The Cure for Marketing Pattern Baldness

The cure for marketing pattern baldnessWe’ve all heard the saying that “if you fail to plan, you plan to fail” and it’s absolutely true. But have you heard of Marketing Pattern Baldness? It’s a side effect of the “you plan to fail” scenario. It’s a result of no plan, no timeline, no strategy and no allocated budget.

The cure is the liberal application of a comprehensive marketing plan.

Before jumping directly into the plan, however, it’s important to differentiate a few concepts: objective, strategy and plan. The marketing objective is the “what” you want to accomplish: brand awareness, acquisition, retention, etc. A marketing strategy is the “where,” it’s the road map for achieving your objective. A marketing plan is the “how” to execute the strategy to reach the objective.

For the purpose of this article, let’s assume you have a clear objective and strategy and you want to organize the “how” into a comprehensive plan. Here are five steps to make it easier to get a handle on your marketing plan.

  1. Format

There are a million marketing plan templates available online or you can create one from scratch. Take a look at a few templates and choose one you think will work for you. If you’re new to the marketing plan I would suggest starting with a template and modify it as needed.

  1. Calendar

The marketing plan should cover at least a one year period, maybe more depending on your industry. Regardless of the industry, it’s likely there are annual, regional or seasonal opportunities that complement your product or service.

  • Mark down the dates for annual, regional, seasonal and special events, trade shows, conferences, sponsorships, etc. Use actual dates. If a date hasn’t been released yet, estimate based on previous years.
  • Add promotional observance dates. Get your hands on a promotional calendar and peruse it to see if there are any observances that fit your business. For example, there’s National Chimney Safety Week or National Head Lice Prevention Month, or National Flashlight Day (all real promotional days, the first week of October, month of September and December 21, respectively). Wikipedia is a great source for these dates. Have some fun with the information; it’s a great way to stand out on an otherwise “typical” day.
  • Meet with other departments in your company to see if there are initiatives they want marketing to support. This is a great preventative measure against last minute requests. (It isn’t a guarantee against last minute requests, however!)
  1. Timeline

Begin at the deliverable date for each project and work backward to determine when you need to start working to deliver on time. Build in some cushion time to compensate for unforeseen happenings that inevitably arise.

  1. Allocations

Budget isn’t the only allocation needed for a solid marketing plan. Assign a project manager and make staff assignments to complete each aspect of the plan. Determine what work will be handled internally and what may be assigned to an outside agency and if staff from another department needs to be involved.

  1. Presentation

When your plan is complete, it’s key to do a presentation to senior executives, department heads and managers. Wrinkles can be ironed out and everyone has the opportunity to voice any concerns or make suggestions. But don’t get too excited, the plan will be fluid as the year progresses and that’s to be expected. Use project changes as a way to refine the marketing plan and modify it for the coming year.

Develop your marketing plan now. Don’t wait until you’re a victim of Marketing Pattern Baldness. It’s a preventable condition.

By Kim Gauthier, Owner Red Shoes Marketing Group

Copyright 2016 Used by permission.

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Restaurant Layout and Design: Planning for Success

Restaurant layout and design for successLayout and design are major factors in your restaurant’s success. Typically allow 40 to 60% of space to the dining area, approximately 30% to the kitchen and prep area, and the remainder to storage and office space.

Make sure the kitchen allows efficient, effective food preparation and interaction between staff, safety in movement, dry and cold storage, dish washing, an area for staff’s personal items, convenient delivery zone, ease of cleaning and maintenance and proper ventilation.

Aim for a practical, useful layout, while setting the mood.

Make sure you have:

  • Seating/waiting areas, serving room, cashier area, rest rooms, bar (optional);
  • One or more areas from which you can view the entire restaurant;
  • Lighting, signs and obstacle-free traffic flow;
  • A variety of seating arrangements: 50% of customers come in pairs; 30% come alone or in groups of three; and 20% in groups of four or more; To accommodate the different groups, use
  • Tables for two that can be pushed together in areas where there is ample floor space. This gives you flexibility. Place booths for four to six people along the walls.
  • Adequate floor space – the suggested square footage requirements per chair are: 10-20 sq. ft in traditional restaurants, 10-12 in cafeterias, 7-17 in coffee shops;

Production Area

restaurant kitchen must have adequet production spaceOften inefficient–the result is a poorly organized kitchen and less than top-notch service. Keep menu production in mind as you determine space for receiving, storage, food preparation, cooking, baking, dish washing, production aisles, trash storage, employee facilities and a small office. Arrange your food production area so that everything is just a few steps away from the cook. Allow for two or more cooks to be able to work side by side during your busiest hours

  • Plan your menu early as the kitchen layout and equipment purchases depend on it. See if you can purchase used equipment or lease new to reduce initial costs.       Taste-test all the recipes repeatedly until the kitchen can achieve consistency. A good way to check the food and service is to have a private opening for family and friends.
  • Form a limited liability company or private corporation and be sure to define all key personnel responsibilities – in detail.
  • Allocate the available space considering furniture and equipment to be included. Consider efficient flow and applicable regulatory requirements.       Be specific for dining, kitchen, dish washing, prep, storage, bathrooms, administrative work areas and entrances/exits.
  • Plan the layout for the dining area in detail. Remember to balance the desire for the maximum number of seats with customer comfort, and avoid seating in high traffic lanes or stuffed into corners. Avoid locating tables in the middle of the room like little islands and consider instead having low divider walls and hanging plants to break up the space.
  • Don’t forget the graphics – from exterior signage to the look of the menus, graphic design plays an important part in the overall image to be portrayed.
  • Pay attention to the lighting design. Focus dramatic light onto the tables to highlight the food, and compliment it with glowing background light to make the interior and customers look good.
  • Decide whether to offer a full service bar as this will dramatically influence initial investment requirements. Periodically Arizona releases a limited number licenses such as Series 6, 7 and 9 liquor licenses – Series 6 is needed to operate a bar, Series 7 is needed to serve beer and wine, and Series 9 is needed to sell liquor at retail. Until recently, the only way to obtain a bar or liquor license had been to buy it from another business with prices reaching $90,000 for an existing Series 6 and up to $240,000 for a Series 9. This state intends to issue a total of 126 new licenses this year at the going market rate.
  • Define your insurance needs. Restaurants are sources of potential accidents from fires to floods to food poisoning, and hundreds of other catastrophes. The NRA is an outstanding resource for guidance on related insurance coverage requirements.
  • Select and train your staff early. Look for enthusiasm, good grooming and experience. Allow them enough time to become familiar with your concept as well as for cross training. Remember that the person greeting customers is as important as the person running the kitchen – and great service and great food is a winning combination for success.
  • Set up a restaurant oriented bookkeeping and accounting system – more on this later on. Be sure to establish control over the meal checks as there are dozens of scams that dishonest servers and cashiers, especially bartenders, can use.       In particular understand and document the entire process thoroughly, and watch the petty cash, cash drawer flow and check cashing processes. Get expert advice on how to prevent abuses.
  • Designate several trusted employees to supervise storage areas. Stress that they must check in all deliveries and audit the food inventory carefully – document these responsibilities into their job descriptions.
  • Read books and attend SCORE training seminars on managing a business. Take a class at a local university on restaurant management.
  • Finally, decide on the restaurant’s overall look. Beware of trendy, contrived designs that are short lived. Attempt to provide a warm, friendly atmosphere tailored to the customer base you are trying to attract.

Dining Area

Plan your restaurant's decor & seatingDining room design will depend on your concept. This is where you’ll make the bulk of your money, so don’t cut corners. Visit restaurants in your area and analyze the décor. Watch the diners; do they react positively to the décor? Note what works well and what doesn’t.

Calculating Seating Capacity

Note relation of costs to gross and to menu pricing which are functions of number of seats, seat turns, average cover, seasonality (caveat summer), lunch covers, dinner covers, etc.

Estimate gross by number of seats times average cover reflecting these factors:

  1. Determine desired profit—convert to percentage of sales to get sales required;
  2. Determine number of operating days—divide number of days into sales to get average daily sales;
  3. Estimate volume percentages for meal periods (breakfast, lunch, dinner);
  4. Multiply figures in step 3 by average sales per day to get dollar volume per period;
  5. Determine average check per meal period;
  6. Divide dollar volumes in step 4 by average check for the number of patrons per period;
  7. Estimate:
    1. Average seat occupation per meal period;
    2. Time per meal period;
  8. Divide time per period by average occupation to get seat turnover per period;
  9. Divide possible seat turnover into number of patrons to get number of seats required per period;
  10. Take the largest seating requirement in step 9 and add a 20% safety margin for the seating capacity.

This is part of a series: “So You Want to Open a Restaurant?” Click here for the rest of the series and other articles pertaining to the restaurant business.

If you are thinking of opening a restaurant, we’ve got mentors who have been there and done that! Click here to schedule a free mentoring session at a Phoenix location near you!

About the Author:

Roger_RobinsonRoger Robinson, PhD has been a SCORE mentor for over 16 years. His specialties include non-profits, business planning, specifically in restaurants and hospitality, recreational and arts and Entertainment verticals. Read more about Roger here. Click here to schedule a free mentoring session with Roger or another SCORE mentor.

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Who’s Your Restaurant’s Target Market?

This is the next in the series of posts on opening a restaurant. In this part we cover how to determine a restaurant’s target market, the marketing plan and location, location, location!

Target Markets

Who's your restaurant's target market? No single food-service operation has universal appeal. Focus on the 5 or 10 percent of the market you can get, forget about the rest. The main market targets of food-service business customers:

  • Generation Y. Born between 1980 and 2000, A prime target for a food-service business, Generation Y goes for fast-food and quick-service items. About 25 percent of their restaurant visits are to burger franchises, follow by pizza restaurants at 12 percent.
  • Generation X. Born between 1965 and 1977, they are concerned with value, they favor quick-service restaurants and midscale operations that offer all-you-can-eat salad bars and buffets. Offer a comfortable atmosphere focusing on value and ambience.
  • Baby boomers. Born between 1946 and 1964, boomers make up the largest segment of the U.S. population. Many can afford to visit upscale restaurants and spend money freely. Many are becoming grandparents. Offer them a family-friendly atmosphere and/or provide an upscale, formal dining experience.
  • Empty nesters. Early 50s to about age 64, typically have grown children who no longer live at home. They continue to increase as boomers grow older and their children leave home. With the most discretionary income and the highest per-capita income of all, they typically visit upscale restaurants. They focus on excellent service and outstanding food, they like elegant surroundings and a sophisticated ambience.
  • Age 65 and older, often on fixed incomes they tend to visit family-style restaurants that offer good service and reasonable prices. They typically appreciate restaurants that offer early-bird specials and senior menus with lower prices and smaller portions.

Marketing Plan – concentrate on local area

  • Generally lunch requires at least 10,000 potential customers within a radius of 1 mile
  • Generally dinner requires at least 60000 potential customers within a radius of 3 miles
  • Identify competitors
  • Loyalty programs with significant rewards
  • Direct mail
  • Churches (ads in directory)
  • Schools (fund raisers – PTO/PTA)
  • National Restaurant Association (NRA) for additional information see website
  • Door hangers
  • Inserts in local papers
  • Co-op marketing with non-competing businesses
  • Personal contacts with hotel concierges, car dealerships, large employers
  • Grand opening campaign / specials

Location, Location, Location

Where you locate your restaurant is importantChoosing the right location for your business is important. Considerations include the needs of your business, where your customers and competitors are, and such things as taxes, zoning restrictions, noise and the environment.

The better the location, the fewer marketing funds you have to spend. Your restaurant should be highly visible and located in an area with a large number of customers you’re trying to attract – don’t forget to include availability of easy parking.   Don’t make the mistake of leasing a location before you’ve got a solid business model. Don’t sign a lease until the concept and business plan is complete and you’ve reviewed it with a SCORE counselor and an attorney.

Note that not every food-service operation needs to be in a retail location, but for those that do depend on retail traffic, here are some factors to consider when deciding on a location:

  • Anticipated sales volume. How will the location and seasonality contribute to your sales volume?
  • Visibility, Signage, Accessibility to potential customers. How easy it will be for customers to find you, to get into your business. If you are relying on strong pedestrian traffic, will nearby businesses will generate foot traffic for you?
  • The rent-paying capacity of your business. Do a sales-and-profit projection for your first year of operation? Use that information to decide how much rent you can afford to pay.
  • Zoning, Restrictive ordinances. You may encounter unusually restrictive ordinances that make an otherwise strong site less than ideal, such as limitations on the hours of the day that trucks can legally load or unload.
  • Traffic density. Carefully exam of foot traffic. Two factors are especially important in this analysis: total pedestrian traffic during business hours and the percentage of it that is likely to patronize your food service business. Estimate sales potential based on pedestrians passing a given location.
  • Customer parking facilities. The site should provide convenient, adequate parking and lighting as well as easy access for customers.
  • Proximity to other businesses. Neighboring businesses may influence your store’s volume, and their presence can work for you or against you.
  • History of the site. Find out the recent history of each site under consideration before you make a final selection. Who were the previous tenants, and why are they no longer there?
  • Terms of the lease. Be sure you understand all the details of the lease, because it’s possible that an excellent site may have unacceptable leasing terms. Be sure to negotiate a tenant improvement allowance for build out costs. Caveat CAM (common area maintenance costs).
  • Future development. Check with the local planning board to see if anything is planned for the future that could affect your business, such as additional buildings nearby or road construction.

If you are thinking of opening a restaurant, we’ve got mentors who have been there and done that! Click here to schedule a free mentoring session at a Phoenix location near you!

About the Author:

Roger_RobinsonRoger Robinson, PhD has been a SCORE mentor for over 16 years. His specialties include non-profits, business planning, specifically in restaurants and hospitality, recreational and arts and Entertainment verticals. Read more about Roger here. Click here to schedule a free mentoring session with Roger or another SCORE mentor.

 

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eCommerce Consumers don’t buy Products —They buy What’s in it for Them

eCommerce consumers don’t buy products —they buy what’s in it for them

It’s a fact — to many consumers, if you aren’t online you don’t exist. So you built an online store and trusted sales would follow. Why, then, aren’t your amazing products flying off your virtual shelves?

Chances are the problem is not with your products. You researched them carefully before going to market and you know what you are selling is exactly what your target consumer wants and needs. You’ve marketed your site and you are certain eCommerce store is getting traffic. It just isn’t converting into sales.

That leaves your store. Let’s take a look.

Successful eCommerce sites include:

Show them the benefits

The bottom line is that consumers don’t buy products. They buy benefits. No matter how slick, trend-setting or colorful your gizmo is, customers need to know what’s in it for them before parting with their cash.

This means that as a small business owner it is essential to identify the benefits of each product feature and turn those into benefit statements you can share with your buyers.

Instead of simply stating that the Gizmo 1600 features an AC/DC power supply, for example, show them why this is important by turning it into a benefit statement. Don’t overthink it. Simply think about the hows and whys of what each product feature means to the customer. Then tell them what it means to them and, voila, you have created solid copy focused on benefits.

Here’s an example:

“The Gizmo 1600 now includes a versatile AV/DC power supply which means you can take it with you wherever you go.”

If you’re still unsure on how to word things, consider hiring a professional copywriter. You’re the expert at your product; their expertise is making copy sing.

Design it logically

Next, make sure you are presenting your sparkling website copy in such a way that it converts.

No matter how well-written, customers cannot read your pages if they don’t follow logical design. And they cannot buy if your eCommerce design isn’t logical from entering the store to  adding items to the checkout cart.

Again, if creating website architecture isn’t your thing, bring in the professionals. GoDaddy, for example, offers two options:

  1. Online Store. This templated ecommerce solution is ideal for beginning online sellers. It enables you to look professional, easily accept PayPal and credit cards, and ship anywhere.
  2. eCommerce Website Design. This affordable pro design solution will get your eCommerce store online in as little as two weeks. You’ll be able to make your own edits as needed.

Blended options including Facebook Store and Woo Commerce for WordPress allow you to participate in the development process using your own hosting option, without starting from scratch.

Post detailed descriptions

Great product descriptions do more than list specifications. Yes, your customers want to know size, dimensions, colors and features.

They also offer the opportunity to stand out from the competition. Once again, show the benefits. Illustrate to your customers why and how they need your product. Instead of just listing wrinkle-resistant fabric as a spec, show them that it means they can stuff their little black dress in a suitcase and simply shake it out — no need to iron — before stepping out for a nightcap after a long  meeting on a business trip.

Images count, too. Choose an eCommerce solution that will enable you to show how amazing your Gizmo 1600 looks in action or how sleek your dress looks on a smiling model. Include video if you can, and plenty of high-quality images of each product from different angles.

Summing up

By now, you should be able to identify features and associated benefit statements, which means you are ready to write a few of your own. OK, your turn.

By RuthAnn Hogue, GoDaddy

RuthAnn Hogue, GoDaddyAbout the Author

Award-winning print journalist and traditionally published nonfiction author RuthAnn Hogue now spends her work days immersed in technology. When she’s not helping people with their hosting as the Hosting Support Agent for GoDaddy, RuthAnn volunteers her time as Marketing Director for Rag Collection. She also spoils four energetic Jack Russell terriers.

 

 

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Restaurant Categories and Concepts: What’s Your Style?

Restaurant Categories and Concepts: What's your style

This is the 4th in a series of post on starting and opening a restaurant.

Restaurant Categories and Concepts:

  • Quick-service restaurants sub-categories are fast food and fast casual. These establishments offer limited menus of items that are prepared quickly and sold for a relatively low price. In addition to very casual dining areas, they typically offer drive-thru windows and take-out service. This category serves chicken, hot dogs, sandwiches, pizza, seafood and ethnic foods as well as hamburgers and french fries
  • Mid-scale restaurants occupy the middle ground between quick-service and upscale restaurants. They offer full meals but charge prices that customers perceive as good value. Midscale offers a range of limited- and full-service options.
  • Upscale restaurants offer full table service. They focus on the quality of their cuisine and the ambience of their facilities. Fine-dining establishments are at the highest end of the upscale restaurant category and charge the highest prices.

Your own personality, skills and preferences will dictate the type of restaurant you choose. Restaurant Categories and Concepts: What's your styleDo you have a passion for a particular type of cuisine? Do you enjoy a predictable routine, or do you prefer something different every day? Are you willing to deal with the additional responsibilities and liabilities that come with serving alcoholic beverages?

Are you an early riser, or do you prefer to stay up late and sleep late? If you like–or at least don’t mind–getting up before dawn, your niche may be a bakery or a casual breakfast-and-lunch operation. Night owls are going to be drawn to the hours required for bar-and-grill types of restaurants, fine-dining establishments and even pizzerias.

If you’re a people person, choose a food-service business that gives you plenty of opportunity to connect with your customers. If you’re not especially gregarious, you’ll probably lean more toward a commercial type of business, perhaps a bakery or even a catering service, where you can deal more with operational issues than with people.

Once you have decided what best suits you, figure out the niche you’ll occupy in the marketplace. As you do this self-analysis, think about your ideal day. If you could be doing exactly what you wanted to do, what would it be

Selecting a Food Concept, the Challenge

The challenge is to develop a concept that fits a definite market and to do it better than your competition. Care must be taken to ensure that it is not a fad, that there is a market for the concept and that there are enough customers in the area to support the concept over time.

Concept Adaptation

Food service operators deciding to open a new operation have several options:

  • copy a successful concept
  • adapt an existing concept
  • develop a new concept.

The advantage of copying an existing concept is that you piggyback on the work and success someone else has accomplished. The disadvantage is that you will have to offer something better or why should guests go to your operation rather than the original. You must do proper research to make sure your adaptation of an existing concept is what customers prefer.

Look at the fast food hamburger market. Operators realized they could not compete with McDonald’s head to head, so they tried to find ways to differentiate their burgers to draw customers from the segment leader. Burger King offers burgers cooked over an open flame, Wendy’s offers a salad bar, chili, and burgers using fresh rather than frozen meat.

The most risky of the options is to develop your own concept. To be successful you must be creative and find a need that is not being filled by existing operations. If your goal is to have a successful business you must appeal to a range of customers. You must exceed customers’ expectations. The more you research the needs and desires of your customers and provide offerings customers want and need the greater opportunity you have for your operation to be successful.

Patrons want to be delighted with their dining experience, but don’t want surprises. Concepts let patrons know what to expect and provide some structure for the operation. Some of the more popular restaurant concepts:

  • Quick-service seafood restaurants generally offer a limited range of choices, often restricted to fried seafood. Midscale and upscale seafood restaurants offer a wider selection, prepared in ways other than fried,. Seafood can be a risky as prices are always changing, and many kinds of seafood are seasonal. Make sure items are fresh and meet your standards of quality. If you are not happy with what a distributor offers, you can be sure your customers won’t be either.
  • Steakhouses are part of the mid-scale and upscale markets. Mid-scales are typically family-oriented, offer a casual environment with perception of good values. Upscale steakhouses offer a more formal atmosphere and may serve larger cuts of meat that are of better quality and charge higher prices. Their décor may be similar to fine-dining, offering guests more privacy and focusing more on adult patrons than on families.
  • Family-style restaurants. Geared toward families, they charge reasonable prices. They also appeal to seniors, offer speedy service that falls somewhere between that of quick-service places and full-service. Menus offer a variety of selections to appeal to the interests of a broad range of customers, from children to seniors.
  • Casual-dining restaurants. These appeal to a wide audience. They provide a variety of food items, from appetizers and salads to main dishes and desserts. They offer comfortable atmospheres with mid-range prices. Many center on a theme that’s incorporated into their menus and décor.
  • Ethnic restaurants. They range from quick-service places with limited selections to upscale eateries with a wide variety, including Americanized ethnic dishes, as well as authentic food. Most popular are Italian, Chinese and Mexican followed by Indian, Thai, Caribbean, English, French, German, Japanese, Korean, Mediterranean and Vietnamese.
  • You have two primary choices; a to-go in a modest facility specializing in pizza and beer, limited seating and self-service or a full-service pizza restaurant with a menu that features a variety of pizzas, beer and wine, as well as Italian entrees like spaghetti, ravioli and lasagna, side dishes such as salads (or even a salad bar), and a few desserts. Hire a good pizza cook who knows how to make a good pizza. Invest in top-quality ingredients and preparation methods. Make every pizza as if you’re going to eat it yourself and your customers will keep coming back for more.
  • Sandwich Shop/Delicatessen. They enjoy high profit margins and can change their menus quickly and easily to adapt to current tastes. Many add delivery and catering to their sit-down and take-out operations. Most sandwich shops serve only sandwiches, possibly with some side dishes or desserts. A delicatessen offers a more extensive menu, including    sandwiches, prepared meats, smoked fish, cheeses, salads, relishes and various hot entrees.
  • Coffee is the world’s most popular beverage. Beyond coffee, people frequent coffeehouses and espresso bars to meet with friends, for a quick lunch and a drink to perk up the afternoon, or simply to start off each morning with a great cup of coffee. Most successful coffeehouses have heavy foot traffic and high-volume sales serving up to 500 customers per day and up to five customer turnovers during the lunch hour, despite having limited floor space and modest seating capacity. Profit margins for coffee and espresso drinks are extremely high – the product is more than 95 percent water. The average ticket is around $3, so you need volume to reach and maintain profitability.
  • “Bread-only” retail bakeries have almost disappeared. Today many offer cakes, scones, bagels and coffee drinks. Some even have full dining menus, including sandwiches, hot entrees, beer and wine. The market is extremely competitive

Trends in terms of menu content and design should influence the type of food-service concept you open. The problem is whether the new food service trend is really a trend or just a short lived fad. Care must be taken when adapting a trend and changing a concept so that you do not lose your existing core of business in the attempt to attract new customers.

Trends include vegetarian items, tortillas, locally grown produce, organic items, fusion dishes (combining two or more ethnic cuisines in one dish or on one plate) and microbrewed or local beers. Pita dishes and wraps are a high demand easy-to-consume alternative to sandwiches. There is a strong demand for bagels, espresso and specialty coffees, and “real meals,” which are typically an entree with a side order. Also trending is more chicken, seafood and beef dishes. At the same time, growth is in meatless alternatives. There is demand for “comfort food”–the dishes that take them back to their childhoods, when mothers baked from scratch, and meat and potatoes were at the center of each plate.

If families are a key part of your target market, have four or five items in smaller portions that youngsters will enjoy. If you serve snack items as well as entrees, note that kids are choosing healthier snacks more often thanks to concerned parents. Consider allowing your young diners to choose among a selection of nutritious options.

Though menu variety has increased over the years, menus themselves are growing shorter. Dining out is a recreational activity. Keep your number of items in check and menu descriptions simple and straightforward, providing a variety of choices in a concise format. Indicate what dishes can be prepared to meet special dietary requirements, including items low in fat, sodium and cholesterol.

Remember, as you develop your particular concept, you’ll need to find a way to differentiate yourself from all the other competitors.

If you need help deciding which way to go, a SCORE mentor can help guide you for free! Click here to schedule an appointment with a SCORE mentor.

About the Author:

Roger_RobinsonRoger Robinson, PhD has been a SCORE mentor for over 16 years. His specialties include non-profits, business planning, specifically in restaurants and hospitality, recreational and arts and Entertainment verticals. Read more about Roger here. Click here to schedule a free mentoring session with Roger or another SCORE mentor.

 

 

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5 Reasons Restaurants Fail and How to Avoid Them

5 key reasons restaurants fail and how to avoid them

This is the third in a series of posts on what it takes to open and run a restaurant. Restaurants are different from other businesses. It takes a lot more than just good food to have a successful restaurant.

Here are some of the key reasons restaurants fail:

5 key reasons restaurants fail and how to avoid themFalling in love with the concept

Even experienced operators can fall into this trap. You’d love to see your name on the sign above the door. You think your food or your mother’s family recipes are so great that people will just flock to your establishment.

Lack of experience, not really understanding the business

We covered this in part 1 of this series. Just because you know how to cook, doesn’t mean you can run a restaurant.

Insufficient startup capital

You need sufficient capital to see the operation through the first year if it makes no profit:

  • To ensure enough funds for menu development,
  • To ensure enough funds for wet and dry inventory
  • To ensure enough funds for personnel hiring/training
  • To ensure enough funds for marketing
  • To ensure enough funds for always present, unforeseen problems.
  • To ensure sufficient enough funds until break-even which takes up to 6-12 months
  • To ensure sufficient credit or operating capital to cover worst case projected cash flow.

Avoid spending disproportionate amounts of money on the beginning phases such as excessive food, liquor, furniture and equipment purchases. Do your homework so you can make educated buying decisions. Risks are certainly high and depending on building size and scope of the operation. Start-up costs can range up to $500,000 for small to medium, to over $1 million for new upscale restaurants.

Inadequate Marketing

Every Business Needs a Marketing Plan. Your food-service is no exception. Research by the National Restaurant Association reveals that word-of-mouth is still the best method of advertising. Four out of five consumers choose a restaurant they haven’t patronized before on the basis of a recommendation. Make the foundation of your marketing program an absolutely dazzling dining experience that customers will want to talk about and repeat.

To create complete marketing packages know your market, and it’s not enough to just gather demographic information once. Markets change, and food-service businesses that don’t change their marketing strategies with population shifts are missing out on a lot of opportunities.

Step back and a look at each element in your facility. Everything from the parking lot to the interior decor to the printed items contributes to your marketing message. Is each should be an accurate reflection that message? Ask every new customer how they found out about you, and make a note of this information so you know how well your various marketing efforts are working. You can then decide to increase certain programs and eliminate those that aren’t working.

Identify your category, concept and your target markets, the specific demographic groups your restaurant concept is most likely to attract. Target the age groups and lifestyles you are most familiar with. Create the menu, décor and prices they seem to like. Plan your advertising, social media and public relations campaign to begin well before the restaurant opens. Contact the food editor of the local newspapers about an article, connect online with local food bloggers, consider church newsletters and circulate flyer’s to announce your grand opening.

Not being aware of costs exceeding these key guidelines:

  • Space / occupancy costs – rent (mortgage) + common area maintenance (CAM) should never exceed 10% of gross income, ideal = 7-8%.
  • Food (inc. shrinkage of 2-3% reflecting portion control, waste, theft, employee meals, etc.) should be approximately 30% of gross or less. Food costs at high end restaurants (Morton’s & Flemings run 40%+, others as low as 25%).
  • Labor (inc. benefits & taxes) should be approximately 30% of gross or less
  • Combined food & labor should not exceed 60%.
  • Restaurants with alcohol, pour costs should not exceed 28-32%, night clubs pour at 20-24%.
    • Liquor – 15-20%
    • Draft Beer – 10-20%
    • Bottle Beer – 30%
    • Wine – 30%
  • When alcohol is involved sales goal is 70% food & 30% alcohol.
  • Supplies, equipment and property repair and maintenance, utilities – 10%
  • Legal, accounting, insurance, property taxes, misc. – 5-7%
  • Advertising & promotion @ 3-5%
  • Profit – 10% (note: must cover return on investment, all debt service, etc)

Part 2: The Business Plan

About the Author:

Roger_RobinsonRoger Robinson, PhD has been a SCORE mentor for over 16 years. His specialties include non-profits, business planning, specifically in restaurants and hospitality, recreational and arts and Entertainment verticals. Read more about Roger here. Click here to schedule a free mentoring session with Roger or another SCORE mentor.
 

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