Starting, Owning and Marketing A Restaurant Blog|Starting and Owning a Restaurant - Construction, Planning, Marketing, Opening and Managing a New Restaurant

Clearly there is a national “fad” with hamburgers. It seems the fascination with big, juicy hunks of fried ground beef topped with some kind of cheese is trendy. Celebrity chefs are capitalizing on the phenomenon with burger boutiques and the big chains are bucking the health police by offering larger more complex burgers.

Question - Is this bovine craze more about the consumer’s limited pocketbook rather than some new taste? I think so.

The recession has definitely changed the way people are spending their hard earned dollars for eating out in restaurants. Everyone knows there is a limitation on the cost of a hamburger, no matter how big or how good it is. So walking into a trendy burger joint doesn’t mean you will have to shell out $20 to have something you really like that is satisfying. The customer knows they won’t have to search the menu to find a reasonably priced entree and they don’t feel like they are missing the overall restaurant experience by waiting in a drive through line under the golden arches.

Since my childhood days in the sixties, hamburgers have been a staple in the American diet. Good for you or not, few people haven’t longed for that greasy ground concoction topped with anything that tickles your taste buds. Hamburgers aren’t new, but consumer restaurant discretionary spending limitations are new. The combination of the burger and spending conservatively has fueled the biggest restaurant growth segment in history that is totally focused on one simple sandwich.

The lessons for restaurant owners in this economy are simple. Rich or poor, old or young, people want comfort, satisfaction and simplicity in their food choices. They are taking less risks and their willingness to venture a few extra bucks on an unknown is very limited. Where does your menu stack up based on these observations?

It never fails. Every time I travel for a brief vacation, I can’t get away from the restaurant business. You have to eat. My mind, eyes and ears tend to observe the events related to the restaurant business unfolding as you eat and drink.

In this case we were in Key west for a few days with a group of friends. While making some general observations like the lack of crowds due to the BP disaster in the northern Gulf, my perusal of the many menus we encountered were, as a general statement, very much the same. Little creativity. Fried shrimp, nachos, tacos and local fish prepared as you like were all ok. The high end restaurants like the old A & B Lobster House, Virgilios (La Trattoria) and Louie’s Backyard are all still great restaurants, but the casual dining restaurants who come and go have a strong element of sameness that you cannot escape.

The thing that stood out the most, however, was the lack of service standards found in this tourist dependent area. Here they have a perception that the customers will only be around for a day or two, so exceptional guest experiences are hard to find. For those of us that have to perform for the same people potentially three or four times a week, the bar is raised for acceptable customer care.

It is a lesson to watch the staff of dozens of restaurants go about their business with little guest attention and universally poor attitudes. In many places sales suffer from lack of attention and indifference. Each year we visit the keys there are dozens of restaurants that are closed, have changed hands and clearly in decline. I always wonder if they could survive by focusing more attention to their service. Would guests come back more than once during their stay? Would guests recommend their experience to other travelers? Could they build a LONG TERM marketing strategy by being one of the small minority of hospitality establishments that pay more attention to the individual guests rather than just the high volume of visitors who just wander in their doors.

Service IS part of marketing. I think captive markets like hotels, tourist centers and high volume walk-in locations can be a reminder for those of us who build customers one at a time through the formation of relationships.

Most restaurateurs go to many food shows year after year. They face the same poorly cooked unsavory looking samples under heat lamps at booths spread across a convention hall floor. Except for the occasional Vienna hot dog or the fresh baked brownie, most of the food doesn’t warrant more than filling an open space in your stomach at that given time.

Look a little deeper and you find yourself immersed in thousands of dollars of valuble information and food trends that may delight customers. Companies like ConAgra, Kraft, Nestle and many others spend millions of dollars tracking food trends, composing flavors, finding new ingredients and matching cost saving techniques to create menu items. The fact is most of the creations can easily be recreated by chefs and cooks in the average restaurant. Sure, there are labor factors to be considered, but the research and is worth experimentation.

Conceptually, it is the underlying data that caused the new item to be conceived and ultimately produced and packaged for the industry. Rarely do the giants of the industry blindly introduce a new product without confidence in the changing tastes of the consumers.

When visiting food shows try looking at new products only. You may spot items (and trends) that inspire ideas that can be translated into menu items. A particular product may not be very appealing, but the research and flavor profiles may be worth a second glance for your restaurant’s creative approach to a fresh menu.

Perhaps the most frequent inquiry I get is something along the lines of, “I have this idea for opening a new restaurant, ..(idea comes spewing out)……….what would you suggest?”. Or some variation of, “What is the secret to being a success in an industry that sees 80% or 90% failure rate for new start up restaurants?”. As promised in a previous post, here are my Top Ten Tips for Opening a Successful Restaurant.

1. Clearly understand the risks, headaches, financial burden, stress and impact on your personal life and family before you begin. It may be your dream that you must pursue, but don’t expect the rest of the world to stop while you try to make your mark. There will be more than 50,000 other people doing the same thing this year. Only about 5000 of them will be around in five years.
2. Plan to succeed. The restaurant bushiness is like any other venture when it comes to mapping out your strategy, plans and goals. You can do it on the back of a bar napkin or in a 50 page booklet, but know where you are going, how much you can spend and exactly what you expect the rewards to be.
3. Don’t start with your fabulous food idea. Few people open a restaurant with bad food and even fewer fail because of the food. Start with your customer experience. What will be so different about entering your restaurant than any other? Assume someone duplicates your idea across the street within thirty days of opening - why will customers choose your restaurant instead of its twin across the street? If you can’t spell out the differences, the customers won’t be able to either! This process is the beginning of a marketing plan that must detail how you are going to fill those empty chairs everyday. Your marketing plan should be at least half of your overall business plan. If you have any thought that just serving great food is enough, you are destined to become a statistic.
4. Before you begin, make sure you understand how restaurants work. If you have never worked in a restaurant, become a volunteer at someone else’s food operation for a period of time. If you have the experience, become a student of the business. Read, question, research and retain good ideas and practices for now and the future. Make note of everything customers don’t like - read restaurant reviews, not from critics, but from guests who post their experiences online.
5. Once you have created your plan, share it with family, friends, business acquaintances and as many other restaurateurs as possible. Take in criticism, input and other ideas. Remember, it takes a lot of different kinds of people to get butts in your seats who will frequent your establishment.

If you were to believe the pundits and restaurant marketing “experts”, coupons are the way to drive traffic to your restaurant and solve all your problems. Don’t believe it if you are the average independent full service restaurant. There are successful, although costly and addictive, methods that some food service operations survive based on couponing, giveaways and incentives to buy. For instance many pizza operators (particularly chains) heavily utilize coupons to motivate a guest to buy their product. Once they start and a big promotion pays off (they think) with dozens of redemption’s, there is no way to measure the negative effects on their business.

Coupons are difficult to measure because:

• You can’t count the ones used by existing customers who otherwise would have paid full price without the discount. That bottom line effect is not what you want.
• The customer who responds to a coupon purely for the low price will never be a loyal guest - which should be your goal. This type of customer will move to the next cheaper promotion from another restaurant.
• Once you raise awareness that you CAN sell your product for less, how do you convince people that your food is worth more in the future?
• What does there regular use of coupons say about your brand? Does this type of marketing lead to the impression that you are a “discount” restaurant not to be taken seriously?

Restaurateurs spend many hours confined within the walls of their restaurant locations. We become slaves to our masters, the customer. We also become stale like day old bread - still good for some things, but the creative juices are harder to get flowing. Traveling, or visiting multiple restaurants locally, gives us the opportunity to get the mind open for a rush of new ideas.

Rarely have I eaten a dish in a restaurant that I wanted to copy. On the other hand, rarely have I visited another restaurant without coming away with flavor combinations that worked, presentations that caught my eye and customer service thoughts that were good (or bad).

On a trip last week to a major metropolitan area for a few days, I came away with;

• A sauce idea for chipotle sweet and spicy mustard. The flavors worked.
• While consuming a better than average pizza at a local popular pub I detected a smokey flavor that lead me to believe the pizzas were cooked in a wood fired oven. I came to find out they only had a standard deck oven, but used a smoked provolone cheese as part of the ingredients. That gave me the idea for an oven braised brisket sandwich that would be topped with the smoked provolone cheese that could add a new dimension of flavor.
• While consuming a horrible hotel breakfast, there was a yogurt sauce comprised of frozen blueberries and a touch of maple flavoring that topped fresh fruit. It worked!
• A house salad that was served in a giant martini glass tuned upside down at the table onto a plate. It had everyone oohing and awing at the sight.
• In a virtual zoo of restaurants along a mile stretch of commercial roadway, there had to be 60 restaurants, independents and every national chain imaginable. Visiting a couple of the independents that were exceptionally busy was my goal. They were surviving quite well in the midst of one of the most competitive markets I have seen - with ongoing construction that will lead to more potential competitive conditions. I wanted to know why they were full on a snowy weekday night. An un-scientific, quick survey showed three things. One, the two independents I visited both had food that matched the demographic for the area. Two, service was on target, friendly and not scripted like many chains. Three, the atmosphere was cozy and locally themed versus the clinical look of many chains.
• Two other notes I made in this beehive of restaurants was that half empty parking lots at five big name Italian chains in this mile long stretch showed that over building in any market can be a silly venture. Finally, the burger wars were evident. The big names were there including stalwarts McDonalds, Burger King, Wendy’s, White Castle, Rally’s, Sonic and expanding chains like Five Guy’s, Red Robin, Steak n’ Shake, Dairy Queen and WhataBurger. Nestled in between all of the big names were a couple of local favorites that seemed to be able to find their niche with long lines that exceeded the chains during the dinner hour. The second note I made was the number of sub shops that were tucked in every corner of the area. There were two Subways, Quizno’s, Grinders, Blimpie’s and a Firehouse Sub Shop being constructed. The mental note I made was the potential for a local sub shop to produce a better product than any of the cookie cutter franchises. I have yet to see a sub franchise be able to compete with a good product produced by an independent in a local market for subs.

Prior to the recession, restaurant guests seemed to be a happy lot. They ventured into just about any food purveyor that opened their doors partly for exploration, curiosity and culinary adventure. In the last two years wallets closed up like the strings on a beggar’s purse. Consumers with less discretionary dollars to spend wanted value and “comfort”.

If you look the word comfort up in the dictionary, the common definitions include to “soothe, console, reassure, support, encourage and make physically comfortable”. That seems to sum up the average diner who walks into a full service restaurant in today’s new world. The term comfort has to be your goal for the purposes of restaurant marketing.

In the restaurant world we have bantered around the word comfort primarily to describe a particular type of food that made people feel good or brought back memories from earlier days. In fact most restaurants who changed their menu philosophy in the last year or two will tell you that “comfort” foods sell better than they ever have. That is one blessing this financial hurricane has made clear - you can be creative using lower center of the plate proteins and give the guest what they want at the same time.

However, comfort must extend beyond the plate to get more frequent visits from your guests and keep the buzz about your restaurant going. To extend your comfort factor consider these tips;

• Are you offering a comfortable atmosphere that matches your concept and guest’s expectations? Is your restaurant too loud, too quiet, too bright, too dark, too fancy, too casual?
• Physical comforts are just as important. Are your chairs too hard, too high, too soft? Is the temperature too cold, too warm? Do you smell of pleasant food odors or stale carpets and bleach cleaned floors?
• There is comforting service standards to consider. The old days of hard hitting up-selling professed by out of work “consultants” is over. You and your servers need to be less formal and more personal with the guest. Names are important. Smiles are like gold. Haste is unforgiving. Manager visits are expected. Greetings on entering and exiting should be part of every staff member’s vocabulary. The days of the pompous waiter in the tux are over.
• Value IS comfort. People want to know they are making good buying decisions. That applies to buying a car or a meal. Highlight the things that make the guest’s experience at your restaurant a value. Can you rattle those things off right now - this minute? Is it portions, prices, entertainment, friendly servers, exceptional chef, fun, easy to park and enter, quick service? Embed those comforting aspects of your restaurant in your server’s mind, your POS materials and advertising as part of your marketing plan.

In a recent article the NPD Group, a statistical research company of restaurant trends, said that total restaurants in the US declined in 2009. In general, the only segments seemingly holding their own were the quick service and fast casual chains. Hardest hit was fine dining and independents in all segments. The stats should not surprise anyone.

It should be easy to figure out that chains have more resources than independents. Many of them are feeding on themselves by selling company owned stores to franchisees and building sales by loss leader promotions at the franchisee’s expense. The arrogance of the fine dining segment, who failed to recognize early in the recession the customer’s reluctance to pay exorbitant prices, have just begun to realize dining habits may have changed for many years to come. Even the celebrity driven, curiously named restaurants of famous chefs like Gordon Ramsay and many other media made restaurant “stars” have shuttered their doors.

While most of the chains will survive, although several smaller ones have filed for bankruptcy, the real disaster is the loss of the independent restaurants across the country. These are places that have seen the proprietors put their heart and soul between the walls of memento filled structures dedicated to serving their guests the best they could. Unfortunately, the guests had to endure the same economic impact as the restaurants that wanted to serve them.

Many people, even wealthy people, have been clutching their bank statements as mutual funds declined, the security of jobs were in question and the financial structure of the country was threatened with total failure. In the main stream, millions of people are out of work and many more are losing their homes to excesses of the past. Eating out has become less of a habit and more of a thoughtful experience mitigated by relative financial condition. Big spenders moved down a notch, the secure middle class went to more fast casual and the unemployed or lower income segment moved quickly to QSR’s.

For independent restaurants, many have closed. Others are digging deep in their pockets to survive and still more are hovering daily between solvency and bankruptcy. The end of the recession is not at hand. There are no quick fixes that will magically transform the world overnight.

There are the exceptions to the gloom and doom word picture. Many restaurants made the adjustments early. The owners, management and chefs came out of the kitchen and recognized their patrons were disappearing. Management listened to concerns of other customers, new and old, who were still visiting, watched their ordering habits change and reacted. Most of these restaurants are doing well and many have grown or “beat the street” meaning doing better than most.

If you are an independent, keep connected to your guests. Listen to the customer and not to media. Forget the “restaurant consultants” who believe coupons, discounts and promotions will solve all your problems. Don’t believe the the remarkable stories about social media and the instant successes - it doesn’t happen that way. If you are struggling and can make it for a few months more financially, here are a few steps that may salvage your dream:

1. If you haven’t done it, make the toughest financial cuts you have ever had to make. That may include the loss of long term employees, reducing salaries, wages and/or hours. Every expenditure should be questioned, no matter how big or how small.
2. Today, not tomorrow, talk to your suppliers. Find out what IS selling. Even more important find out what is NOT selling. The larger purveyors can help you with refreshing new ideas for your restaurant. Use them - most are looking for new business also.
3. Creatively change your menu. Look for value from a customer’s perspective, while maintaining a reasonable margin. If $25 steaks have been turning grey on your line, try the alternative grades and cuts. Let the customer know you are searching for alternative proteins to offer some relief to their pocketbook crunch. Make that menu change today and let the customer know it. In the past, restaurateurs have always focused on higher priced items. Now your focus should be better value items. If you don’t offer them, guests will migrate elsewhere.
4. If you haven’t used inexpensive marketing tools like email marketing, viral marketing, networking, word of mouth campaigns, community involvement and dozens more, start today - all of these take time to produce long term results.

Finally, if you are lost, and feel you can make it with some direction, send me a private note through the comment section of the blog. Tell me your circumstances. All comments are first directed to me before they go public. None will go public that deal with any individual restaurant. That keeps the “consultants”, spam and sellers of products and services from ruining this restaurant blog designed for the independent restaurateur. If nothing else, I will send you a copy of The Restaurant Ebook for free or at least the section titled One Hundred Ways to Market Your Restaurant. All 100 ways cost little or nothing. Maybe all you need is a restaurant cheerleader. I can be that also. One thing I can assure of - I know what you have been dealing with! My three restaurants are in the same economy as yours.

 Note: No identifiable information will ever be published!

It is sad to see independents close their doors. Let’s re-connect with the guest and keep the dreams alive.

Word of mouth is unequaled in the power to get new customers through your doors. Word of mouth marketing is also one of the most universally misunderstood. Just because Aunt Violet made a comment to a neighbor that she visited your operation and the food was “good”, that is not word of mouth restaurant marketing. While it was a positive sign that Aunt Violet made the comment, having “good” food applies to 75% of the independent restaurants in the country.

True word of mouth restaurant marketing includes customer training. That’s right, training the guest to be your ambassador to friends, family and acquaintances. When a customer knows what to say and how to describe your restaurant, the effectiveness of the communication is of far more value. You wouldn’t think of sending a server to a table without training — why would you send your guests into the world without the right things to say?

For instance, if Aunt Violet had told her neighbor, “ Joe’s Restaurant had great food because they used “all local citrus” from farms in the area that reminded her of what “fresh really is”. Where do you think a phrases like that came from? What if Aunt Violet had stated, “Joe’s had rustic bread that tasted like it came from a monastery in France”. Where do you think that description would come from? How about bacon that was “apple cured and thick cut”.

Restaurants communicate with guests in many ways. The common methods are through menus, servers, table POS, signs and advertising. Repetitive phrases that describe your food, your differences and the things that make the dining experience unique can be embedded in your guests mind. I call them “talking points” much like speakers and politicians use in preparation for speeches. Do your servers, menus and signs contain talking points your guests can use when describing their visits to your establishment?

As the new year begins and a new decade is born, the question about the costs to start a restaurant will survive and be repeated another million times in the next ten years. In hundreds of emails, countless meetings and numerous uninformed writers querying me, I know I’ll hear it. And yet, it’s difficult to explain to the questioner why it’s the wrong question to be asking.

Obviously, each restaurant is different. The size, type, location, demographic and owner choices cannot be factored in a brief encounter. What can be determined are the things that cause financial pain and hardship for most restaurants who’s new owners don’t ask the important question -  ”What are the costs to start a restaurant that I won’t be able calculate without experience?” That is the question. It is easy to calculate and add up equipment costs, food inventory, salaries and fixed costs, but what about the things you didn’t think of?

Below is just a partial list of costs generally forgotten or not factored into those starting restaurant budgets;

• Deposits - While these may not be carried on your financial statement as a cost (or expense), they are a cash outlay that be in many thousands of dollars. There are lease security deposits, utility deposits, bank deposits for starting cash and even possible retainer deposits for professionals like attorneys and accountants. Collectively, these could total $5000 to well over $10,000.
• Licenses - The cost to start a restaurant has grown significantly in the last few years as local, state and federal agencies have turned licenses into a method of taxation. Examples include licenses for occupancy (from $200 to $1000), cafe permits for operating on sidewalks or streets, liquor license fees for inspections, forms and filing fees, franchise fees for registering your business, fees for state and identification numbers and fees for federal filings and tax ID numbers. These fees can total thousands of dollars depending on your location.
• Professional Fees - No one should start a business today without competent advice from both an attorney and an accountant. While their fees can total as much as $250 per hour, they can save you tens of thousands of dollars in taxes and problems as your business grows.
• Impact Fees - Many communities now charge start-up “impact Fees” that are supposed to be the cost of your usage of community services such as gas lines, water lines, streets and infrastructure built by the local government. In the last restaurant we opened, I had a $10,000 surprise during construction!
• Cash Flow Requirements - Of all the cash needs, this one can put you out of business in a hurry. Without getting into a whole accounting class on cash flow, let it suffice to state that a profitable restaurant can go bankrupt profitably (with negative cash flow) just as easy as a slow to develop restaurant can run out of cash. If you do not have the cash to survive for six months in a worst case scenario you and your accountant calculate, don’t open a new restaurant until you can.

These are the things that are commonly missed on restaurant business plans. These items can turn a great concept into locked doors very quickly. Food and service are still the biggest factors in buiding your restaurant, but cash needs can bring you to your knees no matter how great the food is.