Marketing Mix by Karen Cathey
January/February 2008, vol 7 #1 and 2
‘Restaurant Success by the Numbers’ by Roger Fields, CPA, a review
After ten years practicing as a certified public accountant, Roger Fields followed his dream to open a restaurant. Three successful restaurants later, he decided to share what he learned in “Restaurant Success by the Numbers: a Money-Guy’s Guide to Opening the Next New Hot Spot” (Ten Speed Press, $16.95). Divided into sections that focus on the conception, planning and actual operation of a restaurant, the book is so useful at any stage of the business that a synopsis of each section follows.
Dreaming for Success. The book begins by illuminating dreamers about the most common reasons why restaurants fail, some of which may seem like no-brainers. The point is to make sure every aspect of the business gets specific attention, because guesswork is not sufficient and it’s too easy to put things off in the midst of the craziness, which contributes to failure.
Two frequent mistakes are poor choice of concept and poor choice of location, frequently caused by romantic notions and a “build it and they will come” mentality. Poor business acumen is another factor that, if it exists, should be faced head-on. Prepare for the planning process by examining these potential pitfalls.
When you shape the concept take into account the following: service style and restaurant type, atmosphere and ambiance, menu, price range, possibility of a bar and selling alcohol, and restaurant size. To address competition, identify a Unique Selling Proposition (USP) that will set you apart and help your customers perceive the value that will keep them coming back. Examples are lower prices, a signature dish, using local foods, or a unique atmosphere.
The difficult task of identifying the target market in your geographical area is simplified—learn to find information such as average ages and marital status, education and income levels, food and beverage sales and major employers and industries. Learn even more about your customers by analyzing the competition in detail as well.
A good location can mean the difference between success and failure, not only because of site visibility/accessibility and traffic patterns but also due to things like access to utilities, zoning and codes, and parking availability.
Once all of these have been taken into account, you’ll develop a feasibility study to estimate income and sales, estimate fixed and variable costs, and calculate your profit (or loss) and break-even point. Worksheets and tables help you outline the sample sales forecast, labor schedule and costs, and pro forma operating budget. In turn, these will enable you to estimate your capital requirements and establish a realistic budget.
Look at www.score.org for help preparing budgets, training and counseling.
Developing the Details. After you have an idea of your customers, competition, and budget you can build the menu. In addition to taking your customers’ tastes and current trends into account, consider availability and affordability of ingredients, preparation time, availability of adequately skilled personnel, equipment needs, kitchen layout and design, and the profitability of the dish. To determine pricing, details are given for recipe costing as well as how to price menu items to make a profit.
Atmosphere is equally as important as the food. Again, consider the wants and needs of your target market when designing the look and ambiance. Learn how to express your design ideas and work with a designer or architect. Important considerations are flow, acoustics, music, lighting, restrooms, aromas—all contribute to the brand image as much as the food and service.
Next, make decisions about your table settings. How will the tables be spaced and what type of tables and chairs will you have? Tabletop design includes dinnerware, glassware, flatware, tablecloths and napkins. Tips range from choosing dinnerware to complement dishes and accommodate portion sizes to preventing breakage to using different colored napkins to change the atmosphere at different times of the day.
The bar can be a big profit center in a restaurant, and again the target market should be considered when choosing the types of drinks to serve. Liquor liability insurance and types of liquor licenses are explained. Topics covered include bar size, layout and configuration, supplies, glassware, bar tools, ice, storage, types of beverages and brands, and trends. Most importantly, there’s an explanation of how to determine prices and suggestions for preventing waste and shrinkage.
Often overlooked, a well-designed kitchen can have a big impact on the quality of service. Fields says, “Your goal should be to design and lay out both the back and front of the house to create a seamless operational flow from receiving to preparation to production to service.” Size, location, layout and flow, receiving and storage areas, refrigeration, waste, types of equipment, cleaning stations, and maintenance are all discussed.
Finally, a broad range of advice on staffing from the chef to the wait staff deals with hiring, training, and establishing policies and procedures. For help writing employee handbooks, visit www.restaurantville.com or www.restaurantowner.com where you can download templates. Additional topics are service issues, customer expectations, and handling problems.
Marketing Mix: PART 2, 0208
After ten years practicing as a certified public accountant, Roger Fields followed his dream to open a restaurant. Three successful restaurants later, he decided to share what he learned in “Restaurant Success by the Numbers: a Money-Guy’s Guide to Opening the Next New Hot Spot” (Ten Speed Press, $16.95). Divided into sections that focus on the conception, planning and actual operation of a restaurant, the book is so useful at any stage of the business that a synopsis of each section follows.
Getting Down to Business. Only after doing all of the research, planning, and decision-making can you look for financing. There’s detailed information about Small Business Administration loans, as well as alternate funding sources such as equipment leases and buying used equipment. The biggest tool to get funding is the business plan, which is outlined section by section. All of your research and planning will be laid out in this document, so the more thoroughly you’ve done your homework the better your plan will look to prospective investors.
The commercial lease is a binding contract and so critical to your business that it’s essential to understand all of its aspects. The following clauses are explained: lease term, renewal options, use and occupancy, rent, gross versus net lease, percentage rent, alterations, insurance, sublease or assignment, signage and façade, rent security, rent concessions and free rent periods, personal guarantees, good guy clauses, tenant’s versus landlord’s work, future work by landlord, co-tenancy, indemnification and hold harmless clauses, arbitration, recognition, demolition and condemnation, nuisance, and hours of operation. Another vital decision is to select a legal and tax structure for the business, whether a sole proprietorship, partnership, corporation or Limited Liability Company (LLC). Federal and state tax identification numbers and bank accounts also need to be established.
Once the business is set up, it will be time to turn your attention to getting customers in the door. Communicating your brand and generating “buzz” are often intimidating and it may be helpful to hire a press agent if you can afford it. If not, try sending press releases to local newspapers and magazines as well as posting messages on food and restaurant blogs. Once the doors open, build on the buzz in myriad ways: conduct tastings and give out samples at street fairs and farmers’ markets, throw a grand opening party, distribute flyers in the neighborhood, get involved with neighborhood “welcome” programs and packages, and distribute gift certificates or coupons to local realtors and new residents as well as to credit card mailing lists. Web sites, blogs, and restaurant reviews help to build a lasting customer base.
There are many guidelines on important business practices after the doors are open. Taking and managing inventories, stocking and overstocking, spoilage, purchasing, receiving and storage, unnecessary waste, and employee theft are all things that can change the bottom line drastically. Understand cost of sales and labor costs, adjusting for inflation, and working with a Point-of-Sale (POS) system and how it can help your business.
Throughout the book, there are vignettes written by respected food and wine professionals on topics like “Crafting a Unique Concept,” “Creating a Basic but Good Wine Program,” and “Take It from a Food Critic.” The last story in the book suggests that to have long-term sustainability, “A business must measure not simply its financial performance, but also its environmental performance and its social performance.”
Roger Fields closes his book by saying, “With good controls and by paying attention to your numbers you at least will be able to identify problems, stem losses, and preserve some capital to keep your dream alive and start again, better prepared with a new concept.”
His easy-to-understand book is so chock-full of logical, systematic advice that any restaurateur would benefit from having it on their reference shelf at any stage of the game.
Karen Cathey is the president of Bon Vivant, LLC, a food marketing consulting firm in Arlington, Va., and chairman of The American Institute of Wine & Food. She can be reached via www.BonVivantFoodMarketing.com, or at 703-237-3780. If you have food marketing questions you would like to see addressed in future columns, feel free to e-mail Karen.Cathey@BonVivantFoodMarketing.com.
