DISASTER OR OPPORTUNITY?
Perspective changes everything. We all know that the recent recession has taken a toll. Most of us can't really quantify that toll beyond how it has affected our own businesses and budgets.
In a recently released study conducted by The NPD Group, a Market Research firm in Port Washington, N.Y. it was revealed that in a one-year period, April 2010 to April 2011, 9,450 restaurants closed in the USA. Of those, 8,650 were independents.
This seems like scary stuff.Think about it. Most chains have the resources to keep poorly operating restaurants open, or to re-direct their concept to maintain their outlet count. Independents don't. This number of restaurant closings represents a decline in operators of about 1.6%. That means that 1.6% of the weakest operators closed their doors. While unfortunate, there were/are reasons why this happened and is still happening, and it has NOTHING to do with impending disaster for you. But it does give you an opportunity to capture some of these potential guests.
We have been fortunate in having visited hundreds of restaurateurs in the past decade. We've seen the range of operators from very strong and in control to those staying open by the skin of their teeth due to poor controls, poor operating systems, and a general misunderstanding of basic business principles. We can say with firm conviction that most of those now-closed independent restaurants probably needed to close.
How close are YOU to closing? Are you making money? Enough money? How much do you have invested in time and money in your business? What would you do or spend in order to improve performance and profits? It's likely that another 5,000 independent restaurants will close in the next year. And most will close for the same reasons.
- There are three cost areas which you MUST control in order to be successful and to make money. They are Cost of Goods Sold (COGS), Labor Costs, and Operating and Occupancy costs. Adding the first two (COGS and Labor) together gives you what is referred to as "Prime Cost." Prime Cost really drives your success (or failure)
Where is your restaurant on this chart?
|
Category |
Ideal |
High |
Ouch |
Closed |
|
Prime Cost |
60% |
70% |
75% |
80% |
|
Operating Costs |
10% |
10% |
10% |
10% |
|
Occupancy/Rent Cost |
10% |
10% |
10% |
10% |
|
Misc Costs |
5% |
5% |
5% |
5% |
|
Left Over (Profit) |
15% |
5% |
0 |
0 |
- Marketing is a potential Black Hole for independent restaurants. You CANNOT compete with the chains, so you must be creative. Presuming that word of mouth is enough to sustain your business is a major case of denial. Surprisingly, many restaurants still don't have a web site, and many of those who do don't maintain it or pay much attention to how powerful this medium can be.
Internal (warm market) marketing can sustain an otherwise strong business, and some other creative marketing media, such as FaceBook and Twitter can (in many cases) offer very powerful means to attract business. One mistake too many operators make is in presuming that giving something away (2-fers, BOGO's, Groupon, etc.) have some value to their business. We want to be very clear...if you MUST give something away to earn new guests, you MUST call us right away.
The most powerful marketing tool is your menu. Properly designed and engineered, it can make the difference between profit and loss. We estimate that 90% of independent restaurateurs have not re-designed or engineered their menus, which means that 90% of independent restaurateurs are NOT enjoying the gross profit they should have.
- Your BRAND is what distinguishes your business from ALL others. In order to guarantee longevity and profits, you MUST have a Brand which is well-defined, and which carves out a niche in your local market. If you are just like 4 other restaurants in the area, one (or more) of those others is probably thinking just like you, and is trying to get a leg up. But if you can create something new and unique in your niche, you have a much better chance at sustaining guest counts.
Too many operators don't understand the importance of presenting a well-defined BRAND. Your BRAND includes the way your menu looks and presents, the signs on the building, a catchy and evocative LOGO, your web site and advertising media, the preparation and plating of your food, the décor and ambience in the public areas, and the hospitality and service your employees offer to your guests. If all the above are GREAT and consistent, then you probably have a successful restaurant. If not, well, we can help.
National Restaurant Consultants works with our clients to strengthen their businesses. In some cases, we have helped to re-Brand a Client's business. In others, simply making some critical adjustments is all that has been needed. We would love to hear from you. We invite you to call us for a no-obligation, no-cost discussion of your operating issues.
Too many independent restaurateurs are thinking of closing their businesses...don't be one of them!
National Restaurant Consultants has helped hundreds of operations around the world to improve their performance. Contact us at (303) 757-3663 so we can help you see better results and profit from the current operating environment.
