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How do you control food and liquor costs?
This is probably the most often asked question by restaurant owners, managers and chefs. If you are smart enough to be calculating your actual food and liquor costs by performing a physical inventory, then you are half way there.
This article will discuss a very important part of controlling food and liquor costs, one that most restaurants do not do. To many of you, this will be new information. To many others, this is something you’ve heard myself and others talk about, but have never known how to actually perform the task. This article is about ideal costs, why they’re important, how to calculate them and what to do with the information.
What are ideal costs?
Ideal costs are the dollars that the product you’ve sold should have cost you to sell. They tell you that if you’ve sold 20 hamburgers and 10 steaks, that it should have cost you “x” amount of dollars.
Why are ideal costs important?
Ideal costs are important because they give you a scale to measure your actual food costs against. When you perform a physical inventory at the beginning of a period and calculate it’s value, add your purchases for the period, then subtract the value of your physical inventory for the end of the period, you are calculating your actual costs. This is the amount of dollars the food you sold during that period actually cost you to sell. This number is imperative to know if you want to control your product costs. However, most operators make the mistake of using this number all by itself to determine if they have cost problems. They only compare it against a budgeted cost percentage. With only doing this, there is absolutely no way to know if your actual cost is good or bad, only that it is higher or lower than some arbitrary budget number. It’s relativity to the budgeted number does you no good because your budget number does not take into account your sales mix. If you set your budgeted food cost for example, at 35%, and your actual cost is 40%, many chefs/managers/operators will assume there is a problem with the costs. The error with this assumption is that a simple change in your sales mix could have created this variance, and there may be absolutely no problem with waste, theft or any other issue. As a matter of fact, what you’ve experienced could be a desirable situation where you’ve sold a higher number of high cost percentage, high gross profit menu items during that period. This would cause your actual food cost to be higher, but it will also drive your profit higher, creating a situation where you might actually reprimand your staff for doing something good! After all, you’d rather sell 5 steaks that cost $10 and sell for $20 ($50 gross profit) than you would 5 hamburgers that cost $2 and sell for $8 ($30 gross profit), wouldn’t you?
How do you calculate ideal costs?
To calculate ideal costs, you need to know how much your menu items cost to make, whether they are food items, liquor drinks or beer (luckily the recipe for a bottle of Bud is pretty easy to cost out). This requires that you make recipes for all your food items, and calculate costs per pour for all your liquor and tap beer. Bottle beer costs what you buy it for. If you know how, liquor and beer costs can be calculated right in your inventory spreadsheets. I have spreadsheets that make these calculations automatically when you enter in bottle and keg costs, in addition to pour sizes. Food items should have a recipe spreadsheet created for each of them. To make recipe calculation easier, you can link recipe spreadsheets to your inventory spreadsheets which will update your costs as you update your inventory prices. If you don’t know how, just do the math by hand and update your recipe costs at least every six months, or you can email me at firstname.lastname@example.org to help you.
Once you know what every item you sell costs you, you have to track how many of each item you sell. I suggest using a spreadsheet to track these numbers to keep things organized. When you know how much of each item you sold for a period, and you know how much each of those items cost you to sell, you can multiply those two numbers together to come up with an ideal cost for those items sold. This is what those items should have cost you to sell.
What do you do with all this information?
When you calculate your ideal costs for a period, and you also have performed a physical inventory and calculated an actual cost for the same period, you have the information to truly control your product costs. Convert your ideal costs to a cost percentage by dividing your ideal cost by your sales for the period. Convert your actual costs to a cost percentage by dividing your actual cost by your sales for the period. Compare these two percentages. There should be no more than a 1.5% difference between the two. The smaller the better. If you have a larger variance, you know that you have product getting wasted or stolen, unless there is an error in your calculations. Without using ideal costs to compare actual costs to, you may think there is waste or theft when there isn’t.
Comparing ideal and actual costs is an incredibly powerful cost control tool for your business. You can learn to know when you have a problem, or when you just may need to raise prices.
Not every operator, chef or manager has the ability to create the spreadsheets necessary to calculate ideal costs. To save you time and provide you with a cost control tool that can save you thousands of dollars, I’ve already created this tool. You can visit my webstore at http://www.bodellconsulting.com/webstore.html to find a downloadable file with spreadsheets for tracking your sales by item and calculating not only your ideal food costs, but also your ideal liquor, beer and tobacco costs. If you need help setting up your spreadsheets, you can reach Brandon O’Dell at 1-888-571-9068 to purchase telephone consultations.
If you would like to purchase the Ideal Food, Alcohol and Tobacco Tracking Spreadsheets directly, just follow this link. We process payments through Paypal. If you do not have a Paypal account, simply follow the “continue” link next to the credit card icons on the bottom left of the page:
O’Dell Restaurant Consulting
Quick tips – Update your menu often
You can greatly improve your cash flow by adopting a policy of smaller, more frequent price increases instead of waiting for a year or longer before raising prices a larger increment.
Use this simple example to catch my drift:
Chicken tenders $5.99 from January 2008 – January 2009
Price raised to $6.99 after January 2009
4000 orders of chicken tender sold during whole year
$23,960 in sales for year
Chicken tenders $5.99 from January 2008 – March 2008
Chicken tenders $6.29 from April 2008 – July 2008
Chicken tenders $6.49 from August 2008 – October 2008
Chicken tenders $6.79 from November 2008 – January 2009
Price raised to $6.99 after January 2009
4000 order chicken tender sold during whole year, 1000 order per quarter
$25,569 in sales for year
By not waiting to raise the price, you gain an additional $1,609 in profit for the year off one menu item. You also help mask the price increase by doing it incrementally. Your customers are much less likely to notice $.20-$.25 increases compare to a $1 increase.
Pricing food – Why you’re doing it wrong and how to fix it
One thing I’ll never forgive formal culinary schools for, is teaching new impressionable would-be chefs to use a budgeted cost percentage to price food menus. Chain restaurants share an equal responsibility for perpetuating this bad practice by focusing their managers on food cost percentages without letting them in on the secret that the cost percentage is a management tool, not a pricing tool.
Though most culinary programs teach many different methods for pricing food, every culinary student seems to emerge from the Culinary Institute of America or Le Cordon Bleu believing in the world of restaurants, all they have to do to be profitable is serve great food and deliver a 33% food cost, or is it 25%, or 35% or 30% or 19%? The truth is, hitting a budgeted food cost does nothing to guarantee there will be enough money left over from the sale to pay for things like labor, rent, insurance, linens, smallwares, uniforms, utilities, taxes, etc, etc, etc. Hitting that cost percentage really means nothing. Further, not hitting it only means, “I should give things a closer look.” It doesn’t mean there is a problem. On the contrary, a high food cost could mean you’ve been selling a lot of high cost items that contribute more gross profit per sale. Are you going to make more money selling 50 hamburgers priced at $6 that cost $1.50, or 50 lobsters priced at $30 that cost $15? As long as there isn’t a significant increase in the overhead of serving the lobster, gross profit dollars win every time. You don’t want to sell the item with the 25% cost and $4.50 gross profit, you want to sell the item with the 50% cost and the $15 gross profit. Rather than comparing the food costs, you should be comparing the gross profits from each item. Obviously, if you have $15 left over from the sale after paying for food (gross profit) compared to $4.50, you’re going to have a lot more money to pay your overhead and turn a profit.
If you want to create prices in your restaurant that guarantee you’ll have enough dollars left over after paying for food, you’ll need to make three important considerations:
- Market price point – What does your market consider a fair price for the food you are preparing, served in the atmosphere you offer?
- Menu item cost – I know I said you shouldn’t use cost percentages. That doesn’t mean you don’t include the cost of the food into the price. You need to keep up-to-date recipe dollar costs for every item on your menu, and use those costs to figure into your pricing.
- Needed gross profit – What does every person who walks through your door cost you to serve? You have a lot more costs to cover than just food. That’s just a fraction of the picture. You must consider every expense of running your business when pricing menu items, including the profit you need to make.
I guess now the question is, “How do I price by gross profit?”.
I’m glad you asked.
Market Price Point
You can’t throw prices out there, whether based on cost percentages or gross profit, without considering what your market is already paying for those products elsewhere. Just like your potential customers, you must consider what other operations are charging for the same type of food, or even the same dishes, that you are offering. If you are going to charge more for the same dish than your competitor down the street, you have to be able to justify your price with added value. Added value could be larger portions, more exotic ingredients, better atmosphere, better location, live entertainment or something else. It could also be the promise and delivery of a unique selling point that your competition doesn’t have.
Whatever your prices, they must offer value to your customers. If your customers don’t feel your food is worth what you’re charging, you won’t have enough of them to make money no matter your pricing method.
Menu Item Cost
How much does each menu item cost you to make? Ingredient costs go up all the time. When is the last time you updated your menu item costs? Without knowing exactly what a menu item costs you to make, and how many dollars you need to add on to the price to pay for the ingredients, you can’t possibly come up with prices you KNOW are going to make you money.
The easiest way to track recipe costs (menu item costs) in my opinion is with Microsoft Excel spreadsheets. While there are many commercial food costing and inventory programs out there that will help you cost out your items, many use costing formulas based on valuation methods I don’t endorse, or require too much input to keep prices up-to-date. Some do have the capability of linking directly to broadline vendor’s invoicing systems to update prices automatically, but most smaller vendors don’t have this capabibility and you’re still left doing a lot of extra manual input. For my money, there is nothing simpler, less time consuming and easier to use than Excel spreadsheets. That doesn’t mean you shouldn’t use other inventory and costing tools. Any effort you make toward calculating recipe costs and inventory is going to pay off. Even the more expensive softwares will make you money in the end.
Don’t make the mistake of getting lazy with your recipe cost tracking. Many operators only price out menu items when they’re making a menu change (which are normally too few are far between). Between changes, they don’t see how the cost of ingredients is impacting certain menu items, and without that information they don’t have the urgency to make the necessary pricing changes needed when they are needed.
Needed Gross Profit
This is the most important consideration in setting menu prices. You must know what your guests cost you to serve. Without knowing what they cost you to serve, you can’t know how much money you need from each of them to pay all your bills and make a profit.
Look at your financial picture this way. Your food costs make up anywhere from 20-35% of your financial picture in most restaurants. Depending on your labor costs, your food cost could be the largest expense of running your business, and it needs consideration when forming menu prices. BUT…… What about the other 65-80% of your financial picture? It’s not all profit. Most of that picture is expenses other than food cost, and if you’re lucky a little profit left over. Doesn’t it go to reason that you have to include those costs in your pricing? Of course it does. Without knowing those costs are covered, you can’t know you’ll make money.
Before you can know how to add gross profit into a menu price, you have to know how to calculate it. Here are some explanations to try and illustrate how to calculate a needed gross profit per person. The needed gross profit per person is what you add to your recipe cost to arrive at a menu price. Unlike the menu price, the needed gross profit per person is a fluid number. Since it is important to keep menu items within the price point of your market, you will likely have to increase the gross profit you add to some items, while decreasing it on other items. It’s only important that the end result gives you an average gross profit per person that delivers enough gross profit to pay the bills.
You can start to calculate your needed gross profit by looking at your financials and customer count records. It’s best to use financials from months where you achieved as many of your financial goals as possible to establish your needed gross profit numbers. You can use an average of all months by using a year-end profit and loss statement. From your P&L, you need to find how much all your operating expenses for the year were without including product costs. This is your overhead. To this, you’ll add the ideal profit you should have made during that time period.
Total expenses for year – product costs + ideal profit = Total needed gross profit
Once you know how much gross profit you would have needed to collect during the last year to make the profit you should have made, you have the beginnings of your pricing method. Before we go any further, you need to take into consideration any inflation or cost increases you can assume for the following year. Operating costs will always go up, and you need to price for those cost increases. If you’re smart, you’ll re-price your menu every 3-4 months to make sure those costs are covered, but that is another article. To be on the safe side, I add a 5% cost increase into the total needed gross profit to come up with a target for the next year. With the ever increasing cost of gas, you could either add in a higher buffer, or do what I suggest and evaluate your pricing every 3 to 4 months. It’s much better to do regular, small increases to some menu items than annual large increases to all of them.
Total needed gross profit x cost plus increase (105%) = Total needed gross profit (adjusted for next year)
Now that you have your new needed gross profit, it is very easy to figure out how much of it you’ll need to collect from each person to cover all your expenses. That is, assuming you track how many people come into your restaurant. If you don’t, you need to start doing it now, and you’ll need to estimate how many covers you did for the previous year. Estimate low to be on the safe side.
To find out how much you need to collect from each person, simply divide your total neeeded gross profit for the upcoming year by your total customer count for the last year.
Total needed gross profit ÷ previous year customer count = Needed gross profit per customer
This number is simply the amount of gross profit you would have had to collect from each of last year’s customers to achieve your financial goals for the upcoming year. What this gives you, is a target gross profit to collect from every person this year to achieve profit. That profit will be achieved if you can meet or exceed your customer counts from the year before, or you can exceed the gross profit average per customer.
Gross profit per customer x customers per year = Actual gross profit
If you can exceed your total needed gross profit per year with your actual gross profit, and you do a good job of controlling your expenses, you will exceed the profit you budgeted for.
Remember in all this that your budgeted food cost percentage hasn’t entered into the equation once. You are adding the actual cost of your menu items to the needed gross profit per customer to come up with a selling price. That’s all it takes.
There are a few other things to consider though. Your needed gross profit per customer is collected from a few different sources. You don’t have to mark up every menu item by your needed gross profit. Your needed gross profit per customer is collected by combining gross profits from everything a customer buys. The markup on entrees, appetizers, desserts, soft beverages, alcohol and merchandise all contribute to gross profit. If you need $7 in markup from 30,000 customers per year to make your total needed gross profit, you have many different avenues to get it from and don’t have to mark up every menu item by $7.
Another factor that majorly affects these averages is your customer count.
If you’ve determined that you need $7 gross profit from each of 30,000 customers that walks through your door to reach your total needed gross profit, then you can also reach that number ($210,000) by serving more customers at a lower gross profit markup. If you could double your covers to 60,000, you could theoretically collect $3.50 in markup from each to collect the same total gross profit. Whenever considering cover changes however, you must also consider how serving more people will change your overhead. If you serve twice as many people, some of your expenses will also increase. They WILL NOT however, increase exponentially. Additional customers are always cheaper to serve than your primary customers, as they are the ones you are covering your fixed costs with. Add your additional expenses to your year end numbers and start over calculating your needed gross profit.
I hope I’ve laid out this method in a way that you can understand it. While it isn’t complicated, it does go against the principles being taught in classrooms, chains and kitchens all over the country. If you have followed along well though, you can see how this pricing method takes into consideration every cost of doing business, and leaves no guessing as to what you need to do to make money. This method of more effective planning could do a world of good for your profitability. Try it out. If you need some help, give me a call.
O’Dell Restaurant Consulting
Office: (888) 571-9068
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.
O’Dell Restaurant Consulting
Office: (888) 571-9068
Don’t give your customers what you want
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 their customers for their failure
- Couple loses their restaurant, still owes $100,000 to the bank, loses their home which they used as collateral for the loan, owes $500,000 for the next 10 years of the restaurant lease, files bankruptcy and spends the next 20 years paying off their debt
Pretty sad scenario, isn’t it? It’s very common though. As a matter of fact, failure in the restaurant business is more common than success. Studies from Cornell University, Michigan State University and Ohio State University have found that around 60% of new restaurants fail around the three year mark. Between the 5th and 10th year, closer to 70% fail. While that is no where near the long-rumored 90-% failure rate that has been unsubstantially perpetuated for years, it’s still playing against the odds.
Now you’re supposed to ask, “How do I beat the odds?”. I’m glad you asked, and I’m going to help you past the first hurdle, and a common mistake, giving customers what YOU want, instead of what they want. Restaurant owners are notoriously egotistical. Sorry if I’m offending anyone, but it’s true. I’ve been this same way myself. Owners have the bad habit of projecting their own tastes on their public. They think because they believe something is delicious, that everyone else will too. Some of them are right. Many of them have eclectic tastes, and find themselves to be wrong though.
Our egos tell us that if we like something, it must be good. If we really like something, and we believe ourselves to be very knowledgable about that something, then it must be great, and will make us millions if we bring it to people who haven’t had it before.
The fatal flaw with this reasoning is that people who haven’t had something before will not have a craving for that something. There will be no demand for that something. So, while rotisserie fired Peking Duck may have been a hot ticket in your eclectic little community in San Francisco, that doesn’t mean it will be all the rage when you move to Phoenix. I know what you’re thinking, “You obviously haven’t tried Peking Duck, if you had, you would love it.”
You may be right. Your favorite food from your last home may be fantastic. It could possibly even spurn a following in a new community, and support a restaurant, once everyone develops a taste for it. There is the kicker. How can people have a taste for something they haven’t had? They can’t. You can’t build a following for a fantastic new dish or type of food in an area where people don’t crave that food. At least not without having a huge marketing budget to give free food to ten times the people you need to sustain your business. Until someone knows what they are missing, they can’t miss it, and they won’t crave it.
The moral to my point is this. Don’t let your emotions and your ego decide what you are going to offer your guests. You may think something is the greatest dish, or type of food, in the world, but if the people you are trying to sell it to don’t know about it, it’s not going to sell. Give your customers something they already want. If you don’t know, conduct a survey. Ask them if they know about a particular food, if they would go to a restaurant just to get it, how far they would drive for it, and what they would pay. Let your customers determine what you are going to offer them.
Don’t give your customers what you want, give them what they want.
A lesson in listening
Listen to learn, not to defend!
by Andy Swingley
Thomas & King
One of the skills we should all take time to be better at everyday is listening. Many opportunities pass us by each day when we don’t engage in “active” listening. There is a positive benefit to be gained from everyone you interact with on a daily business especially in your career or business. In the competitive world of business, people occasionally view listening, learning, and changing as a vulnerable or weak value. Some would say, well if I don’t stand up for my position or prove my point, I will get walked on or miss the next big chance. Every person you engage with achieved the level of their current position with an attribute or skill that is worthy of understanding!
So slow down, look the person in the face and listen. Close your mouth and open your ears. Slow your mind down and really try to understand the message that is being given to you. Set aside proving the idea that is coming out of the other person’s mind is wrong or needs corrective coaching from you. When engaged in active listening, practice these mental behaviors:
What is the outcome of this conversation? Are you here to learn something, be sympathetic to a plight, or help solve a problem – ask the person talking to you which one it is – this will give you a better foundation to listen from
What is the topic?
Why does the subject mean this much to the person delivering it?
How can I better listen to understand what this person means?
Validate points back in the conversation – what I hear you saying is….. Then the person talking to you can determine if you are getting it and agree or reframe the discussion to present it better for you
Ask for specifics when the discussion gets off course or “tangents” away from the outcome you discussed at the beginning
And, if you just can’t keep your mouth shut…..take pen in hand, scratch pad and take notes about what the person is saying. This will force you to hear and capture the message.
So………listen to learn and not to defend
When you become a truly great listener, you develop a “mentor” quality that attracts people to you.
When you become a truly great listener your relationships, both personal and professional, become deeper and more satisfying.
When you become a truly great listener, your quality of life improves.
When you become a truly great listener, you learn from others, and this is where the best ideas come from!
Unique selling point – vol. 1
Excerpt from a forum post to an Indian restaurant owner:
A unique selling point stays away from claims about “better food” and “better service”. Those are minimum expectations of your customers, not reasons to choose you over your competition. Sure, you may be able to get that very small market of people looking for Indian food by being the only Indian restaurant around, but you’ll starve to death if you’re depending on that market. Your market must be bigger and transcend your food. Good food and service don’t make restaurants profitable. They’re not even a necessary ingredient though they help. Having good management systems and marketing, then consistently meeting the expectations of your customers whether high or low is what makes restaurants profitable.
I’m not saying all of those points aren’t important to the success of your restaurant, I’m just saying none of them provide your target market with a reason to go to your restaurant over the one down the road.
People DO NOT buy products, they buy emotions. A USP expounds on whatever emotion you are offering to your customers. Talking about your food, and your chef will win over a small amount of people, but the majority of people are looking to get some sort of feeling by visiting your restaurant, or in anything they do for that matter. If you market correctly, whenever they are in the mood to feel the way your restaurant makes them feel, they will think only of you, because your USP is truly unique. Now, you have to decide what feeling you want your customers to associate with your restaurant. Something unique to start. Then you do ONE THING (or more) that none of your competition does and give them that feeling you are selling them. Then, they’ll remember you and you’ll have a competitive edge on your competition. Then, your target market grows past people that just want great Indian food, to people that want to feel the way your restaurant makes them feel.
Think more along the lines of some of these feelings other restaurants sell:
“I’m selling stature, not food.”
Roll out a red carpet. Use crystal glassware. Real silver. Have a valet. Call every guest by name. Make sure the name of the restaurant suggests “stature”. TELL your customers visiting your restaurant will impress their friends.
“I’m selling speed. Not food.”
Offer fast service. Put a time limit guarantee on getting your product to them. Arrange your restaurant to cut steps out getting food to the customer. Have your restaurant’s name suggest “speed”. TELL your customers you are the fastest place in town to eat.
“I’m selling sex. Not food.”
Hire attractive waitresses. Dress your waitresses in short shorts and tight tops. Teach them to flirt. Name your store a sexually suggestive name. TELL your customers it’s the place to go to be waited on by beautiful women.
“I’m selling nostalgia. Not food.”
Collect memorabilia from a certain era or genre. Display it in your restaurant with stories about the pieces. Decorate the store in the style of the era or genre. Give your restaurant a name that suggests “nostalgia” for that era or genre.
“I’m selling accomodation. Not food.”
Encourage your customers to customize your menu items. Allow substitutions and many choices. Adopt a moniker that says you’re accomodating and market the heck out of it. Use a name that implies “accomodation”.
“I’m selling fun. Not food.”
Build a playground in your restaurant. Use cartoon characters and marketing partnerships with kids movies in your menu selections and marketing. Use colors in your restaurant that appeal to kids. Use a name that implies “fun”.
Well established brands realized long ago that only a few people come to them because they like their food better than any other restaurant. They know that people have to be thinking about you when they’re hungry to keep you at the top of their mind when they’re thinking of places to eat. They know that feelings and emotions create stronger memories and associations than any of the 5 senses.
What are you selling? If it’s food and service, don’t expect too many people to get very excited about it. They can get that anywhere.