Buzzword Building a Restaurant
The first time I heard the word “crowdsourcing” was about a year ago. It was in an article about a subject that I don’t even remember. The term wasn’t really clear to me then and now crowdsourcing is being used to develop a restaurant in the Washington D.C. area.
What does crowdsourcing mean? Let’s say you wanted to make a better mouse trap. You would ask a big group of people who all had different skills, ideas and backgrounds to get together and give you input into the project. This “crowd” may be designers, engineers, manufacturers, users, SPCA members, marketing specialists and just about anyone else who wanted to contribute to the development. In other words, you are sourcing out various elements of the idea to a crowd; ergo, crowdsourcing.
On the surface it sounds like a great way to get a lot of free advice, technical knowhow and create a buzz about your plan before the actual product was built and sold. You would think, with all this help, you would have a better product. Sounds reasonable to me with a consumer oriented product that a WalMart, Sears or Ace Hardware would put on their shelves.
Now take the buzzword and apply it to a restaurant concept. You are going to have chefs, architects, POS geeks, restaurant critics, foodies, social marketing experts, consultants, restaurant owners, equipment manufacturers, food purveyors and anyone else interested help you design your restaurant. Sounds great. One consultant (I won’t go into what I think of most consultants), stated in a stroke of brilliance that, “crowdsourcing was like having a comment card before you open”.
Again, on the surface it sounds OK.
But herein lies the rub. What restaurant entrepreneur wants all this input? What inspired chef wants all this help to create his signature dish? What dreamer wants a group of people modifying his fantasy?
Can you imagine if Leonardo da Vinci had all this help with the Mona Lisa? Would Mona have turned out to be a blue-eyed bombshell like a Jessica Simpson, Raquel Welch or Marylyn Monroe? How about the Leaning Tower of Pisa? Would it stand up straight if the developer had better input? Yes, it probably would, but then we would have no Leaning Tower of Pisa!
Food and restaurants are a personal thing. Each Chef puts his/her own touch on a dish. Each guest has their own preference; do you know how many different ideas there are about what a medium rare steak should look like? How about eggs “over easy”? Try to get people to agree on that one!
You can’t take the personal emotions, taste and feelings out of the restaurant business. Guests and owners must mix and share all of these subjective parts.
My point here is that restaurateurs are like artists, entertainers and movie directors all wrapped up in one package. They want people to share their creation. They know the whole world can’t be pleased, but just enough people to profitably support his or her creation will be fine. Perfection never exists for the restaurateur; there is always a new idea, a happier guest, a better way to do things and a new inspiration every day. “Crowdsourcing” might work for the uninspired, but in the restaurant business it’s about building a better mouse trap on your own – that is the fun, motivation and satisfaction. Who wants to share that?
That is why 75% of the people in the world have thought about opening their own restaurant! It’s about people, not perfection.
Larry Edger, Author
The Restaurant Ebook
Restaurant Marketing Plan Handbook
Do We Lose Focus? Restaurant Profits Aren’t Dirty Words
Occasionally, we all lose focus of our goals. A couple of recent events have reminded me it is easy to forget that at the top of the list of goals, things to do and immediate tasks must be producing a profit. The events that spurred me to post this article were:
- I recently reviewed a business plan mission statement that was very eloquently done, brief and to the point. I missed one thing. There was nothing in the mission statement that said anything about accomplishing their goals profitably.
- In another inquiry, a restaurant entrepreneur asked about his plan to offer his quick service menu at an extremely reduced price to get immediate volume. He stated a “consultant” suggested this to build opening traffic and slowly increase prices over the following weeks and months. Not a very wise idea for long term success, if you manage to stay in business and pay your bills.
- Over the last few weeks there have been a number of ads in the newspaper offering coupons for everything from numerous restaurants. In some cases, the offerings were at or below cost. They looked like desperation advertising. You cannot operate without making a profit – period! There are no quick fixes that don’t have negative consequences. Consistent restaurant marketing with a plan is the only way to get proven results.
Why we, as restaurant owners, lose focus is beyond logical reasoning. Is it the pressures of the economy, too much focus on food and not enough on business, just plain laziness – who knows, but we all do it.
With consumers spending less money on eating out, spiraling food costs and general inflationary trends, we should be:
- Revising our menus monthly.
- Comparing food and beverage costs between suppliers monthly.
- Refining our daily labor scheduling.
- Comparing costs for insurance, credit card fees and other administrative expenses.
- Finding higher margin menu items to replace low margin proteins.
Instead, some of us are:
- Offering discounts.
- Promoting 2 for 1 deals.
- Running loss leader specials.
On the other sales side of the coin we should be:
- Implementing every low cost (and free) marketing tool we can find.
- Taking advantage of the consumer’s “feel good” attitude with food.
- Using available staff hours for local visits to businesses delivering menus and food samples.
- Getting regular customers to be our ambassadors to talk about us and help bring new guests in the door.
Most of us know what should and shouldn’t be done, but we lose sight of the necessity of profits to fuel our survival and growth. It’s much easier to ignore the obvious than pull our head out of the sand and other less attractive places!
I spoke my piece, not let me get the sand out of my eye and ears.
Larry Edger
Author
The Restaurant Ebook and The Restaurant Marketing Plan Handbook
Your Restaurant Location and Demographic Evaluation (Part Two)
In part one of this post we discussed how to define your market and gather data to help evaluate your restaurant’s potential. This part of the article will identify the exact data to collect and the evaluations you need to make before opening a restaurant or to re-vitalize a marketing plan in an existing restaurant.
To facilitate and simplify the data collection process, we use a Checklist that should be printed and kept in front of you while reading this post.
After defining your market, you will need specific customer information like average age, income and family structure. Location data like traffic patterns, counts and foot traffic will ensure decisions about sufficient potential customers. Competitive information will help identify your strengths and weaknesses to capitalize on marketing tools you choose to use.
Each part of the Demographic Evaluation Checklist has each key data elements listed. The sections should be filled out as follows:
- Defined Market Data – each fact you obtain as shown on the checklist allows you to compare your concept to the people who live and work within your defined market. This data is used to evaluate your concept and menu for their relativity to your target customers. Some factors may not apply and can be ignored.
- Competition – ignoring competition is a terrible mistake and may limit your potential to grow and penetrate your target market. Putting an Italian restaurant in the middle of four or five other successful similar concepts will lead to further dilution and segmentation due to customer loyalties, convenience factors and customers’ varying tastes. Data collected should be collected on all restaurants operating in your meal period(s). To further refine the data, you should complete the data collection for each competitor in your price range with a similar concept. This will require one or more visits to each competitive restaurant and an open minded evaluation.
- Your Location Comparative Evaluation – this review requires your subjective, but honest, comparison from the data previous collected. The final product will help you determine what to highlight and down-play in communicating your message to potential guests. The checklist may point out factors in your operation that may need improvement or correction.
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Comparative Strength Scale – estimating your strengths in given parts of your concept points out the weaknesses that should be improved as compared to your competition. In marketing plans underscore your competitive advantages with downplaying your weaknesses. Keep the key reasons for choosing a restaurant that guests use as your priority. These reasons in the order of importance according to most restaurant customer surveys include:
- Food Quality
- Service
- Convenience
- Price/Value Ratio
- Atmosphere/Facility
Chain restaurants spend a considerable amount of time, effort and money to produce very sophisticated reports on all of the factors contained in this article. Their success rate for survival is only slightly better than the independent restaurateur. However, total reliance on factual based decisions without the underlying subjective thoughts cause them to make bad location and market decisions. You can avoid their mistakes by using your common sense approach to the data you collect.
Opening a restaurant is a risk. Perhaps the greatest risk of any type of business. Correcting the placement of your concept may be financially difficult or impossible to do. Make the right moves based on the facts and common sense. Placing a fresh seafood restaurant in the middle of an open desert would defy any sense of reality. On the other end of the scale, if you were the only restaurant within a half mile radius of Times Square, I will personally guarantee your success. Somewhere in between is the answer to your potential!
Your Restaurant Location and Demographic Evaluation (Part One)
How do you tell a businessman here are the ways to properly gather facts that can lead to a better restaurant, but, in reality, there are so many subjective factors that cannot be labeled, factually identified and computed that the ultimate demographic and location impact on your restaurant is largely an educated guess. That is exactly what the goal is here; get as many facts as you can about your market and make your best educated guess with regard to the demographic support of your restaurant.
As part of the research for this article, I reviewed a document produced by Michigan State University titled Restaurant Market Analysis. While the article was well laid out and logically constructed, it was clearly produced by non-restaurant analysts. Broad assumptions that the average restaurateur would not accept were taken for granted and other factors were ignored such as server training, ambiance, and cost to value ratios in competitive operations. These are significant factors affecting the potential marketing results of any restaurant operation.
When evaluating the area you define as your market around your restaurant, there are common elements you need to determine in order to make a judgment on the strength of your customer base as it relates to your concept. In other words, get the facts and make sure they relate to what you are going to sell. Planning a restaurant selling old fashion country cooking in a health conscious Y generation neighborhood probably won’t work. Placing a pizza operation in the middle of a neighborhood that has 15 other pizza choices within a three mile radius isn’t too wise.
The steps to obtain objective facts are:
- Area Definition – Define your market on a map. Depending on your location and concept, it could be a radius of 1 to 5 miles or just a few blocks. A hot dog stand in downtown Chicago may have the potential to draw from only a four block square area, while a suburban fine dining dinner restaurant may have a 5 or 6 mile drawing radius.
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Gather Facts – You have a number of resources to get information about the businesses and households in your defined target area. Many of the sources have online details. The resources include:
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U.S. Census Bureau Data – households and income.
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Chamber of Commerce – businesses and area details.
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Local Library – demographic
publications and studies. -
Newspaper Archives – searchable articles on area demographics and trends.
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- Competition – There is only one accurate way to get competitive details, visit them. Locate each competitor in your market area that is in your general meal period and price/value range. Eat at each at least once noting all the factors that go into producing the customer experience like, food, quality, service and location.
Market analysis is a science and could be conducted by trained professionals at a cost that may far exceed your budget. In the final product, there is still a subjective judgment that is necessary to compare, evaluate and make assumptions about your market area. Making those decisions based on accurate data will make the guesswork a little more accurate.
Using the facts obtained in your analysis to open a restaurant or design a marketing plan to improve sales at your existing restaurant, will help to point out strengths and weaknesses you didn’t know you had. You can implement marketing tools that differentiates you from the competition.
In Part Two of this post, we will explore exactly what data you need to collect and a handy checklist to help your competitive analysis.
There is More to a Restaurant Business Plan than Words and Numbers
Many entrepreneurs know they need a business plan. They go online, get a form and fill in the blanks. The small booklet of data is a document they are proud of. It spells out the general ideas behind the concept, estimated revenue projections, management plans and, hopefully, a marketing plan to get the guests in the door. Proud of their accomplishment, they put the task aside and move on to the business of opening a restaurant.
However, your restaurant business plan is not a conceptual exercise. It is a working roadmap to get from concept to opening and beyond. The roadmap has challenges along the way. Costs go up. You can fit in 20 more seats than planned. Your final menu is more expensive than planned. All of these things affect your profitability, revenues and even needed equipment to open your doors.
When differences occur, they need to be incorporated into the business plan. You need to know how cash flow will be affected, your profitability will change and even more importantly, your cash needs. Can you open your doors with enough capital to sustain your operation? More restaurants fail because of low cash reserves than any other single reason.
The process to create a restaurant business plan must be a mental exercise that separates reality from assumptions. While a pre-worded document that just requires filling in the blanks is convenient and shortens the task, it shouldn’t stop your thinking process. All the “what if’s” need explored. What if we increase per person check amount by 75¢? What happens if the equipment costs $10,000 more than projected? What if you forgot the CAM charges on the lease? What if your menu ingredients cost 8% more than projected? What if all of these occurred at the same time? All of these need explored to know how your restaurant would look financially with relative minor changes.
By all means start with a document that makes your writing easier and covers all topics, but don’t forget the real value is the mental exercise that helps you understand how little and big changes can affect your ability to survive and grow.
