Tag: restaurant

What You Need to Consider Before Opening Your Own Restaurant

Posted on by Franchise Strategist

The amount of work it takes to not only survive but also make an impact with a restaurant is massive. According to FSR Magazine, 60 percent of all restaurants fail in the first year. A restaurant that lasts for years takes humility. You must acknowledge daily how bad you are at restauranting, until one day you’re not bad anymore.

What You Need to Consider Before Opening Your Own Restaurant
The following is adapted from Unsliced.
By Mike Bausch

Opening a restaurant is a huge decision—one of the biggest decisions you’ll ever make. It’s hard work, full of risk and failure, and can be disappointing and frustrating. It can also be rewarding and fun, and if you do it correctly, can be profitable.

But you may have a 9-to-5 job right now that brings in steady income. How do you trade that for the uncertainty of the restaurant business? For most people, it’s not a trade they’re willing to make. To know whether you’re one of those people—or the type of person who should try their hand at restaurant ownership—here are few important considerations.

Two Types of People: Which One Are You?
First, look at the two statements below. Which one best fits you?

I am a person who tries hard, and the effort is what counts.
I am a person who likes setting my mind to things and accomplishing them.

At first glance, both seem like positive, motivational statements. But the second statement is actually better because the mindset is results-oriented. You’re focusing on a goal, and just trying hard and giving it an effort isn’t enough.

This means that when things get bad, you enjoy finding a way out of it. I’m pretty sure that being a glutton for punishment isn’t necessarily normal or healthy. However, it’s an essential trait of anyone looking to own their own business—especially a restaurant.

Owning a Restaurant for the Right Reasons
You may have decided to own your own restaurant hoping to become a celebrity chef. Or maybe you just don’t like your job and think owning a restaurant will be fun. If these are your reasons, then forget it. A restaurant is not the answer to your problems. It’s asking for a lot of new problems—problems you’ve never encountered or imagined.

The amount of work it takes to not only survive but also make an impact with a restaurant is massive. According to FSR Magazine, 60 percent of all restaurants fail in the first year. A restaurant that lasts for years takes humility. You must acknowledge daily how bad you are at restauranting, until one day you’re not bad anymore. That’s a lot for the average person to absorb.

Asking Yourself the Big Question
The restaurant life will affect your home life drastically. Restaurants sometimes destroy relationships and consume your mental health and quality of life. This life choice is a gamble—a gamble you might succeed in, in your hope to serve people food in an industry with a meager financial return rate and as I said, an extremely high failure rate.

If you haven’t committed to a restaurant yet, please pause and say this out loud:

“I need this; I need to own a restaurant. I don’t just want to own a restaurant. I absolutely need to do this. This is my calling. I got this, and nothing else will suffice.”

If that statement sounded stupid when you said it out loud, restaurant ownership isn’t for you. If you don’t believe what you said, you aren’t ready to do this. If you’ve never even operated or worked in a restaurant, then don’t assume for a second that you know anything. In fact, your best move is to concede you know nothing so you can be a blank canvas ready for paint.
Make the Best Decision for You

So what’s it going to be? Safety or risk? The same old routine or unpredictability? Don’t feel bad if you choose to opt for that cubicle job. It usually offers a lot less stress and heartbreak than opening your own restaurant. The world needs people in those office chairs.

But if you choose to be a restaurant owner, be ready for a roller coaster ride. Be ready for long days and nights, unexpected changes, and some lean times. But you knew that, or you wouldn’t have made that decision, would you?

For more advice on deciding to open a restaurant, you can find Unsliced on Amazon.

About the Author:
Mike Bausch is an industry leader whose restaurant, Andolini’s Pizzeria, is a top ten pizzeria in the US, as named by TripAdvisor, BuzzFeed, CNN, and USA Today. Andolini’s began in 2005 and has grown to five pizzerias, two gelaterias, two food hall concepts, a food truck, and a fine dining restaurant by 2019. Mike is a World Pizza Champion, a Guinness Book world record holder, and a writer for Pizza Today. Mike is part of a Marine Corps family who has lived across America from New York to California. Mike calls Tulsa home and lives with his wife, Michelle, and son, Henry.

Restaurant Marketing for the Upcoming 2021 Recovery

Posted on by Franchise Strategist

Restaurant owners are infamous for being callous with their marketing decisions, this is partly because the research process in the restaurant industry itself can be quite tricky. Gathering insightful data within a small or slightly larger community will be tricky as it is. This is precisely where digital surveys, restaurant management software, etc play a huge role.

MARKETING YOUR RESTAURANT THROUGH 2020-’21
Business Articles | November 19, 2020
BY KEVIN JOSEPH

Although it may seem rather glamorous at first glance, starting a restaurant is no easy feat. In fact, the restaurant & food business, in general, is one that is extremely time-consuming, high overheads, razor-thin margins & a manager’s nightmare.

But, it is also one that is central to our society and the eating-out culture in every country is the cornerstone of its culinary heritage. This is precisely why, especially during the light of the lockdowns, restaurants, in particular, are facing a very uncertain & grim future which, if left unchecked, can turn into a disaster for the industry.

There are a few things that we as consumers can do in order to help the restaurant industry and the entire hospitality industry in general, but more than anything else, this post is aimed at a few marketing strategies that restaurants can easily adopt.

1. Understanding Their Audience

Restaurant owners are infamous for being callous with their marketing decisions, this is partly because the research process in the restaurant industry itself can be quite tricky. Gathering insightful data within a small or slightly larger community will be tricky as it is. This is precisely where digital surveys, restaurant management software, etc play a huge role.

But more than anything that a machine can do, understanding what the consumers themselves experience while at the restaurant is something priceless in itself. For this, employees & busboys must be trained to ask the right questions and keep an eye out for understanding the consumer experience.

This practice is so conspicuous in its absence that several suppliers & marketing companies for restaurants have taken birth for a study that would probably best be done by the restaurant owner himself. For Instance: folks over at FurnitureRoots, a Jodhpur based manufacturer of restaurant furniture, on several occasions has recommended styling themes depending on the clientele. For a clientele that largely comprises of the youth, industrial style furniture happens to be the best option.

You may visit FurnitureRoots at Plot No 58/2, Jodhpur-Pali Highway, Sangariya, Basni Baghelao, Jodhpur, Rajasthan. 342013

Rustic style furniture is another great option for restaurants that see customers visit with their families.

2. Adapt With The Changing Times

Most non-western countries have more or less been out of the eating out trend in the past. However, many countries have seen a drastic change in this trend. Countries like India are at the forefront of these shifts in trends.

Several cafes in India have seen a rise in environmentally friendly themes. Cognizant of this fact, Prithvi Cafe in Bombay began manifesting an eco-friendly establishment replete with cups and saucers made with disposable leaves, 4 different cans for recycling different types of materials & of course, greenery all around the place.

Naturally, Prithvi Cafe did understand its market’s shifting needs and adapted to it accordingly.

3. Spatial Strategies

These happen to be the strategies that are short term in nature (hoping the pandemic won’t be around for long).

Spatial strategies during these times are to ensure that the image of the restaurant reflects trustworthiness and safety. Although this does involve a bit of mental, time & a minor cost investment, it will forever instill a sense of trust among the local & regular customers.

Spatial strategies are the ones that aim to maximize the seating area while ensuring the social distancing norms for restaurants are maintained and are intact as well. This can also include moving to temporary outdoor seating as has been advocated by several governments across the world to curb the spread of the virus.

4. Go Digital

I bet most of you must be tired of hearing this every now and then but the fact remains that the digital landscape is no longer some sort of a novel initiative that one must undertake. It has become the staple of a business and several businesses are almost exclusively reliant on their digital strategies.

For restaurants, however, this does not mean simply enlisting themselves on food aggregating platforms. Several restaurants suffer from a lack of long term thinking, they fail to realize that the aggregating platforms own the customers and not the restaurants themselves.

Making an app or a website nowadays has become a complete breeze & it is also a sound business practice. Small wonder that Dominos, Burger KindHealth Fitness Articles, Mcdonalds have all invested heavily on their own platform to ensure loyal customers don’t have to purchase from them via a third party.

This is no less true for any other restaurant.

We hope all businesses in hospitality a speedy recovery after this dreaded misfortune of a virus.

Stay Safe!

Source: Free Articles from ArticlesFactory.com

ABOUT THE AUTHOR

Kevin is the Marketing & Content Lead at FurnitureRoots.com, a hospitality furniture manufacturer, supplier & wholesaler

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Franchise, Restaurant, Profit
Franchise Your Business Here: www.franchisegrowthsolutions.com

Tips on How a Franchise Brand Can Become a Top-Performer in the Franchising Industry

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How a Franchise Brand Can Become a Top-Performer

By Ed Teixeira.
VP Franchise Development FranchiseGrade.com , Author, Franchise Expert, MA Economics, Industry Partner of Stony Brook University Center of Entrepreneurial Finance, Pace University Lubin School of Business Advisory Board

For a franchise brand to become a top performer, franchisors must adhere to certain operating principles. One of the most important ones is to grow the number of franchise locations to promote the franchise brand. In the case of certain well-known franchise brands, system size alone doesn’t always convert to a top performing franchise brand.

Franchisors that want their franchise to be recognized as a top brand need to follow a set of building blocks that can serve as the foundation for a successful franchise system. Utilizing these building blocks will strengthen the franchise program, provide its franchisees the best opportunity for financial success and help establish the franchise brand as a top performer.

1. Equitable franchisee ROI must be a priority

The foundation of the franchise program operationally and financially must provide franchisees an opportunity for success that does not require extraordinary performance. If franchisees follow the franchise program and do not earn an ROI commensurate with their original investment, then the franchise may be flawed.

2. If the franchise program is flawed, then it must be fixed

Franchisors should adjust a franchise program that isn’t “working.” There is no reason why a royalty or advertising fund contribution can’t be changed. If certain products or services aren’t successful, then find alternatives. Conduct franchisee surveys to measure franchisee satisfaction levels.

3. The franchisor must control the franchise sales process and adhere to its ideal franchisee profile

Establish a franchisee profile and if franchise candidates don’t fit this profile say no! If the franchisor utilizes brokers, the franchisor must maintain control over the franchise sales process.

4. Be transparent with prospective franchisees

Provide prospective franchisees full disclosure about the franchise opportunity and what’s needed to be successful. The franchisor sales staff should act as more consultant and less salesperson.

5. Franchisor leadership must be engaged in the franchise operation

Franchisor leadership should be accessible and involved in the franchise operation, so they are aware of franchise system performance. There shouldn’t be surprises when it comes to franchisee performance.

6. Franchisee input should be solicited for important operational and marketing strategies

Significant changes or alterations to franchise operations and marketing, should involve the franchisees. This can be done using the FAC, advertising committee or other representative body.

7. New products and services should be evaluated and measured by franchisees before introduction

The franchisor should test new products, services or equipment in representative franchisee locations before introducing them. This process leads to objective and credible results that will earn the franchisees buy-in.

8. Obtain financial results from franchisees on a regular basis

Use franchisee financial statements to identify individual and collective franchisee performance. A lack of important financial information prevents a franchisor from knowing which franchisees are profitable and which are not.

9. Uphold and protect the integrity and standards of the franchise program

It’s critical that the franchisor uphold the standards of the franchise. The franchisees that follow the program deserve it and the customers that use the product or services provided by the franchisees are entitled to consistency. Franchisors that don’t protect the brand are not respected by their franchisees.

10. Invest in franchisee training and support

Top notch franchisors have viable and effective training programs. Training and support don’t end with start-up franchisee training but should be a continuing activity. When franchisor staff identifies weaknesses in the execution of franchisee operational practices the Training Department should implement programs to address these problems.

To build a top- performing franchise program franchisors can use these 10 building blocks, which requires implementing policies, practices and procedures to improve franchisee performance and success.
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Learn more about the author and Franchise Grade:
Ed Teixeira. VP Franchise Development FranchiseGrade.com , Author, Franchise Expert, MA Economics, Industry Partner of Stony Brook University Center of Entrepreneurial Finance, Pace University Lubin School of Business Advisory Board

How Do You Write A Good Brand Story

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How Do You Write A Good Brand Story
By Jon Allo  

Your brand story differentiates you from everyone else. Otherwise, you’re just one more solution for the same old problem that customers can choose from, and usually without a standout differentiator they’ll base their choice on price. Most of the time, you do not want customers to choose you based on price alone. You want them to choose you because you’re you.
Telling your unique story starts with these questions:

When, Why and How Did You Start?
The best way to show authenticity is to be able to tell your audience when, why and you started doing what it is that you do. If you can tell your story in a way that your audience relates to you, and even roots for your success – even better.

How Do You Want Customers to View You?
As you write your story, it’s important to convey your values and ideals in a no-nonsense way. While you may be frightened of turning off some people, you really don’t need to worry about that. Those people aren’t your audience. Your audience consists of the people who can relate to your story, share your values, and want to be part of it.

Where Do You See Your Business Down the Line?
This is where you’ll try to dream big, and let your audience know where you see your business in the future. It also gives you the opportunity to refine consumer expectations toward what you offer rather than what the competition offers.

How you answer these questions is important.
You’re going to have many opportunities to do so via every communication you have with your audience – be it your blog, social media or even through the types of products you offer.

With the answers to these questions you can start to form your story and weave it throughout everything you do.

Share through Story Telling
Using an honest, no-holds-barred communication style to tell your story, your customers’ stories, and the story of your products is a good start. Use case studies, interviews, and in-depth relatable blog posts to accomplish this.

Share through Doing Good
Get involved with your community to give back something that is noticeable. You don’t want to do this just to get noticed, but you do want to pick something that helps people understand who you are as a business owner and what your business stands for.

Share through Experiences
You and your audience likely share common experiences that should be discussed. The more ways you can relate to them, the more ways they’ll see your offerings as unique and different.

Share with the Truth
Don’t hype, and don’t “blow smoke”. Consumers are smart today. They want the black and white truth of the matter. If it takes 20 hours a week to do what you do, and you’re teaching them, tell them the truth. If you’ve had to stay up overnight to work around children’s schedules, say so.

Share Everywhere
Don’t just “tell” your story on your blog in the “about” section. Tell your story everyplace. Use infographics, memes, blog posts, guest blog posts, articles, testimonials, good deeds and every possible way to spread your story. Be your story by your actions.

Branding is important for small business owners as well as large ones. If you have a limited budget, smart branding is perhaps the most inexpensive business tool you can create. To learn more about how to make you and your business stand out, download my free checklist, Branding For Small Businesses at https://jonallo.com/branding

Article Source: https://EzineArticles.com/expert/Jon_Allo/1079948

How do you strategically get your brand’s voice out there in a unique way?

Posted on by Franchise Strategist

PR firms specialize in acquiring earned print and digital media coverage. They also employ other digital marketing methods, such as influencers and popular hospitality reviewers, to pique the interest of the new and returning clientele. It’s this third party, “validation” that sets you apart from basic self-serving advertising.

Using PR For Restaurant Marketing
BY GARY OCCHIOGROSSO – CONTRIBUTOR TO FORBES
Photo by Campaign Creators on Unsplash

Living in the New York City market, I have grown accustomed to the noisy chatter that restaurateurs make attempting to lure guests into their restaurants. While the restaurant business has always been demanding, it’s become more so as a result of COVID -19. The urgency to get the word out has never been stronger than it is today. In my opinion, many restaurateurs have not yet embraced a new way of distributing their message. Traditional forms of advertising restrict the amount of content delivered to the consumer in any one message. I’m convinced that’s one reason why much of the restaurant advertising I hear and see is limited to the safety measures restaurant owners are taking to protect guests and employees. Of course, in this extraordinary time, safety is a tremendous concern for many consumers. However, it’s critical to get more information about your business out to attract customers. It is vital you don’t get lost in the monotony that has become restaurant advertising. Let’s not lose sight of the fact that restaurants provide an essential service and well as an enjoyable experience for their guest. People returning to dine-in restaurants certainly want safety. Still, they also expect great food, service, and a feeling of returning to normalcy.

So, how do you strategically get your brand’s voice out there in a unique way? My recommendation to my clients is to use Public Relations as the method to tell their stories. PR firms specialize in acquiring earned print and digital media coverage. They also employ other digital marketing methods, such as influencers and popular hospitality reviewers, to pique the interest of the new and returning clientele. It’s this third party, “validation” that sets you apart from basic self-serving advertising.

Earned Media Increases Visibility

Debra Vilchis, Chief Operating Officer of Fishman Public Relations puts it this way: “A TV segment or online news article where a restaurant owner is interviewed about safety and hygiene measures, including photos or video of the protocols in action, go a long way in calming people’s fears about going out to eat again. The story and video then get posted on the news channel’s website and social media. People head to the restaurant’s website or social media profiles where they find reassuring updates on what the restaurant is doing to keep employees and patrons safe. Our PR agency has been working non-stop reaching out to media on behalf of our restaurant clients since early March about all of these things.”

Whether you hire a PR firm or not, there are many steps a restaurateur can take to increase their visibility. Large franchised restaurant chains and independent operators can look to PR as an alternative or additional tool in their overall marketing strategy. I included a shortlist of methods to consider when using public relations and social media to promote your restaurant or franchise. Addressing customer concerns regarding Covid-19 while creating compelling reasons to visit your restaurant should be the goal when developing a marketing plan.

Add Your Personal Story To The Message

It all begins with telling your story. Every restaurateur, as well as the founder or franchisee of a franchised restaurant, has one. Telling your story can be as simple as talking about what inspired your menu. Are you starting a franchise that serves some of your grandmother’s recipes? Did you decide that you wanted to be a chef or a restaurant owner at a young age? These intriguing memories help you connect with potential customers by making you relatable. Telling your story through an active social media account or press release gives newspapers, websites, and other platforms a starting point. It attracts reporters who may want to put together an article or review about your restaurant. [1]

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Take Advantage Of Social Media Outlets

When it comes to connecting with customers, nothing works quite like social media. Your restaurant needs to have a complete and active profile on all the platforms, including Facebook, Twitter, and Instagram. Plus, you need to ensure that your Google profile is accurate and compelling. The first thing many customers will do upon learning about your restaurant is to check out your social media presence. They’ll expect to see reviews, sample menus, pictures, and more. Social media is the most influential type of message distribution because it allows you to attract new customers with very little time, effort, and money.

Make Sure You Have News To Share

Another essential public relations method involves staying relevant and continuously having news to share. People like to be “in the know!” Wondering what’s deemed newsworthy and what isn’t? Well, are you opening a new location or franchising your restaurant? That’s news! Are you donating a portion of your proceeds to a specific charity, like a local food bank? That’s news! Are you sending out some of your wait staff or line cooks to help serve meals in a homeless shelter?.[2]

Regarding newsworthy and engaging customer information, Vilchis added: “If you think about it, consumers had little else to do than consume media 24/7, especially during the early stages of the pandemic. Smart restaurant brands and operators leveraged the opportunity to get the word out about their delivery & takeout options, safety measures they were taking, and their reopening plans. Some also did a great job of promoting goodwill to help frontline workers with free meals. Those acts of kindness went a long way with their customers. Some of our restaurant clients used PR during the pandemic to offer cooking tips or recipes – any way they could remain connected with their customers. Or they offered expertise on eating habits during the pandemic. The idea was they became a resource that news outlets wanted to turn to for information while mentioning their restaurant name on air or in print/online. It became a win-win for everyone.”

Use Influencers And Reviewers To Your Advantage

When it comes to advertising and public relations, there’s nothing quite like a 5-star review posted on social media by a local influencer. So, where do you start? Compose a list of these essential influencers and local restaurant reviewers, whom you can invite to your restaurant for a special “influencer night.” Influencers love to be wined, dined, and recognized. This event gives you a chance to ensure they receive impeccable service, an exclusive interior look, and savory food. In exchange, your restaurant will end up trending on social media, drawing in the highly coveted attention of potential customers.[3]

PR Builds Trust And Success

It should be clear that there are plenty of ways to utilize public relations and social media to build trust and attract loyal customers. Credibility, authenticity, and creativity are essential to the restaurant industry’s survival and future success, using public relations strategies to keep your restaurant’s name in the media will set you apart from the steady, mundane drumbeat of traditional advertising.

Sources:

THE RESTAURANT TIMES
‍PR for Restaurants: How To Publicize Your Restaurants

PR for Restaurants: How To Publicize Your Restaurant

GOURMET MARKETING
Utilizing PR in The Restaurant Industry |https://www.gourmetmarketing.net/utilizing-pr-restaurant-industry/‍PR for Restaurants: Top Tips and Tricks to use Public Relations to Drive Restaurant Growth

PR for Restaurants: Top Tips and Tricks to use Public Relations to Drive Restaurant Growth

The Franchisor/Franchisee Economic Relationship – It’s A New World!!

Posted on by Franchise Strategist

Photo by Lukas from Pexels
This specific suggestion will not be adopted by existing large chains, because it would be such an obvious reduction of the current royalty stream. However, well established franchisors could, and should, absorb more of the additional systemwide needs…

THE FRANCHISOR/FRANCHISEE ECONOMIC RELATIONSHIP – IT’S A NEW WORLD !!

restaurant, COVID-19, Roger Lipton, Franchise Money Maker

By Roger Lipton

Almost everybody has noticed that there is an increasing strain between franchisees and their franchisors. It is no accident that new franchisee associations are being formed and existing organizations are getting more militant. There are many intangible reasons, as too many franchisors do not treat their “z’s” as partners. We have written many times that the “asset light”, “free cash flow” model is not reflecting the necessary investments in the system to keep franchisees as profitable as possible. Many franchisees are especially bothered by the fact that their franchisors are spending hundreds of millions, sometimes billions, of dollars buying back stock and making acquisitions, while leaving the franchised operators without the necessary new product development, technology upgrades, marketing initiatives, etc.etc.
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Franchise Money Maker

Franchise your company, expand your brand, collect your royalties!

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With all of that in mind, the bottom line is the bottom line. Too many franchisees are suffering financially, under more pressure than ever. The typical franchise royalty is 5%, give or take a point, plus 2%, as an advertising contribution. There are often additional charges, not all that material in and of themselves, but adding to an already large burden. Let’s say the franchisee is fortunate enough to be making 17-18% store level EBITDA (and Depreciation is not free cash in the long run). Rebating 7 points out of 17 or 18 points starts to feel like a pretty big load, and there is still local G&A to be carried. Even if store level EBITDA, before royalties, is in the low twenties, 7 points gets to be a bother. Additionally: many franchisees, Dunkin’ Donuts and Burger King and Jack in the Box are just a few examples of mature systems where decent money is still being made at the store level because the store leases were signed ten or fifteen years ago, so occupancy expenses are lower than today’s economics would allow. That’s, of course, why so few new units are being built by many mature franchised systems, especially in the USA. Today’s economics do not allow it.

When Ray Kroc started franchising McDonald’s restaurants over 60 years ago, the royalty was 1.9%. By the 1960s, franchisors had started charging 2-3%, by the 1970s 3-4%, by the eighties 4-5%, and 5% seems to be the standard today, plus advertising and other fees.

Read the entire article click here https://www.liptonfinancialservices.com/2019/03/the-franchisor-franchisee-economic-relationship-this-is-not-your-fathers-world/

Restaurant Industry In Turmoil, But There Is A Way Out!

Posted on by Franchise Strategist

Photo by Benjamin Davies on Unsplash

In short, most operators, with a great deal of effort, should be able to generate enough sales, on premise and off, to satisfy their landlords, who will have become their partners, dependent on sales. Store level expenses will be largely variable, including rent, and there should be less upward pressure on the fixed costs at store level.

RESTAURANT INDUSTRY IN TURMOIL, BUT THERE IS A WAY OUT!
By Roger Lipton
restaurant, COVID-19, Roger Lipton, Franchise Money Maker

The world, as we have known it, is seriously changed for the foreseeable future. Restaurant and retailers will have to cope with lots of new requirements that deal with social distancing and testing.

PAYROLL PROTECTION?? NOT QUITE!

One of the current priorities is to access the Payroll Protection Program. Unintended consequences are already coming into focus. Restaurant operators realize that business will be slow after opening, which is still weeks or months away. If they spend 75% of the money, mostly for payroll and rent, in the next eight weeks to qualify for loan forgiveness, they will not have the resources to carry the predictable losses when they first reopen, and those losses will likely last for months at least. They have the option of holding the money, which will then remain a loan rather than a “grant. However, while the two year term, at only 1%, seems cheap enough, there is no way that cash flow will be sufficient to pay back the loan that quickly.

MATTO FRANCHISE
A Revolution is Brewing
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Some operators will therefore let their ex-employees remain on unemployment insurance for the time being, use the government capital to cushion losses after reopening, and deal with the ramifications two years from now. Other operators, will take the money, never reopen, and walk away. There are no personal guarantees, after all.

At the least, therefore, the program must be changed to allow for a sufficient payback period to recoup losses. We suggest this will happen, because the problem, and the fix, is so obvious. There are, predictably, other unintended consequences of this huge program that was implemented with such a rush, but we will leave that for another day.

RENT – THE BIGGEST FIXED COST

We are all reading about various companies, small and large, holding back rent. It’s understandable under the circumstances, and landlords realize that their world has changed as well. At the end of the day, we believe that percentage rents will be the new normal. The lessors have no real option. Yesterday’s rent structure is gone, and their alternative in almost all cases is to have empty space for perhaps years.

OFF-PREMISE CONSUMPTION BECOMES CRITICAL

Even after vaccines and treatments are in place, it is going to be quite a while before consumers are comfortable in close contact with strangers. We can be assured that dine in traffic will be at a lower level than previously. It therefore becomes critical for restaurant operators to do everything possible to build their off premise activities. Drive-thru locations, where applicable, can help a lot, but delivery (with or without third parties), catering, curbside pickup, packaged products to go are all brand building alternatives that can help to carry the physical overhead.

OVER-STORED NO MORE

Stated most concisely: there will be more closures than we have seen in at least fifty years (from today’s huge base). Far fewer chains will be expanding. Survivors will have less competition.

LABOR COST PRESSURE WILL ABATE

When the stores open, there will be less upward wage pressure than we have seen in the last few years and that we were anticipating would continue.

The cost structure will be more variable than ever before. It will take a while for negotiations to take place but rent will be based on a percentage of sales. Cost of Sales is variable and Labor is largely variable. Other Operating Costs at the store level (waste removal, bank fees, insurance, property taxes, etc.) can be negotiated lower. (It happens that I am affiliated with a Company that can help in this regard, with no up front cost.) Corporate Overhead can be scaled for the new world we are all living within.

In short, most operators, with a great deal of effort, should be able to generate enough sales, on premise and off, to satisfy their landlords, who will have become their partners, dependent on sales. Store level expenses will be largely variable, including rent, and there should be less upward pressure on the fixed costs at store level. Store level cash flow may not approach previous levels but should be adequate to support, if not enrich, a reasonable level of corporate overhead. Regional operators will have an advantage, with their proximity to the store level and their ability to respond quickly and efficiently to changing circumstances. National operators should decentralize to whatever extent possible for the same reasons. Dedicated corporate management should be able, in most cases, especially if not burdened by excessive debt, to lead their companies to survive, and even prosper over the long term.
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About Roger Lipton
Roger is an investment professional with over 4 decades of experience specializing in chain restaurants and retailers, as well as macro-economic and monetary developments. After earning a BSME from R.P.I. and MBA from Harvard, and working as an auditor with Price, Waterhouse, he began following the restaurant industry as well as the gold mining industry. While he originally followed companies such as Church’s Fried Chicken, Morrison’s Cafeterias and others, over the years he invested in companies such as Panera Bread and shorted companies such as Boston Chicken.

6 Key Points To Keep Your Restaurant Profitable In A Slow Down

Posted on by Franchise Strategist

Look for trends in your sales—for example, busy days and hours versus slower times and days. For instance, if Tuesday afternoons are consistently slow, then consider cutting back on your hourly staff for that period…

6 Key Points To Keep Your Restaurant Profitable In A Slow Down
by Gary Occhiogrosso – Managing Partner, Franchise Growth Solutions, LLC.
Photo by Gor Davtyan on Unsplash

In good times and not so good times, operating a profitable restaurant can be a daunting task. The high cost of rent, labor, and raw ingredients, often overlooked by guests seeking a fine dining experience at fast-food prices can make value perception and profitability difficult. Nonetheless, there are a few things every operator should be aware of, especially during tough economic times. Below I have listed six tips that when put into everyday practice, not only help save money and increase sales when times are lean but serve to maximize profits in better economic times.

Be Mindful Of Your Payroll
Payroll is the one thing in your operation that you have total control over. You determine it, and no one or anything else has a hand in the result. Knowing how to manage payroll is an essential element to success in the restaurant business.
Controlling labor during a slow business period can be tricky. If your businesses’ survival is dependent upon the need to terminate personnel, then managing the schedule of your hourly employees as well as your key people in a compassionate way must be your top priority. You’ll need to delicately balance the limiting of hours among your best employees. Whenever possible, spread the cutbacks out amongst as many team members as possible. That way you can lessen the impact to any one team member.
Be mindful that if you schedule less labor than you need, your restaurant may end up giving poor guest service. That will negatively impact the guest experience as well as your Social Media reviews. On the other hand, if you over-schedule your labor as a percentage of sales, then you’ll be out of line with acceptable budgets and typically lose money.
Look for trends in your sales—for example, busy days and hours versus slower times and days. For instance, if Tuesday afternoons are consistently slow, then consider cutting back on your hourly staff for that period. If you employ a salaried manager, have that person substitute in a station position. Labor is the most critical line item on your P&L. Oversee it, adjust it each day based on projected sales. Remember, unlike food inventory, which allows you to store it (in many cases) for another day, labor, once spent, is gone forever.

Engineer Your Menu To Reflect Current Goals
Sometimes bigger isn’t better. A smaller, more focused menu is often more profitable than the “be everything to everyone approach.” During a recession or slow season, use your menu to attract new customers as well as enticing your regular customers to visit more often. Adjust your menu by offering items that have more appeal in a budget-conscious climate. Understanding what guests want, what they can afford, and what you wish to sell them is a critical piece to menu engineering.
Also, position your lower food cost items in a prominent spot on your menu. That way, you can offer your guests lower-cost menu items and still make a profit.
And although it goes without saying, don’t forget to conduct a weekly inventory. Monitoring your food cost will help you manage cash flow most efficiently and accurately.

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MATTO FRANCHISE
A Revolution is Brewing
LEARN MORE HERE:
 https://www.mattofranchise.com/

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Stay In Front Of Your Customers
The saying “out of sight, out of mind” is never is more accurate than in a recession or slow period. You may not want to run your full Radio/TV or Print campaign. However, now is not the time to cut advertising to zero. Instead, increase your paid social media and your paid Google ads. Post photographs of guests in your restaurant, delicious-looking food items, and creative, fun graphics to entice and remind your guests how much they enjoy your restaurant and what you have to offer.
In addition, utilize the database you’ve collected of customer’s email addresses and mobile telephone numbers. You can use this data to send your customers special offers via email blasts and text messaging. Be proactive!

Promote Value, Not Price
During a recession or other tough times, offer your guests real value, not discounts. It is my opinion that you should never attach the price of the menu item to the item itself, for example, selling a hamburger for $1.00. Discounting your products creates a considerable problem for future sales of those items when you move them back to full price. Lowering the price of a menu item creates a product/price value perception, which may negatively impact the customer’s perception of value at a later date. Guests will connect the cost of the menu item to its overall value, now and in the future. Cutting prices for the sake of attracting customers or keeping up with a competitor is never the answer.
Instead, create reasons and additional “occasions to use” your restaurant in your guest’s mind. Then the guest will associate a discounted price with a particular promotion or event. For example, ladies’ night, or seniors day, or it could be the anniversary of the restaurant, and you’re rolling back prices, or National “whatever” Day. Whichever the case, offer real value by promoting events and Limited Time Offers (LTO’s) as a reason to create the “frequency of visit.” This method is also useful for attracting new guests or guests that haven’t visited your restaurant in a while.

Paying Attention To The Details Saves Money
Pennies add up! Keep a watchful eye on expenses. Monitor electricity and water usage, napkins, paper towels, cleaning supplies, and other items that often go unnoticed until you see the cost on your P&L. Be mindful and control those costs each day. Make your staff aware of things like shutting off lights, turning off water faucets, and how many paper towels they may be used to clean a counter. Get your team members “woke” to the idea and actual cost of everything in the restaurant.

One Final Note
Good times follow bad times, and bad times follow good times. Nothing is forever, so learn how to manage a restaurant through a rough patch you’ll be in a better position to maximize your profits when times are good.

MATTO FRANCHISE
A Revolution is Brewing
LEARN MORE HERE:
 https://www.mattofranchise.com/

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Franchise Restaurants Show Modest Gains – What’s Happening On The Ground?

Posted on by Franchise Strategist

Photo by Spencer Davis on Unsplash

McDonald’s is the sales standout, and they are in a class by themselves, providing value and upgraded quality to a population hungry for price/value. Taco Bell is also an exception, for similar reasons. Even Domino’s and Wingstop, who have put up great numbers in recent years, are reporting only modest gains at the moment.


RESTAURANT MAIN STREET – WHAT’S HAPPENING ON THE GROUND??
By Roger Lipton

We have long believed that the restaurant industry provides an excellent leading indicator as to consumer sentiment. It is much easier to adjust dining habits, every day, than to plan and spend for large ticket items.

Quite a few restaurant companies have reported their quarterly results, ending 6/30. The sales and traffic trends, collectively, indicate that not much has changed in terms of consumer optimism. The table below provides the reported results for comp sales, including a breakdown, mostly provided by company operated locations, relative to traffic, pricing and menu mix. Also shown on the table are the outlook, when provided, relative to commodity and labor expense.

No Meaningful Improvement
The company operators show, with just a couple of important exceptions (Chipotle and Starbucks) modest comp gains, more than offset by pricing and menu mix, so traffic is negative almost everywhere. The only other outlier is Diversified Restaurant Holdings, franchised operator of the Buffalo Wild Wings system, going against very easy comparisons. Most importantly, In terms of third quarter to date, virtually no one is guiding toward a meaningful improvement. In our view, Chipotle and Starbucks (with the strongest trends) can be viewed as “special situations”. Chipotle is bouncing back from their multi-year troubles and doing a great job with mobile app/delivery, and Starbucks is the premier worldwide brand selling an addictive product by way of an extraordinary employee culture and great technology.

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The franchising companies that have reported are showing a similar trend, modest sales gains in almost all cases. The franchising companies steer away from reporting traffic, but it is safe to assume that pricing and sales mix trends are similar, so traffic is no doubt down. McDonald’s is the sales standout, and they are in a class by themselves, providing value and upgraded quality to a population hungry for price/value. Taco Bell is also an exception, for similar reasons. Even Domino’s and Wingstop, who have put up great numbers in recent years, are reporting only modest gains at the moment.

Delivery On The Rise
It’s important to note that, within the sales mix, delivery, curbside and in-store pickup, are rapidly increasing portions of the revenue mix, so dine-in traffic is down materially more than the comps that are reported. We haven’t heard any restaurant company bemoan, though they could, the fact that their physical plants are only fully utilized a few evenings per week.

In addition to the sales and traffic trends, we are equally interested in the commentary relative to cost expectations, namely commodities and labor. Expectations are mostly higher for commodity costs, dramatically so for chicken wing prices. It is clear that the benefit a year or so ago from lower commodity prices is in the rear view mirror, and higher cost of goods is likely. Labor expense, predictably, is expected to move ever higher.

CONCLUSION:

The beat goes on. With prime costs, as well as other expenses such as insurance, common area charges, utilities, etc. also increasing, it takes more than two or three points of comps to improve margins. A handful of the larger premier operators such as Starbucks, McDonald’s, Darden, Domino’s and Wingstop continue to provide better the best results. However, even among these “best of breed” operators, it’s a battle for market share and an increasing challenge to generate a worthwhile return on incremental investment.

Roger Lipton
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About Roger Lipton
Roger is an investment professional with over 4 decades of experience specializing in chain restaurants and retailers, as well as macro-economic and monetary developments. After earning a BSME from R.P.I. and MBA from Harvard, and working as an auditor with Price, Waterhouse, he began following the restaurant industry as well as the gold mining industry. While he originally followed companies such as Church’s Fried Chicken, Morrison’s Cafeterias and others, over the years he invested in companies such as Panera Bread and shorted companies such as Boston Chicken (as described in Chain Leader Magazine) .

The Last Mile – On the Ground in Delivery Land

Posted on by Contributing Writer

As a long-time restaurateur primarily in the franchised, fast-casual business, I understand the need to outpace and add more value & service to customers. Our contributing writer today, Roger Lipton highlights and adds his insights to what he calls the “The Last Mile” in the restaurant business. As more and more operators are fighting for the same dollar, speed, value, and convenience become the point of differentiation for many restaurant brands.  Enjoy Roger’s take on ‘Delivery Land.”

 

Another potential problem, as pointed out by a group of restaurant operators in Los Angeles, is that delivery agents are not trained in food handling and temperature maintenance standards. One LA-based operator said, “If a customer gets hepatitis, they are going to sue the restaurant.” Another stomach-turning pitfall, as described, is the hungry delivery person that helps themselves to part of the milkshake or a couple of the ribs.

 

DELIVERY, THE BIG THING IN RESTAURANT LAND – THIS IS WHAT “THE LAST MILE” LOOKS LIKE.

 By Roger Lipton

Reposted with permission

Restaurant companies are unanimous in their pursuit of delivery as one of the huge opportunities to increase the productivity of their physical plants. Too much square footage continues to be a burden on productivity, especially when it takes labor at $15.00 (ex the tip credit) per hour to service the space. It’s also clear by this time that control over the “last mile” is of major concern to restaurant operators. Not only is the reputation of The Brand at stake, but valuable information relative to the customers is in the hands of the third-party agent, potentially not as useful to the food provider.

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A reality of this new source of business is that margins for the restaurant company will be affected since 15-30% of the ticket is paid to the delivery agent. While some argue that a large portion of the delivery dollars is “incremental,” it stands to reason that a customer who receives the product at home on Wednesday night is less likely to visit that restaurant on Thursday or Friday. On the hopeful side: delivery companies are already competing for market share, negotiating their fees lower, therefore improving the remaining margin for the restaurant. Overall, this is a portion of dining dollars that is very much in a state of flux.

ON THE GROUND IN DELIVERY LAND

Two articles caught our eye in the last day or so, in the New York Times and the New York Post, describing the reality of “the last mile,” and it’s not pretty.

The Post described how a delivery worker (from DoorDash) punched a pizza store employee in the head because the order wasn’t ready for pickup. We are not trying to focus on DoorDash (DD) in particular, because this could happen with any third party agent, but another DD employee posted a negative review on Yelp because the food “trash” wasn’t ready on time. Another DD hire made a scene after getting a parking ticket while waiting for a delivery pickup. Since delivery agents, including DD, UberEats, Postmates, and others, get paid primarily for completed deliveries and little, if anything, for waiting time, they are obviously very sensitive to the availability of the order. At the same time, restaurant employees, including one cited at (well run) Cheesecake Factory, are not necessarily treating the delivery person with great courtesy.

TRAINED TO DELIVER FOOD BUT NOT HOW TO “HANDLE” IT

Another potential problem, as pointed out by a group of restaurant operators in Los Angeles, is that delivery agents are not trained in food handling and temperature maintenance standards. One LA-based operator said, “If a customer gets hepatitis, they are going to sue the restaurant.” Another stomach turning pitfall, as described, is the hungry delivery person that helps themself to part of the milkshake or a couple of the ribs. All of this can be considered “anecdotal,” but the proper selection and training for third party agents are no doubt far from optimal at this early point in the evolution of the food delivery industry. Parenthetically, stock investors might well keep all of this in mind before they pay a considerable valuation for DoorDash when it comes public.

The New York Times described the experience of a bicycle delivery person in Manhattan, obviously a unique market, but still indicative of urban issues. The bicycle person, working for UberEats as well as Postmates, had continuous decisions on the run to make, all while anticipating traffic patterns and potential delays. Should he pick up several orders at a Mexican restaurant five blocks away for UberEats, or divert to two orders for Postmates at Shake Shack that was a little closer. As he said, “I had to decide: take on three orders at once and risk falling behind? Stick with UberEats, which was running a $10 bonus for doing six deliveries by 1:30, or try for a Postmates bonus? Information was limited. The UberEats app doesn’t tell you where the delivery is going until you pick it up. I could not know what the Postmates job would pay. The Postmates clock ticked down – you have seconds to accept or decline an order. I was threading my way around lurching honking trucks and oblivious texting pedestrians and watching for cops and looking down at the phone mounted on my handlebars and calculating delivery times.”

The article goes on to describe the intense competition among companies like Grubhub Seamless, UberEats, Caviar, DoorDash and Postmates, and delivery agents are often representing more than one company. The restaurants have been forced into the e-commerce business, outsourcing their product to the hands of a fleet of freelance personnel who may or may not appropriately represent the restaurant Brand. Especially as competition has increased, the net hourly pay for delivery agents has become closer to $10/hour than $20, sometimes even less than $10. We can only imagine the professional skills, or lack thereof, of a person that is going to subject themselves to this kind of pressure for that kind of wage. There is a myriad of other hurdles that delivery agents in urban areas will have to deal with, but that will vary by venue. We can say with assurance; however, just as above described in suburbia, there is enormous work to be done to iron out the issues, reduce the risk, and improve the profitability for the restaurant operator.

CONCLUSION:

The challenge remains to make delivery incrementally profitable, without taking on considerable risk to The Brand in the process. To whatever extent possible, maximum control over the delivery process should be at The Brand level. In the meantime, takeout and curbside pickup may be convenient enough to maintain market share, without incurring the risks as described above. Perhaps orders, above a specific size at limited times of the day within a certain radius, can be delivered by properly trained store-level employees. There is a large market to be served, but not necessarily at the risk of The Brand.

Read more from Roger Lipton here