).
As the U.S. population and inflation rates remain very steady, the only way emerging brands and categories can grow at the double-digit rates we see in so many pockets today is if they take it from somewhere else (like casual dining restaurants and other concepts and culinary strategies out of sync with the rapid shifts in consumer dining behaviors and consumption trends).
Neuroscientists have now quantified that approximately 20% of the human brain is made up of what’s called “mirror neurons”. These are basically the copycat gene that – while helping us learn how to walk, eat, and stay alive as infants – is also still present in the adult brain and invariably means the less creative among us will copy the best examples of success they can find.
So, if you’re successful, you will have a limited window to capitalize on it before having your best ideas knocked off and replicated by quasi-competitors with chameleon-like abilities. And it’s not only an external threat, many restaurant companies have had their valuable intellectual property walk out the door with former employees and managers that don’t so much see it as stealing as taking a shortcut to success. The CEO has to worry with not only making sure the company I.P. is locked down, but also steer clear of the other crooks, charlatans, and other corporate risks to intellectual capital.
It’s not just your intellectual property and capital that’s at risk, it’s also your human capital. Today workers expect to be treated like paid volunteers; therefore, the CEO must consider more than just pay, perks, and promotions as a means of keeping top talent; they must now also factor in how to build a company “cause” (beyond a vision; a purpose) that will win the talent wars not just by what is put in their wallets but what is put in their hearts and minds in terms of work that has meaning.
If the board doesn’t pay enough, they won’t get the best CEO; and it trickles down the organizational chart from there. However, if they’re paid too much, the scrutiny and public outcry can also damage the company reputation and morale of the crew. QSR executives are often harshly criticized that the CEO can make as much as $26,000 (USD) per hour while the bulk of the company workers make minimum wage.
Not getting it right on supply chain logistics can cost a company a lot more than just higher food costs; it can also limit growth into new markets, weaken the competitive proposition, and in terms of brand relevance and reverence on behalf of the consumer. Nearly a quarter of all American’s are willing to pay more for local food and drinks and 41% say locally sourced ingredients influence their restaurant choices.
A survey of professional chefs polled about their views on top food trends in 2016 shows a clear pattern (found repeatedly across all sorts of similar studies) – the supply chain, sourcing, and offering both a sense of place and sense of season in the menu resonates powerfully with today’s consumer. This requires a multi-functional team (made up of both internal leaders and external experts), on a mandate from the CEO, within any restaurant chain to adequately address in the present and properly plan for the future.
While the consumer is certainly looking for more transparency (68% of consumers are familiar with the term “transparency” as it relates to a company’s business practices) with regard to where their food comes from, the ingredients, and corporate social responsibility, there is also another reason to wade through the complexities of a more modernized and responsible supply chain – the benefits of traceability.
Investments in traceability technologies and SOP can help a restaurant brand by: improving consumer trust, lowering liability costs, mitigating concerns related to the rise in counterfeit products and risks related to more food coming from countries with lower health and safety standards, being proactive against the increased threat of terrorism via the food supply, mitigating the economic loss from negative impact of recalls, and helping bolster the fragile consumer confidence and rising distrust of the food supply.
The Grocery Manufacturers Association in the U.S. estimated that the financial impact of a recall is over $10M in 52% of the cases and 23% exceed $30M. While restaurant CEOs trust their supply chain and food safety teams to get this right – which they almost always do – it only takes a small slip to bring down a big brand so this dot has to also remain on the radar for the CEO (also the same individual that will be called on to answer for any mishaps at any possible broken link within their supply chain).
It should be enough to terrify any restaurant CEO or restaurant industry investor to witness the $11.5 billion evisceration of market capitalization from Chipotle. While more on our minds now than a year ago, given their troubles, most companies still aren’t equipped to deal with the crisis communications fallout (and more important than that is avoiding the crisis in the first place).
There are 48.1 million Americans living in food-insecure households. Food loss from full-service restaurants in the United States accounts for 49.3 million pounds, and an additional 85.1 million pounds in loss from quick service restaurants. Re-purposing this waste would account for 2.8 pounds of food per each person living in a food-insecure house. With so many millions of Americans going to bed hungry every night and so many millions of pounds of food wasted, responsible restaurant CEOs have an obligation to give this fact a moment of their time and consider what role – if any – their company should play in bridging the divide.
In a recent survey of 1,400 chief executives of the globe’s largest companies 74% cited “geopolitical uncertainty” and 73% listed “exchange rate volatility” as big threats to business growth. As mature brands are increasingly pushed to look abroad for growth, the complexities of running an already complex business such as a restaurant chain are multiplied.
Add in other concerns with multi-national operations such as social instability, restlessness, large scale voluntary (and involuntary) migration, political upheaval, climate change-provoked food and water crises, economic volatility, regulatory changes, tax code changes, and uncertainty due to elections in all of the markets a restaurant chain may operate in now or plan to, it’s enough to keep not just the legal and accounting departments busy, it’s enough to have a CEO age before your very eyes.
As restaurant chains increasingly sprawl their systems out over the map, executives are more mobile and in the field in unfamiliar territories. While many of the large chains have risk management programs and training in place to teach mobile executives how to reduce their risk of being kidnapped or victims of violence, there remains a growing risk in important emerging restaurant markets that are attractive for growth.
In 2011, the Mexican government reported a more than 300% increase in kidnappings since 2005 (but many believe these figures to be seriously underestimated). The New York Times found that Al Qaeda and its affiliates pulled in well over $125 million in kidnapping for ransom from 2008 to 2013. Some consultants dealing directly with clients lacking kidnapping coverage for executives charge $3,000 per day, and that will need to be paid upfront well ahead of the actual ransom and extortion costs.
The federal tipped minimum wage has been $2.13 since 1991. To put this into perspective, there have been six increases in the non-tipped wage since. Tipped employees have a median wage (including tips) of $10.22, compared with $16.48 for all workers.
To help even the playing field between front of house (often tipped) and back of house (not tipped) employees, the “to tip or not to tip” debate has been snagging global headlines (see Aaron Allen interviewed on the subject here). Some even made claims that the “U.S. has banned tipping” (though it was just Danny Meyer’s 15 or so restaurants in New York who implemented a “hospitality included” policy). Joe’s Crab Shack implemented a no-tipping policy at 18 of its restaurants, and at 14 of the test locations sales dropped between 8 – 10%, or a loss of about $300,000 in revenue per store, or an equivalent of about $630,000 in total tips lost for its servers. In Q1 2016, Ignite Restaurant Group (Joe’s Crab Shack’s parent company) sales were down from $122.1 million (2015) to $117.9 million (2016). This decrease of $4.2 million, or 3.4%, is about the equivalent of the 8 – 10% loss seen by the 14 no-tipping test locations.
One easy way to know if you’ve made it is whether or not you’ve been sued. For any famous brand or successful business, it is almost a certainty you will be sued. That doesn’t mean that when it happens it will bring the CEO joy. What it likely means is months or years in meetings with lawyers dragging them through depositions, legal discovery (another way of saying legalized torture for business folks … basically it’s like having your fingernails pulled off but instead of with plyers it’s with intrusive questions and backroom bullying fierce lawyers billing out at $700+ per hour based largely on how uncomfortable they can make someone so they will settle to make it all stop), and ultimately the cost to board and business is ghastly.
The plans of the CEO can quickly be sidetracked by unexpected and costly litigation (if worrying that it might happen doesn’t keep the CEO awake, going through it almost certainly will).
Fifty-five percent of global consumers are willing to pay more for products and services provided by companies that are committed to positive social and environmental impact.
Along with the social pressures of being sustainable, restaurants will need to start paying attention to their supply chain and what kinds of items they are serving, and plan to serve in years ahead. Humans are creating the sixth great extinction of animals, and the extinction rate for species in the 20th century is up to 100 times higher than it would have been without man’s impact. As CEO, one must ask of the company, what’s our impact, position, and responsibility?
Of course, the cost of raw food ingredients will have a significant impact on restaurant profit margins. Climate change trends and droughts have been steadily increasing the prices of food since 2010 – with the price of beef increasing by 34%, attributed to droughts in California and Texas. Produce prices have increased an average of 5% in the last two years (again with the California drought being the main factor).
It’s not just domestic influences either, as international production patterns and subsequent demand increases affect prices worldwide. While commodity markets, naturely, aren’t in the control of restaurant executives, appropriate monitoring and, more importantly, forecasting of food prices is critical when planning menu items and promotions.
As little as just a decade ago, restaurant marketing was pretty straight forward. It came down to media buys, ad value equivalency, and demographic segmentation. Today, restaurant CEOs have to check in with their head of marketing to be sure the company is staying on top of not just digital, social, mobile, web, sophisticated new approaches to CRM and loyalty; they have to also be sure the company is anticipating what’s next (and already applying the new sciences of neuromarketing, sensory branding, and have things like their signature scent and olfactory logos in place).
They must also segment and appeal to their audiences based on psychographic classifications (it’s not how old they are, but how old they feel and act; it’s no longer about ad impressions as a measure of brand strength and awareness, it’s about relevance to how your brand is perceived and how your current and prospective customers and employees self-identify). People now buy brands based on how well it reflects on them and how they see themselves (otherwise it’s based on price and convenience which aren’t always the most profitable proposition for growth-minded companies). This may sound like a lot of nuance, but it’s far from it; it’s neuroscience and something else that must now be on the CEOs radar.
Data breaches have become more and more common in both the retail and restaurant industries. Following debit card information being stolen at more than 1,000 Wendy’s locations earlier this year, the company was served with a class-action lawsuit and its stock price took a significant hit (which it still hasn’t recovered from).
Technology is increasingly critical to running a successful restaurant. With 78% of customers preferring to pay with either a credit or debit card, and the fact that 87 percent of customers would not (or would not be very likely to) shop at a company that had faced a data breach involving credit or debit card information, failing to protect the company from cybersecurity threats is too big of a liability to let it slip the mind of the CEO.
Consumer spending makes up 70% of the U.S. economy, and some of the most volatile industries include airlines, restaurants, entertainment, and big-box retailers. After recent attacks in Paris and Brussels, even some of the most popular restaurants in the world were sitting near empty. Alain Ducasse’s restaurant at the Plaza Athénée hotel in Paris was serving only two tables during the lunch hour after the terrorism scares. And his restaurant has a coveted three Michelin star rating – so no one is immune to the affects. Restaurant CEOs also have to be on the lookout for deliberate attacks, as corporate sabotage isn’t out of the question. Many speculated that some of Chipotle’s recent food safety scares could have been planted by insiders from the GMO industry looking to make a statement.
Natural disasters – including floods, tornados, hurricanes, typhoons and blizzards – can all also blow earnings estimates and guidance out the window. Not only if the restaurant is shut down, but crippling after-effects that can compromise food safety, cause building code violations, and more.
About one fifth of consumers will go out of their way to eat at a restaurant which is socially responsible, and 45% of people will make the same choice if it is convenient. Corporate social responsibility (CSR) encompasses how a company treats all of its stakeholders – from customers to employees to the community.
As consumers are becoming more critical of transparent facades, they look for more concrete results. While McDonald’s, as a corporation, is very involved with multiple charities – principally its own Ronald McDonald House – and donates tens of millions of dollars each year, it still takes on a negative perception and gets more attention for its harmful impacts than positive contributions. Starbucks, on the other hand, has reaped the benefits of its many company initiatives to improve lives for its employees through healthcare benefits and education initiatives. CSR is not something that can be delegated by the CEO, it must be the CEO that sets the example and pace.
There are so many more considerations weighing on the mind of the modern restaurant CEO that it’s little wonder why compensation packages are climbing as high as $26,000 per hour. And it’s not just the global view of the business and market dynamics, it’s remembering that each brand, location, country and operating geography, franchisee, and employee within the system also carry their own concerns and issues that could be escalated to the CEO.
Couple with this media pressures, earnings calls, same store sales trends, new unit growth, profitability, productivity, big data, disruptive technologies and innovations, nutrition and menu labeling, forecasting and predictive analytics,…again, the list goes on and on.
It’s a tremendous responsibility. Any mere mortal would be terrified. But not only must the modern restaurant CEO contend with all of these concerns and more, they must also do it with grace, dignity, empathy for others, and while looking cool and collected from every angle. And, fit in quality time with the family and sleep too (those without great teams often suffer poor results and/or stare at their ceiling in bed as if watching a ticker tape scrolling marquee of things to worry about rolling by).
There’s a lot to think through these days and the stakes seem to get raised every 6 – 12 months as innovation cycles seem to shrink and accelerate the pace of change. That’s why when asked how they do it, any successful CEO will say they are surrounded by great people both inside and outside the company. Because one person – no matter how terrifically charismatic and talented – can make it all happen alone (even if, ultimately, they alone must answer for the results).
Aaron Allen and Associates is a leading global restaurant consultancy helping chain foodservice and hospitality executives understand new trends and market dynamics that can enable a future with higher productivity, profits, brand relevance, and to leapfrog the competition. For more information on our strategic planning services, facilitating an executive retreat, or to discuss other ways we can help your company solve its most complex challenges and achieve its most aspirational goals, let’s start a conversation.
The post 25 Scary Things Keeping Restaurant CEOs Awake at Night appeared first on .]]>
The post 20 Most Common Restaurant Menu Design Mistakes appeared first on .]]>
Re-engineering and designing menus is vital to this process. Think of the menu as a piece of real estate with, and restaurateurs are the landlords. Are all of the renters (menu items) paying their fair share? Here are some of the most common menu design mistakes we see.
Haphazard placement of profitable items decreases their value. Menu engineering is an important step in reaching profit potential, so consider each item from the perspective of its profit margin and popularity. The most popular and profitable items should rise to the top of a menu and should be obviously apparent to guests.
Often, these high-earning items fall into a similar category, like seafood or steak, making them easy to organize. Not highlighting the most profitable items means customers will be more likely to choose other dishes and missing out on potential profits.
The overuse of dollar signs makes appears too money-conscious, and makes it look like a restaurant is all about money over quality. Restaurateurs should do everything they can to communicate a tone of hospitality and welcoming, rather than business and profit.
For this reason, some restaurants incorporate prices into menu descriptions and list costs as numbers without dollar signs. Lining prices on one side or with dots leading to them directs the customers’ eyes over to the prices and encourages guests to scan for the least expensive items, rather than focusing on menu offerings themselves.
Rather than “Chinese menu” style of pricing, with the item on left with and “….$price” on the right, use columns and nested pricing instead. The placement and format of prices has a huge psychological impact on guests. If prices are separated and justified on the right side of the page, visitors view the menu as generic and read from right to left, starting with the most inexpensive items instead of the most interesting.
The best menus facilitate easy scanning of creative item names and expertly written descriptions, and guests should make decisions based on what sounds and looks the best, not the price. Try nesting the price into the description of an item, using the same size font, or placing two spaces between the end of the description and the price. This way, the cost is listed but not emphasized.
A menu should function as a tour guide of the best signature items and those with the highest gross margin – it can be so much more than just a list of simple dishes offered. It should highlight those dishes that have the highest gross margin, taking guests on a tour of the items and elements that make a restaurant stand out from its competitors.
To help accomplish this, make sure to merchandise a minimum of one – but no more than two – item(s) on each page or panel of the menu. Don’t overdo the merchandising, but guests will often appreciate guidance and order highlighted items on a well-merchandized menu.
QSR or fast casual operators that still use static boards rather than migrating to digital menu boards lose out, as digital menu boards can lead to a return on investment (ROI) 28 percent higher on average. These boards give fast casual restaurant operators a great opportunity to display food photography and highlight different dishes each day.
In 2010, Burger King implemented digital menu boards in their London and Birmingham locations. Within one year, they saw a 64 percent increase in sales at those locations. Static menu boards are not only less interactive, but they are difficult to update when implementing menu changes. The profits of switching to digital menu boards will more than outweigh the costs.
People often want decisions made for them, or at least made easier. If there are too many dishes on a menu, guests will have a hard time choosing and will be less likely to return. Cut less successful items out of the menu and prune selections so that only the most popular and profitable listings remain. On the flip side, having too few items will also decrease guest frequency. If there is only one item on a menu that a guest likes, they will pick a restaurant with more options.
Find the perfect line between serving everything you can make and challenging chefs to create more dishes. Develop a menu that is mostly made up of unique, signature items, leaving room for about one third of the total dishes to be experimental, creative and fresh.
Many restaurants haven’t put their menus on their website, or have menus that can’t be accessed from a mobile phone. Eighty percent of consumers say they think it is important to see a menu before settling on a restaurant, and 70 percent prefer to do this on a smartphone. Sixty-two percent of potential guests even go so far as to avoid restaurants that don’t have menus available online.
As the Internet becomes a stronger tool for restaurants, those that do not adapt will be left behind. Menus should be easily available online and should be formatted for mobile devices. This is a relatively inexpensive, simple task, but it is one that many restaurants have yet to accomplish.
Many physical menus are overly susceptible to food, grease and water stains, tears, and other common restaurant wear and tear. As with all things at a restaurant, the menu is a reflection of a brand and its values. If menus are worn and stained, the restaurant will appear to customers as old, dirty and cheap.
Restaurants should order menus that are durable, whether they are made from paper with a special matte finish or are laminated. Some establishments even go so far as to print their menus on wood or other unconventional, though brand-appropriate, materials, giving one of the most important pieces of restaurant collateral a unique aesthetic and increased durability.
Many restaurants fail to conduct a competitive and profitability analysis at least twice per year, even though the price of food fluctuates greatly each year. Such fluctuations are normal and ongoing, and if restaurants don’t increase their menu prices when cost of food rise, they often lose their profit margins. On the other hand, having widely fluctuating prices isn’t a good idea either, so consider swapping out menu items if the price of ingredients is rising too quickly.
In addition to evaluating menu pricing, evaluating and updating menu offerings should be done twice a year. If unpopular menu items are still on the menu, a restaurant won’t reach its full potential. Each item offered should be popular, and dishes that are rarely ordered should be replaced.
When looking for new menu items, look at the items already on the menu to see if there are ways new dishes can be created from those same ingredients. If brisket is the most popular item, for instance, offer a brisket salad or a brisket sandwich. Guests who already order the brisket are likely to try and like the new dishes.
Restaurants that build a menu based on what worked and was popular yesterday instead of what will be popular tomorrow are not relevant. Food prices, trends and tastes change regularly, and there are many indications of the trends that are gaining speed and going to take hold in the coming months. For instance, organic, ethical food has been gaining popularity in recent years, as have gluten-free options.
Make sure to update the menu and base it off of future trends instead of the ones that are already past their prime of popularity. For instance, a menu full of processed, hormone-raised foods will not do nearly as well as one that has healthy options and environmentally conscious ingredients, and even this trend is becoming dated. Guests are looking to restaurants to create what’s next, so keep current with industry publications and stay up with and ahead of the trends.
For a menu to reach its full potential, it has to be unique and efficient. Items that are comparable to competitors decreases its appeal, so avoid offering the same items as competitors or selling two items that are essentially the same. Don’t offer the same items as everyone else, and don’t sell two items that are essentially the same.
If both a BBQ brisket sandwich and plain brisket sandwich are on the menu, it’s portably safe to eliminate the plain option altogether, especially if it’s ordered less frequently. On the same token, if all of a restaurant’s competitors offer the same plate of spaghetti, customers will compare prices and choose the cheapest option. Create something new with no direct competition, and profit margins rise almost instantly.
Limited time offers, or LTOs, create an opportunity for restaurants to show that they are constantly updating and staying fresh. They also create an opportunity to offer something new for guests to try, attract new diners and keep loyal customers happy. Employees can also get more excited by LTOs, as they have something new to feature when communicating with customers. Regularly updating and developing the menu is a great way to carry a restaurant brand forward. This allows a company to grow and change instead of settling into a stagnant rut.
Specialty drinks are a great opportunity for restaurants to boost check average. Super-fruit drinks, smoothies and specialty flavored iced teas are opportunities for beverages for operations that don’t serve alcohol. Specialty drink menus make a restaurant relevant and attract customers back to your business more frequently. Make sure to include photos, as these are one of the most powerful tools in promoting menu items.
Printing and offering too many separate menus can be confusing and overwhelming to customers. Just because a separate list for dinner, dinner specials, desert, drinks and drink specials can be designed doesn’t mean they should. Design one menu with everything organized and consolidated in a logical manner that emphasizes the selections with the highest profit margin. An alternate drink menu can be appropriate if there is a large selection of alcoholic beverages, and a specials insert can be okay, too, if it suits the tone of the restaurant. But remember to keep things simple and uncomplicated, and make it easy for guests to see standout items.
Allowing staff to sell the menu before they have been adequately trained and tested leads to costly mistakes. A restaurant’s waitstaff can’t properly sell the menu and act the part of knowledgeable, welcoming servers without proper training. Have new servers and hosts sit down with a chef or a manager and taste the most popular dishes, sauces and any unique drinks when they are hired.
The team should study the menu regularly and take verbal tests to see if they are ready to sell popular, profitable items. Before starting to sell, they should know the menu inside and out, and be able to answer questions about how dishes are prepared, which are most popular, and common allergens or dietary restrictions about each item.
Not properly analyzing menu sales or underutilizing powerful back office tools and software to get a better understanding of the sales mix is a common mistake by many operators, both big and small. Reviewing and analyzing itemization reports regularly will lead to insights that might not be obvious at face value.
Take advantage of modern-day back office and analytical tools to review menu performance with metrics like sales per menu item, sales per category, monitor upsets and add-on popularity, and more to identify what areas of the menu are performing well, and – more importantly – figure out why certain items are selling more than others. This information will be valuable when the time comes for the next menu design and rollout.
Menu descriptions that are written by the chef, rather than by a professional copywriter with the assistance of the chef, are often confusing to guests. The primary goal of a menu is to maximize profits, and guests will get a lot more out of menu descriptions if they are written in a manner that sounds appetizing rather than simply technically correct. A chef is much more likely to write using industry jargon that other culinary professionals would understand, but visitors would not fully appreciate.
While the chef’s input is vital for having a menu that is correct, they should consult with copywriters instead of writing the menu themselves. Make sure item descriptions make customers hungry and read more like an explanation than a recipe.
Inefficient layout or overuse of add-on prices for menu item variations is frustrating and confusing. The menu layout should be logical, with the most profitable items emphasized and organized in a manner that makes the entire menu easy to scan and read. Item variations should either be the same price, or the price should be listed in a logical place. For instance, the price for substituting onion rings for fries should be listed at the top of the burger section. Sides should either be listed next to each section, or in one clearly outlined area near the bottom of the menu.
It’s best to minimize the prices for menu item variations, as customers often miss these and are surprised when the bill is higher than they expected. To balance, consider averaging the price of items that are similar. For instance, if a cup of soup costs a little bit more than a house salad and visitors commonly order both, average the two and charge the same price for each option.
Waiting too long to adjust prices (or adjusting them too quickly) to account for food cost fluctuations can lower profit margins. Monitor price fluctuations and slowly adjust the menu to account for inflation of a meal’s ingredients. Make sure adjustments are gradual and avoid adding a dollar or more to the price all at once. This is a great way to keep your margins and account for rising food costs without upsetting your customers.
Waiting too long to increase prices may lose customers when charges raise significantly all at once. On the flip side, failing to increase prices at all can cause margins to drop and noticeably lower profits. Avoid both situations by regularly analyzing the profitability of the menu.
Check out the 20 Most Common Restaurant Service Mistakes and 20 Most Common Restaurant Design Mistakes, too.
The post 20 Most Common Restaurant Menu Design Mistakes appeared first on .]]>
The post How to Diagnose a Restaurant Brand Identity Crisis appeared first on .]]>
Most companies know that a brand is not a “one and done” investment, rather an ever-evolving demonstration of present-day relevance; while at once honoring the history of the brand and simultaneously steering it safely through the changing tides to its imagined future state.
Branding used to just include the corporate identity, packaging, interior and exterior designs, and some reflections in training and company culture. But in this day in age, oftentimes the physical and digital representations of the brand are out of alignment, as there are more channels that brand communications need to be monitored than ever before.
We’re now living in a world where branding means having an olfactory logo (and not just a signature dish, but a signature scent) and all sorts of other new mandatory knowledge like sensory branding and neuromarketing.
So, how did you do? If your executive team answered “no” to several of the questions above, congratulations – you have successfully self-diagnosed a very common problem faced in the restaurant industry.
Along with all of the digital channel explosions, the evolution of consumer trends means that companies have to react on faster cycles just to keep up. Most restaurants would typically remodel every 5 – 7 years, drastically outpaced by the change in technologies we are now accustomed to.
With this constant acceleration of change, the more frequently brands need to be recalibrated or adjusted to keep from falling behind. Think of it as the equivalent of driving a steamroller versus an airplane – the faster moving plane is more difficult to manage and keep consistently on course, and that’s essentially what’s happening to restaurant companies all over the world. Some troubled chains realized too late that the pace of change outside the business was happening faster than change inside the business and it cost them buckets of cash and market share.
Even big brands going through identity crises and have cycled in and out of relevance over the years. Just look at the evolution of McDonald’s and Coca Cola, often considered some of the strongest brands in history. McDonald’s is fighting and finding its way back to relevance again today but they’ve been here many times before.
Increasingly, purpose-oriented companies have demonstrated that such a focus is good not only for their company and causes it supports, but also delivers tremendous value to shareholders. Of 50,000 brands studied, the 50 fastest-growing, in terms of value (referred to as the “Stengel Top 50”), were purpose-driven and purpose-oriented.
This is not just the flavor-of-the-day in brand strategy; Millennials are arguably the most important demographic to the restaurant industry, and they are more cause-conscious than any generation before them.
Other trends to take into consideration when evaluating the future for a brand include:
Running a company can be paralleled to running your own country. Using this analogy, what kind of government would be the closest representation of how you want your company to run? And what would be included in your company’s constitution – the set of fundamental principles, values, virtues, and vision that can guide all other decisions made within the organization?
If every executive in the company was sitting around a table and was asked to write down the story of the brand, would everyone’s answer come back the same?
We all generally agree that the best marketing is word of mouth. But that leaves us wondering – if the C-suite can’t communicate the story, how could it possibly be expected that the crew could? Some think the crew does not have to deliver on the branding, but these employees are some of the most important ambassadors of the brand. If employees at the unit- and line-level are tasked with delivering this story, but aren’t able to communicate the brand story in a concise, compelling, and consistent way, the impact of the brand is diluted at these customer touchpoints.
The natural inclination might be to think that these things are covered during training, or documented in company standard operating procedures (SOP). But consider this through the lens of the brand. Just delivering on the technical requirements of the job description – what we typically think of as SOP, the technical requirements, tasks, checklists, and basic guest service norms, does not sufficiently address the aspirational aims of the brand messaging nor reflect a true enculturation and internalization of the brand for company employees.
It’s a lot easier to diagnose drawing conclusions from obvious symptoms than it is to prescribe and carry through on an expensive and laborious treatment plan. It is okay to acknowledge a problem and short-comings (advised, in fact, if acted on) and you can also take comfort in knowing that almost all companies go through an identity crisis at some point (the successful ones, at least).
The harder part of all of this is: what do you do now? How do you fix it and get back on track, aligning the history and DNA of the brand with its future aims and aspirations? Oftentimes, this requires objective, external insights and guidance – helping to understand the trends, where the consumer is headed, ever-changing market dynamics, accurately predicting those factors and competitive forces – to help a company navigate through these changes.
After diagnosing whether or not your brand is having an identity crisis, here are some questions to prompt conversations to help resolve it and lay the foundation for a refreshed brand (also see: How to Refresh a Stale Restaurant Brand).
Aaron Allen & Associates is a leading global restaurant consultancy specializing in holistic and integrated brand strategy. As a part of our work we facilitate and lead rebranding initiatives for executive teams looking to honor their brand history while reimagining and strengthening its future. Click here more information on how we can further enrich and enable your brand.
The post How to Diagnose a Restaurant Brand Identity Crisis appeared first on .]]>
The post 20 Most Common Restaurant Design Mistakes appeared first on .]]>
Walking inside a restaurant is like walking into the belly of an advertisement. Everything communicates. Unlike typical ads, which often just engage one, two or three senses maximum, a restaurant touches all five of the human senses. This raises the stakes substantially on customer expectations and performance levels necessary to compete effectively today.
Guests should be greeted by a smile, not a messy, overcrowded host station. This area at a restaurant is not a locker for hosts or hostesses, but rather a space that allows the team to efficiently do their jobs. The station should be clean, orderly and only visibly contain those things that are absolutely necessary – a list of parties waiting, for example, a pen and a light if the restaurant has lower illumination. Mint tins, drinks, hair ties and knick-knacks should all be kept in the employee area in the back. People are more welcoming than items, so make sure the host is greeting customers, not clutter.
Inefficient floor plans, wait stations, bar setups and table configurations impede servers and customers. Consulting with an architect who has restaurant experience prior to building out the space is ideal. Even the perfect space for a restaurant can fall short if layout of tables and chairs is wrong. The most common problem: many configurations simply don’t provide enough seating capacity. Other arrangements place certain tables in areas where high amounts of traffic naturally converge. Both situations should be avoided. To ensure that each table is well-situated, managers should sit at each during service to observe which have too much noise, traffic or fall short in other ways. If the configuration is not optimized, guests and servers alike will suffer from the inefficiency.
Clunky, dirty, dusty or other decorations that don’t help tell the brand story actually detract from profits. The entire restaurant needs to be centered on the brand story and personality. As with anything, good planning helps with execution, so start by writing down the vision for the restaurant. From there, think about the decorations, lighting, fixtures and even the chairs and tables. Remember, everything placed inside a restaurant must support its story. Every item should contribute to communicating the brand promise, positioning and personality. Teddy bears on the shelves in the dining room of a luxury, white-tablecloth restaurant sends a mixed message. Get rid of irrelevant decorations and make sure to dust decorations regularly, as any sort of dust or grime detracts from the overall atmosphere.
Visible bus pans or overflowing trashcans detract from a guest’s restaurant experience. A restaurant’s primary function is providing good food for its visitors. Many people wouldn’t cook in a dirty kitchen at home, and they certainly don’t want to pay for food prepared in a restaurant’s dirty kitchen. If guests see overflowing trashcans, bus pans, clutter, dirty dishes piled in a sink or other unsightly areas, they are likely to feel less comfortable, and view the meal as less valulable. While managers and servers may become desensitized to these areas, guests are not. Make sure behind-the-scenes operations stay backstage and don’t encroach upon diners.
Doors to bathrooms that push in rather than out bother customers. When designing a restaurant, pay attention to the details. Most bathrooms are placed in an area where the door can open out just as easily as it can open in. Guests prefer the former option because they don’t have to touch the bathroom door handle when exiting. If a bathroom is in a place that necessitates the door opening in, however, place a trashcan right next to the door on the inside so visitors who didn’t want to touch the handle can discard the paper towels they used to open the door.
Acoustical issues, such as music or ambient noise that is too loud or too low, distract. Just like it’s important to finding the perfect number of servers, there is a fine line between too much noise and an uncomfortably silent dining room. Guests don’t like to feel as if they are in a library, but they also don’t necessarily want to experience a rock concert while eating dinner. There should be a comfortable amount of noise to facilitate normal conversation where no one feels the need to whisper or shout. Silence often seems sleepy, which applies to the restroom as well. Create ambient noise by playing music in the restaurant and in the bathroom. Also, make sure to use furniture like couches and drapes to dampen sound and reduce echoes.
Spending too much money on linens or cleaning services is inefficient, and linen-cleaning services are expensive and often unnecessary. Many restaurants make the mistake of thinking only white tablecloths are up-scale, but nice wooden tables can create a similar effect. Restaurants that employ linens to cover up bad tables end up spending more in the long run than if they had bought new tables. On the other hand, restaurants that use linens on good tables are wasting money. If linens are being used, try to find some that can be cleaned in-house, rather than through a service – it’s an easy way to save money.
Restaurants that neglect interior directional signage and zone merchandizing miss out on profits. Zone merchandizing consists of identifying the various zones, or marketing channels, used to communicate with guests throughout a restaurant, and using each area to plan in-house marketing. Some key sections, or zones, are TVs, tabletops, windows, bathrooms, greeter stations and more. Restaurants that use this marketing technique create an engaging, fresh atmosphere – a tone that is consistent with the business story and perspective. Interior directional signage also helps visitors make sense of a restaurant by enabling them to find the exits, restrooms and other important areas. Both types of information are important, as they help guests feel more comfortable and welcome.
Space is money, and an inefficient use of space, including storage, prep, service and POS stations, decreases a restaurant’s efficiency. Inefficient storage of food or a poorly planned organization in the kitchen slows down staff, thereby increasing the time it takes each guest to finish dinner and decreasing the number of customers that can be served in a given night. To illustrate the cost associated with every inch of a restaurant, think about the money and space that could be saved by consolidating several pieces of equipment and purchasing one appliance that serves multiple functions. When measuring performance, make sure to consider sales by square foot averages and think about how costs can be decreased by better utilizing the space.
There is a lot of work that goes into food preparation before ingredients even hit the counter. Restaurants that don’t have clear, efficient systems and controls in place tend to throw out a lot of food or, worse, serve bad dishes. Systems that ensure all deliveries are correct, including the quality and quantity of items received, and that food isn’t wasted because of improper storage should be in place. This should also check that employees aren’t skimming supplies. Establish checklists and clear chains of accountability. It is easier for these things to get missed if no one can be held accountable (people who place orders shouldn’t e in charge of receiving them), so ensure that there is one employee in charge who can’t pass the buck. If multiple employees oversee storage of ingredients, make sure there is a clearly defined chain of responsibility.
A guest’s experience at a restaurant starts long before the greeting from the host or hostess. Everything from the placement of signs, the paint on the outside of the building and the parking lot communicates and sets the initial tone for a restaurant brand. Here are some of the most common mistakes restaurants make with the exterior of their establishments.
Signage is more important than many people realize. Improper signage can cost a business as much as $1 million each year in potential revenues, so be the building owner allows the display of elements like blade and pole signs before committing to a lease. Restaurateurs should also ensure that city ordinances allow signs to be displayed, before ordering and installing those materials. One given the go-ahead, walking and driving by the restaurant, like guest would, to see what kind of marquees will work best for Once you have the go-ahead, drive and walk by your restaurant like guests would to see what kind of marquees will work best for your location. Blade signs that stick out into the road are a good idea for many establishments.
Restaurants often don’t make their concept clear from the exterior design and signage. When establishing a business, there should be a clear idea of the brand message, tone and promise. It’s best to lay this foundation well at the beginning of the process (though it can be corrected later on, it’s worth the investment to get it done right up front). Having a concept is important, but making that concept clear at a restaurant is even more so. Figure out the brand personality (if the brand was a person, how would it walk, act, talk, dress, and behave?), promise, position and story, and make each apparent to guests visiting the restaurant. The best solution, though, is to consider these four questions when designing your building’s exterior.
Location, location, location. Right of way issues that make it difficult to get to the restaurant during heavy traffic periods decrease business. It doesn’t matter how good a restaurant is if people can’t reach it, so make sure to pay close attention to the location of a potential restaurant prior to signing a lease. This means both considering what area the building is in and researching the traffic patterns surrounding it, and investigating street-side visibility. Guests should be able to see and reach a restaurant with ease.
It’s easy to overlook parking, but guests often get frustrated to the point of dining elsewhere if parking is impossible to find. If a lot has insufficient parking but there is room to add more, do so – and do it quickly. Mandatory valet parking to solve a lack-of-space is a poor solution, as many visitors would prefer to park slightly further away than to have to pay for a parking service. On the flip side, it is a good idea to offer an optional valet, if it is appropriate for the tone of a restaurant. The increased business from offering both options will more than make up for the expense of the valet.
While insufficient parking and packed lots is its own issue, having an empty parking lot can be just as much of a curse. People view empty parking spaces as a sign of an unpopular or bad restaurant and tend to stay away. Seeing cars in front of a restaurant is similar to reading good reviews online: people assume that busier establishments are better ones. One strategy that worked well for my father was having the staff park in front of the restaurant early in the day (when there were fewer customers), then move their cars further away into the back lot when business picked up. This way, there were always cars in the lot.
Restaurants without exterior menu boards, or old, tired, faded boards outside, look unsafe and uninteresting. A restaurant exterior, including any menu boards, reflects the concept and brand. If the outdoor menus are faded and falling apart, the restaurant will look similarly outdated and tired. As this can be one of the first impressions for many new customers passing a restaurant, it can have a negative impact on business. An exterior menu is like a free advertisement, so make sure to spend the time to make it attractive and keep it maintained. A board that is up to date and clean can bring as many as 20 new guests in each night.
Run-down, tired looking exteriors reflect poorly on an establishment. In many cases, it doesn’t matter how good the food is – if a restaurant looks unsafe or uncared for, most potential guests will pass by on their way to another option. While parking lots are expensive to re-pave, adding a blacktop is a simple way to give a lot a clean, updated aesthetic. Make sure outdoor lighting is brighter than indoor lighting in the evening so the restaurant is a beacon to hungry passers-by. Paint the building, clean windows every day, replace dead or flickering light bulbs as soon as they go out and make sure to care for plants and grass around the property regularly. Most restaurants don’t budget for this care, and thus can’t afford these measures when they are necessary. To avoid this, budget between 1% – 2% of total sales for on-going maintenance projects and up-keep.
Having trash and debris within restaurant property line looks untidy. Litter is incredibly unattractive, and while most guests understand that restaurant staff aren’t the ones who left trash in the lot, it still reflects poorly on the restaurant. Cleaning up the parking lot and exteriors several times a day is just as important as keeping the floors and counters inside a business clean. This is a simple task, but it can drastically increase the amount of new visitors. Placing a garbage can outside of each entry door allows visitors to throw away gum, coffee cups and other trash they may have with them when entering or leaving.
Unsightly service areas, like garbage and dirty equipment, that are visible to customers can ruin a meal. The outside of an establishment should be as clean as the interior. This means emptying and cleaning trashcans and dumpsters regularly, not leaving rubber mats out to dry on the patio while guests are still there and cleaning dirty equipment. If anything smells bad, clean it. The dirty-dumpster smell from unwashed trashcans can be horribly unpleasant. The only place a customer should encounter something as unsightly as a trashcan at your establishment is outside of the front door.
Restaurants that leave their lights out, neglect landscaping or allow their entrance to be cluttered send the wrong message. One of the worst mistakes restaurateurs can make is accidentally creating the appearance that their restaurant is closed, either permanently or for a short period of time, when it is not. Restaurants should be convenient, welcoming and easy to access to attract as many guests as possible. Landscaping that looks like no one has ever tended to it burnt out lights are universal signs that an establishment is either closed for repairs or has been shut down.
If you found these interesting, check out the 20 Most Common Restaurant Service Mistakes, too.
The post 20 Most Common Restaurant Design Mistakes appeared first on .]]>
The post 20 Most Common Restaurant Service Mistakes appeared first on .]]>
Staff who greet guests with “how many?” or “do you want to sit in the dining room or bar?” rather than a proper welcome. Restaurant employees should be warm, friendly and play the role of “host.” Hosts and hostesses are there to greet people and make them feel welcome, and while this may seem obvious, it isn’t a point that all restaurant greeters grasp. The host(ess) is the first team member that guests encounter when entering a restaurant, and thus are largely responsible for creating their first impression.
Studies indicate that 38 percent of a person’s first impression is established by tone of voice, and 93 percent of a person’s overall judgment of someone else is determined by non-verbal communication – so make sure hosts are standing up straight, smiling and personally greeting each guest. Hosts who seem bored or busy and act like customers are inconveniencing them can be enough to keep people away in the future.
I often respond “Uh, yes, I would like a haircut please.” to this question. “May I help you?” may be appropriate for customers in a department store who look lost, but it comes off as curt and rude at a restaurant. The vast majority of people who enter a restaurant are there to eat, and team members should greet them appropriately. Instead of “May I help you?”, host staff should try something more along the lines of “Welcome to our restaurant! How many people will be in your party?”
A host or hostess shouldn’t ask a solo diner “just one?” Instead, they should try “will you be dining alone today?” It isn’t safe to assume all single diners are sad to be eating alone. Hosts or hostesses often make this assumption and phrase questions accordingly, which can come off as offensive. For instance, many feel like the question, “Just one?” is judgmental, and implies that a party of one is lacking. Instead, have staff try something more positive and friendly.
Hosts or hostesses should also never sit single diners at the bar unless they expressly ask to be seated there. This can make solo-diners feel awkward and prevent them from returning.
Taking the diner’s drink away from the table to replenish it, rather that replacing it or refilling at the table derails the meal and conversation. Removing diners’ glasses from the table essentially halts their meal. Little details like this can distract and bother guests enough that they may qualify an otherwise good dining experience as mediocre. Waiters should also bring water as soon as possible once customers are seated, and should refrain from bringing other drinks before bringing water.
Saying “No problem” implies that the guests’ requests are inconvenient. Restaurant staff is there to provide a pleasant experience for visitors, and responses like “My pleasure!” are much more appropriate. Everything about the latter phrase implies a willingness to help and puts guests at ease for further inquiries. The change may be subtle, but it makes a huge difference to customers. Employees should use similarly elevated language whenever they interact with diners, and team members should focus on making each guest feel as comfortable and welcome as they do at home.
Even though restaurant employees wash their hands regularly while at work, customers don’t want someone else touching the upper half of their glass. The top portion is where they are going to put their mouths – this area shouldn’t be handled by anyone but them. Servers should only ever handle the bottom half of a guest’s glass or cup. Many servers aren’t aware that this is in poor taste, however, making this one of the most common (and avoidable) mistakes. Fingerprints near the rim of a glass can be enough for a customer to send the drink back. To help prevent this faux pas, managers should remind employees not to touch the top half of any drink they serve.
Hosts and hostesses often fail to pause long enough during initial greeting to make eye contact with each guest. Catching a guest’s eye when he or she enters a restaurant is, for many customers, the first human point of contact with a brand. Gestures as simple and personal as a host or hostess pausing to acknowledge a new visitor makes a world of difference. This signal alerts the guests that the host knows they have entered and are waiting for attention.
Many servers try to cut corners in ways that don’t actually save time, such as cutting out the few seconds it takes to make eye contact. This is a mistake, as it weakens the restaurant experience. A host or hostess should be able to establish a personal connection with each customer, and focus on making them feel appreciated and valued. Something as small as looking up can make the difference between guests waiting for their party to be called and deciding to leave to find a friendlier restaurant.
Servers often use overly-friendly and disrespectful names such as “dude,” “buddy” and “pal.” Eating in a restaurant is a business transaction, not a budding friendship – servers should be welcoming, polite and professional. While team members should make customers feel comfortable, they should not be inappropriately friendly or familiar. Using nicknames and overly casual terms for guests is rude and off-putting. Servers should also stand, or, if they are having a difficult time hearing, kneel, at the edge of the table. Sitting down with customers is another overly familiar, invasive gesture that will almost never be appreciated.
Failing to recommend a favorite or popular item detracts from a restaurant team’s professionalism. Suggestive selling is an important skill for waiters and waitresses. Seventy percent of the people who enter a restaurant don’t know what they are going to order ahead of time, and many guests are open to server suggestions. After all, the employees should be intimately familiar with the food at a restaurant. Most often, diners will have a rough idea of what they want and can ask for a server’s recommendation.
For example, they may ask whether the smoked salmon or the tri-tip is better. Staff should never respond with a bland “everything here is good.” If they don’t have a personal favorite, they should be able to respond with which item is most popular. This doesn’t just help direct the customer; it also validates the customers’ taste.
Servers are salespeople for a restaurant, and those who are unfamiliar with the cuisine they serve or express that they dislike a particular culinary style (i.e. “oh, well, I don’t eat seafood”) reflects poorly on the restaurant as a whole. While guests can get information about the food from the menu, they often look for a human opinion and expertise from their waiter. This makes sense, as the waiters should reasonably have experience with the food.
If a salesman who doesn’t like a product and is advertising this fact to patrons, there’s a problem. Similarly, if servers have never tried the food they are selling, they can’t properly sell it. Make sure servers have sampled menu items, regularly taste new dishes. Instruct wait staff to suggest items they do like or popular dishes, rather than pointing out menu items they don’t enjoy.
Visitors should smell the cuisine, not the waiter. Just as it wouldn’t make sense to put fragrant lilies at the center of a table, waiters should not be wearing half a bottle of obnoxious cologne when serving food. Taste and smell are both the perception of airborne chemicals and, as a result, are intricately intertwined when it comes to food. People use this relationship regularly, which is why they plug their noses when something tastes bad or pause to smell a glass of wine while dining. If a server is wearing strong cologne or perfume, it could literally affect how patrons taste the food at your restaurant.
Waiters who gossip or talk loudly about improper subjects within earshot of guests can ruin the atmosphere. The waiter-diner relationship is a business transaction. Guests pay to enjoy the food and the atmosphere, and waitstaff is there to serve patrons and represent a restaurant, not to socialize. If servers are speaking inappropriately, such as swearing near a table – especially one with children – or speaking so loudly that guests can’t enjoy their own conversations, guests will view it as a reflection on a restaurant rather than a reflection on individual servers. After a meal dominated by staff’s conversations, guests will be unlikely to return.
Disheveled appearance and bar stamps on servers’ hands from the night before all reflect poorly on a brand. A restaurant should be built around a story, and staff should reflect that brand. If staff is wearing sloppy clothing or their personal appearance speaks louder than their uniform, the impression they give is one guests will apply to the establishment. To help avoid such discrepancies, make sure to hire people that align with the desired message and brand image. Also, ensure that standards are up to par, including a well-designed uniform and a clearly defined and enforced dress code.
Servers who are ill-prepared when delivering food, such as forgetting to bring a steak knife with steak or a spoon with soup, seem sloppy. Staff should double check that every necessary condiment, piece of cutlery and dish is on their tray before delivering a plate. This means bringing enough appetizer plates, steak knives (if necessary), ketchup with fries and extra napkins with buffalo wings.
Forgetting something that is integral for eating or enjoying a meal can ruin the entire experience for guests. What are they supposed to do with a steak without a knife while they wait? The situation is made even worse when severs take a long time to bring the forgotten item. If a server does forget something, they should bring it as soon as they remember – definitely as soon as the customer inquires – and ask what can be done to fix the situation. Guests will usually require nothing or ask for less than you would initially offer. This gesture takes responsibility for the error and indicates a willingness to remedy the problem.
Servers sometimes make comments that embarrass or belittle a guest, such as “guess you didn’t like that one, huh?” when a guest doesn’t finish everything on their plate. This kind of criticism is annoying to many people, even if it comes from friends or family members. Naturally, people like these judgments even less when they come from strangers at a restaurant. Most guests don’t like to feel the need to justify their tastes to their waiter or waitress, and guests don’t appreciate being made to feel like a child who hasn’t cleaned the dinner plate. Instead of pointing out unfinished items, servers should try asking if everyone enjoyed their meal and focus on the positives of the experience. This is also a great time to ask if anyone would like a desert menu.
Not returning to a table within one minute after the entrée is delivered leave guests feeling abandoned. Guests usually discover a missing item – dipping sauce for fries, lemon for fish or extra napkins, perhaps – right at the start of the meal. If visitors have to wait longer than 60 seconds for the server to return, they will either eat the meal without the item and have a less enjoyable experience, or allow the food to grow cold while waiting for attention. Either situation is enough to deter customers from returning, so make sure staff checks on visitors within one minute of delivering each course.
Employees should be rewarded based on hard work and a job well-done, not just working at a restaurant for the longest period of time. Rewarding employees based solely on tenure provides very poor incentive for new employees to work hard. They will naturally infer that they will receive a reward after a certain amount of time, regardless of excellent service and a standout work ethic. Rewarding on merit helps keep restaurant staff fresh and working hard.
Too much or too little help can both be costly, and there is a fine line between having too few servers and too many. It is just as annoying to have three different servers ask if you needed anything as it is having to wait 30 minutes to see a server again. Either mistake can drastically affect guests’ dining experiences and can prevent them from returning if done poorly.
Failing to offer to refill beverages in a timely fashion can cut profits, especially when that second $11 glass of wine a customer would have ordered isn’t offered. Beverages, particularly if a guest is drinking alcohol, make up a large portion of a tab, and customers are likely to order two or three drinks if the server returns and offers another at the right moment. The best time for a waiter or waitress to ask is when there is one third of the drink left.
Not only are guests more inclined to accept since they are currently enjoying their drink, but it also spares the embarrassment of having to flag the server and ask for another. Waitstaff should make this a habit with any drink, including water, but particularly with more expensive alcoholic beverages like beer, wine and cocktails – these missed opportunities, in particular, usually cost $8 to $15 apiece.
Allowing guests to leave the restaurant without being properly thanked by the team member who greeted them or someone other than the tip recipient is a big mistake. Truly successful restaurants don’t just serve good food; they also provide fantastic hospitality. A guest is infinitely more likely to return to a restaurant if they felt welcome and appreciated. It is important to have an employee who wasn’t tipped by the customer thank them as they are leaving. The interaction is viewed more as a financial transaction when it comes from the waiter or waitress, since they are often thanking guests for the tip as much as for the visit. Make sure another staff member makes eye contact and gives a genuine smile and thank you to each visitor when they leave.
Is your restaurant having troubles with some of these same mistakes? We can help – click here to start a conversation.
The post 20 Most Common Restaurant Service Mistakes appeared first on .]]>
The post 7 Essential Labor Optimization Strategies appeared first on .]]>
The restaurant industry will be reshaped by several forces converging together over the next few years ranging from increases in labor costs, the new fast casual 2.0 model, delivery, technology, supply chain pressures, changing consumption and consumer dining behaviors, urbanization, and globalization (to name just a few).
Restaurants with low check averages, and those with a low sales-per-employee ratio will be hit the hardest in the industry. Teenagers and first-job seekers, and individuals with under-developed critical thinking skills will be impacted the most from the employee perspective.
Grocery stores and restaurant chains with advanced analytics systems and tools for performance measurement and performance management will be the least affected (and perhaps even benefitted) by the upcoming changes.
It’s clear that labor optimization will become critical to any restaurant open today seeking to still be alive in five years. It’s not that managing labor is any more or less important than it was in the past, it’s that the sophistication required to manage and optimize it going forward will prove far more challenging. As survival-of-the-fittest instincts kick in for the strong to evolve or die, they will look for every competitive edge they claw into their toolkit, including killing off the weaker of their kind that didn’t prepare or avail themselves with the best offensive and defensive strategies.
If this all sounds like one of those futuristic game shows where friends compete for their lives until only one or a few are left standing, that is, sadly, sort of the case. Globally, we will soon reach the point where there are so many more people desiring to eat in restaurants than there are people willing to work in them for the wages offered, that for both factors of costs to operators and changing demands of consumers there will be a seismic shift in restaurant economic models, and new tools and tactics will be devised and deployed in the battle for a share of consumer stomachs.
Most battles are won or lost before the first bullet is ever fired. Thinking through the following items will help to plan out a successful strategy for the next chapter in the share of stomach war.
The first step in any improvement initiative is to establish baselines and conduct a gap analysis of current performance to desired targets and comparable industry or internal benchmarks. Some questions to ask when beginning to set the baselines include:
Putting this into practice, say for a drive thru restaurant, one question would be what is the maximum number of vehicles that each restaurant can put through in an hour? If it’s a large system and some locations have double lines and multiple service windows but others do not, is this factored into the capacity analysis for each location, and then system wide? Or is it just averaged across the company (as this could make a difference in the performance evaluation for each location)?
Sound overwhelming? Don’t worry, most restaurant chains don’t currently have this data at their fingertips at the moment, either. However, as labor costs rise, operators will be pushed to build intensely robust analytical capabilities to be able to see real-time performance metrics for every position and station in every restaurant in their system. Yet, at present, most restaurants are still circulating weeks-old Excel files for manual data tabulation and analysis and backwards looking printed P&L statement, rather than finely tuned future-looking forecasts and predictive analytics tools.
After establishing maximum capacity and par levels, it’s time to conduct a gap analysis to see how station- and position-level data and performance stack up. Here are some methods to identify areas of opportunity for process improvements when looking to optimize labor:
It’s is true: most of the line-level staff in limited service restaurants will be replaced by robots. Kiosks and other self-ordering technologies have already begun to replace hourly employees (McDonald’s, Panera and Wendy’s have all implemented some self-order tech in at least some of their stores to mitigate and offset the effects of wage inflation).
Predictive analytics technologies that help forecast customer traffic and even popular menu items by analyzing and aggregating historical data – everything from previous order trends to the weather and traffic patterns – will enable restaurants to more accurately plan their labor schedules and optimize time on the clock.
One consistent theme across all categories and geographies will be the pursuit and desire to shift and off-load aspects of service – particularly to the guest using self-ordering in a manner that customers do not feel but off by, but rather attracted to and appreciative of. When seeking means of improving labor optimization, first identify opportunities for the reduction of repetitive tasks, then determine ways to eliminate or automate those tasks.
Ultimately, screen sizes will be chased down from digital boards, to kiosks, to tablets, to individual mobile devices, until screens themselves disappear and re-emerge in the form of artificial intelligence using predictive analytics to anticipate customer orders and preferences. All of these technologies are related to the guest, though equal – yet less obvious – efficiency enhancements and gains will come from other uses that will allow employees, franchisees and other key stakeholders to serve themselves on otherwise administratively burdensome activities and repetitive tasks.
For years there’s been discussion of the growth of “the cloud” and its role in the future. For restaurants, this goes far beyond just cloud-based POS systems. It will enable other on-demand self-serve and real-time tools and technologies. Managers invest time in penciling out an Excel spreadsheet schedule that’s inevitably scratched over as employees trade shifts – an administrative time-suck that plays out next to the manager’s office in restaurants all over the world with everyone thinking “there has to be an easier way.”
With new labor management modules and applications that have been created to address these problems, employees can now trade schedules electronically with an automated manager approval process with permissions and restrictions set as parameters providing control without being controlling.
This is only one example, and this theme can be applied across much broader applications, which could result in percentage points of reduction in inefficient use of time. This multiplied across a system with tens or hundreds of thousands of employees will tilt the balance of power in favor of early adopters.
There has probably never been a discussion on the subject of labor productivity that didn’t also address the critically important consideration of Associate Engagement; and we won’t break with that important tradition here.
As cliché as it may sound to anyone looking for clever new tricks for labor productivity improvements, any productivity initiative that doesn’t put winning the hearts and minds of employees at the top of the list of issues to address is doomed from the start.
Communicating (early and often) about the changes that will be upcoming for employees is a crucial step before implementing the productivity initiatives. In fact, Associate Engagement can even be improved during times of change if employees are provided with tools to provide their feedback to the changes being made, and their opinions are heard and taken into account.
Company culture is something that needs to be actively lived in an organization, not just a mission statement and mantra that rests in a dusty three ring binder on a shelf in the back office. Having this set of values, “norms,” and beliefs developed and truly integrated into the company is something many companies (mistakenly) believe is an unnecessary expense, rather than an investment that pays returns in the long term.
In addition to developing a company culture, having a clear progression plan for employees will create a sense of “gamification” among employees. Yes, that’s a real word that means applying the same premises of games (like scoring points, competition with others, and “winning”) to non-game activities. And who doesn’t want work to feel more like a game, so employees are motivated to keep besting their own (and their coworkers) scores?
When considering a career progression program, companies should consider what it takes for employees to get to the next level within the organization. Is it clear what needs to happen to get to the next position for every position that’s currently held? And are there quantifiable targets with unbiased scoring criteria and clear progress metrics that will make it feel like employees are playing a fun while working hard and get ahead within a company.
Management by objectives (MBO) is a philosophy developed in the 1950s. While it’s still taught in business schools and widely and generally understood, it’s rarely implemented (or at least implemented effectively). MBO enables the creation of a meritocracy within an organization, and the best contributors (regardless or seniority or position) are able to elevate themselves and, likewise, the business through meaningful and tangible contributions which are quantifiable in nature (as “do your best” objectives are as good as no goals at all).
While time-consuming and often requiring dedicated internal and external resources to administer and manage such a program effectively, companies that use an MBO system to set goals quarterly generate 31% greater returns from their performance process than those who set goals annually.
We’ve seen this program, implemented effectively, have a transformative effect on client operations. For instance, we adapted the MBO philosophy and approach, combining restaurant-specific performance metrics and operational understanding with modernized tools for tracking, measurement and reporting and were able to improve unit revenue growth in every case by 20% or more – in some cases doubling revenue growth out of existing locations while simultaneously improving on important productivity metrics (sales per employee, sales per labor hour, etc.) and profitability.
It’s more than just the “if you can’t measure it, you can’t manage it” mantra. It’s also the dramatic and positive impact on employee morale. By recognizing and lavishly rewarding top performers publicly and pointing to their demonstrable results, other middle-performers have an example of success to emulate and a kind of peer-to-peer coaching and self-policing sets in, whereby top performers and contributors coach and counsel underperformers to improve and, where need-be, champion their exiting of the company. Winners don’t want to work with losers.
Organizational design – or identifying elements of work flows or systems that provide opportunities for improvement – enables companies to focus efforts on maximizing both human processes and technological advances.
Companies should ask themselves if they would still structure their organizational chart the way it is now if they could do it all over again. Even universities have had to reshuffle their degree programs at an accelerating rate – as, for many, by the time a student graduates from a four-year program, half of what they have learned is outdated (or even obsoleted) by new technologies and discoveries.
Applying this methodology to restaurants (which have historically lagged behind the times in terms of adopting technological advancements) may lead to the realization that the organizational chart needs to be dramatically reworked.
If this sounds complicated or burdensome to think about, imagine if a caveman were transported to today. For him, even the most trivial and taken-for-granted, every day comforts and technologies we use would likely scare him back to his cave with shrills of horror. The pace of change is speeding up and we’re jumping generations of technology in shorter and shorter hop.
While operators aren’t caveman, five years from today they’ll look back with almost equal amazement for how dramatically decades-old processes and procedures were reshaped or replaced by the offspring of disruptive new technologies being born today. Naturally, for them, there would be no cave to run back to.
The post 7 Essential Labor Optimization Strategies appeared first on .]]>
The post How Much Does it Cost to Open a Restaurant? appeared first on .]]>
Delays in opening from complications with permitting, scheduling, hiring, improperly estimating lead times on equipment and delivery, sequencing of build-out and installation can all contribute to additional costs. And the burn-rate on cash (between rent, management, line-level employees, utilities, and the cost of capital) can quickly drain and deplete the budgets before the restaurant is even opened.
When planning to open, a restaurateur has to find, screen, hire, enroll/inform, manage, and maintain relationships with an army of help including a minimum of the following specialized disciplines:
The average restaurant could easily have 100+ different supplier companies and active accounts. For every one of the items in the list above, restaurateurs can be paying anywhere from $100 a month to $800 an hour. And that’s before all of the free accounts that need to be managed, like Twitter, Facebook, Instagram, Vine, Google+, TripAdvisor, Yelp! and whatever else is hot-button (not to mention the countless trade publication subscriptions to be keeping up with).
Naturally, costs and revenues vary by category, concept, cuisine, geography and the economies of the business and entrepreneur. Typical restaurant build-out costs range between $150 – $750 per square foot, depending on the quality of materials used, construction costs, and other factors. The total investment (excluding land and soft costs) usually ranges between $250,000 – $2.5 million, and the average size ranges between 1,200 – 10,000 square feet.
Here are some averages for major restaurant companies, and the distribution of their opening costs.
The average restaurant operates with sales per square foot of $513.70. The average cost to build of $404 per square foot includes just the build-out cost. Some of the other costs that often go underestimated (or in the worst cases, forgotten) include the following items (and hundreds more scattered across more than a dozen cost categories).
Typically, 30 – 40% of the total hard cost budget is allocated to furniture, fixtures and equipment (FF&E), with the rest of the budget being distributed among construction/leasehold improvements (40 – 60%) and contingency (10 – 15%). On average, 10 – 20% of the total FF&E costs is allocated to design and architecture fees.
As an example, a decent commercial chair is going to cost at least $80 (in most cases). In a luxury restaurant, it wouldn’t be unheard of to see those as high as $800. That multiplied out by a 100 seat restaurant adds up very quickly.
Printed menus can range from only about $5 each from the local print shop, to as much as $300 per menu with sturdy binding and intricate inlays. Assuming a 200-seat restaurant (a good rule of thumb is to order 1.5 times menus as there are seats), that could be close to $90,000 in menu printing costs (which will have to be replaced periodically, too).
This is one of the contributing factors as to why you don’t see a lot of fine dining restaurant chains – as those expenses are better suited for one-off restaurants and the celebrity-chef features in high-end markets. It’s also a reason why the trend of investment in restaurants is geared more toward fast casual concepts and those that have lower capital requirements and higher sales to investment ratios.
Sales to investment ratio is a key metric for investors when considering opening a restaurant. Here’s a quick overview of McDonald’s sales to investment performance over time.
To develop all of the recipes for testing, either a temporary kitchen or rented equipment will be required – how else could the menu be developed and properly tested, if not on the actual equipment set up? And while a chef won’t fail in the development of each new menu item as much as Thomas Edison did when inventing the light bulb, rest assured he won’t get it right on the first try. Money in inventory is necessary before selling any food just to get the menu perfected.
Restaurants are in cash-burn situation for months (or up to years, if not executed properly). Before a dollar can be collected in revenue, a considerable sum will be spent in capitalized operating expenses. Expect at least a few months’ worth of pre-opening rent, labor, and utilities. But this can also get tricky, as we’ve seen unexpected delays for operators that can push back openings by an extra four to six months, easily. That might not sound like much, but on a percentage basis for the pre-opening expenses budget, it can be an increase of as much as 300%.
Grand opening expenses would also fall in this category. While an opening can cost as little as a balloon and some ribbon out front to let customers know the restaurant is open, we’ve also helped support restaurants who had dedicated grand opening budgets of more than $100,000 (granted, most restaurants also don’t need $1 million in Venini glass separating the restrooms, either). Usually, for the first year of operation we recommend a marketing budget of 6% of anticipated sales. Of that budget, 30% is recommended to be allocated to pre-opening marketing.
Increasingly in the modern age, technology is being utilized in an enhanced capacity for not only marketing but also greater efficiency (i.e., replacement of labor), convenience, and increasing analytics and visibility into the business performance. Technology in restaurants can take on many forms, including:
For these items, cost is not driven solely by the hard cost of acquiring and installing these technologies, often – more substantially – it’s driven by the soft cost of skilled and experienced internal personnel or external experts who help properly define the business and technical requirements and guide and ensure proper implementation, execution, monitoring and reporting.
Just as the fryer does most of the work during the cooking process, there still needs to be someone there to push the buttons (meaning that, with almost everything going in, it’s driven by people, process and intellectual property – whether that is cheap, valuable, bought, or rented).
A business plan is all too often either an afterthought or conjures up the mental image of a clunky fill-in-the-blank form on the Internet or an antiquated piece of software that asks you questions like “What is your Vision?” or prompts about writing your Mission Statement (which are almost inevitably filled in with something generic and uninspired, along the lines of “to offer good food, good service, good atmosphere”).
Many operators gloss over it and skip to the financial tables in the appendix. But all of the items listed in this article, and the hundreds (if not thousands) more details that go into opening a restaurant will have a (hard or soft) cost that is often missed or skipped. These costs need to be considered in the business planning process before any heavy investments are made in other capital costs.
The biggest shortfall in the budgets often relate to the soft costs of development. Even some of the most experienced operators who have opened dozens or hundreds of restaurant locations are often at a loss for words when asked “How much does a new restaurant prototype cost to develop?”
By our estimate, no less than 10,000 man hours of development must go into creating a restaurant – whether that’s free labor from the entrepreneurs donating their time to the cause, inexpensive hourly labor who’s inexperienced in the development of prototypes, or highly experienced professionals who cost more upfront (but are more likely to get it done right the first time and save more on the back end). A lot goes into developing standards and specifications, and documenting those – a step that’s often skipped when in a hurry to get the place open.
Once restaurant turnover rates kick in (which is often a surprise for those outside of the industry, as the average turnover is 100% for most concepts, and for quick service restaurants (QSRs) can be as high as 300%), the intellectual property walks out the door with the employees. The documentation of standards, specifications, policies, procedures, and replicable training protocols was simply in their head and created organically, rather than formalized during the business development.
The development of training programs is rarely listed as a line item on a restaurant start-up budget (again, even for highly experienced operators). Training costs for start ups usually just include the cost of recruitment and the dollar amount of the hourly crew members who are being trained.
But there needs to be something the employees are being trained on. This means the standards, specifications, proprietary processes and intellectual property need to be developed by someone. While free to low-cost templates are available on the Internet as a way to save money, making the investment up front will yield higher returns on the back end. Most companies pinch pennies on the planning and often pay for it with a pound of flesh in run rate performance drag.
We’ve seen (in several instances) a restaurant become very successful after the first 3 – 4 months of opening be closed by month six. The reason being, due to underinvesting in pre-opening expenses and marketing, starting with slower-than-projected rates. As such, they begin to get behind on supplier bills and deplete their reserves.
Although they were successful and the once-empty restaurant was packed by month four, it was completely empty by month six and rented to someone else by month eight (who got all of the free equipment forfeited by the previous tenant who didn’t sharpen their pencils well enough in the development of their financial estimates, business plan and capital budgets).
We get it. If most restaurateurs and entrepreneurs knew what all was going to be involved before they made the leap, they wouldn’t do it in the first place. Some land in a lush flowerbed or splash into a crisp, cool ocean while others go splat on the rocks. But it’s not the action of jumping off the cliff; it has more to do with looking carefully and jumping off at the right spot at the right time.
Darden, the parent company of Seasons 52, reportedly invested $20 million into the prototype before the first location even opened. If restaurants cost $20 million before they open, few – if any – of them ever would. Darden, though, won’t invest in a concept unless they believe it has the potential to be a $1billion company. In that case, it makes sense to invest $20 million into a prototype that will be replicated hundreds, and bake the efficiencies in, rather than bleeding out all of that lost profit potential replicating a less-than-perfect model.
For most restaurants, if they spent what they needed to get everything right in the beginning, almost none of them would pursue opening a restaurant; but if more restaurants that did start had invested what they needed up front, fewer of them would have closed.
The business plan should be allocated as a percentage of the overall capital investment (including hard and soft costs) for the development of professional feasibility study, business plan and professional guidance as it relates to brand strategy, location strategy, understanding the market and competitive dynamics, study of the trading area, financial models, and more (including, in some cases, support with the development and presentation of investor proposals and pitches).
The best restaurants are like timing a soufflé to the crescendo of an orchestra. Yet most seem like the output of a plastic bag full of groceries and candies melted together in the microwave. If we haven’t talked you out of opening a restaurant, hopefully we’ve talked you in to taking your plans out of the microwave and putting them on simmer in a nice sauce pan.
The post How Much Does it Cost to Open a Restaurant? appeared first on .]]>
The post 25 Questions That Can Lower Your Food Costs appeared first on .]]>
In a similar way, many restaurant companies – and not just small shops, even well-established and successful multi-national restaurant chains – have pains with costs, consistency, profitability, and tattered or broken links all throughout their supply chain. In large systems, just a few ounces or minutes of waste in a preparation method can lead to tens of millions of dollars in lost profits when extrapolated across the company.
The following set of questions does not serve as a fire brigade for food cost reduction, but they will provide the clues and insights you and your team will need to find and put out the fires burning through your profits.
Do we know what our actual food cost is? Not vaguely, and not just with an “it’s too high” answer, but with precision requisite to assess actual versus theoretical cost variance analysis?
If our food cost is too high, do we have the right tools, paperwork, documentation, and reporting to diagnose why?
Are our recipe guidelines and product standards/specifications accurate and up-to-date? Are received products being audited for compliance with specifications?
Are we regularly updating theoretical food cost worksheets and have we checked them for accuracy in the last inventory and accounting cycle? Is this an automated or manual process?
Have we conducted a make/buy analysis in the context of recent increases to labor costs and product pricing?
It’s not always just about a cheaper product-price, because you must also factor in labor and other variables to get a true cost. Every operation is going to have its own nuances and unique set of circumstances. But, generally, just because beef is cheaper by the pound to have a whole cow dropped off at the backdoor of the kitchen doesn’t mean it’s better to buy a T-bone steak this way. A lot of variables need to be worked in to the math like yield, utilization, volume, staff competencies and capacities, equipment plans and kitchen layouts, and so much more.
Are we effectively looking at opportunity buys and developing LTOs & LSOs in a strategic fashion?
Are we analyzing/predicting commodity markets? Forecasting, hedging, and taking a position?
Are we evaluating our own purchasing against a commodity price index?
Have we recently looked for new supplier/product consolidation opportunities?
Do we have the right KPIs in place for purchasing, distribution, stock rotation, receiving, spoilage, waste, breakage, voids and returns? How do we perform relative to industry benchmarks and best practices for comparable concepts and companies?
Are we fully utilizing our point of sale (POS) system to maximum effect? Does the POS provide necessary reports, and are we evaluating these reports with the right frequency?
Have we enlisted our suppliers as true strategic partners (versus evaluating primarily on price and convenience)? Have we recently asked our top 3 (or 5) suppliers for support in product development, creating cooperative opportunities for improving cost, yield, utilization, and lowering landed cost and building a win-win partnership? How often do our top people meet with their top people (not just salesman to buyer)?
Are we consistent on compliance with regard to recipe preparation, production, plating and presentation?
Bonus systems driven primarily by bottom-line performance and managers measured with the primary focus of food cost reduction solely will often backfire. The incentives, while not out of alignment with the business, are at odds with a holistic approach, which is requisite for sustainably and responsibly reducing food costs.
As an example, if a manager’s performance is measured based on a target food cost of 30%, and in one week he has a food cost of 32%, then gets in trouble for that at the start of following week, often times he will over-adjust and food cost will come in at 28% for the week after that. While this may look good in a monthly P&L in that food costs all balanced out to the target, the reality is that in that second week, most of the customers got less cheese and pepperoni on their pizzas. And the loss of customers and attrition of the lifetime value of those customers bled out to competitors with more consistent food cost and product quality far out-weighs less significant cost variance that was due to mismanagement in the first place.
Have we evaluated our kitchen layouts and equipment plans to identify potential yield and efficiency gains? Is there new and more modern equipment that, while a capital investment, would improve efficiency and operating margin? Can we reduce CAPEX on new openings with a better configuration?
Have we conducted industrial engineering practices (time/motion studies, spaghetti diagrams, etc.) to determine station- and position-level production capacity and performance standards and metrics?
Have we conducted proper sensitivity analysis to calculate potential impact on food costs?
Are we conducting theoretical food cost versus actual food cost variance analysis? If so, do we know which areas and items are most significantly and consistently contributing to the variance?
Have we conducted capacity analysis for each work station, in the context of work loads, demand, peak capacity levels, and par levels of inventory and individual/station performance?
Do we have measures in place to quantify the skill and competencies required of back of house positions? Are we collecting information to analyze these skills and competencies in regard to waste, spoilage, breakage, returns or voids to identify operational concerns?
Is our menu properly aligned with existing and emerging consumer dining behaviors and trends that could impact purchase price, frequency, check average and product preferences
Menu items that provide a unique value and experience with additional components of labor and manufacturing already included in the purchased product inherently perform at a higher profitability level. Products with low value-add compete mainly on lower price, with margins that more closely resemble a commodity.
Have we completed a true competitive menu analysis to evaluate comparable pricing, portioning, variety/number of items, and brand differentiation in the last six months?
Have we conducted a menu mix, day part mix, and profit center mix analysis to identify potential opportunities in the last six months?
Are we taking inventory properly (if at all)? Are are we able to define stock levels, rotation, product velocity, and total inventory value in relatively real-time?
Do we have proper systems in place to prevent and control theft (i.e., understanding the chain of custody of product, cash handling procedures, receiving, requisitioning and reconciliation of product movement)?
Can any correlations/patterns be seen in data to help diagnose if a particular unit type, geography, season, preparation method, product, station, specification, or supplier is contributing to an increase/decrease in food cost?
The better the question, the better the answer. Organizations looking to reduce costs and improve profitability and productivity should have solid answers to the questions above.
Keep in mind also that “if you can’t measure it, you can’t manage it,” and while this focused solely on lowering food costs, you can’t save your way to success.
Short term cost savings efforts will not allow for growth and success in the long term, unless cost-savings decisions are informed through the lens of the guest. Sustainable success can be achieved when effectively managing costs while maintaining or enhancing the guest experience.
The post 25 Questions That Can Lower Your Food Costs appeared first on .]]>
The post Chipotle: A Love Story or Competitor Loathing? appeared first on .]]>
We anticipated a heart-tugging video from Chipotle this summer, but not quite this one. Surely, after the loss of nearly $12 billion in market capitalization from a series of food safety blunders, the anticipated video would be about taking responsibility for ones’ actions and taking measures to improve personally. Nope. It was instead centered on blasting competitors for doing exactly what Chipotle is doing with its newest message to the world.
At a time when Chipotle should be fixing its own failings and tending to the broken trust and loss of customers and shareholder value, they’ve cooked up a cartoon criticizing and condemning competitors, and then playfully packaged a rather dark message with a cheerful soundtrack and happy ending that at first blush seems as lovable as the characters are in the end. But what’s missing from this installment from Chipotle is a hero, and what’s hidden is a more sinister theme. Chipotle rattles sabers about the big guys, but in many ways it has itself become one.
The July 6, 2016 release of “A Love Story,” while certainly charming and entertaining on many levels, is another remarkably tone deaf – almost self-indulgent and “poor me” – messaging blunder put forth by Chipotle since it lost its footing less than a year ago. Chipotle has been tumbling down the mountain it climbed akin to a high-speed skier flailing down a steep snow covered slope – we all look on with shock and disbelief, empathetically pained by the disorienting bangs and whirls the skier is absorbing, knowing there’s little any of us can do but look on with our mouths ajar and hope everyone is okay once it’s over.
We’ve all seen the parade of headlines and know Chipotle is in crisis mode. The weight of it all sinks in a bit more though when combined.
In addition to accusations that Steve Ells stole intellectual property from Momofuku, and repeated food safety scandals (one after another for months), there’s the being sued for misleading investors over food safety, being sued for GMO claims, being sued over lavish executive compensation, being sued for sexual harassment and discrimination, the Better Burger trademark blunder, and meanwhile their CMO – one of the highest paid CMOs in all of corporate America – was ordering cocaine deliveries like the rest of us order pizza.
In just the last 24 hours they’ve put out a charming four minute cartoon chastising competitors (confusingly titled “A Love Story”), have been outed for using a proxy to pursue a better burger concept called TastyMade, and lost 3% of their stock value this morning with new rumors of making customers ill in Manhattan (a single Tweet was enough to do it).
With this, yet another critical commentary of Chipotle and its recent communications blunders, we don’t mean to condemn, rather to express deep concern for how the brand is being stewarded through this difficult time in the company’s history.
We’ve long admired the Chipotle brand, in particular the leadership of Steve Ells, and have advocated for them on many occasions. We’ve even likened Steve Ells to Henry Ford of the restaurant industry.
The Scarecrow was one of the best pieces of restaurant marketing that’s ever been produced, in our view. It worked on so many levels – not just the innovation. You could watch that just for the entertainment value, and also if you were an activist pushing for change in the food industry enjoy while taking away some of the deeper meaning that reflected the positive characteristics of the brand promise, the notion of “Food with Integrity,” and Chipotle’s role of pushing that agenda and its cause forward.
Chipotle has improved on the quality of the animation over previous iterations (with Back to the Start and The Scarecrow), but what’s different in a bad way is that there is no hero, no positive moral, and rather than using their well-honed skill at tugging heart-strings to get us to forgive their recent woes and failings, they hurl blame for what’s wrong with our food system at their competitors. Isn’t it the pot calling the kettle black to put out a months-in-the-making video that criticizes competitors for competing with each other in a video that criticizes your competitors?
In both of the previous animations, the story was centered on what Chipotle believes – and what we all believe – about the modern food system and how it could be better. The message was about something bigger than a company and the cold corporate pursuits of ever more productivity and profitability no matter the price. We all saw Chipotle in the hero of the previous stories and it endeared us ever more to the brand. We took Chipotle’s cause up as our own and cheerfully paid whatever price it needed to keep doing good and helping to change our global food system for the better.
In “A Love Story”, the message is about rivalry, jealousy, envy, raw and blind ambition, and nearly every frame for three minutes is filled with contemptuous counter-positioning of quick service restaurant (QSR) competitors (with some jabs at casual dining competitors sprinkled in). It’s painfully obvious which competitors are being called out: KFC, McDonald’s, Taco Bell (especially Taco Bell), and more. There are subtle references to pink slime and others using chipotle in new menu introductions (we get the ‘Spice it Up with New Spicy Orange…’ hints) and not so subtle references to QSR value menus, McDonald’s All Day Breakfast, Big Gulp, and even their QSR playgrounds. We also noticed the evil eye in the sky throughout the video (and wonder if the play on Apple’s 1984 commercial was as intentional as it is obvious throughout the video). Even Starbucks got worked in, it seems (the distinctively Starbucks-styled food cases around 2:11 behind the old QSR style food trays in that frame).
After the two characters have battled it out and wake up to realize they’ve built companies that horrify them, they are thrown out by evil pink slime sparkle dust snakes via a trash chute that looks to eat them alive and dump them in a dark, litter-filled alley. They brush themselves off and start something healthier and more honest.
This is what’s so confusing. Is Steve Ells perhaps considering resigning? Being thrown out of his own company? While that may sound far-fetched, some shareholders are calling for his head and it happened to Steve Jobs not too long after his 1984 commercial. Or is the implied meaning McDonald’s and Taco Bell should take away from this that they should resign, get together, and start a food truck business?
Chipotle is now far too large to play the “little guy” card. There are new up-and-coming fast casual 2.0 players that will win over fans much faster playing to the American desire to root for the underdog. So, does this mean that Steve Ells has woken up inside a company filled with unintended consequences and is now signaling a desire to start over with something small and new? Is this why the company appears to still be pursuing a new better burger concept even though it has tried repeatedly to downplay and dismiss questions about such a move while still in the throes of crisis that should be demanding full attention of executive leadership?
While the businesses grew throughout the video, so too did the investments in facilities and guest-facing operations (playgrounds, drive thrus, etc.). While we certainly don’t applaud use of antibiotics important to humans, artificial flavorings, and many of the other perversions of modern food production, we should recognize that these companies have been making positive steps in recent years to reduce the reliance of food additives and preservatives.
The others are trying. They’re certainly not moving fast enough, but the same could be said of Chipotle’s crisis communications and failed response to food safety breaches that resulted in customers bailing and billions of dollars in lost shareholder value.
Largely, the emphasis is that these competitors are doing everything they can with the menu, facilities, promotional efforts and so on, to steal customers back and forth from each other. Chipotle has done that for years on end. The first loss it ever posted was earlier this year (Q1 2016). They’ve got to steal customers back now, so they’re putting out a video condemning their competitors for competing with one another, to try to win back lost customers?
In a way, this is Chipotle getting a taste of its own medicine. The loss of customers in the animation that the characters fight to grab back is a feeling and concern that Chipotle executives have had to confront – quite painfully – starting in the fourth quarter of 2015 when sales dropped 30%. For all of its struggles and inherent flaws, not even McDonald’s lost that much.
When we showed Back to the Start and The Scarecrow to other foodservice industry leaders, they asked themselves what they could be doing better to contribute to the industry and our food system more meaningfully. Sure, there are plenty of copycat companies out there that have tried to mimic Chipotle – from variations of their Food with Integrity tagline (“yeah, yeah, let’s call ours Food with More Integrity”) to the blatant attempts to capitalize on Chipotle by putting chipotle in and on everything (Chipotle sued at least one of them for flattering them in this way).
We all viewed Chipotle as the Scarecrow – the caring character we all rooted for, believe in, and wanted to see win. Recent behaviors and messaging (saying one thing in public about the better burger concept but apparently doing something else privately) liken Chipotle more to the crow than that kind farmer family or that sensitive and sensible scarecrow we came to love.
This kind of messaging has the potential to further drive the rift between a public that wants to trust and a corporate America that seemingly gives them little reason to. Chipotle is less solving a problem than poking and provoking its competitors. The timing of such a move and message is baffling given the demands of fixing the brands’ own failings.
Chipotle has failed, painfully and publicly, and needs to focus on getting those things fixed rather than slinging derogatory and damning innuendo at the competitors that have picked up customers Chipotle has scared off.
Repeated failures of a food safety program for any restaurant is among the most egregious shortcomings and breaches of trust. Restaurant management bears ultimate responsibility for ensuring the safety of its patrons – that means through every link in its supply chain and every sequence of its SOP and with all of the believability of a company that has built its brand on the promise of trust and integrity.
They have, in some ways, failed on their integrity – but have certainly failed on the promise of keeping us all safe. And that certainly means guests and food safety, but also the safety of shareholders’ investments.
Chipotle has grown to a point where they have a very powerful platform to speak from. Others throughout the industry, not just in the United States but around the world, follow the brand and have looked to Chipotle as a champion for the belief that the food system could be better, and that it has become perverted over the decades in the pursuit of profits and productivity.
That’s really the notion of a brand: a promise around a shared set of beliefs that others are both attracted by and want to enroll in helping advance. But one of the concerns is that when the champion stumbles, and its first reaction is to criticize its competitors, rather than accept responsibility for its own actions and performance, it runs the risk that it can convert its followers from loyal and invested believers to skeptics, and can lose the hearts and minds of those who cared most.
It would have been possible to still maintain this not-marketing-but-really-marketing kind of marketing while also furthering and reinforcing the brand story more effectively. Yeah, a story about love seems safe enough. We concede; who doesn’t love a good love story? However, in this case, customers and shareholders would probably most love to know that it’s really safe to eat at Chipotle again; and that the company cares and loves food safety more than lampooning competitors.
Chipotle is starting to seem like the corporate giants it has railed against for so long. Our advice is to focus on advancing the food safety and supply systems not only within their company, but leading the industry responsibly, authentically, and with the kind of integrity the company wants to be known for.
The post Chipotle: A Love Story or Competitor Loathing? appeared first on .]]>