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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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Chef Employment Contract now available for download!

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This contract template will help you avoid potential problems if you happen to lose your chef like:

  • Not having ownership of the recipes for your menu
  • Your chef going to work for your competitor
  • Important documents and management tools being taken for use
  • Proprietary secrets being divulged

A good working relationship requires mutual benefit and trust. Create an atmosphere of trust by spelling out your employee/employer relationship in an employment contract that defines all the terms of employment and protects both you and your chef.

This contract template is a Microsoft Word document and can be edited for use with other management, employees or sales staff.

Disclaimer: O’Dell Restaurant Consulting is not a legal advisor and this contract and all included should not be considered legal advice given to anyone using it. Check with your attorney on enforceability of all areas of this contract and use a qualified legal professional to assist you in making sure all employee agreements are legal and enforceable.

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Who owns your kitchen’s recipes? Has your chef signed an employment contract?

A popular topic lately in a couple different restaurant discussion forums I participate in is the question of who owns the recipes your restaurant uses?

Let’s look at a couple possible scenarios that could affect your restaurant.

  1. Your executive chef or kitchen manager quits. Maybe one or two members of the kitchen staff leave with her/him. Your chef keeps extensive recipes written down in a book they’ve had since long before they worked for you.
  2. You fired your executive chef and there are no written recipes. Everything comes from the head of the executive chef or the cooks he/she trains.
  3. Your chef leaves your restaurant for a bigger, better opportunity. It’s a benevolent departure. No animosity.

What happens next in any of these scenarios? Do the recipes the chef has written down belong to the restaurant? Does the restaurant get them when the chef leaves? If there are no recipes, can the restaurant make the chef create them before the chef leaves so the restaurant can continue to produce the same food? Are any of the cooks trained enough to recreate the recipes the chef used to make? Is this cook even going to stay when the chef is gone?

No matter the answers to any of these questions, it is very important for the continued success of your restaurant that you are able to consistently produce the same quality of product, tasting the same as before, if you want to keep the loyal customers you have. If the food was horrible, maybe you want to change all the recipes, but you’ll still want to pay attention to the rest of this article to avoid potential pitfalls with the next chef.

All this begs the question, “Can your restaurant survive the departure of your head chef or kitchen manager?”

In addition to helping you evaluate your current situation and the risk you already have if your head chef leaves, I’m also going to help you take the steps to lower your risk and remove the impending doom of losing your top chef.

What are the risks if my chef leaves?

If you are unfortunate enough to lose your executive chef, whether it be a termination, the chef quitting, or the chef moving on to a better opportunity, there are several potential problems they could leave you with and several considerations you may have never made.

  • Recipes can be copyrighted, but copyrighting doesn’t keep someone else from using the same formula or recreating the same food. It may only protect any unique methods or systems of creating the food. In effect, you may not be able to keep a chef from reusing the recipes you use at a restaurant down the street just by copyrighting the recipes.
  • The chef may consider the recipes they create as their own intellectual property. If they were created while working for you, doesn’t that make them your property? Does a researcher for Pfizer get to keep the cure for cancer if they create it while working for Pfizer? “Who owns my recipes?”
  • A chef you have fired or who quits, even one who leaves under good terms, may not feel compelled to leave you with the recipes created while they were working for you.
  • A chef you have fired or who quits may think it’s a good idea to go to work for one of your competitors and make the same food you serve to hurt your business.
  • A chef or cook who leaves your restaurant may think it’s a good idea to start their own restaurant using the recipes they learned at your restaurant.
  • The chef takes half your kitchen staff with her/him, including everyone who knows how to make your recipes.
  • The chef takes their recipe book with them which are the only written copies of the recipes to your food.
  • You’re left without a chef and without recipes. You are in a state of desperation while having to negotiate employment with the next chef you hire.

Any one of these problems could do some serious damage to your restaurant. It’s best to consider these issues before hiring your chef and create an employment contract that protects the quality and consistency of the food you serve. Without that quality and consistency, your restaurant is at great risk to fail.

Now that you know it’s very important to protect yourself from these potential problems, and I’ve told you that an employment contract can help, you’re lead to your next question, “What should be included in a good chef employment contract?

Here are what I consider to be “must haves” in any chef employment contract. Many of these you will want to include in an employment contract for all your cooks, your General Manager and any other key management staff that have access to your proprietary secrets.

  • A statement of duties, as in a job description. Usually an addendum to an employment contract, a job description helps you define in writing what is expected of the chef or other employee. The job description should be acknowledged and signed by the employee so you have proof the employee was aware of their duties.
  • The job description MUST include “creating and recording recipes in a recipe book owned exclusively by the restaurant” as one of the duties.
  • Intellectual property. This statement declares that any work done by the chef or other employee, recipes or operational tools created, procedures, etc. are the property of the restaurant and remain the property of the restaurant upon termination of employment. The employee is being paid by you to create for you. The creation remains your property just as it would if you commissioned a piece of art or hired a researcher to find a cure for cancer.
  • Conflict of interest statement. For full time, key employees, you will want a statement in their contract saying that while under your employment, they cannot hold another job or engage in any business or activity that conflicts with the interests of your restaurant. This is not a reasonable expectation for part time employees in my opinion though. If you are not providing enough hours so that the employee does not need another job, you should not try to prevent them from having one. Your employees have to eat too.
  • Confidentiality agreement. This statement in your employment contract forbids the employee from divulging any of your proprietary secrets to anyone else. These secrets include recipes, financial information, operations tools and manuals, policies, vendor agreements, training practices, technology, food and service methods, techniques, processes, studies and any and all records kept by the restaurant or any of it’s employees. This statement specifically helps you prevent your chef or cooks from taking your recipes or procedures down the street to your competitor.
  • Surrender of company documents. Upong separation of employment, this statement requires that the employee surrender any and all documents and property belonging to the restaurant, including recipes, checklists, operating tools, manuals, agreements, and any document whether printed or digital that was created on the clock while working for the company or was provided by the company to the employee.
  • New employer notification. This states that you reserve the right to contact the employee’s new employer to divulge to them the terms of the employee’s employment contract with you. This is meant to help you let the new employer know that their new hire is under contract not to divulge your proprietary secrets, procedures and recipes.
  • Non-compete agreement. The greatest risk of a good employee leaving is that they will go to a direct competitor and try to compete with you. A non-compete agreement helps you prevent them from doing just that. A non-compete should state that an employee can not work for, consult with or own interest in a similar business in your market. Basically that they can’t compete with you. A non-compete cannot keep an employee from making a living however. If you create a non-compete that tries to prevent an employee from performing any job even remotely similar to the one they held with you, you may have trouble enforcing it. Laws regarding non-competes vary from state to state and your ability to enforce yours may vary greatly from a restaurant in another state. In reality though, you are not trying to prevent your chef from finding a job somewhere else. You are trying to prevent them from taking your trade secrets and competing against you with them. A non-compete normally contains a time limit. 24 months is customary for most non-competes.
  • Employee solicitation statement. This statement forbids an existing employee from soliciting your other employees to work for them. This includes not only a direct job offer, but any sort of enticement, encouragement or pressure of any sort.

There are several other statements you should include to create a good contract. Make sure to use a qualified lawyer experienced with labor law and restaurants when creating any contract of any sort. I am not a lawyer and you shouldn’t consider this article legal advice. What this is however, is a good place to start when trying to protect proprietary information like recipes.

Until you have an employment contract in place, and a job description letting a chef know they are creating recipes for you that you will own, you are at the mercy of their ethics. A great chef knows that they are only as good as they left their last kitchen. They should have the moral drive to set any kitchen they run up for success long after they are gone. They shouldn’t try to steal employees or hide recipes. After all, a great chef can recreate a recipe anytime they wish, and there’s a never ending supply of recipes inside a great chef’s brain. You can’t depend on every chef you hire being a great chef however. You need to protect yourself and create an atmosphere that benefits not only your chef, but every employee in the kitchen.

Use employment contracts. Use job descriptions. Create and maintain up-to-date recipes on all your menu items, including the specials. Make sure you have copies too. Don’t be held hostage by any one employee. Create an atmosphere where chefs will be beating down your door to work in your organized, well run operation, just for the opportunity to express their own creativity. For the opportunity to work for a successful brand, and to have the freedom of creating to their hearts content because you’re not holding them back from insecurity that they may some day move on to bigger and better things. After all, if you hired a great chef, they will eventually move on to bigger and better things.

For help writing an employment contract for your chef or cooks, visit our webstore and look for our Employment Contract for Chefs and Cooks. This same contract can be amended to use for any employee.

Brandon O’Dell is an independent restaurant consultant who assists small to medium sized independent restaurants and small chains create the operational systems their chain competitors use everyday. Visit www.bodellconsulting.com for more information, or visit their blog at blog.bodellconsulting.com.

Restaurant Review – Waxy O’Sheas in Shawnee, KS

I’ve decided to start a new category of posts for the O’Dell Restaurant Consulting blog that I think will be very beneficial to restaurant owners everywhere. I am going to review restaurants that I have been to. These are not reviews from strictly a patron’s standpoint, but from the standpoint of an experienced food service professional and consultant. I will attempt to identify strengths and weaknesses in the operations of a restaurant and make suggestions on how the particular restaurant could maximize these strengths or overcome the weaknesses. Please read the following disclaimer:

Disclaimer: This review should not be read as an endorsement or warning for or against patronizing the described restaurant. It is intended strictly as a study of the restaurant’s operation, perceived weaknesses and strengths, and suggestions on how to improve the operation. As this review is not sanctioned or paid for by the owner, it is not meant to be a comprehensive review such as one O’Dell Restaurant Consulting provides to it’s clients. It is strictly superficial. There has been no discussion with the restaurant owner about these observations and no back of house or office visit has taken place to gain perspective as to the cause of the problems. My assumptions are based on my experience and may not necessarily reflect the actual cause or source of an issue.

Now that the disclaimer is out of the way, let’s get to my review. I will break this review down into three sections that describe different key parts of the operation; reception, service and food. Future reviews may contain other parts of the operation I have also been exposed to, such as marketing.

Waxy O’Shea’s Irish Pub – Mother’s Day 2010

Reception

Mother’s Day or Easter are traditionally the busiest days of the year in a restaurant. Many restaurant, like Waxy O’Shea’s, offer a brunch buffet. The intent of offering a buffet is to serve as many patrons as possible in as short a time as possible. On a day like Mother’s Day, it is especially important for a restaurant to process customers quickly. There are many customers to be served and the more customers served, the more sales dollars to be made.

Quick service for a buffet starts with the reservation (or no reservation) of tables and seating of customers. In order to process the most customers possible, a restaurant must have a good system in place to get customers from the door to the floor. Our first observation about Waxy O’Shea’s came when calling to make a reservation. Waxy O’Shea’s does not take reservations on regular business days and did not take them for Mother’s Day. Not taking reservations normally serves two purposes for a restaurant:

  1. No reservations means no empty tables being held open while the restaurant is waiting on the reservation to arrive. When there is a steady stream of customers, not having tables sitting empty for reservations means the restaurant can serve the maximum amount of customers their staff can handle during their rush. This normally means maximized sales.
  2. No reservations also eliminates the work of processing phone calls, tracking reservations and setting up a dining room to accommodate those reservations.

Not taking reservations sounds like a good idea, doesn’t it? In theory, it is, and it works for many operations. However, on the busiest days of the year, not taking reservations eliminates some advantages that can be gained through better planning.

  1. Taking reservations means being able to adjust hostess, bar and service staff to make sure your customers are best served.
  2. Taking reservations means being able to adjust food production to reduce waste, or more importantly, to make sure there is enough food to serve everyone.
  3. Taking reservations allows you to plan ahead for large tables and reservations that require you to separate or put together tables in your dining room.
  4. Taking reservations means having some control over the flow of customers in and out of your restaurant, allowing you more direct effect on their dining experience.

Whether or not taking reservations is a good idea for your restaurant depends on your ability to handle lines of people, clean and reset tables and give proper service.

Here is my observation on how Waxy O’Shea’s did in receiving and seating their customers.

First, I believe Waxy O’Shea’s would have benefited greatly by having a reception area for customers. The restaurant has a small wind break foyer, then a small receiving area inside the front door. The left side of the restaurant is the bar and the right side is restaurant seating. The small receiving area inside from the foyer has a floor standing specials board with a couple plants behind it. There is also a floor standing specials board in the foyer. In my opinion, the second one inside the door is redundant and the space would be much better used as a reception with benches for patrons who are waiting. Instead of a hostess stand, there is a shelf in the hall to the dining room where the menus are set, with a stool beside it where the floor plan with sections on it is kept. The look is very unprofessional and I believe this area would be best utilized for additional seating for reception. In all, I believe there is room to create seating for 12 or more patrons at the front of the restaurant. I’m sure the owners of the restaurant would question where to set up the menus and floor plan. I believe there is also plenty of room for a free standing podium with shelves inside, though I would rather see a built in hostess stand with a telephone line ran directly to it.

Another observation about the seating process of Waxy O’Shea’s was their lack of hostess staff. One person, who may have been an owner, had a note pad to take names for a seating list. While she did a good job with keeping everyone straight who was waiting for her to add them to the list, she was also trying to help clear and set tables for seating which took her from the front. While we were already on the list and waiting for a table, four groups of customers came in and waited to be put on the list. They were all added to the list in the right order of their arrival, but what the hostess/owner did not see was the 3 groups that came in the door, were not greeted and left to go eat somewhere else. The lack of a good setup and system cost the restaurant at least $200 in sales just in the 20 minutes I was waiting for a table.

On the positive side, we were able to come in the front door of the restaurant, put our name on a list, and get seated in 20-25 minutes. That was pretty good for Mother’s Day. However, I was very disappointed to see that after waiting for 20 minutes, and counting around 20 people waiting behind us, there were 13 tables in the dining room that were no longer full. Lack of a good system and slow processing caused all those people to wait while the restaurant could have been serving them and earning dollars, in addition to serving the others that decided not to wait. To someone walking in the door, the restaurant was full and the wait looked to be an hour. In reality, half the tables in the dining room were empty and the hostess was on the floor instead of greeting them and explaining the situation.

In addition to changing the reception setup, I believe Waxy O’Shea’s would have greatly benefitted from being adequately staffed for reception. In a restaurant that seats likely 200 people, a day like Mother’s Day where the tables could have been turned 4 or more times would require at least 3 hostesses. There could have been a constant flow of patrons being lead to tables while another hostess helps put together or separate tables to set them to the right size, while the hostess/owner/manager was supervising the process and managing the waiting list.

Service

Upon being seated, our table was greeted by one of the waitstaff very quickly. I believe it is important that guests be at least greeted within the first 30 seconds of being seated. Mission accomplished. That server was taking care of another section, but the greeting acknowledged us and let us know someone would be with us shortly. Our server took 2 or 3 minutes to make it to our table, but on a very busy day that is acceptable, though not preferable. The server took our drink orders which included water and a couple bloody marys. She put our drink order into the POS to send to the bar, then went after the waters. The waters took longer than needed to get to the table, but not unacceptably long. However, the bloody marys didn’t come back on the first trip with the waters. It took more than 5 minutes to receive the bloody marys.

During the meal, the server returned to the table twice to clear plates and ask about needs and another time to refill beverages. A manager also cleared plates one time. This many trips to our table did provide the necessary visits to provide good service, however the server neglected to refill the coffee for one of the guests. Though this level of service wasn’t “bad”, it wasn’t impressive. My wife perceived this as the server not considering to refill her coffee. While the server did ask if we needed anything on a prior visit, a better trained server would ask specifically if the coffee needed refilled, or better yet would have just made rounds with a coffee pot and topped off every coffee cup in the section or even the whole dining room. EVEN better yet, the restaurant could have staffed bus persons to refill coffee, tea and water, in addition to clearing and resetting tables to allow for faster seating. There seemed to be enough servers staffed in the dining room, but no bus persons at all.

Here are some changes I would suggest to Waxy O’Shea’s to improve their service for future Mother’s Days and other busy days. I suggest having two bus persons in addition to the two additional hostesses. Between the bus staff clearing and resetting tables and the hostess staff seating customers quicker, Waxy O’Shea’s could have processed dozens more customers. Using bus staff to also refill teas, coffees and waters would not only increase the level of service and improve customer’s perceptions of service, but it would also allow servers more time to suggest, sell and replenish cocktails. Cocktail service could have been started at the reception area. If the bar is properly staffed and set up for speedy service, the cocktail sales on the day could have likely doubled. Another suggestion would be to set up smaller service stations through the dining room where water and tea pitchers could be kept for quick access. They could also keep a coffee burner on those stations for quick access to coffee. With just a tray jack, tray stand and a table cloth, you can create a very effective service station. One more step I would take would be to prefill glasses with water and ice and have them at the ready to set down as soon as the hostess knows how many patrons will be at a table. When the table is being cleared, a hostess can convey to the bus person that the table needs to be set up for “x” number of guests. When the guests arrive, their waters are waiting and the server can concentrate on selling them add-on beverages like tea, coffee and cocktails.

In all, I think the service at Waxy O’Shea’s was acceptable for a busy day, but “acceptable” should never be good enough. If you want to earn a great reputation, you need exceptional, not acceptable service.

Food

As far as quality goes, everyone at our table was pleased with the food offered at Waxy O’Shea’s Mother’s Day brunch buffet. Most their food, if not all, is made from scratch and well seasoned. The biscuits were light and fluffy and the prime rib was tender.

What I would have improved upon from a food perspective at Waxy O’Shea’s was the presentation of the buffet. The buffet was simply chafers lined up on a table. The salads were in several different types of bowls crammed together on a 4-top. The omelet station was an absolute mess by 11:00 am. I can only imagine what it looked like by the time brunch was over. The prime rib carving station was just as messy. The rib was being carved on a cutting board set inside a sheet pan, with tin foil covering the exposed rib to keep it from getting cold. Visually, the buffet was a disaster.

The first thing I would have done to improve the perception of the food would be to garnish the pans and bowls of food. Creative use of herbs, lettuces, colorful vegetables and fruits can do a lot to enhance the appearance of a pan of food with very little cost.

The next thing to do would be to have their carving and omelet stations moved to a different location. It’s hard to describe a restaurant layout on a blog, but the important thing to convey about the buffet layout is that the carving station and omelet stations were positioned beside the reception area on the opposite side of the area from the dining room. This drove much of the traffic to the stations through the guests waiting at the front of the restaurant. While I didn’t see any major occurrences from our table or while we were at the reception waiting for a table, there was a lot of cross traffic that could have resulted in a spilled and/or broken plate, stains on customers or even a slip and fall accident. Any of these things can pull needed staff and attention from the dining room and affect service and the customer’s experiences. The main part of the buffet was set along a wall inside the bar. A better place for the carving and omelet stations would have been anywhere inside the same room. Tables and seats could have been moved and recovered in the area where the stations were. The flow of the buffet would have been much improved and a lot of risk of potential accidents could have been avoided.

Along with moving the buffet, the overall aesthetic appearance of the buffet could have used a “woman’s touch”, or at least the touch of a create man. Chafers can be elevated slightly to give the appearance of levels. A nice centerpiece can be placed on the table with some flowers in in. Other decorations such as colored beads, fresh flowers, lemon leaf, leather leaf, ribbons or different colored linens can be used to fill space between chafers and liven up the appearance. The salad presentation could be spruced up with some attractive bowls and creative garnishing, different levels and the same decorations. I would also suggest to delegate the constant cleaning of the buffet to one kitchen staff member. This person should have a wet rag at all times to wipe off the excess food being spilled onto the table cloth. Messy spills can then be covered with clean napkins of the same color.

The appearance of a buffet can have a dramatic affect on the perception of the food by the customers. Great food on a nasty buffet suddenly becomes mediocre food. Mediocre food on a beautiful buffet becomes great food. Imagine what kind of impression great food on a beautiful buffet can make.

Summary

The lesson to be learned by this review is not to leave money on the table. With better staffing, a more guest friendly reception, quicker seating, faster bar service and wait staff more focused on selling “extras”, Waxy O’Shea’s could likely have increased their Mother’s Day sales by $2000.

If they take the extra step and improve the look of their buffet, they could move their price from the bargain $14.99 we were charged, up to $25 per person which is still less than other “nice” buffets they are competing against for customers. If they can pump through 400 customers on Mother’s Day with efficient systems, that extra $10 per customer could gross them an additional $4000 in revenue.

Done my way, their brunch could have easily yielded $6,000 more in sales while pleasing more people and earning more repeat business than how it was done. Take what I have observed at Waxy O’Shea’s and apply it to your big brunch days. Don’t forget that days of “guaranteed” traffic like Mother’s Day are a prime opportunity to build your customer database with names you could turn into regulars.

Brandon O’Dell
O’Dell Restaurant Consulting
www.bodellconsulting.com
blog.bodellconsulting.com
brandon@bodellconsulting.com
(888) 571-9068

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