Category Archives: Articles

These are articles or other print pieces that contain information I deem very important to independent restaurant owners and other food service operators. They may be written by myself or others.

Groupon dying a slow, painful, and welcome death | blog.bodellconsulting.com

New article out by Joan Lappin at Forbes about Groupon’s recent struggles:

Groupon still searching for a viable business plan as stock crashes

Here’s my take.

It’s been years since I started warning restaurant owners against using services like Groupon, Restaurant.com and other parasitic daily deal sites to market their businesses. Restaurant.com was really the first one on the scene in my industry. Groupon however, has been the most “successful” at what they do. I remember years ago when restaurant owners were first investigating these companies and asking opinions about them in some of the restaurant discussion forums I frequent.

The daily deal site promise sounded good at first, “Access to thousands of new potential customers,” they’d say. “Think of all the new loyal customers you could get?”. “We bring them in and your great food and service will bring them back.”

It was a good sales pitch. From the start though, it was obvious to myself and many others that these people coming through the door were never going to become new, loyal customers to the restaurant. Their loyalty was going to lie with the service that was bringing them the discount, namely the daily deal sites like Groupon.

We started warning people from the beginning that these people were going to be loyal to Groupon, not to the restaurant. They were going to follow the next deal right out the door to the next restaurant, and they did. The owners I know who did try these deals learned this the hard way. They would be overwhelmed with business for a short period of time, preventing them from putting their best foot forward. This wave of temporary customers tipped on the discounted check, not the original check, and servers lost tip money. The cost of the campaigns that Groupon projected never included all the costs of doing business, like extra staffing and other overhead. It never included the lost revenue from the Groupon customers filling seats that could have been seated with customers paying full price. Regular customers were put off by the fact that these drive-by customers were paying less for their meals than they were. Staff were inconvenienced, and in the end, restaurant owners were left with no extra customers and a business that felt like it had just been hit by a big storm.

Luckily, after years of horror stories from restaurant owners who had decided to use these daily deal sites, the word got out. While there are a few positive stories out there, there have been so many horror stories, these sites started getting a reputation. Restaurant owners started listening to people like myself who were showing them the real math behind a daily deal.

Now, the inevitable is playing out. Groupon is in trouble. A couple years ago, its founders cashed in by offering an IPO and selling stock. Since then, they’ve been divesting themselves of Groupon stock and cashing out. The unfortunate people who were dumb enough to buy stock in a company who is in the business of killing the very businesses it depends on for revenue are losing their shirts. Groupon’s current stock prices is half of what it was in it’s initial public offering. Groupon’s revenues are faltering and they can’t come up with a viable business model after coming to the realization that theirs is unsustainable.

I, for one, am happy to see them fail. I feel a little bad for people who have lost money on their stock, but they should have known better. Daily deals are great for the people who buy them, great for the daily deal site, and can even work for businesses who don’t carry much overhead, mainly service based businesses without any competitors on the same daily deal sites. For the vast majority of businesses though, the daily deal sites are the beginning of the death march, and I am glad to see Groupon floundering. It’s demise can’t come fast enough for me.

Brandon O’Dell is an independent restaurant consultant and owner of O’Dell Restaurant Consulting and Friend That Cooks Home Chef Service. The O’Dell Restaurant Consulting Blog offers helpful articles and tips for restaurant owners, managers and food service professionals. Downloadable spreadsheets and other tools can be found in the webstore on the main website at www.bodellconsulting.com/webstore.html.

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How do you get funding for your restaurant startup?

Here’s a story out of San Francisco about the new wave of crowd funded restaurant ventures in San Francisco. “Crowd funding” is the practice of raising money online through donations via sites like www.KickStarter.com. The websites help you promote your idea and raise money to get it off the ground.

Looking at the amount of money being successfully raised, I’m not sure if crowd funding will ever be enough to bankroll an entire restaurant buildout. It does however seem pretty viable to raise enough money for your operating capital or a down payment on a bank loan for your restaurant.

Read the original article here.

 

Don’t give your customers what you want

Originally posted on O'Dell Restaurant Consulting's Blog:

How to make sure your products will sell

Pretty confusing main title, isn’t it? I’ll bet you’re wondering exactly what I’m talking about.

Along with the other biggest mistakes restaurants owners make, offering customers what the owner thinks is good, instead of what the customer thinks is good, is a surefire way to lose money in the restaurant business.

Here’s the scenario I’ve seen a dozen times.

  • Young couple sells their house and moves to a new city
  • New city doesn’t have restaurants offering their favorite foods from previous city
  • Couple decides to leverage all their assets and open a restaurant selling the fantastic food from their last city that they know everyone will love if they would just try it
  • Couple doesn’t realize the complexity of the restaurant business, and opens up underfunded and underexperienced
  • No one comes to restaurant, and couple blames their vendors, their employees, their landlord and…

View original 610 more words

McDonalds McWrap trying to compete with Subway | blog.bodellconsulting.com

Chicken McWrap picture

New Chicken McWrap from McDonalds

It looks as if McDonalds is making a move to try and keep up with Subway which has outpaced McDonald’s growth by a large margin in the last few year and surpassed McDonalds to become the largest restaurant chain, measured by number of stores, sometime in 2010.McDonald’s latest attempt to defend it’s position as a market leader manifests itself with a new menu item, the McWrap, that is aimed at millenials who gravitate toward higher quality, healthier menu items.

Their thought is that they want to give millenials a reason not to go somewhere else if they are trying to eat better.

Here’s my take:

The goodIt’s always a good idea to consider where the market is going. Staying ahead of menu trends can help a restaurant remain a market leader. Making intelligent changes based emerging trends may also prevent the concept from getting stale and protect it from competition from newer, trendier restaurants.

The risk – Rolling out new menu items to compete with other chains can hurt the market position of a restaurant brand. A well established brand like McDonalds means particular things to people. Screwing not just with menu items, but with menu direction can adversely affect a restaurant’s ability to deliver on the preconceived notions that diners already have about a restaurant. Not delivering on your customer’s expectations will hurt any brand, even one as big as McDonalds. A great example is the Angus burger line for McDonalds. They rolled out this line to compete with the emerging high quality “quick casual” concepts that have been dominating new growth in the quick service segment the last decade. The effort has been widely seen as a failure and the Angus burgers maybe on their way out of the McDonalds menu lineup.

McDonalds needs to make sure that any new menu items take advantage of their current market position. They will never be able to rebrand themselves as a “healthy” concept. They will never be an “upscale” quick casual concept. That just isn’t why McDonald’s existing customers go there, and trying to be those things can alienate those existing customers and confuse new customers who relate to McDonalds one way through their existing customers and another way through McDonald’s own branding efforts.

The verdict – It’s up to history how the McWrap will do at McDonalds. I predict a big, fat flop. First, the McWrap is being rolled out to chase health conscious millenials who are simply never going to see McDonald’s as a healthy place to eat, despite the fact that McDonalds does in fact have healthy menu items. The Angus burgers failed to help McDonalds position itself as a quick casual or high quality option like it’s “quick casual” competitors. It was a waste of time and resources.

The advice – McDonalds would make more money realizing that what it’s customers want most is speed and consistency. People don’t expect the best hamburger from McDonalds and frozen 1/4 lb Angus patty doesn’t deliver it anyways. It’s great to try new menu items to keep your existing market demographic happy. It’s not great to sacrifice your existing market position to chase a completely different market. McDonalds should refocus on who it is most likely to come to their restaurant, trim the fat from extra menu items that don’t speak to that market, then focus on innovative ways to reach new customers that have the same sensibilities and desires as their existing market base.

Brandon O’Dell of O’Dell Restaurant Consulting offers operations and marketing consulting for restaurants and food services of all types. Visit www.bodellconsulting.com for more information and find downloadable spreadsheets and management tools in the webstore at www.bodellconsulting.com/webstore.html.

Should an Applebees server who posted a customer receipt online be fired?

A recent story from my area of the country brings up an important question that will inevitably come up many more times. What should a restaurant owner do if an employee posts a customer’s receipt online? Does it make any difference that the receipt has something rude written on it?

Here is a link to the original story I’m referencing on the Consumerist. In short, the media is reporting that a church pastor stiffed a waitress because they didn’t like the 18% auto-gratuity on their check, the waitress posted the receipt online and then was fired by Applebees. One media outlet, the Huffington Post, is circulating a petition to get the server her job back.

Here is the USA Today version:

There are some major mistakes in most, if not all the news stories I’ve seen about this situation other than the original. Since the Consumerist’s original story had the facts right, it begs the question of intent of the other media outlets in misstating them. Here are the important facts being left out:

  • The waitress who posted the receipt online was not the waitress who waited on the pastor. She was not the one purportedly “stiffed”.
  • While the pastor crossed out the auto-gratuity and added up the tab without the tip, she did leave the server a $6 cash tip on a $34.93 tab, equating to a 17% tip. The server was not “stiffed” at all.
  • Applebees, where the incident took place, charged the 18% auto-gratuity to the pastor anyways, because it is their policy to charge 18% automatically on tables of 8 or more. This is standard in many full service restaurants. The waitress actually made a 35% tip on the table, though that certainly wasn’t the intent of the pastor.

I’m not posting this information to defend the pastor in any way. The pastor wrote “I give God 10%, why do you get 18%?” on the check. Even if she intended it for the restaurant and not the waitress, this sort of activity by a customer is inexcusable. The restaurant should “fire” the pastor as a customer for leaving such a comment on the tab in my opinion, or at a minimum give them a warning, and the church should fire the pastor for disgracing the church as its primary representative in the public. Using God as an excuse to make a negative statement about tipping an individual person is never okay, even if she did leave the server a 17% cash tip.

The real question being raised here is, “Should the server who posted the receipt be fired?”

My opinion is that yes, the employee was rightfully fired by the Applebees where she worked. Customer receipts are private property of both the customer and the business, not the server. As such, the server has no right to post that information online, regardless of what was written on it. Had the server only shared what was written on the receipt, without posting a picture of the receipt, I might have a different opinion. It’s possible there might even be some sort of criminal law broken by the server. The server’s defense is that there is nothing in the employee manual forbidding her from copying and posting receipts online.

I’d like to get the input of restaurant owners and managers out there that could face the same situation in the future. What do you think is the right thing to do as a restaurant owner?

One piece of advice I do have to offer restaurant owners on this type of incident is that you should have a policy in your manual forbidding employees from posting pictures of guests, their personal property, or the property of the restaurant online. I also believe it would be good to expressly allow the posting of food and drink pictures online for the purpose of promoting the restaurant.

Brandon O’Dell with O’Dell Restaurant Consulting is an independent restaurant consultant who offers operations and concept strategy consulting for independent restaurants and small chains. You can learn more about their services at www.bodellconsulting.com.

Originally posted on O'Dell Restaurant Consulting's Blog:

Food comping should only be used in extreme cases. By comping food, you train your customers to expect it. Then when you don’t, they’re dissapointed for not getting something they wouldn’t have gotten at another restaurant anyways.

A customer that simply orders something they end up not liking, not because it was bad, but because it doesn’t suit their taste, is never someone whose meal should be comped in my opinion. Along with other complaints from customers who eat most or all their meal, or do not have enough of an appetite to let you make them something else, you should be offering these people some sort of bounce back offer instead of a comp.

Your first approach should always be to try and replace the food with something they do like. Even if you have to make a dish twice, as long as you collect the money for it…

View original 134 more words

50 ways employees steal from your bar or restaurant

I’m not sure where this list originally came from and I don’t take credit for it myself. I didn’t create. However, it is a great list of 50 ways employees can steal from your cash register or POS. As long as there is cash involved in transactions in the restaurant/food service industry, there will be theft. For every possible technique to prevent theft, there is another to get around that prevention method.

If you do suspect an employee of cash theft, one of the best techniques you can utilize to catch them is the mid-shift drawer countdown. This is an unannounced drawer switch in the middle of a shift. You or your manager take a new drawer, with change, to the register. You run a sales report on your point of sale system, or an “x” report (not a “z” report) if you are using a cash register. Switch out the drawers and count down the drawer the employee was using. Most employees who steal will keep their extra money in the cash drawer until the end of shift countdown or sometime close to it.

If you count down drawers together with the employee (which you should), they will try to keep track of how much extra is in the drawer in their head and pull the extra amount before the countdown. They are usually careful not to take so much as to potentially make the drawer short. This causes them to be long fairly often.

If you do not count down the drawers with the employees, they will not pull their extra cash until they count down their drawer at the end of the shift, and they are less likely to leave the drawer long every shift, but will still be long more often than an honest employee will.

In any case, NEVER allow employees to keep their tips in the drawer. This completely eliminates your opportunity to detect theft.

Another tool for reducing employee theft is cameras pointed at the till. Many camera systems will now interface with point of sale systems so you can see what an employee is ringing into a drawer while you are watching their cash handling. Having the cameras alone will keep many employees honest.

Another tip is to eliminate the “no sale” button, or require manager approval to use it. A no sale button makes it very easy for employees to collect money for drinks never rung in. You should also make sure there are no $0 priced items in your point of sale menu. Some poorly designed point of sale systems require you to create sales items for your modifiers, and can inadvertently cause you to have a lot of modifier buttons that can be “rung” in with $0 balances due, but still allowing the employee to settle the sale and open the drawer. If you have $0 menu items or a no sale button, use your sales by item reports to see how often they are used. Also use your transaction reports to see how many $0 transactions are settled. These are both good indicators of theft in your restaurant, bar or food service.

Take a look at the following 50 ways employees steam from your bar or restaurant and keep your eyes open in your own restaurant. An aware owner is one that doesn’t get stolen from.

50 Ways to Steal from the Bar

  1. Short Ring – Under-ring the correct price of item and pocket the
    difference. Common when employees have access to a “no sale” button or sale items with $0 prices that are used as modifiers in a point of sale system.
  2. Phantom Register – Extra register put in bar and items not rung
    in on main register.
  3. Serve and collect while register is reading between shift
    changes.
  4. Claim a phoney walk-out. Keep money received from
    customer.
  5. Phantom Bottle – Bartender brings in his own bottle and
    pockets cash from the sale.
  6. Short Pour – Pour less than shot to cover “give away” liquor
    costs.
  7. Collusion between cocktail server and bartender.
  8. Using one shot on two glasses.
  9. Claim a returned drink – Extra drink is sold and cash is
    pocketed.
  10. Returned bottle of wine – Wine is credited on inventory,
    bartender sells wine by the glass, pockets cash.
  11. Undercharge customers or free liquor in hope of large tip.
  12. Re-Using register drink receipts.
  13. Bartender exchanges drinks to cooks for dinners.
  14. Adding water (diluting) liquor to get more shots out of it. Pocketing the cash.
  15. Using lower priced liquor and charging for call brands.
  16. Receiving kickbacks from liquor distributors.
  17. Charging customer regular prices, ringing happy hour prices.
  18. Complimentary cocktail or wine coupons from hotel rooms
    sold by maids to bartender which can use in place of cash.
  19. Short-Changing Customers.
  20. Ringing food items on liquor key in order to cover high liquor
    cost percentage.
  21. Giving free drinks to employees in exchange for higher tips.
  22. Not pouring liquor into blended drinks to cover high pour
    costs.
  23. Duplicate imprinting of customers credit card charge slip.
  24. Claiming opening bank till was short.
  25. Z-ing out register tape early. Under-reporting of sales.
  26. Recording incorrect overrings and voids.
  27. Change a credit card amount after a customer leaves.
  28. Hitting “no sale” key to open register. Pulling money out later.
  29. Keep income from vending machines.
  30. Ringing items on another bartender or manager key.
  31. Bringing in a pair of work shoes, wearing boots. Put liquor
    bottle in boots and walk out with it.
  32. Claiming fictitious Paid-Outs to customers for broken
    malfunctioning vending machine. Keeping Cash.
  33. Re-using empty bottles to get new inventory out of storeroom
    without suspicion.
  34. Pouring wine by the glass and ringing in a bottle sale. (the sum
    of the glasses is more than the bottle price).
  35. Not ringing in cocktail server sales and splitting the money.
  36. Turning in only the amount of sales on Z-Report and keeping
    any overages.
  37. Under pouring drinks by a sixth, keeping track, and pocketing
    the cash for one drink every sixth drink.
  38. Using jiggers brought in from home that are smaller than
    standard pour, with the same objective as above.
  39. Substituting a house brand for a premium brand (that usually
    sells at a higher price), charging for the premium brand, and
    pocketing the difference.
  40. Overcharging the number of drinks served to a group of
    customers who are running up a tab to be paid later.
  41. Claiming a fictitious robbery.
  42. Re-pouring customer wine leftover in bottles (e.g., banquet
    wine) to other customers by the glass.
  43. Claiming a fictitious walk-out.
  44. Free drinks to local merchants in exchange for merchandise.
  45. Making juice or coffee drinks with little or no liquor.
  46. Picking up excess customer change on bar.
  47. Carrying full bottles of liquor and beer to the dumpster with
    the empties.
  48. Free drinks to the cooks in exchange for food that is sold and
    cash pocketed without ringing in.
  49. Inflate ending inventory values by filling empty liquor bottles
    with water and counting as full.
  50. Free drinks to customers in exchange for larger tips

Share your own tips for preventing theft or other ways employees can steal cash from an employer.

Brandon O’Dell and O’Dell Restaurant Consulting offer operations and brand strategy consulting for independent restaurant owners and small chains. Learn more at www.bodellconsulting.com.

What mobile apps are helpful to restaurants?

The potential of apps in business settings is mind boggling. Every time you turn around, someone introduces another fantastic app that automates a process or system for your business or personal life for a very cheap price. Unlike software, apps don’t carry a lot of packages, postage and marketing overhead. An app is hosted on a website and you use it via the internet, making traditional distribution methods for software worthless overhead.

Five years ago, when Microsoft and other companies were predicting that we would all be using internet applications instead of software someday, I thought they were crazy. Now, the writing is one the wall. Great applications are coming out constantly and business owners that don’t learn how to use them face the possibility of not being able to compete with business owners that do. Restaurants are no exception.

The following is a great article I found on mobile apps that are designed specifically for restaurants that really give you a good idea of some of the potential uses for apps. Some of them are already popular and some still have a little growth needed before they become mainstream and really effective. Either way, this article from Software Advice’s Stephanie Shih is a must read for any restaurant owner or marketing professional that wants to stay ahead of the competition.

Check it out here: 6 mobile apps restaurants should know about

Brandon O’Dell of O’Dell Restaurant Consulting offers operations and marketing assistance to independent restaurant owners and small chains. Learn more at www.bodellconsulting.com.

Are daily deal sites like Groupon good for restaurants?

With most of these sites, you offer a gift certificate that is sold on the site for 50% off. That’s a pretty big hit already, and by itself would turn one of these deals into a money loser. To make it really expensive though, these deal sites demand 50% of the money that is collected, and expect you to pay for the processing cost of the transactions for your gift certificates.

In numbers, here is how the “deal” looks.

  • You offer a $50 gift certificate for $25.
  • Groupon keeps $12.50, you keep $12.50.
  • You pay a 3.5% processing charge on the full $50 sale, which is $1.75.
  • You net $10.75 for $50 worth of your product.
  • The customer comes in and spends $10 over the gift certificate with a net tab of $60 (if you’re lucky).
  • You run a food cost of 33% on your product meaning that the food you sold cost you $20 to sell.
  • You normally run a 30% labor cost. You think it will go down when these deals get redeemed since you are busier, but you forget to factor in your loss of revenue so your labor cost actually goes up to 40%, not down, costing you $24 in labor.

Without calculating in other costs like laundry, chemicals, wear and tear on furniture, fixtures and equipment, and every other cost of you doing business outside of the 10% of your budget that is fixed, this daily deal that netted you $20.75 in sales (thanks to the extra $10 they spent) cost you $44 to sell. That’s a net loss of $23.25 for every deal that you sell. Since most deals sell 1000+ gift certificates, you could be looking at your Groupon, Restaurant.com or LivingSocial “advertising” campaign costing you $23,000 or more.

In contrast, that amount of money could buy you a premium billboard location ad for a year, two years worth of cable TV ads or 6 months of prime network television ads, two to four years of radio advertising, two years of service from a professional public relations specialist or full page color ads in two premium magazine circulations for an entire year.

One of the “selling points” for the daily deal is that the cost is spread out so you don’t have to pay for it all at once. In truth though, all advertisers will do this for you. The daily deal sites are doing you any favors or offering you anything you can’t get from another advertising medium. What they ARE very effective at is getting customers through your door, who will likely be loyal to the daily deal site instead of your restaurant, who will tip your servers low because of their low check averages, and who you will likely never see again.

There are a few businesses that daily deal sites could be good for, but restaurants are not one of them. For some great analysis on other problems created by these sites, for both business owners and buyers of these deals, check out the following article from USA Today, based on a study by Applied Predictive Technologies…

Daily coupon deals may not work for buyers, sellers | USAToday.com

Brandon O’Dell and O’Dell Restaurant Consulting offer operations and marketing consulting for independent restaurants, private clubs and food services. Learn more at www.bodellconsulting.com.

Are you taking advantage of low lobster prices? | O’Dell Restaurant Consulting blog

Lobster prices | NPR.orgWhen prices move significantly on food, it usually worries restaurant owners. There are times when prices going down OR up can offer you a good opportunity to earn extra revenue though.

Currently, Maine lobster prices are tanking. There has been a glut of Maine lobsters caught this year and prices for lobsters on the East coast have hit a record low. While a restaurant owner might normally think “prices are down, that’s great for me“, it can be a double edged sword. You do not want prices on your already low priced products going down, especially if those products make up a large portion of your sales. While initially you may earn more money from lower recipe costs from those items, eventually your customer is going to want some of those savings passed on to them. When you do decide to drop your prices or offer featured items with these low priced ingredients, what you might experience is a skewing of your product mix to those lower priced items. This can actually canabalize sales of other items that may have a higher food cost percentage, but also likely contribute more gross profit dollars to your bottom line. That means less money in the bank.

Low lobster prices are a different story. When typically high priced food items drop in price, they allow you to lower your prices and skew your sales mix toward those items. Even though those items cost less than they normally do, the lobster is probably still going to be higher priced than your average sale and contribute more gross profit dollars than your average item sold. This represents a huge opportunity to improve both sales and profitability. By offering a lower price on lobster, your guests perceive that they are getting an incredible value so more of them order the lobster. Your average ticket goes up and so does your average gross profit per item sold. Win for you and a win for your customer.

O’Dell Restaurant Consulting offers operations and marketing consulting for independent restaurants. Visit www.bodellconsulting.com for more information.

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