Restaurant Survival – Mom & Pop Restaurants, Heart of America – One Year Later!
Author’s Note – One of the most difficult things to do is to find fresh content for a blog. Many current topics are hashed over on every restaurant blog and become boring. The article below was written one year ago during the first week of October. As I re-read the words, the relevancy and impact is the same today as it was a year ago — before the chains starting closing thousands of locations.
If you are here and reading it again, congratulations! You survived what has been the most difficult year in the history of the restaurant world. Little did I know then that not only did we have to change, but the average restaurant customer was going through a metamorphosis that will last for the foreseeable future and maybe forever. If you are hanging on by a thread, the points made here may help. Reinvent ourselves is what we did to survive and more change will come as we move to please our re-modeled guests now and in the future.
There is no question this year will end with a record number of closed restaurants. Chains and independents alike are feeling the three pronged attack of escalating food costs, less consumer spending and predatory fuel costs. While it saddens me to see any business shut down, the mom and pop restaurants struggling to compete with the McDonalds, Burger Kings and KFC’s up and down the street hit a soft spot.
Small businesses are the heart and soul of America and small restaurants still outnumber the chains. They are the diners, the little breakfast nooks, the small town luncheonettes, the crab shacks along the coasts, the chicken and rib joints, and the neighborhood deli’s that dot the country. These restaurants are more than just a place to eat. They serve as the center of interaction between real people who gather for more than just a good meal. Politics, religion and good old gossip keep traditions and the very foundation of our society solid in these small but powerful centers of discussion. The smell of coffee, grease, apple pie and fresh baked bread mix with friendly greetings. They are disappearing. Doors are being padlocked and the stack of unpaid bills are stained with tears of sadness shared by communities across the country.
The survival of our fundamental American belief, that this is a land of opportunity, is at stake. Can the small restaurants survive this economic blow? I don’t have the answer, but I have two propositions.
First, the next time you opt for that quick $1.00 value meal as a loss leader to get you through the drive through, think! Can you spare another dollar or two for some home cooking and good old American spirit? Can you slow down long enough to sit down and enjoy other people as our past generations did? You might be part of the solution.
Second, to Mrs. Mom and Mr. Pop, restaurant owners, you have to rethink the way you do the mechanics of your business. You are going to have to do things you have never done before. Good food and great conversation isn’t enough anymore. The Starbucks, IHOPs, Subways and Dunkin Donuts up and down the streets of America have changed generations of people. The thing today is to conform and be trendy. Certainly not because of quality food, but from wooing the fast paced life style of Americans through constant advertising and stylish conformity. Small restaurant owner, you can change too.
So Mrs. Mom and Mr. Pop, here are my suggestions:
- You have to learn to communicate with your customers and prospective customers in more ways than just that friendly greeting at the door. You have to think about direct mail, email and flyers that get to your customer. Forget that ad in the local newspaper. It won’t be seen. The Internet, cable television and cell phone have become media choices of the next generation(s).
- You must experiment with new and fresh ideas that coincide with changing American taste buds. Our land is more of a melting pot of ethnicities than ever before. Be a little more receptive to new flavors, twists on old classics and spices you have never had on your racks.
- You have to become more of a business person than you want to be. That means you have to start negotiating prices, watching every penny of waste, pricing according to cost, turning your inventory, dealing with new suppliers, training staff better, learning that there is a story behind each day’s sales. Product mixes, percentage of labor to sales and cost controls can’t be out of the hip pocket anymore.
- Computers aren’t your nemesis. If you are intimidated, you have two choices. Learn to use them or hire a server, cook or helper that can assist you to find ways to inexpensively do tasks that have been labor intensive or non-existent such as marketing, tracking sales, cost comparisons, more frequent menu changes, accounting and automated functions.
- Get help from your customers. They don’t want to see your doors closed. Enlist their help. You might be surprised what a free slice of homemade peach pie might get you. The quickest way to new business is from old customers.
- Finally, put pride in the storeroom. Hiding your struggles from family, friends, staff and guests won’t work. When the business is on its last legs, it is too late. There is no advantage to keeping a secret that results in the embarrassment of failure.
Mrs. Mom and Mr. Pop, it is a different world today, whether we like it or not. You may think you can’t change, but creating, running and operating a restaurant indicates you can learn. The challenge of owning a restaurant was daunting when you started. You can do it. You know what hard work and personal satisfaction at the end of the day means. America needs you and our basic values hinge on small businesses that continue to beat the odds.
Larry Edger
Restaurant Owner, Author
Good Time to Open a Restaurant? Maybe, but the Basics Haven’t Changed!
A couple of friends and acquaintances aren’t going to be happy about this post. After a few cocktails, they explained their new concept they planned to open. The location is on a popular beach in south Florida. They are taking over a closed waterfront seafood restaurant that has a large footprint with about 250 seats. The facility is above average with plenty of parking.
The new restaurant this group is opening will be “unique” to the beach scene – a French restaurant with a lounge area on the waterfront featuring a tiki bar. The demographic considerations include a high percentage of tourist trade that is extremely cyclical. Local customers are residents that would consider this restaurant a dinner destination. The price points for the new restaurant would be higher with the elegant French menu planned.
Their reasoning for developing the restaurant is landlord’s willingness to re-open this facility with a reasonable lease and a favorable time for construction as contractors continue to look for work. The group sees these as opportunities they can’t duplicate as the economy improves.
After listening for the better part of an hour to these enthusiastic partners, they asked me for my opinion about their chances of success. First, I don’t like surprises and being lured into the conversation was unexpected. Second, I don’t like discussing serious business over a couple of beers that tend to exaggerate everyone’s emotions and shade the logical side of the mind. Third, it’s tough to be put on the spot without exact data at my finger tips.
Guys – here is your answer;
Your idea has some major flaws that need to be included in your planning. They are in addition to the difficulty of surviving the restaurant business in a normal economy – let alone a recession and changing consumer habits.
The major problems are:
- Location. The facility is large and will have a high fixed cost basis. Waterfront locations require extra maintenance, high per square foot cost and security issues.
- Location. Your biggest customer base are tourists. They come for casual fun in the sun. Few look for fancy French dining. Think about your own vacations. Do you look for fine dining when relaxing on a beach? If you do make a visit to a fine dining establishment, do you eat there several times? You are correct, there are no other French restaurants on the beach – there may be good reasons.
- Location. Locals (which are comparatively few in your immediate vicinity) may support your restaurant, but rich French cooking won’t be something they will eat two or three times a week. Remember Outback closed their beach location a couple of years ago which was predicted.
- Location. Mixing a Tiki Bar with French fine dining may seem like some “fusion” to you, but I can’t imagine tank top clad beach goers being comfortable with the smartly dressed evening diners and vice versa.
- Location. Your menu and customer service standards may be exceptional, but will local residents fight the seasonal choked traffic to get to your restaurant? I doubt it.
- Location. This restaurant facility has had multiple tenants in the last fifteen years. Most have been small seafood regional chains. None have made it even though they had menus and prices that were successful in other locations.
In my opinion, the only way your new restaurant can make it will be an extended, costly and continuing marketing plan that will need to be one of the most creative and aggressive of any restaurant in the area. Cash flow will be negative for months (other than season). Your pockets need to be deep and full.
I applaud this group’s entrepreneurial spirit, planning and the sense to reach out for outside opinions. However, the basics haven’t changed in this recession. You can dress a pig in colorful clothes, expensive make-up and a lot of perfume, but it’s still a pig.
Consumer Perception of Value Is a Moving Target in a Recession – Restaurants Learn Lesson (Part Two)
In Part One of this post we discussed the consumer and how they have changed during this recession. We also looked at the foreseeable future and concluded there is nothing on the immediate horizon that would indicate any changes in your restaurant guests’ spending habits. “Value” is what your customer is looking for in their dining experience.
Before the financial whirlwind that unraveled the economy in 2008, value was simply providing your guest with a fair product at a reasonable price. As the mood of the world fell into worries about jobs, income and the practical issue of spending habits, the simple formula no longer worked. Restaurants found that there were increasingly more components to value. Before 2008 a white tablecloth fine dining establishment may have a great value in a $75 per person dining experience, but the consumer became cash conscious and wasn’t going to part with that many dollars no matter how good the value may be.
At the low end of the scale, as people lost jobs and lost confidence in their financial future, fast food lines grew and even status symbol small extravagances such as a $3 cup of coffee at Starbucks was eliminated from many budgets. Restaurant marketing degenerated into a competition of trying to wrench dollars out of the consumer by heavy discounting, smaller portions and free offers. On a long term basis, we will see if that paid dividends, but many brands are finding loyalty is fleeting and at the whim of the next pitch from chains who can’t seem to connect except through gregarious offers.
Independent restaurants (and a few smaller chains) that have weathered the storm took a different approach. They refused to cheapen their brand by trying to coax the last few coins out of the customer’s pockets. They became creative, inventive and bonded with the guest by serving food that was perceived as catering to the emotional side of the eating experience, finding new proteins and cutting costs to keep margins. They did all of this without discounting their core menu items.
So, the question remains – what is the potential restaurant guest looking for? What does this seemingly elusive target of “value” mean in the diner’s eyes? Based on the brief trends in this recession here is a list that seems verifiable:
- The restaurant guest has a spending limit they didn’t have prior to 2008. No matter how much of a bargain you offer, each demographic has its limits. To some people a $75 meal offered for $39 may be a great bargain and value, but spending $39 isn’t an option in this troubled economy. Other people may see a $10 hamburger at a high end bistro as a value and jump all over it! Disposable dollars is the key in each market. Everyone, rich and poor, is conserving cash.
- Comfort is king. The re-invention of classic comfort food has become the stalwart for many restaurants. The food items that taste good from their childhood and mainstays, which may not have been in a healthy diet a year ago, have become trendy. You see lobster macaroni and cheese, half pound blue cheese bacon burgers, pasta’s with creamy lavish sauces and even cabbage rolls, stuffed green peppers and some ethnic dishes that came out of mom’s kitchen years ago have been elevated to gourmet status. To some degree, healthy eating habits have been put aside in favor of feel good foods.
- Restaurant guests still want service. However, it appears they want service that is more attentive than ever. They demand a smile, a friendly face and interaction with the restaurant staff. Tolerance for rude, uncaring and ill-informed servers is small and will detract from the perception of value more than ever before 2008.
- Little things seem magnified in the consumer’s eyes. An unanticipated gift of a small cookie at the end of a meal may add big value points. An extra item on a plate that wasn’t expected may be interpreted as a sign of offering a real bargain; such as a little scoop of fried apples with that pork chop.
- Finally, the consumer doesn’t want to be tricked! It doesn’t take long for that person who bought a $1 double cheeseburger with a large Coke to figure out they paid $2.50 for 20¢ worth of Coke. They will just buy the burger next time! Fair priced menu items are important. Raising side items to cover cheap entrees won’t add to value expectations.
The restaurant diner has added some astute scrutiny to their menu perusal. They have brought more emotion into the now cherished and less frequent dining experience. Feel good experiences mean as much almost as food taste. Extravagance and elegance are gone from the casual diner’s vocabulary. Will we revert back? Maybe, but it’s going to be quite some time for the public to forget 2008 and 2009.
Consumer Perception of Value Is a Moving Target in a Recession – Restaurants Learn Lesson (Part One)
Over the years the term “value” has been bantered about as part of our common restaurant marketing vocabulary. The definition has loosely been thought to be providing a combination of food and service at a reasonable price. The conclusion was that if the consumer’s perception of value was met, then our restaurant marketing efforts could be confined to just getting our message to people, if the value target had been achieved.
Now we have discovered that value is a moving target.
Before 2008 restaurants from fine dining to the McDonalds of the world each measured value based on the success of their product. In other words, if people came in the door, you must be meeting the value expectations of the guest. Restaurants at all levels of the per check average from pocket change to $100 five course feasts put their faith in the number of seats filled each night.
Then the world changed. Jobs were lost, corporations re-thought spending, extravagance was eliminated in business and personal budgets, and eating at a restaurant was no longer adventurous, but a well thought out plan. What happened to the customer’s idea of “value”?
To complicate matters, chains like Denny’s, Dunkin Donuts and many others gave away free food. At first they were proud of their achieved success with long lines of hungry people clamoring for their freebie. Supposedly, at the time, the marketing geniuses thought they were building their brand. Now, in hindsight, they aren’t so sure as the long term results have done little to counter their declining head counts. Offering something for free has little to do with value. It is what it is – FREE – there is no value perception to anyone and has no part in a restaurant marketing plan. In fact, there are some studies that indicate offering too much for too low of a cost can permanently harm a brand.
On the high end of the restaurant scale, the Morton’s, Ruth Chris’s, Smith and Wolenski’s and others discovered they weren’t recession proof with their clientele spending $75-$100 a person. Even the celebrity chefs bolstered by tons of free publicity are shuttering restaurants and re-thinking menus. If there is any humor in this economy, it’s watching the many ways celebrated television cooks can “re-invent” the hamburger in their many restaurants. Even this endeavor is failing miserably in many cases.
In the middle range of the per check pricing, restaurants like Applebee’s, Chili’s, Friday’s and the rest started offering 2 for one deals, then it was three courses for $20 for two people, and now, the restaurant promotions that once saw people get small portions and poorly presented entrees, are going back to the restaurant marketing drawing board. The consumer quickly figured out that there was no value to be found in the tiny plates they were getting.
The questions that need answered are:
- What is value today?
- How do we achieve value in our operations?
- How do we react to markets as conditions change?
- What does the future hold?
Let’s start with the last question first. The future for the restaurant industry takes more than a crystal ball to determine. Some economists predict that as the economy recovers from a Wall Street perspective, the consumer may be left behind. Jobs are lagging and inflation will surely follow in our tax and spend environment. Will our restaurant customers be changed forever? Some say it will take many years before we see consumer spending evolve back to pre 2008 levels. So, we can easily predict that our guests won’t be the same for any foreseeable future.
The key to answering the value question is like being a flea in the consumer’s pocket. When will guests have disposable income? I suggest that will depend on the size of a customer’s wallet. As unemployment returns to normal levels and corporations begin spending on inventories and expansion, the picture will remain the same. As incomes return, so will the adventurous spirit and entertainment factor of going out to eat.
In Part Two of this post, we will explore how to achieve value in the customer’s mind in our individual operations.
Reality is Catching Up to Gordon Ramsay
A few months ago we posted an article about the so-called business magician and chef extraordinaire called Gordon Ramsay who was showing others around the world how to run a restaurant. As predicted in the post titled Secrets to Running a Successful Restaurant – The Ramsay Revelation, celebrity chef’s
who create “reality” TV shows do a terrible disservice to restaurateurs around the world. Ramsay’s shows “Kitchen Nightmares” and “Hell’s Kitchen” are closer to soap operas than real life.
The general media pegged Ramsay’s shows as “reality” hits. Most of us in the business knew there was more showmanship than spontaneity that actually occurs in running successful restaurants. It seems Ramsay has found his own reality as his empire of restaurants crumbles around him. It’s like Rocco’s many times over.
For the latest details on Ramsay’s collapse reported by The Wall Street Journal, you can click here for all the “real” details. I take no pleasure in hearing that any restaurant fails. However, in this case, it’s clear once again that a great chef, no matter how talented, needs more than good contemporary creative food to survive. Even add the bonus of notoriety and it still isn’t enough to ignore the basics. Ramsay’s reality shows were brief encounters that portrayed immediate success using some oblivious formula.
Certainly the economy plays a part in all food operations these days and there is no relief on the horizon. It is no miracle that some restaurants are not only surviving, but thriving in this market. They have adapted to their customer’s lifestyle and needs. They aren’t waiting for a General Motors type bailout or crying about business – they are acting!
The restaurants that survive and grow will be stronger than ever. Those that do little other than wait may have a long vacation and a short bank account before this is over. Learn and grow. Find out how to stay within your budget and double your marketing efforts and results. The Restaurant Ebook can help. I guarantee it – literally!
