Blog Archives

Keeping it simple: How to create a restaurant concept that can succeed

High failure rates for restaurants. Yes they’re exagerated, but they’re still high. According to recent studies from Cornell and Ohio State universities, 59-60% of restaurants fail within the first three years. As many as 75% may fail within the first five. Why are they so high? For a list of the six biggest reasons, see The biggest mistakes restaurants make, and why they have a high failure rate.

For the purpose of this article, I’m going to talk about a key fundamental in restaurant concept design, keeping it simple.

Big menus with too many items, oversized dining rooms, multi-ingredient dishes, huge liquor selections and wine lists and over decorating. They’re all symptoms of the same problem, overcomplicating your concept.

As a restaurateur, you may find yourself getting bored with traditional menu items. For you, eating in a restaurant might need to be an adventure. You may have to see or try something you’ve never seen before to be impressed. Very well. I’m the same way.

This may be the underlying factor in why restaurant owners routinely go overboard when designing their concepts. They push their own sensibilities on the general public, not realizing that their tastes are the exception to the rule, and not indicative of the tastes of the public at large. Restaurateurs think they need to present every dish possible to make out of the ingredients they already carry. They think carrying 15 scotches instead of 5 will earn them more customers. If you have a larger selection, you’ll appeal to more people, right? Wrong.

Trying to please everyone leaves you unable to be defined. When you have too many colors in your decor, too many styles of fixtures and furniture, and menu items that represent too many styles of cuisine, your customers find it harder to describe you and recommend you. You find it harder to manage your business effectively and market your brand. You’re trying to stand for too many things at once. Cut out all the extras and keep it simple.

Here’s a short list of things you can do to keep your concept simple.

Choose two contrasting but complementary colors to design your concept around. You may use a third neutral color for accenting, but stay away from unneeded detail and too many extra colors in your scheme. To create a solid brand, you need to be more than attractive, you need to be memorable, and that means keeping your color scheme simple. Use these colors to design your logo, signage, marketing, and to decorate the inside and outside of your restaurant.

Keep your menu small. This serves many purposes, some of which are outlined in my article, Creating a manageable menu. A small menu is easier to control costs on, easier to prepare and order for, and easier to provide consistency with. By having a small menu, your service will be faster, your food quality will be better, and you’ll make more money. Keep your menu simple.

Keep your dining room simple. Smaller dining rooms are easier to manage. If you’re thinking of opening your first restaurant, don’t build a huge dining room with 200 seats. A large dining room takes a large management staff and lots of employees to run. If you find that your 80 seat restaurant gets full every night, then build another one. Don’t worry that you’re not building it big enough.

Keep your market simple. Don’t convince yourself that you want all people of all demographics to like your business. It’s not going to happen. By going after “everyone”, you’ll end up with no one. Even if your style of cooking has mass appeal, your location will determine who is most likely to come into your restaurant. Identify those person’s age, income level, sex, marital status and religion. They are your target market whether you like it or not. If your concept doesn’t appeal to the people in your area, then you don’t have a feasible concept and you aren’t likely to succeed. Keep your demographic simple and focused. For more on identifying your target market, read this article.

Keep your menu dishes simple. When you have too many ingredients, and/or too many touches that need to be made to the dish after it’s ordered, before it goes out, you slow down the production of your food. A ticket will only go out as fast as it’s slowest dish. Keep your food simple and easy to produce. Let the ingredients be the stars and don’t lose them in a mish mash of flavors.

Don’t try to carry every liquor any possible customer could want. If you don’t have Glen Fiddich, but you do have five other single malt scotches, any reasonable customer is not going to overlook your restaurant next time because you don’t carry their particular brand, and for the one in 1000 customers who will, so what. It is more important for you to have a manageable inventory and a selection small enough for your staff to become knowledgable on than it is to try and please every customer’s sense of taste. I’ve got a secret for you. Even if you carry 30 different vodkas, you’ll still end up with someone requesting one you don’t have. Keep your liquor and wine selection simple.

While this is the end of this short list, it’s not the end of the application of this fundamental philosophy of restaurant concept design. Any time you have the opportunity to simplify your concept, take it. You’ll end up with something that is simpler to manage, simpler to market, and simpler to turn a profit with.

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

About these ads

Does your restaurant have an identity?

Who are we?
What do we want our restaurant to be known for?
What style of service do we offer?
What kind of food do we cook?
What can our customers get from us that they can’t get anywhere else?
How can we make our customers FEEL?
What is our color scheme?

These are all questions you should ask yourself about your restaurant long before you open your doors. The answers to these questions will determine whether potential customers will ever make their way through your doors. They need to know the answers before they will make their decision. Planning to answer them after they get to your restaurant is not good enough. Answering these questions for your customers is what marketing is all about, not promoting discounts, coupons and specials. Answering these questions, in addition to getting your customer’s feedback on your performance, IS communicating, and a lack of communicating with customers will close a restaurant faster than an “F” from the health department.

There are many ways to answer these questions. All of them are forms of marketing, and work together to make up your marketing plan.

Who are we?
What do we want our restaurant to be known for?
What style of service do we offer?
What kind of food do we cook?

These are all questions that can be answered without direct communication. You don’t have to send everyone in the town a personalized letter to tell them what you do (though that would be effective too) if you design your name, logo and decor correctly.

Your name itself, and the font you use should answer many questions for your customers. If your business is “Joe’s Crab Shack” and it’s written in a silly or fun font, your customers can deduce without asking that you are a casual seafood restaurant specializing in crab, that you are most likely “kid friendly”, and that you are probably a sit down restaurant, as “crab shacks” usually are. This is a name that communicates who you are and what you do very well. It answers questions, and people who are looking for that type of restaurant will feel very comfortable making the decision to eat there.

A logo can convey many of the same things a name does. The words and the font the name is printed in is a major part of the logo. In addition, a logo can reinforce your identity by using pictures or symbols that also say what you do or sell. Keeping these pictures or symbols simple and easily recognizable is key. A person should be able to recognize a logo at a glance. It should convey everything it needs to convey in less than half a second, as that is all the attention it will be given. If a logo is too busy, uses too many colors, too detailed of graphics, or has too many words, it’s not as likely that a person will get the message they are supposed to out of the logo. A busy logo is like a long winded storyteller. Though they think they are communicating more effectively because they are going into greater detail, the average person’s attention span isn’t near long enough to absorb all the information they offer, so much of the message is lost. Another key element in making a logo easy to remember is using a basic geometric shape in the design.

What can our customers get from us that they can’t get anywhere else?
How can we make our customers FEEL?

These are two often overlooked aspects of running a successful restaurant. Most new restaurateurs see how other restaurants run themselves, and they think it looks easy. They convince themselves that all they have to do is to do the same thing, only better, and that this will make them successful. The problem with this philosophy is that it doesn’t give your customers any reason to eat at your restaurant than they have to eat at the next one down the road. You’re the same. You think your food is better. All your competitors think their food is better. Both your messages tell your potential customers that YOU are the best at what you do, but by having the same message, you are essentially the same in the eyes of those customers. You need a different message, and the easiest way to have a different message is to offer something your competition doesn’t.

When we’re talking about differentiating you from your competition, we’re not talking about having a couple dishes different on your menu. That’s not enough. You need to have a conceptual difference between you and the restaurant down the street. You need to offer not just food, but an experience they can’t get there. Your concept has to be deeper than your food, because good food and service isn’t a special reason to dine with you, it’s the minimum expectation your customers have for the money they are spending. So your food is great. So what, it’s supposed to be!

What you have to do to differentiate yourself is to create an emotional connection between yourself and your customers. You need to make them FEEL something! Choose a particular emotion to build your concept around. Hardrock Cafe offers “nostalgia”. McDonalds was built on “convenience”. Applebees gives their customers a “neighborly” feeling. Hooters feels “sexy”.

Strong brands are built around strong emotional bonds with your customers. Long after people forget what they ate, and who served them at your restaurant, they will remember how eating at your restaurant made them feel. Then, when they get an urge to feel that way again, they will think of you.

What is our color scheme?

The easiest way to get people to identify you, your building, your menu and your marketing is by using a set color scheme. Choose two to three colors, and possibly a pattern, to use in the design of everything you do. Use it in your logo, your signage, your newsletter, your menu, your indoor and outdoor decor, and anywhere else you can. Having a color scheme makes you easy to identify and easy to find.

Whether you are just entertaining the thought of opening up a restaurant, or have been open for 30 years, ask yourself all these questions. Then ask some of your customers. If they can’t answer these questions, your concept isn’t communicating well with them. If they aren’t having the answers to all these questions effectively communicated to them, imagine how hard it is for them to communicate who you are and what you do to others. Remeber that “word of mouth” advertising you thought you were going to build your business with? There’s a reason why it’s not happening. There’s no reason why it shouldn’t though. Take these questions and build an identity for yourself! Let people know who you are! Communicate! Make your customers FEEL! You’ll soon have more business than you know what to do with.

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

The biggest mistakes restaurants make, and why they have a high failure rate

The restaurant business is tough. Everyone in it knows it. Everyone looking to get in it ignores it.

The cold fact of the matter is that opening up a restaurant may be one of the worst investments you could make with your money. That’s a horrible, sobering statement coming from someone like me who’s in the business of helping restaurants succeed, but it’s the truth. Most restaurant fail. Oh, the failure rate isn’t the “90%” you may have heard from friends and family, but according to Cornell University, and the National Restaurant Association, 60% of restaurants fail within the first three years of operation. After five years, the number might be as high as 75%.

Uggghh!

Why the hell would anyone want to get into this business with a failure rate like that? Risk and reward my friend, risk and reward.

As with other high risk investments, opening the right kind of restaurant in the right kind of market can pay off very well financially. Some of the better chains can see average net profits approaching, and even exceeding 30% of sales. That’s a great return! While the risk of opening a restaurant is huge, the reward can also be huge. If you happen upon the right concept, and manage it well, you could see your investment paid off in 3 years or less, and have lots of residual cash flow to boot.

Certainly there has to be some sort of magic formula you can follow to make sure your restaurant gets these incredible returns, isn’t there?

Unfortunately….. no. There is no magic formula. Experienced operators have businesses go belly up every day, and just as often, novices open up with no clue of what they’re doing, and make a killing. While experience does give you a better chance of succeeding in the high risk world of restaurant ownership, I’m going to give you some points of consideration even more important than experience.

These are the top reasons why restaurants fail.

1) No unique selling point

Your customers need a reason to come to you instead of your competition. While I know you’d love to think that your food is so good that people will line up out the door to eat it, you’re mistaken, just as millions of mistaken restaurant owners before you who are now out of business.

Good/great food and/or service is NOT a unique selling point. “Isn’t that the reason people go to great restaurants?”, you ask? No, it’s not. Now, I don’t want to understate the importance of great food and service, but it isn’t the reason someone is going to try your restaurant. Having great food and/or service is not a UNIQUE selling point. While you may honestly believe that your food is better than your competition’s, I guarantee you your competition thinks the same thing, and they are telling everyone they know. This means that your profession that your food is better sounds just like the message of every one of your competition. THAT is not unique. If you don’t believe me, just step back and listen to all the other restaurants out there. They make a lot of the same claims, don’t they?

If you want to offer something truly unique, you need to move past food and service. Yes, you need to have great food and service, but by having great food and service, you are only meeting the minimum expectations of your customers. You are not giving them a reason to eat with you that your competition isn’t claiming as well. What you need is something original to sell. Something other than the best food or the best service. Your need a UNIQUE selling point.

Sonic offers “nostalgia” with their 50’s style drive-in and car hops.

Burger King offers “accomodation”. “Have it your way!” they tell you.

Applebees markets themselves as “Your favorite neighbor”. They put up local memorabilia when possible, and build in smaller towns. They use stained glass fixtures and tacky decor you might find at that old couple’s house next door.

Hooters sells “sex” with cute waitresses in tight tops and shorts.

A truly unique selling point isn’t the best food or service. It’s an emotion you offer to people, whether it be nostalgia, accomodation, sex or something else. People remember emotions long after they remember food and service. If you make a real, emotional connection with your customers, they will remember how you made them feel for decades to come, long after they forget what they ate and who waited on them. Food and service can support a unique selling point, they just can’t be a unique selling point.

2) Too large of a menu

This is a VERY common killer of independent restaurants. As an independent operator, you’ll get pressure from customers to have certain items on your menu. You’ll also have pressure to keep certain items when you make a menu change. You’ll get requests. You’ll get complaints when you change things.

You have to realize that this is all part of the process. YOU CAN NOT PLEASE EVERYONE. It’s a waste of time to even try because you’ll lose your own identity in the process.

Large menus create several problems within an operation:

  • Large menus lack focus. When you try and offer EVERYTHING your customers like, you aren’t giving them more choices and more reasons to come back, you are confusing them. They don’t know what your specialties are, what you supposedly do well, what they should order, and how to describe you to their friends. If your message is focused and easy to convey, more of your customers will convey your message.
  • Large menus take longer to order from. The more choices you have on your menu, the longer it takes each table to peruse that menu, and the longer it takes for them to order. For every minute they are NOT ordering, you are NOT making money for the seat they are occupying. Take this statement to heart if you want to be successful in the restaurant business: You will only ever be as successful as your peak period of service. 80% of revenue, and 100% of profit is made during peak periods. Anything that limits your ability to serve customers and collect money during your peak periods is limiting your potential for profit.
  • Large menus require more inventory items. The more items on your menu, the more ingredients you need to buy to make those items, and the more items you’ll have on your shelf. Every item on your shelf represents a possibility for loss. It can be stolen, it can be mishandled, mis-prepped or stored incorrectly and spoiled. The less inventory items you have, the less waste you’ll have. The less waste you have, the more profit you’ll have.
  • Large menus require more equipment and personnel to produce. The more items you have on your menu, the less opportunity your staff has to cook multiple orders at once. Less multiple orders means more burners, grill space, fryer grease, and hands are required to produce the same number of dishes. All these additional tools cost you money.
  • Large menus mean longer ticket times. When you have too many different dishes cooking at once, and less multiple orders in the same pans, it means more time to produce whatever is being ordered. Beyond the fact that Americans are no longer willing to wait 45 minutes to have their dinner prepared for them, you should be thinking about how long ticket times limit your ability to process people through your dining room. The longer it takes to serve each table, the less tables you can turn during peak periods.

It is inherent in people to assume that somehow offering people more will make you appealling to more people. It’s just not true. When you try to be all things to all people, you end up being very little to very few. People need to know what you’re about. Keep your menu focused.

3) All talent and no brains

So you can cook. Your food is fantastic, and everyone you cook for confirms it. You’re ready to open a restaurant then, aren’t you?

NO!

Not to burst your bubble, but a lot of people are excellent cooks. Many of them have original ideas and fantastic food that no one has ever offered in a restaurant before. That doesn’t make them, or you, a good candidate to open a restaurant.

Owning a restaurant isn’t about cooking. It’s not about having good food. While those things are components of a good restaurant, they are not the reason for it’s success.

Once you have the perfect menu for your market, knowledgable staff to serve your market, a trained line to reproduce your food, and plenty of booze to ply your guests with, you’re 1/3 of the way there. “WHAT?”, you say? “That’s it! I’ve got all the pieces in place! I’m ready to go!”. No, you’re 1/3 of the way there.

What most new restaurant owners don’t realize is that having good food and service is only 1/3 of the battle. The other 2/3rds include marketing their restaurant and managing their restaurant. We’ll talk about marketing after this, but managing is a very important piece to the puzzle that most new restaurant owners overlook. Beyond making good food and selling it to people, you need to know how to collect data and analyze your business to make sure you have the necessary information to run a profitable business.

You need to know:

  • How many people I’m feeding each day/shift/hour
  • What items they’re buying, and how many of each
  • What gross profit those items are contributing
  • What those items should have cost me to sell
  • What my actual cost of selling those items is
  • What my labor is compared to my budget
  • How many labor dollars I spend per sales dollar
  • How many labor hours I spend per sales dollar
  • What I purchase each day, and how to categorize each purchase for analysis
  • What my sales are compared to what they should have been
  • What my profit and loss is for EACH WEEK

That’s a lot of things to worry about, and that’s only the tip of the ice berg. There are many other managerial concerns. This is why I’m telling you that your great ideas for a menu, and incredible talent for cooking will only get you 1/3 of the way to operating a successful restaurant.

4) Poor pricing strategy

Strategy? Yes, strategy. You need to have a method for pricing your menu. You can’t just look at what everyone else is charging, and charge the same. The financial picture of your business is different than every other business out there, and you need to have a pricing strategy that takes your unique financial situation into account.

When considering pricing strategy, I first need to tell you what is being done out there now, in restaurants all over the country, even the world, because the point of this article is to tell you what mistakes everyone else is making.

The predominant method to pricing menus in the food service industry is to use a budgeted cost percentage to formulate prices that will yield that budgeted percentage when the sale of all your different items is taken into account. This method assumes that if you sell X dollars of food, and Y percentage of those dollars go to pay for the food, then you will get Z profit.

The major problem with this pricing method is that most operating expenses within a restaurant do not fluctuate as a percentage of sales. The rent of a restaurant is not always 5% of sales. If sales are down, the percentage goes up, if sales are up, the percentage goes down. Simply achieving a target food cost percentage does not guarantee that a restaurant will make the profit they priced for.

The common sense alternative to pricing by a target percentage is pricing according to the markup you need to cover the expense of doing business, leaving you with a profit you find acceptable. This method is called pricing by gross profit dollars. The basic principle of this method states that you can assume, through calculation, how much every person that walks through your door will cost you to serve, and that with this number you can price your menu to yield an average gross profit greater than the cost necessary to serve every person who walks through your door, in addition to your needed profit. Adjusting these prices according to market price points yields a gross profit that will cover your operating costs, your product costs, and the profit that you decide you need to make for this venture to be worth your time.

Pricing by gross profit is the only method of pricing that takes into account every cost of operating a business, including profit.

5) No marketing skill

This may be the biggest restaurant killer of them all. I’ve talked to hundreds of restaurant owners in my day. I have yet to meet ONE that didn’t underestimate the importance of marketing. As I stated earlier, marketing is 1/3 of the reason you succeed or fail. I may even have to give marketing the extra 1% of the 100% possible when splitting reasons for success into 1/3rds, and say that it is even more important than good food and service, or management skill.

If I have a catch phrase about marketing, it’s this:

“No matter how great your food is, if no one knows, it won’t sell.”

The worst fallacy I see new restaurant owners buy into, is that they can market their new restaurant through “word of mouth”.

Yes, word of mouth marketing is fantastic. New customers are more likely to act on the recommendation of a past customer than they are an ad by you. That much is true.

The problem with assuming word of mouth marketing is going to make throngs of people do the Tennessee Waltz through your door is that when you’re new, NO ONE KNOWS ABOUT YOU! You CAN’T depend on word of mouth marketing until you’re established!

For this reason, a marketing program driven by “word of mouth” marketing for a startup restaurant is a recipe for failure. You need a better plan.

While I won’t go into great detail as to what that plan should include in this post (you can certainly pay me to tell you though), I will tell you that the absolute best marketing tactic you can employ in any retail business or restaurant, is to gather contact information from EVERY person that comes through your door, and market to them. Marketing to existing customers represents an exponentially greater opportunity for increased sales than spending dollars trying to reach new customers. These existing customers are a better source for new customers than any marketing method out there targetting people who haven’t been in your restaurant and aren’t already familiar with your product.

6) Bad negotiation skills

Most new restaurant owners don’t know what they SHOULD be paying for the services necessary to successfully operate a restaurant. That’s a problem.

Every vendor out there, whether they be a food distribution company, point of sale software provider, chemical company, paper goods, linen, liquor, beer or wine distributor, or a credit card processor, has clients who get great deals, and clients who get taken advantage of.

Normally, the difference between a vendor giving you a good purchase rate, and taking advantage of you, is your knowledge of the goods your buying, and what other people are paying for them.

Two thing are a given in negotiating a purchase contract:

  1. If you don’t know what other people are paying for the same goods you’re buying, you’re not getting the best price
  2. If you aren’t making your purveyors COMPETE for your business, you aren’t getting the best price

While there are other negotiation tactics to consider when trying to get premium pricing from a vendor, these two are the most important to remember.

Know this. There is a sucker in every negotiation. If you don’t know who that sucker is, it’s you.

I realize there are other important factors to operating a successful restaurant. These are the six that immediately come to mind while writing this article. I see these six problems in most restaurants and food service ventures I see fail. Keep these six in mind, and maybe, just maybe, you won’t become one of the majority of restaurant owners that fail.

Brandon O’Dell
O’Dell Restaurant Consulting
web: www.bodellconsulting.com
blog: blog.bodellconsulting.com
brandon@bodellconsulting.com
office: (316) 361-0675
cell      (316) 789-5909

Do’s and don’ts for startup restaurants – vol. 2

Do:
Concentrate your marketing efforts and dollars on people who already know you.

Don’t:
Try to be all things to all people. Find your niche.

Do:
Incorporate a few “signature” items into your menu. Having items that your competitors don’t have gives your customers a reason to come to you instead of them.

Don’t:
Depend solely on word of mouth marketing. Word of mouth marketing only works AFTER a lot of people know who you are.

Do:
Update your prices at least 3 times per year. Small, incremental price increases are likely to go unseen by your customers. Wait too long, and you’ll have to significantly increase all your prices at once, which WILL be noticed. Those frequent small increases are better for cash flow than occasional big increases.

Follow

Get every new post delivered to your Inbox.

Join 1,815 other followers

%d bloggers like this: