Some great points made here as to why the movement to ban tipping is misled. Another major point I would like to throw in is that tipping is the single most direct way for a patron to get the most money possible to an employee of an establishment. The Fed and states have laws restricting what businesses can do with money left as a tip for an employee. By forcing pay to run through the whole restaurant system, we add overhead and pieces of those dollars start disappearing to pay for things that don’t directly benefit the employee. Leave tipping alone. It’s in everyone’s best interest.
O’Dell Restaurant Consulting offers operations and strategic consulting services for small to medium sized food services and restaurants. Learn more at www.bodellconsulting.com. Download helpful restaurant tools and spreadsheets at our download store.
Here’s a great article from our favorite menu design company, Hot Operator. The article teaches you how studies have shown your customers eyes to move across a one, two or three page menu and helps you decide where to place your top sellers.
Proper menu item placement on a menu design can increase sales from 5-15% in my experience.
Here’s an article from a Kansas City circular about a chef restaurateur who decided his ego was more important than his success. Make sure to read the comments as the owner replies and reveals all you need to know about why he has had three consecutive failed restaurants.
The first rule of opening any business is to make sure you are offering a product or service your customers want to buy at a price they think is a good value. If you expect people to spend their hard earned cash in your restaurant, you have to give them want THEY want, not what you want to give them. A little humility and a smile doesn’t hurt either. If you can’t be hospitable in the restaurant business, you can’t be a successful restaurant owner.
I don’t post this to pile on to a restaurant owner whose business failed. It sad when anyone’s dream is smashed. However, the failings of others present a great learning opportunity for the rest of us.
Here’s an article from Bloomberg on Subway’s fastest growing competitors in the profitable “sub sandwich” market. Better run sub shop chains can earn around a 30% profit margin, compared to an average 10% margin earned by fast food restaurants as a whole.
This doesn’t come as a surprise to anyone who reads my blog on a regular basis, but I’m shocked (sense the sarcasm) that things aren’t going well financially for Groupon. Rather than rehash an entire article, I thought I would refer you to it to give it a read if you are in the mood for a little Groupon bashing.
Groupon CEO fired | click for Yahoo Finance article
What happens when you sell a product or service that “kills” your customers?
Just ask recently fired Groupon CEO Andrew Mason. I don’t know that he has the answer, but I do.
Groupon was a bad idea from the start. They talk businesses into selling their goods or services for half the cost of their normal price. Of that half price that is collected, Groupon keeps half and the business keeps the last half, minus any charges for processing fees on both their cut and Groupon’s cut, which equals about 7% of the business’ portion.So let’s do the math. Groupon sells a 50% off deal to your restaurant at $20. Groupon keeps $10 for every one sold. You keep $10 minus 7%, leaving you with $9.30.
With that $9.30 collected from the customer, you have to give them $40 worth of goods or services. If you are like most restaurants, just your cost of goods on $40 eats up $10-16 (25-40%), resulting in a loss of anywhere from $.70 to $6.70 for EVERY Groupon deal sold. That’s before you calculate in additional paper products, cleaning supplies, extra staff, and lost revenue from seats that are taken away from full price customers, among other expenses.
All this turns Groupon into the single most expensive tool there is for marketing your restaurant. This a bad, bad business model. A company that promotes itself by claiming they can bring you new business ultimately ends up putting many of it’s own customers out of business, or their customers wisen up and realize Groupon is a horribly expensive way to market and they stop using the service. Either way, Groupon is cannibalizing itself and it’s customers. Groupon claims the payoff is new, regular customers for the business. The reality is that the customers are loyal to Groupon, not the business, and they follow the next deal to the next restaurant.
No business model is going to succeed long term by killing it’s customers unless it has a never ending supply of new customers. For Groupon, that means it’s hey day in the US is over. It has run it’s course here and most businesses are too smart to fall prey to it’s predatory business practices. Groupon will not rebound from it’s current woes in this market. It’s only hope is to expand into untapped markets where business owners are not aware of the dangerous effects of using Groupon. Groupon is the first daily deal model to fall because it was the first in the market. It will not be the last however.
Ultimately, nobody wins with Groupon, except the people who buy the Groupons. Check out the linked article from Yahoo Finance about the firing of Groupon CEO, Andrew Mason. If you own Groupon stock, I’m sorry for your loss, but cut your losses and dump it now. It’s not coming back.
Brandon O’Dell is an independent restaurant consultant and owner of O’Dell Restaurant Consulting, a restaurant consulting company that offers operations and marketing consulting for independent restaurants and small chains. Learn more at their website or visit their webstore to find Excel speadsheets and Word templates to help you build a better restaurant business.
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.
I took a drive by Poco’s on the Boulevard today to snap some pictures of Robert Irvine’s Restaurant Impossible crew in action. Poco’s is a Latin restaurant that is near Kansas City, Missouri’s hispanic neighborhoods, and competes with a lot of great Mexican restaurants located just down the street.
The “rear” view of Poco’s in Kansas City, MO and the Restaurant Impossible tents
When I drove up to Poco’s I expected to see a beehive of activity. Based on the show, the two day makeover is a mad dash to get finished, with Chef Robert yelling that they’ll “never get done on time”. That’s not at all what I saw though. What I witnessed was what appeared to be an organized and calm effort, with most the people helping either sitting or standing around. No running or hurrying and no stress. At least not outside the restaurant. Behind the restaurant, I saw servers in Poco’s uniforms sitting and talking. From across the street, I couldn’t tell what they were doing, whether it was training or helping with the remodel or something else.
As a restaurant and food service consultant, I’ve always wondered what happens when the Restaurant Impossible or Ramsay’s Kitchen Nightmares crew leaves. The restaurant has a new look, the menu is smaller, fresher, and likely higher priced, there is a boost in business due to the publicity and the owners have a new energy to “make it work this time”. My real concern for these restaurants is what happens next. Are the owners left with their same bad habits, only to revert to what is easiest? Do they continue to cling to the old crowd of customers that wasn’t enough to keep them in business, and alienate all the new potential customers by reverting to old habits and menus? Do they have new organizational systems in place or someone teaching them what information to record and how to organize their restaurant’s data to make sure they can be successful in the long run? Is there support after the reboot?
I don’t have the answers to any of those questions, but I do know one thing. More restaurants fail as a result of bad management practices than bad food. That doesn’t mean you can plan on being successful with bad food. The food is obviously very important. It just means that having good food isn’t enough. You have to have management systems in place and a process for tracking and saving important information about your restaurant, to allow you to make better, more informed decisions. You also need to have someone to talk to that knows what successful restaurants are doing that you aren’t, outside of the food.
Most of the Restaurant Impossible staff sitting outside of the restaurant
These restaurants that receive free makeovers from the likes of Robert Irvine, Gordon Ramsay, or the Restaurant Makeover show are getting an incredible gift. The type of remodels and assistance they are getting is worth many, many times the $10,000 budget these shows stick to. The publicity they are getting is absolutely priceless. I don’t expect to be able to get into Poco’s for the next month. Especially in a food crazy town like Kansas City. I just hope the makeover shows are doing something to provide these restaurants with some support after the makeover. THAT is where the battle will truly be won or lost.
Update 8/10/12 – Robert Irvine answered some of the questions raised in this article via Twitter. See his replies here.
Brandon O’Dell and O’Dell Restaurant Consulting provide marketing and operations consulting services to small and medium budget independent restaurants and small chains, and offers downloadable organizational tools on their website. Brandon also operates a home chef service in the Kansas City and Wichita, KS metropolitan areas. Visit visit www.bodellconsulting.com and www.friendthatcooks.com for details.
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