Crowded Hollywood club scene turns bearish

Hard to spin turnaround tales lately

Gurus to today’s struggling firms find value in the small victories

On every news medium we are reminded of the carnage in global markets. Banks are collapsing, governments are making epic financial contributions to the private and public sector and job cuts are increasing. Commercial and personal financing is harder to source and the amount and terms somewhat sharp compared to the last few years. Confidence is low and inflationary pressures have been driving up energy and food prices. Businesses are naturally concerned about surviving and the next few years are clearly not going to be an easy ride.

Most all of our clients – from hotels and casinos to bars and restaurants, are challenged like everyone else. The economic reality is inescapable. However whilst doom and gloom may be the flavor of the month, and for many months to come, that is not the only thing we see.  Arguably, a recessionary environment can provide a platform for innovation and economic growth through entrepreneurialism and creative thinking and we encourage our clients to take novel approaches to countering the downturn.

We are all suffering. Companies will continue to suffer and the insolvency practitioners are clearly going to be kept busy for much of 2010. People are spending less and selectively as disposable income is depleted or conserved in most economic groups. A difficult economic climate requires considerable ingenuity and the ability to look at things differently. And in looking at things differently, the reality is that there are many opportunities out there – opportunities not just for new business but also to improve existing businesses. When things are at their most difficult, you cannot just maintain – by doing that, you’ll in fact move backwards – you have to grow.

Along with a long list of sectors taking a beating, the world of hospitality and leisure is suffering. Bankers are calling in loans, rents negotiated in the ‘good times’ can be stifling and cash flow is constantly under pressure.

With thousands of sites standing empty, landlords and business owners must contemplate other sources of revenue generation to counter their existing challenges. What can they do in this climate if there are less customers, no customers, low spending customers or a business with a model that is currently untenable? Look at your stock, your financials, your customer base, your payroll and your marketing. Look at your margins – in your overall business all the way down to individual services and products. Take this opportunity to look at what makes you money, what draws in the customers and what is essential to the underlying business to ensure that when times improve, you have the infrastructure and team in place to handle that. At times, make tough decisions because you need to be lean to operate in this climate.

The message we give to our clients is be cautious but don’t be inward and conservative. Look outward and look differently at your business model, at your job remit and/or your skills and work hard to seek out where the prospect lies.

There cannot be any “sacred cows” or unchangeable tenements of your business, you have to look and relook at all aspects of the way things are done within your business.  Whether it’s redefining your customer, your product, your delivery method and or your staff, you’ve got to make the changes that make you undeniably viable; you cannot rest on past results or simply what’s worked for years.  The manifest of “Doom & Gloom” is not a given and in fact is only a reality if you allow your business to be stagnant and ignore the need to constantly evolve when times are toughest.

From an unlawful detainer action to a 5 day pay or quit or simply an inability to meet your obligations, the strategy for finding a solution remains the same.

One of the issues we regularly come into contact with in our capacity as turnaround consultants for insolvent or underperforming units are our clients lease obligations. Typically executed during the “good times”, they have often proved to be an onerous burden on struggling units and when cash flow is tight and a business needs to be lean, the ability to renegotiate these leases is often the ‘make or break’ factor.

For a landlord to serve a 3 or 5 day notice to pay or quit, it may mean that talks to date have failed (or perhaps not occurred) and at this point the landlord is making it abundantly clear that they are willing to risk having a vacant property rather than keeping you as a tenant. Essentially, the landlord is looking to stop the bleeding as he or she does not have faith in your ability to remain as a tenant. At other times, the notice may merely be a strategic move to force you to repay some of the monies owing with no genuine intention of actually evicting you. Either way, receiving a ‘pay or quit’ is a nasty feeling for an operator and creates fear and insecurity for the business. As if cash flow was not tight enough already you now need to retain counsel.

Whilst we are not lawyers we do, however, work closely with our client’s legal team in defining a strategy that makes the most sense under the circumstances and provides the business with the maximum leverage. Our involvement is typically based on the competency of counsel as well as the operator’s ability to see the big picture. Our advice is ‘always get the best advice’. If you need legal advice, don’t use your local firm simply because you know them. Find out what they have done in your sector and ensure you are using someone with the right experience because good advice always pays its way, especially when dealing with something like an Unlawful Detainer – which has very little “appeal” process if you are on the wrong side of the judge’s decision.

Whilst OnSite can make a significant impact on the non fixed costs and provide drastic savings, increased operational profitability and streamlining the concept, if the rental amount (typically 7% to 10% of gross sales) is unsustainable, then the value in trying to save the business may be flawed from the day we arrive.

In a majority of recent cases we have been involved in and where we have engaged with landlords in cases of crippling rent, landlords have often been willing to make a number of concessions when presented with a fair option. It is critical not to ask the landlord to reduce the rent in order to offset operator error or concept failure – if you are running your business badly it is neither their problem nor their responsabillity to subsidise you. This is one area where our appointment provides immediate confidence and assistance to the business: We immediately step in to confirm that the operations are being streamlined and efficiencies are being introduced.

An operator who has made significant errors but successfully repositioned the concept and provided a viable and profitable model still has significant leverage because he or she has identified the problem and found a solution. Typically, landlords recognize the current economic challenges that their tenants face and to the extent that they have a good relationship with their tenant, a paying tenant is a better proposition than a vacant, non rent producing unit. You must engage with your landlord in a professional way as simply ignoring the situation will only make matters worse and enrage the already frustrated owner of your site.

When either handling a pay or quit, an unlawful detainer action or even thinking it may be time to attempt to renegotiate with your landlord, you must remember that as a paying tenant, despite your reservations, you certainly have leverage. You should offer a value proposition that makes sense, with financial payments you can meet in a timely fashion and that work both in the short and long term plans.

In all instances, we suggest the landlord be treated as a partner and where available, make modifications to the lease and rental amounts to provide for a base plus gross volume percentage. This would allow, in some instances, for an immediate reduction in the base but also provide the landlord with additional revenue potential based on the expectation that business will grow and ultimately, get back to its pre-recession top line revenues. This will only happen, however, when you can provide absolute data on your business and demonstrate its ability to provide the landlord with this upside.

We have clients where their landlords have offered rent reductions without it being offset into a loan for payback in the future, whilst others have required the operator to personally guarantee the value of the offset. Arguably this creates an unfair obligation and high level of personal exposure for the tenant, however in circumstances where the rent must be reduced to secure the future of the business, operators have to make tough decisions and compromise in areas they would typically consider off limits if they want a second chance on an existing rental contract.

When proposing a change to a landlord, it must be just that – a proposal. It cannot be neither theoretical or hypothetical nor can it be a napkin with some ideas scribbled on it. The operator is pitching his or her landlord to not only receive a reduced rent but also to have faith in the future of the business: This is a lot to ask. This pressure forces an operator to treat their business as a business and create the required cash flow statements and forecasts, to define a cash model that shows a number of different options to the landlord for them to be made whole and exactly how the tenant expects to realize that. You are pitching to your landlord and should make every possible effort to do so in the most professional way.

If your P&L shows a monthly loss, presenting a landlord with a burden you cannot meet and which you are likely to breach is much the same as saying you intend to breach it. You are not being honest and the landlord will spot this and have no faith in what you are proposing. On the assumption that the model will be redefined and the unit is either moving to, trending towards or is profitable, step one has been completed. A practical landlord has less reason to remove a profitable tenant if an equitable deal can be made and a clear path to get there can be defined.

With the P&L showing or trending towards profitability and the creation of cash flow allocations, forecasts and debt amortization tables, you should now be able to show your ability to manage the historic debt obligations you have and the shelf life on those. For most facilities, the P&L is not the problem – rather it is the cash flow that provides the greatest challenge. The ability (or lack thereof) to service the debt with the profits or available cash flow the unit generates is typically the biggest issue in turnaround business plans. This is immediately exasperated by the issuance of a landlord Pay or Quit notice, as lenders will now not be willing to lend money in such an unsettling environment.

This requirement to have a demonstrable business case also ties in to one of the important operational aspects of a business. You must understand your numbers and you cash flow because what it all comes down to is understanding your data and using the information the data provides to drive your business decisions. If you are running a business where you cannot see, down to minute detail, everything from your stock levels to your net margin on dishes served, then you are then running a business that is not worthy of a landlord workout. This financial information and the ability to scrutinize it is one of the keys to restoring profitability.

For our clients and now hopefully for you, with the creation and utilization of rolling cash flow forecasts showing your ability to manage your obligations, you are now able to create a number of options for your landlord or for that matter, any creditor. You can demonstrate with authority and confidence exactly how you intend to pay debts based on what you realistically earn and can pay. Every creditor would prefer to know what you can pay and will pay regularly rather than what you would like to pay but may not be able to with regularity. The intent to breach a deal or regular breaches of financial commitments made only compounds and exacerbates the problem and the relationship – and creates difficulty trying to structure a new deal.

In proposing to a landlord that an adjustment to the rent structure can be viable, it is important and crucial that the immediate recent cash flow shows that whatever is proposed can actually work now, not based on hypothetical projections of increased revenue.

It is also important to note that as a tenant, you should not be trying to salvage the situation if you are not confident that through renewed efforts and a workable landlord you can increase sales and improve the bottom line. This cannot be about working out a deal just to survive because that alone will certainly not incentivize the landlord to renegotiate.

While there are many different interpretations and variations, there are essentially two options for a reworked lease, “less now, more later” or “base plus gross percentage”.

The “less now, more later” option asks for the landlord to decrease the monthly rentin the short term but increasing the rent in the medium to long term. Less cash is therefore required ‘now’ when the business is in trouble but when it is thriving once again, the landlord can claw back rent lost in earlier years with higher income. This option provides for a set increase and is a less riskier option for the landlord but also negates any large reward for the landlords renewed faith and risk.

The “base plus gross percentage” model lets the landlord accept a lower base rental amount but participate in a percentage of gross revenue (important to note that this is always gross and not net revenue).  There are essentially two different types of percentage rent, the most common being based on receiving a percentage of sales benchmarked against a particular target (eg, $2k base and 6% of gross revenue over $500k). The other practical option is a percentage of total revenue but guaranteed with a base amount (eg, 3% of gross sales, base of $3k).  This is riskier for the landlord but has the attraction of a much more lucrative upside.

In some instances, however, the landlord is no longer willing to wait for rent or strike a deal and under those circumstances, a pay or quit is served. For many struggling venues, this is the final nail in the coffin and as if it could not get any worse, they now have to retain an attorney and use the few pennies left in the bank for legal service rather than operational or debt service.

In our experience, however, this onerous and unpleasant process provides a number of theoretical upside opportunities for both the landlord and tenant. If the process is managed appropriately, it can equally be a fresh start for the business as the decision makers are finally forced to make tough decisions that have likely been put off (perhaps in the hope they will disappear).

Upon being served, now knowing the landlord is willing to go ‘all the way’, the first step is to ask for an extension. This gives you all time to arrange to meet for a frank and open discussion (presuming the option is there) and with everyone’s chips on the table, it allows a thorough discussion as to whether there is a deal to be done. Whilst it is common to believe the landlord is in the driving seat, this is not always the case. If your financial modeling proves your ability as a tenant, the landlord is not looking for a vacant unit and financial exposure for the sake of it and would likely rather not restart the process of finding a new tenant. Equally, if no deal is to be found, you will have sufficient time to contemplate your legal position and take advice as opposed to making a rushed and insufficiently thought out decision.

This article is not about defenses to an unlawful detainer in an effort to find the landlord at fault with a defective service nor is this a step by step guide to the legal options available when responding (answer, demurrer or motion to quash) to such a motion. Furthermore, this is also not an article seeking to find potential covenant breach or retaliatory evictions. There are hundreds of options to drag out, extend and respond to a UD that your counsel can advise on. This is about the options or remedies that you may wish to explore if your concept is viable and you can “make it work” both on paper and in practical terms. This is about turning around your business and dealing with the issue of burdensome rent whilst also nursing your unit back to full health.

Understanding what has to happen and the legal strategy your business should take is unique to each situation. In some instances, the balance outstanding along with other debts may make a bankruptcy with intention of assuming the lease a viable option. In other instances, performing an Assignment for the benefit of Creditors (ABC) with your landlord allowing the debt to rollover to the new entity might be a potential solution.

At other times, it is just a matter of legal defense and starting the process of ensuring your lease is upheld. As an operator your entire business is tied to the lease and whilst there may be some assets (FFE, Liquor license and other items) the only real asset is the lease.

For clients who have run into difficulty with their lease obligations based on year on year and month on month revenue decline, we have seen successful use of California’s “hardship defense”. The value of this defense is that the entire concept of an unlawful detainer is the landlord asking for vacation of the property as an equitable remedy, grounded in fairness. If the landlord is asking the Court to act fairly and return the property then the court must provide you, by default, with that same level of fairness.

If you are experiencing this month on month decline in your business after you entered into a commercial agreement with specific revenue expectations you have not been able to meet – and where you have not been able to meet those due to the economic climate – then this hardship defense has merit. You did not enter into the agreement on false premise nor did you seek to mislead the landlord in committing to pay this rental amount because as an operator, the business case seemed viable. In this climate where business owners are struggling to keep their doors open, the hardship defense is very relevant and one you should turn your attention to and, where relevant, discuss it with your attorney.

This legal process of eviction is terrifying because it does not deal with overdue collections and summary judgments: Instead, the entire business is at risk. Think laterally and contemplate how you can involve your landlord to your mutual benefit because both parties stand to gain from finding a solution in these circumstances.

Why Companies Don’t Need Headquarters

David F. Carr, 06.03.10, 6:00 AM ET

James Sinclair, head of the hospitality industry turnaround firm OnSite Consulting, says one of the biggest challenges his employees have had adapting to the way he runs his business is answering the question, “But where is your company based?”

The answer: Wherever the work needs to be done. “We have 65 people, and we have no office,” Sinclair explains. Headquarters is a post office box; he also has an Internet-based phone and unified communications system.

Sinclair used to have an office. “Sure, we picked out a nice office with a conference room and people working away. But our clients don’t want to see our office, don’t want to see the conference room. They want us to come to them,” he says.

OnSite is in the business of reviving restaurants, hotels and casinos that are in trouble, sometimes on the verge of bankruptcy. In past years the company has bought and rehabilitated some facilities, but today it focuses on working with current owners on overhauling management and operations. Sinclair himself has long been a road warrior, and was rarely in the office anyway. When he did come in, he believed employees felt obliged to pepper him with issues they had been managing just fine while he was away. Or he saw them doing busywork solely to impress him with their industriousness.

About 18 months ago Sinclair decided to send all his employees into the field, where they could be more productive. That made a lot of sense for consultants and salespeople. But Sinclair went further, also dispersing his administrative workers. The person who handles billing, for example, now has a desk at the site of a longtime client.

“At first a couple of clients did say something like, ‘Let me get this straight: You gave up your office so you can use our office for free?’” Sinclair concedes. But he convinced them that any employee he parked at their location could at least serve as a point of contact, helping ensure a smoother working relationship.

Although employees found the “Where is your headquarters?” question awkward at first, Sinclair likes to turn it around, telling potential clients the OnSite consultants will be, well, on site 90% of the time, precisely because they don’t have an office to retreat back to.

The technologies Sinclair uses include Microsoft’s Office Communications Server for Internet call-routing and integration with other communication modes, such as e-mail and instant messaging. He also relies on Microsoft SharePoint for collaboration and BlackBerry Enterprise Server for mobility. OnSite has no IT staff of its own, so the technology is all managed and hosted under contract with 123together.com.

I heard a similar story from Doane Hadley, president of BizTech Solutions. I’m never quite as impressed when technology companies turn out to be showcase users of the technologies they promote, and BizTech had been a longtime beta tester for Microsoft SharePoint before adopting Office Communications Server.

Still, when Hadley decided to get rid of the firm’s office in New Jersey, he did it for his own reasons. Once his company had adopted unified communications, it became easier to tell people it was OK to work at home more–especially as gas prices spiked or the weather was bad. When his office manager announced she was moving to North Carolina, Hadley decided she could work from home.

“It got to the point where there weren’t a lot of people in the office anyway, and there didn’t need to be,” Hadley says. So he did away with it, and now all his employees work from home or from client sites.

Hadley has an agreement with a shared office facility in New Jersey, where he has one person stationed more or less full-time, and where he can have the use of a conference room if he needs it. But instead of running servers in his own data center, he now rents space in a commercial data center. “At the end of the day it’s better, because we have guaranteed uptime and higher connectivity,” he says.

OnSite’s Sinclair believes the decision to do away with his office has been worth more than $1 million in savings, supplemented by the increased business he has netted from a more productive workforce.

One of the side benefits is that people who were formerly confined to back-room tasks are now in contact with customers, giving them the opportunity to prove their worth. And employees are happier as a result, Sinclair says. “Some of them are earning double what they were a couple of years ago–because they’ve proven that they should be.”

David F. Carr is Forbes’ columnist on technology for small to midsize businesses. Contact him at david@carrcommunications.com.

Hollywood Cues Up Food Fight

Rolling Stone to launch eatery near Hard Rock.

Photo by Ringo Chiu

Rolling Stone’s space at Hollywood & Highland.

Rolling Stone is making its red carpet premiere this summer at the Hollywood & Highland Center with the opening of its first restaurant and lounge, but it won’t be the only rock star on that mall’s stage.

That’s because Rolling Stone is set to open its doors just as Hard Rock Café is scheduled to launch a restaurant and live event venue in the same center – in a first-ever competition between the two iconic names.

Entrepreneurs Niall Donnelly and Joe Altounian licensed the Rolling Stone brand to develop the multilevel, 10,000-square-foot space, which sits on the back side of the entertainment complex along Highland Avenue. They’re using the venue’s Hollywood debut as a test case: If it’s a hit, the partners plan to turn it into a national chain.

“We are bringing the magazine and the culture and what it represents to life,” said Altounian, a real estate developer.

“The plan is to absolutely open more,” said Donnelly, an Irishman who moved to Los Angeles a year and half ago after a successful run of operating bars and nightclubs in the United Kingdom.

Meanwhile, Hard Rock, which operates a restaurant at Universal City Walk, has spent the last few years looking to strengthen its presence in the L.A. area. Company executives view the opening of a 20,000-square-foot Hard Rock Café along Hollywood Boulevard – complete with a retail store, restaurant and live event stage – as a way to make a splash.

“We’ve been looking into the Los Angeles area for quite a time for a second location,” said John Galloway, vice president and chief marketing officer at Orlando, Fla.-based Hard Rock Café International Inc. “An opportunity opened up on Hollywood Boulevard and we jumped at it. The opportunity to be in such a vibrant area as Hollywood is one that we couldn’t pass by.”

While executives from Rolling Stone and Hard Rock said the Hollywood & Highland complex is the ideal location for their establishments, they insist that any similarities between the two stop there.

“We are a different concept,” said Rolling Stone’s Donnelly. “They are a memorabilia restaurant and we are slightly different. Our design is vintage chic. It’s a very cool, modern design.”

But some industry observers said a sort of battle of the bands between the music-inspired venues seems inevitable. That’s because Rolling Stone and Hard Rock will be vying for the dollars spent by the 15 million people estimated to visit the Hollywood & Highland complex each year – the majority of them tourists passing through just once.

“Rolling Stone might be a little bit more upscale than Hard Rock and they might have a different menu choice,” said Gary Levy, a hospitality consultant at Roseland, N.J.-based J.H. Cohn LLP. “But it seems to me that they are going to be competing for the same diner.”

Slow start

The Hollywood & Highland open-air mall is anchored by the Kodak Theater – site of the Academy Awards and the future home of a Cirque du Soleil show. Lining the walkways of the multilevel mall are more than 60 stores and nine restaurants. When the complex first opened in 2001 it struggled to draw a steady crowd. The $10 parking fee kept people away, and critics said the layout made it difficult to easily access the restaurants and stores.

Parking charges were lowered, and Hollywood real estate investment company CIM Group Inc. purchased the center in 2004 and spent millions on improvements designed to boost foot traffic.

It worked. Tourists and locals can now be found walking through Hollywood & Highland late into the night.

What’s more, the center’s popularity as also been boosted by the ongoing redevelopment of the area. Hollywood backers said the opening of Rolling Stone and Hard Rock are a testament to the renaissance there.

“To come to this point where we have two iconic brands coming to Hollywood and locating at Hollywood & Highland is a reaffirmation that Hollywood is back,” said Leron Gubler, chief executive of the Hollywood Chamber of Commerce.

The high-profile Hollywood premieres of Rolling Stone and Hard Rock are likely to become an additional draw.

“They are going to be battling,” said B. Biggs, who works as a security guard in the L.A. area and who spends his free time relaxing at the Starbucks near the future site of Rolling Stone. “It’s going to be a tough run, but I think Rolling Stone will be for the old schoolers and Hard Rock for the young ballers.”

Rocking out

Rolling Stone magazine was founded in 1976 by Jann Wenner and music critic Ralph Gleason. The publication became a force in politics, rock and pop culture with the gonzo-style journalism of Hunter S. Thompson and memorable covers – among the best known is a posthumous naked John Lennon wrapped around Yoko Ono.

The magazine has continued to leave its mark on society with provocative photos of stars such as Britney Spears posing with a Teletubby and Lady Gaga covered in bubbles. But Rolling Stone has also been faced with a decline in advertising revenue, which dropped 15 percent from 2008 to 2009, according to Publishers Information Bureau. The decline is blamed on a weak economy and overall slowdown in magazine advertising.

Donnelly and Altounian approached Rolling Stone with the concept of opening an establishment inspired by the magazine about a year ago, around the same time as Hard Rock announced it was coming to Hollywood & Highland.

Donnelly and Altounian are working with Brodin Design in Beverly Hills to turn the space into something that fits with the Rolling Stone concept. The selected motifs are black brick, tufted leather and vaulted ceilings, and there will also be an antique iron staircase connecting the second-floor restaurant with the first-floor lounge.

The pair hasn’t finalized the menu offerings, but Donnelly said the restaurant will serve American fare “with a twist.”

“It will be good quality food at a good price,” he said.

The restaurant will be accessible from inside the Hollywood & Highland complex and cater to the tourist crowd during the day. There won’t be a Rolling Stone retail store comparable to what Hard Rock offers, but tourists will be able to pick up a Rolling Stone T-shirt and other merchandise emblazoned with the magazine’s time-tested logo.

The bar and lounge area will be accessible from the street along Highland, and Donnelly and Altounian are hoping to turn the spot into a hangout for locals by offering pricey bottle service, access to two VIP entrances and celebrity deejays.

“It will be a higher-end lounge where people come to enjoy, relax and get bottle service, and listen to good music and get taken care of,” Altounian said.

The pair also plans to host private corporate events there, and Donnelly said the Rolling Stone name has already helped them book several groups.

Some industry insiders said they’ve got a few hurdles to overcome.

Jim Hustead, an executive with hospitality consultancy OnSite Consulting LLC, said Rolling Stone is less visible to passers-by since it faces the back of the complex. What’s more, Hustead said Donnelly and Altounian will likely have a challenge making a lounge at Hollywood & Highland a draw for locals.

“A nightclub doesn’t work for Hollywood & Highland,” he said. “You are never going to have the cool kids from Sunset Boulevard and West Hollywood. It’s the tourist mecca of Los Angeles.”

But Donnelly and Altounian swear by the site. They note that it’s visible from Highland, and they’ll attract people from the crowds who go to the mall’s second floor for views of the Hollywood sign.

“I prefer that it’s slightly off of Hollywood Boulevard because it’s not an obvious space,” Altounian said. “We are creating our own area there, and a lot of eyebrows are being raised as people drive by there.”

L.A. roots

They’ll be vying for dollars with a formidable competitor. The new Hard Rock Café will be sitting just around the corner on the more traveled Hollywood Boulevard.

Hard Rock, founded by L.A. businessman Peter Morton, opened its first U.S. location in 1982 at the Beverly Center and then opened a second L.A. restaurant in 1996 at Universal City Walk. Hard Rock now operates 150 venues in 52 countries, including 125 cafes, and nine hotels and casinos.

But the Beverly Center Hard Rock closed in late 2006 and the chain spent years looking for a higher-profile L.A. location that would draw both locals and tourists, many of whom frequent the establishment to sneak a peek at its rock memorabilia collection and snag some Hard Rock T-shirts, collectible pins and even golf balls. So when Virgin Megastore shuttered its Hollywood & Highland location last year, Hard Rock jumped at the opportunity to move in.

Hard Rock is turning the space into a 500-seat restaurant with a concert area and adjoining retail space. The store opened in November and sells limited-edition Hard Rock merchandise.

Hard Rock’s Galloway said the décor of the Hollywood & Highland location will reflect the flavor of Los Angeles by displaying memorabilia from local musicians, including rocks bands Guns N’ Roses and Motley Crue, composer and electric guitarist Frank Zappa, and pop singer Fergie of Black Eyed Peas.

“First and foremost, it will tell an L.A. story once you walk inside,” Galloway said. “The memorabilia will be focused and dedicated to Los Angeles and California music.”

While Hard Rock is known as a tourist-friendly brand, executives are hoping to attract Angelenos with the live music venue, which will feature performances by L.A. bands.

But industry insiders said Hard Rock will take center stage after it opens its doors to diners.

“This is a big splash to put yourself on the map,” said James Sinclair, a principle at OnSite Consulting. “I think this is one of their better moves – going back to what they do best.”

Indeed, entertainment-themed chains such as Planet Hollywood, which has filed for bankruptcy twice but has since made efforts to rebound with fewer locations and a Planet Hollywood Hotel and Resort on the Las Vegas strip, have struggled to turn a profit.

But if Rolling Stone and Hard Rock executives have it their way, both establishments will bring even larger crowds to Hollywood & Highland.

“I think it’s great for the center,” Donnelly said. “Cirque du Soleil, Rolling Stone and Hard Rock will draw in a crowd and feed off each other.”

Resort fees catch guests by surprise

Justin M. Bowen / File photo

A view of the Las Vegas Strip.

By Liz Benston (contact)

Saturday, May 8, 2010 | 2:01 a.m.

Chicago resident Tim Murtaugh keeps close tabs on his trip expenses, so when the Excalibur tacked a $4.50 “resort fee” on top of his $39 room rate for each night of his stay, the retired librarian sent a complaint letter to the resort’s management.

“I just didn’t think it was right,” Murtaugh says.

Neither do many others who have been surprised by resort fees charged for their stays in Las Vegas. The tide of complaints about the fees is rising in online forums, travel blogs and just about everywhere else that frequent travelers swap stories and post reviews.

Murtaugh had previously stayed at Las Vegas hotels that didn’t charge resort fees, so the added charge caught him off-guard. Resorts say the fees cover amenities such as high-speed Internet, gym and pool access and newspaper delivery.

They are relatively new in Las Vegas, but the fees are part of a growing trend in the hotel industry that’s expected to spread as tourism rebounds.

A 10 percent increase in hotel add-on fees this year is the prediction of New York University’s Preston Robert Tisch Center for Hospitality, Tourism and Sports Management.

Hotels are adding and raising room surcharges to boost profit, says the study’s author Bjorn Hanson, an associate professor of hospitality and tourism management at NYU.

It’s a risky strategy, as room rates are the No. 1 or No. 2 determining factor for leisure travelers who book rooms, rivaling the hotel’s brand name and what that represents, Hanson says.

“This is a period of grand experimentation to see what fees and surcharges guests will tolerate,” Hanson says.

The fees can vary by hotel, even hotels owned by the same company in the same city. That’s especially true in Las Vegas, where resort fees vary by property, though many are owned by a handful of companies. Most Strip hotels now charge resort fees. Some started charging them a few months ago; others have had them for a few years.

What’s more, Las Vegas hotels that formerly charged taxes only on the room cost are increasingly taxing the added fees as well, which can inflate the total bill.

Many consumers have complained that the fees are sometimes buried in fine print, so hotels and travel booking sites have improved disclosure in recent years.

Hotels in Las Vegas and elsewhere have trained employees to discuss such fees with customers if they are booking rooms by phone or as they are checking in.

They also have trained employees how to handle customer complaints from angry guests who don’t notice the fees until they check out and see their final bills, Hanson says.

These hotels graciously refuse to refund such charges, saying they were adequately disclosed beforehand.

Customers such as Cindy Weldon of San Francisco say they are fighting back by boycotting hotels that charge mandatory fees not included in the advertised rate. Weldon says some resort fees in Las Vegas can double the cost of a room. Weldon said some hotels still charge the fees even if they “comp” gamblers the room.

“It’s a sneaky, mandatory charge,” she says. “We used to only have to worry about taxes. Now we have to hunt to find out what these resort fees are.”

Station Casinos, which began charging resort fees ranging from about $15 to $25 per night in 2004, calls such customers a “vocal minority” because the fees are disclosed upfront, before customers book their rooms online or over the phone. On the company’s website, the amount of the “hotel amenity fee” is included as the fifth line item in a terms and conditions section that appears after customers select a date and room type at a particular hotel.

A small number of complaints about the fees crop up in guest surveys, but the vast majority accept the fees as a fair deal, says Michael Grisar, vice president of hotel operations for Station Casinos.

Previous to bundled fees, he says, customers were paying several times those amounts for services and amenities such spa access and shuttles to and from the Strip.

“Every time we added a new item it started costing more for the guest … you might be talking about an extra $60 to $70. We offer one low clean price for a package of amenities that guests have always wanted. We didn’t want to see them nickel and dimed for various things.”

Gordon Absher, a spokesman for MGM Mirage, which began introducing bundled resort fees two years ago, says the fees have spread at MGM hotels because “our guests see it as a convenience to have a single charge added to their overall bill” rather than a series of charges for things customers might not have expected needing, such as Internet access.

Likewise, guests like the convenience of sipping in-room bottled water and would end up paying more for water had they purchased it separately, he added.

Hospitality industry consultant James Sinclair of OnSite Consulting in Los Angeles advises his clients against charging mandatory fees in favor of a la carte fees or optional, bundled charges. Hotels that insist on charging mandatory fees shouldn’t make customers pay extra for basics like housekeeping, but rather, should include more tangible offerings such as access to the spa, he says.

“It’s not worth risking the angry customer who wasn’t looking for these fees or the customer who begins looking for resorts that don’t charge them.”

Sinclair calls mandatory fees “a deceitful way of making money,” given that hotels are reluctant to include them in advertised online rates so as not to get knocked out of a search for the lowest-priced hotels.

And yet, hotels feel pressured to implement them given that some competitors are tacking them on the back end of discounted rates, Sinclair adds. Many hotels — knowing that most people won’t dispute charges even if they don’t like them — are no longer removing charges for disgruntled customers now that business is picking up, he says.

Harrah’s Entertainment in Las Vegas is among a few companies resisting the resort fee trend. At a meeting this year, Harrah’s executives decided to charge for things the old fashioned way so as not to risk turning off customers.

At Harrah’s-owned properties in Las Vegas, customers can go down to the lobby to buy a bottle of water or a newspaper. They also pay for long distance calls and amenities such as the spa.

“If you want these extra things, we’re happy to sell them. But customers don’t necessarily want all these things,” says Marilyn Winn, regional president of three Harrah’s Strip resorts — Bally’s, Paris and Planet Hollywood.

The spread of resort fees is inevitable, much like the higher prices Las Vegas tourists now pay for improved amenities, says Mehmet Erdem, an assistant professor in hotel management at UNLV. People will grow accustomed to paying the fees, especially if they get a good deal on a room, he says.

“There’s a learning curve. When I first came to Las Vegas, there was no $20 buffet. Now that’s the norm. And you don’t see people getting sticker shock over it.”

Resistance to hotel fees isn’t so different from cruise ship customers who dispute mandatory tips and other previously disclosed add-ons when they receive their final bills, Erdem adds.

“On the day of debarkation, you will see this huge line of people at the front desk.”

And yet, such fees have become standard for the cruise industry, which attracts many repeat customers.

And resorts in Hawaii have long charged bundled resort fees, which have become a necessary and largely accepted cost of a Hawaii vacation, he said.

In fact, Murtaugh will be back at the Excalibur next month.

Based on his gambling activity, he’s getting three of his four nights for free, paying a resort fee for one night. Including taxes, the fee will cost him about $16.

“That was hard to turn down,” he says.

By Pamela Mills-Senn

PizzaToday.com

BY COURTENAY EDELHART, Californian staff writer
cedelhart@bakersfield.com | Wednesday, Apr 28 2010 12:29 PM

Frozen yogurt shops are back.

In the 1980s, they were as ubiquitous as big hair and ripped up sweatshirts.

Now it seems they are enjoying a renaissance. Bakersfield has two new ones so far this year, and a third is set to open downtown next month.

“The yogurt craze happened in the ’80s, again in the ’90s and again now,” said James Sinclair, a principal at Los Angeles hospitality consultant OnSite Consulting. “It’s almost every 10 years like clockwork.

“The key reason for this explosive growth and what seems like a yogurt brand in every available corner, strip mall and random location is actually purely economics,” he said.

The barriers to entry to this industry are so low that any time there is a depressed real estate market, yogurt stores spring up in all the newly affordable commercial real estate space, Sinclair said.

A yogurt store doesn’t require a lot of upfront expenses, he said. Inventory and equipment are fairly cheap, and it doesn’t take much time to train management and staff.

“An operator can open in almost no time at incredibly low cost,” Sinclair said.

With so many eateries going under in the soft economy, there also are good deals to be had on restaurant equipment, said Peter Siegel, founder of BizBen.com, a Web site for buyers and sellers of small businesses.

Then, too, it’s a simple matter of timing.

“Yogurt, ice cream and other cold food places tend to open just before summer, just like you see more coffee shops opening up right before winter,” Siegel said.

The frozen yogurt industry has done a really good job of marketing itself in franchise networks, too, Siegel added. Chains are attracting people interested in franchises by stressing strong profit margins and the low cost of the product at a time when consumers are watching their spending, he said.

That was one of the draws to the business for Churros and Yogurt, an independent frozen yogurt shop that opened March 25 at Valley Plaza mall.

“It’s a good, healthy treat and it’s affordable,” said Raoul Biteng, who started the store with business partner Logan Bui.

Churros and Yogurt offers eight flavors of yogurt and 27 toppings, including fresh fruit and candy, as well as, of course, churros.

Biteng said he chose to start out in the mall because of the built in foot-traffic there, but would like to expand to other areas and eventually sell franchises.

Another newcomer, Love Yogurt, opened in a strip mall this month at 6077 Coffee Road north of Olive Drive. The owner did not respond to repeated requests for an interview.

BurrBerry Frozen Yogurt is scheduled to open in a week or two in the Moronet Professional Building, 1514 18th St.

Attorney Bruce South is opening BurrBerry Frozen Yogurt downtown with wife and business partner Pam Boucher.

They thought downtown would be a good location for a yogurt shop.

“We sat out there for an hour one day and just counted the people walking by, and there were 130 pedestrians,” South said. “That’s a lot of potential foot traffic.”

Along with yogurt, the 1,300-square-foot store will sell low-fat pastries and a full line of gourmet coffees.

BurrBerry Frozen Yogurt is trying to differentiate itself from the competition by attracting the health conscious, South said.

“We want to provide a nutritious alternative to the Snickers bar in the afternoon,” he said.

So no high-fat yogurt flavors such as chocolate, and candy toppings will be gone in favor of such offerings as granola, fresh fruit and coconut.

The yogurt selection will be burrberry tart and a rotating flavor of the month. Or consumers can buy a swirled blend of the two.

Ice cream shop Cold Stone Creamery, which has three locations in Bakersfield, discontinued frozen yogurt at one point only to bring it back.

Frozen yogurt is not a fad, said general manager Violet Garcia.

“Customers are much more health conscious now, wanting the low-calorie or low-fat selections,” she said. “So many people are watching what they eat.

“I think we’re going to keep it around for a while.”

By DIANA RANSOM

With Earth Day just days away, consider greening your office. Or better yet, get rid of it altogether.

Thanks to improved technology and the high price of gasoline, working remotely has become an increasingly popular—and less expensive —option for both large and small work forces. Since 2006, the number of U.S. employees who worked remotely at least one day per month increased 39% to 17.2 million in 2008, according to the latest survey available from WorldatWork, global human resources association in Washington, D.C.

Employers that go this route typically like the reduced rents and technology savings telecommuting affords, while employees appreciate spending less time commuting and lower transportation costs. Despite these benefits, however, many employers remain concerned about whether they’re getting the most from employees, says Rieva Lesonsky, the founder and president of GrowBiz Media, a small business consultancy in Costa Mesa, Calif. “It’s a loss of control thing for them,” she says.

How to tackle the challenges of managing a remote work force? Here are six strategies.

Start off slow

Inevitably, there will be systemic kinks and bugs that will accompany a transition to a remote office. Instead of dispatching all of your workers simultaneously, transition gradually, suggests Ms. Lesonsky. “Until you get more comfortable with having a disparate work force, offer the ability to work from home one day a week or three days a month,” she says. Then, be sure to check on those workers at the end of the month. “See if there are any glitches,” says Ms. Lesonsky.

Probation periods

Unless you have a 100% virtual company, don’t let new employees work from home right away, says Ms. Lesonsky. Having a remote work force is built mostly on trust. “You have to be sure you can trust your new workers with the responsibility of working from home,” she says. Ms. Lesonsky suggests giving new workers a 60- to 90-day probationary period before giving them the OK. For fully virtual companies, hire workers who don’t require much managing and can thrive in an autonomous setting, she says.

Set expectations

Although working at home lends itself to more flexible hours and working in one’s PJs, it should be clear to employees what’s expected of them, says James Sinclair, the CEO of OnSite Consulting, a hospitality management and consulting firm in Los Angeles. Mr. Sinclair delegates the day-to-day management of his 65 employees to team leaders, each of whom heads groups of five or six workers. The leaders are responsible for defining project goals and making sure workers adhere to both daily and weekly tasks. “We don’t have people on our staff walking around looking for something to do,” says Mr. Sinclair. “But we do have to monitor and track them nonetheless.”

Use technology

Technology can also be vital for keeping up with virtual employees, says Andy Miller, the CEO of CardStar, a smartphone application provider that stores loyalty, rewards and club membership card information. His team is located in three different U.S. cities, and each employee has a laptop, cellphone and USB modem “so that they can connect anywhere,” says Mr. Miller. Texting and email, along with meeting via video Skype, provide something akin to face time. “When I was in corporate America, I realized that it was highly inefficient: There were so many meetings you didn’t have to be at but were required anyway,” says Mr. Miller. “You end up working harder and doing less.”

Don’t stalk employees

It’s perfectly acceptable to check in on workers and make sure they’re doing their jobs appropriately. However, there’s a fine line between just checking in and watching them, says Ms. Lesonsky. “The danger is if the employee goes home and you are constantly questioning them, they’ll feel like they are more under your eye,” she says, adding that retaining employees in such a situation will likely become difficult.

Establish performance measurements

Of course, it’s perfectly reasonable to want to know how remote workers spend their time, which after all you’re paying for. When Ken Clark, the CEO of 1-800-Translate, a translation and language management service in New York, started moving his work force home last year, he found it challenging to manage a 12-person staff, plus thousands of contractors around the world. To keep employees on track, Clark turned to performance reviews. Each time a job is completed, the company sends out quality assurance emails to customers. This practice helps signal early on which employees are doing well and which aren’t, he says. “For small businesses, especially, one bad apple can put you out of business,” Mr. Clark says. “Even a marginal employee is a tremendous strain on an organization. Our aim is to identify with them quickly.”

Write to Diana Ransom at dransom@smartmoney.com

Celebrity theme isn’t always a meal ticket

menkoji@sacbee.com

Published Sunday, Mar. 28, 2010

Here’s some sage advice for Sacramento Kings star Tyreke Evans: Think twice before you open a restaurant with your name stamped on it.

Restaurants with themes – particularly those with celebrity names – face particular challenges, which makes them vulnerable and often short-lived, say restaurant experts.

“Before you’ve even opened, all these odds are stacked against you,” said James Sinclair, a principal with OnSite Consulting in Los Angeles, which specializes in advising insolvent and underperforming restaurants.

“It’s a natural for sports celebrities to open a sports bar because, by extension, they are sports fans,” Sinclair said. “The name is not enough. The brand name brings in the customer for the first time; the quality of the product keeps them coming back. While it’s a simple concept in theory – serve food, get money, pay bills – it’s not.”

Celebrity names inflate expectations about a restaurant for consumers, he said. Diners often drop in just because they expect to see the namesake, and themed restaurants have to remain relevant and fresh on top of all the other requirements that keep people coming in the door, experts say.

In Sacramento, former Sacramento King Chris Webber’s restaurant closed recently after a few years. The rock ‘n’ roll-themed Hard Rock Cafe closed its downtown Sacramento location on Saturday after a 13-year run.

“Do themes get old? Can you go to the Hard Rock three times a week? I still think it’s a very strong brand, but it’s time to relook at the concept and redefine their model because there’s a lot of competition in the market right now,” Sinclair said.

There’s no shortage of theme restaurants nudging into the region.

Dave & Buster’s, a restaurant and gaming arcade combination, opens its first area site – its 57th nationally – on May 3 at the Fountains at Roseville, offering 65 percent of 17,000 square feet to games, from Skee-Ball to Guitar Hero.

“It’s interesting because they are looking for that competitive edge. That’s the Holy Grail,” Sinclair said of the Dallas-based chain.

Statistics on speciality restaurants and how they fare are scarce, but experts like Sinclair can name a slew of celebrities – athletes, actors and, now, celebrity chefs – who struggle to bring their star power to the table.

Scandal scrubbed Clemens

At headlinerdiners.com, Matt Bridgeford has gathered details – such as photos and recollections – on celebrity restaurants in 500 locations. He estimates that just under half were opened by sports celebrities.

Bridgeford, a Seattle assisted-care worker, figures he’s visited 50 of them. He’s seen the best and the worst of the concept, he said. Major-league pitcher Roger Clemens, scandal-ridden and disgraced over links to steroid use, had to scrap plans for a Houston restaurant before it even opened, he said.

He’s also marveled at New York Yankee Mickey Mantle’s restaurant that is going strong in the city that loved him, a legend that can draw in tourists and fans years after his death. He’s also sampled Danny DeVito’s steak house in Miami, an upscale menu that the rotund actor personally developed: try an 8-ounce rib-eye steak for $60.

“It was the best shrimp I ever had,” he said.

“I think there has to be a chance you are going to walk in and see the celebrity there, having fun, and you might take your picture with them or something,” he said of the ideal, successful celebrity restaurant.

If a celebrity or athlete doesn’t frequent the business, then those $20 hamburgers will be a hard sell, he said.

He had hoped to make it to Webber’s Center Court With C-Webb in Natomas, but after about three years it closed in November as the recession weeded out underperformers.

“It’s hard to expect that these places are going to last for 20 years,” Bridgeford said.

The food has to be good

The primary pitfall when celebs become entrepreneurs is they bank too heavily on their persona, said a Riverside restaurant consultant.

“I’ve seen a lot of celebrity restaurants in different parts of the country,” said Ron Santibanez. “The inherent problem I see is that they have focused more on the name than on the food and service. It’s still a restaurant. There is a still a level of service that needs to be met.”

After the initial hype, the aura could fade if execution falls short, he said: “Then you’re just left with a restaurant. If customers don’t leave a restaurant talking about the food, you’ve got a problem.”

Former NBA great Karl Malone had partnered in a short-lived restaurant that opened in Riverside County, more than an hour from the Los Angeles area where he played briefly late in his career, he said. After the Laker Girls and other teammates opened the place, the fanfare fizzled.

“Once everything was said and done, it wasn’t one of his hangouts and the food and service was mediocre,” he said.

De Niro doesn’t use name

On the other end, a popular concept could get overextended, Santibanez said.

He suggested that Wolfgang Puck, the Los Angeles celebrity chef, might be spreading himself too thin these days, with a couple dozen locations of varying concepts from fine to takeout dining, a line of frozen food and appliances. “No matter how famous a person is, it comes down to the execution,” he said.

Some celebrities are less interested in putting their name out there on a restaurant marquee, Sinclair said. Actor Robert De Niro has invested in two dozen fine-dining restaurants around the world – such as Nobu, his sushi restaurants – but none carry his name, Sinclair said.

“That’s a great example of a great product. It just so happens Robert De Niro is part owner.”

Owners and operators of themed restaurants realize the odds are stacked against them.

At the Fountains at Roseville, Tres Agaves opened in 2009 with a seemingly narrow theme: tequila.

“There’s definitely challenges in it,” said Ashley Miller, executive beverage director for the restaurant. “How do we keep it a hot place?”

The first restaurant opened nearly five years ago in San Francisco and tequila aficionado and rocker Sammy Hagar was originally involved but is no longer. The restaurant offers 130 kinds of tequila and cuisine from the Mexican state of Jalisco, the home of tequila.

With two locations, the owners have no intention of going beyond a handful, which narrows the focus, Miller said. “We don’t want to be a huge chain.”

Tequila is the fastest growing spirit in the country and the restaurant capitalizes on that trend with parties for Mexican holidays, a “passport” program for those who want to track their way through all 130 labels and food that remains true to the region.

“They come for the tequila, stay for the food and come back for the service,” Miller said.

Former Sun shines

Almost in the shadow of Phoenix’s downtown NBA arena, former Phoenix Sun star Dan Majerle opened Majerle’s Sports Grill in 1992 and remains a majority owner of that and two newer suburban locations.

A year after the downtown restaurant opened, A.J. Sulka, the managing partner, realized the restaurant needed a focus besides the bar and bar food.

“If we want to be here for the long term, we need a good lunch,” Sulka recalled thinking at the time. The restaurant caters to a business lunch crowd with a consistent and rapidly served menu, Sulka said.

Majerle, a born crowd-pleaser on the court, carried the same personality to the business, Sulka said. At least four or five days a week, Majerle, who left the NBA in 2002, is behind the bar or serving a Cotton Club sandwich, named for the late Suns’ coach Cotton Fitzsimmons.

The restaurant has always fulfilled a fan’s fantasy with Suns players past and present dropping by, Sulka said. Sacramento Mayor Kevin Johnson, a former Sun, used to lunch at Majerle’s. Suns sensation Steve Nash comes by. And so does Suns center Amar’e Stoudemire – who lent his name to a downtown Phoenix restaurant that filed for bankruptcy protection recently.

Majerle’s survived recent lean summers in a downtown that saw more than a handful or restaurants come and go, Sulka said.

“If we run Majerle’s the way Dan played basketball, loyalty to the team, coaches and fans, and his hard work, determination and the consummate professional he was, no way could we fail,” he said.

© Copyright The Sacramento Bee. All rights reserved.

Harnessing New Semantic Search
By: John Rossheim, Monster Senior Contributing Writer

Many have called semantic search the future of resume search technology. But what exactly is semantic search?

Imagine search engines that don’t get hung up on the particular words that you and your perfect candidates use to describe a given profession. Instead, semantic search interprets the meaning behind the words and concepts.

If that simple concept still sounds murky, there’s good news: to reap the benefits of semantic search, you don’t need to know how it works.

Here’s a glimpse behind the curtain of semantic search that will help inform your use of it.

The Power of More Accurate Search
Basically, semantic search gets down to the meaning of words — the terms of your query and the prose in the resume database — to separate the wheat from the chaff much more effectively than conventional search.

“Semantic search creates strong job searches for the employer so it doesn’t take hundreds of clicks to sift through the results,” says James Sinclair, principal at OnSite Consulting, a hospitality consultancy in Los Angeles that performs executive searches for clients.

Maybe the most surprising aspect of semantic search is that it lets you describe who you’re looking for, almost as if you were speaking with a networking contact who knew all the top candidates out there.

“Our semantic search incorporates an engine that looks at context and addresses a lot of language pitfalls in resumes,” says Earl Rennison, vice president of architecture at Monster. For example, Monster’s Power Resume Search resolves misspellings, abbreviations (standard and otherwise) and synonyms and variations in terms. For example, SOX, Sarbanes-Oxley and Sarbox are all understood to refer to the Sarbanes-Oxley Act of 2002.

Recruiters find that it’s more effective to search on specific, hard skills, like C# programming, than on soft skills like team player. Those all-important soft skills are best evaluated by hiring managers and HR professionals in personal interactions.

Finds Candidates on their own Terms
Semantic search is necessary precisely because human language is so full of variations. “Candidates don’t create resumes thinking about how you will search for them,” Kforce vice president of recruiting Glen Cathey told attendees of SourceCon 2010.

Semantic search uses webs of related terms and their meanings to uncover resumes that use words closely related to your search terms. So, for example, when a recruiter or hiring manager runs a search on programmer, the results may also include jobs titled software engineer and developer, since they are potential synonyms.

Skills and traits are then weighted in semantic search to produce optimal ranking of results. Monster’s Power Resume Search gives more weight to a candidate’s experience that’s more recent, for example.

Even in the current buyer’s labor market, perfect candidates are often elusive. Thus Power Resume Search lets recruiters designate each desired skill as either required or nice to have.

Using Technology to Meld Information
To match your search query with the best candidates, semantic search combines advanced analytics with real-world knowledge of occupations in many industries.

“For each resume, the technology extracts concepts and tags sections,” says Rennison. “Then we analyze and summarize all the information in the resume,” to produce a conceptual portrait of the candidate.

Monster’s subject-matter experts encode knowledge from many professional fields, Rennison adds. They define a concept, find all the ways of referring to that concept, and determine where the concept fits in the “semantic space” of industries and occupations.

Here’s one such example: because advertising is a form of marketing communications, a resume with advertising copywriter in its Job Experience section can be presumed to belong to a candidate who has some marketing experience.

“Unless you have the right technology, making all of this come together is exceptionally difficult and fraught with problems,” says Rennison.

For instance, parsing errors can cause some words to be misinterpreted because their context is misconstrued. If a CPA’s resume states that she is marketing herself as a forensic accountant, the resume search engine should not classify her as a marketing professional. Sophisticated semantic search will analyze where in the resume marketing appears and interpret the word in that context.

Will Semantic Search Reshape Recruiting?
Who needs professional recruiters when semantic search is available? Most employers who have been using recruiters will find that these human experts will remain essential to the sourcing, recruiting and hiring cycles.

“Recruiting for top management still requires the personal touch,” says Sinclair. Additionally, concludes Cathey, “Intelligent search and match applications are not a replacement for creative, curious and investigative recruiters.”

Armed with semantic search in their tool belts, “recruiters can focus on developing relationships with clients and candidates,” says Rennison. Since semantic search streamlines the discovery of candidates, he adds, “recruiters can devote more time to determining whether candidates meet the promise of their resumes.”

When an Employee Stock Ownership Plan Makes Sense

Even though the employment market is flooded with unemployed top talent, smart companies need to always be thinking about the most effective ways to retain their best employees.

Perhaps one of the most powerful employee engagement tools is an employee stock ownership plan (ESOP). “What greater way to motivate each and every [employee] than by giving them all a little piece of the pie,” says James Sinclair, the principal of OnSite Consulting, a nationwide consultant to the hospitality industry. An ESOP “motivates employees, improves firm performance, fosters innovation, and promotes sound financial health,” says Sinclair. Indeed, studies show that employee motivation and productivity increase in companies with ESOPs.

By definition, an ESOP is a qualified defined-contribution employee benefit plan that invests primarily in the stock of the employer company and allows employees to become partial owners of the business. In the United States, more than 11,000 companies — from Fortune 500 firms to small, private types — have implemented an ESOP. That translates to an estimated 8 million employees who own stock in their companies through an ESOP. And according to Gary Young, a corporate attorney and advisor to small businesses on ESOP issues, the appeal of ESOPs for employees goes beyond participation in company ownership. “Like a pilot in a plane, passengers take some comfort in the fact that the pilot will share in the same fate as they will,” he says.

But using ESOPs as an employee engagement tool is often not the primary motivator for most business owners. The real motivation? Tax advantages. “ESOPs give [business owners] the most tax-favored option that the tax code provides anyone,” says Young. An ESOP provides a tax-advantaged vehicle to create liquidity, and a ready market for company shares so that the owner can take some cash out of the business. One of the potential tax advantages is that an entrepreneur who sells company stock with favorable capital gains treatment can possibly defer recognition of that gain indefinitely or altogether, says Young.

There are two types of ESOPs: leveraged and non-leveraged. Companies can make tax-deductible cash contributions to the ESOP to purchase stock or have the ESOP borrow money to buy the shares. Under a leveraged ESOP, an ESOP obtains a loan from a bank, usually with a company guarantee. The ESOP then uses the loan proceeds to buy stock from the company and/or existing shareholders, says David Johnson, an attorney with Turner Padget Graham & Laney in Florence, South Carolina. The company makes annual tax-deductible contributions of cash to the ESOP, which in turn repays the bank. With a non-leveraged ESOP, the company makes annual contributions to the trust either in the form of stock or in cash that is then used to buy shareholder stock.

Waiter, Bring Me a Fresh Idea
10 strategies that are working in the tough restaurant economy
By Jason Daley | Entrepreneur Magazine – March 2010

URL: http://www.entrepreneur.com/magazine/entrepreneur/2010/march/204986.html

It was about 20 years ago that the casual dining boom got started in the United States. It was a golden, batter-dipped age: We were lured in by the novelty of mozzarella sticks and artichoke dip, marveled at the cluttered walls and uniform flair and gulped down two-liter mango margaritas like every night was Friday.

But the bloom is off the bloomin’ onion when it comes to casual dining. The recession has customers trading down to fast food and the growing “fast-casual” segment of takeout specialists (think Chipotle (CMG), Noodles or Panera (PNRA)). Over the last couple decades, while drive-thru burger joints have kept their prices flat, the typical bill at casual dining chains has multiplied three or four times. And the quality of the food has remained pretty much the same while fast food has become better and more diverse. Add to that grumbles about predictable, high-fat menus and stale décor and it’s understandable why in 2009 the category was down 5 percent to 8 percent with a 3 percent to 5 percent drop forecast for 2010.

But some chains are figuring out ways to keep customers coming through their doors. Red Lobster (RT), for one, has designed a quick-turnaround lunch service designed to draw the time-strapped crowd, and its new wood-fired entrees are appealing to the health-conscious. Ruby Tuesday (DRI) redesigned its menu, retrained staff, modernized its décor–and brought in almost 2 percent more customers in late 2009 than in late 2008.

There are plenty of steps to take in a down market, and it’s important to remember that even individual franchisees are not powerless. We spoke with some of the leading thinkers in the casual dining field to find out what you can do to put a little flair back into your business.

1. Think locally
Casual dining chains are some of the most aggressive national advertisers out there. (Remember the “I want my baby back” jingle?) The problem is, plenty of franchisees think that’s enough, especially after a splashy grand opening with big media buys. “Local franchisees are advised to put 1 to 5 percent of their money into local advertising by their franchisors, but they think the national TV commercials are enough to drive customers,” says James Sinclair of OnSite Consulting, a Los Angeles firm that helps rescue flailing restaurants. “We often suggest local marketing like sponsoring soccer teams, participating in fundraisers, things like that. There’s no better advertising than getting buzz in the community.” Casual dining mom-and-pops haven’t been hurt as much by the recession, mainly because people feel a strong connection to the businesses. Becoming a local leader and integral part of the community, versus a faceless chain, can go a long way to developing customer loyalty.

2. Speed up lunch
Lunch is when the fast-food joints and casual restaurants go head to head–and where casual dining loses out. “Business users want to get in and out quickly, and most don’t have a full hour for lunch,” says Darren Tristano, executive vice president of Technomic, a Chicago-based food-industry consulting and research firm. Shaving 10 to 15 minutes off a visit can mean the difference between drawing a lunch crowd or sitting idle for the afternoon. Cracker Barrel (CBRL) and Chili’s have invested in system-wide redesigns of their kitchens and service procedures to help cut big chunks off their service time, but franchisees can help keep things moving by investing in more lunchtime staff, making sure servers are trained and efficient and streamlining the lunch menu to keep the kitchen on track. Tristano also suggests keeping prices competitive. Having lunch entrees in the $5-to-$8 range makes it less likely that budget customers will shift to the burger shack if times get tougher.

3. Push the bottle
Booze is always a high-margin item for casual restaurants, but more importantly it’s a gateway to gaining customers for dinner. According to Technomic’s research, only 14 percent of customers find occasion to drink in the afternoon, which is why national chains have started placing a new emphasis on earlier happy hours. Ruby Tuesday recently revamped its bar lineup, retrained its bartenders and introduced $5 signature premium drinks. T.G.I. Friday’s offered free appetizers at the bar last year in an attempt to draw people in during the dead afternoon hours. Starting drink specials at 2 or 3 p.m. is a great way to attract shift workers, business people scheduling casual meetings or retirees looking for afternoon deals. “You have to remember,” says Jeff Davis, president of Sandelman & Associates, a food-service research firm in Irving, Texas, “when times are tough alcohol is the one thing people don’t cut back on.”

4. Push the plate
Besides offering an extended happy hour on booze, create a happy hour on menu items, suggests Tristano, who points out that Steak ‘n Shake’s afternoon half-price milkshake promotion can easily lead to an order of burger and fries, and Braxton Seafood Grill’s happy hour, when it sells lobsters at cost, often gets orders for a few beers and all the fixings. One innovative strategy to woo the late-afternoon crowd is offering items at ascending prices–$3 appetizers at 3 p.m., $4 at 4 p.m. and so on. “The only way to maximize opportunities is to trade up,” Davis says. “The main goal when you get someone through the door is to trade up.”

5. Focus on the quality
“If you’re at a Mexican restaurant, people are going to notice if you’re scraping broken tortilla chips from the bottom of the barrel and not filling their glasses to the top,” Tristano says. Many chains also make the mistake of charging for soft drink refills or reducing the number of servers to save money. This sends a clear message to the customer that you’re struggling. If it is necessary to reduce costs, he suggests making cuts across the board instead of pulling savings in the areas of servers and food costs. Instead of switching from a good cheddar to a block of “cheese product,” try to renegotiate prices with vendors. “Be careful to negotiate pricing and to take cost savings out of other areas,” he says, “not from areas where customers will feel it most.”

6. Don’t chase Subway
One of the big temptations in casual dining is to simply slash prices until hordes of $5 deal-seekers start filling the tables. But Sinclair says that’s exactly the wrong tactic. “All that does is draw in deal hunters, and when the promotion is over, they won’t return,” he says. “You can’t focus on the short term. You have to be focused on what is going to make the customer return. If you’re going to discount, rebuild the menu so the price of the dish doesn’t lose you money.” The same thing goes for cutting portions. For the most part, consumers see smaller portions as a loss of value–and the savings to the restaurant are small. In the end, Sinclair says, “you’re not saving money per dish, you’re losing customer satisfaction.” Some portion-cutting campaigns have been successful: T.G.I. Friday’s Right Portion, Right Price campaign hit a sweet spot and The Cheesecake Factory scored when it brought its lunch portions down to human scale. But the strategy was about “right-sizing” ridiculous portions. “Some places serve way too much,” Davis says. “Why pay $15 for a salad that I can only eat a third of?”

7. Give them something special
It might seem obvious: People go to a specific restaurant to get food they can’t get anywhere else. But that idea has become murky in casual dining, where fried appetizers and flatiron steaks have all melded into culinary clichés. Tristano says there are two ways to give your menu an edge: Offer items that are a healthful alternative for those looking to adopt a “better-for-you lifestyle” or dishes that most diners can’t cook at home. “Quality Mexican entrees are difficult for people to make at home, or Asian appetizers like pot stickers. For crème brûlée you need to have that little flamethrower,” he says. “People are drawn to items that require culinary expertise or ingredients that are difficult to purchase.”

8. Reward loyalty
The best way to earn loyalty–and repeat visits–is to provide quality food and service. But Americans are suckers for deals, and loyalty programs are one of the things that keep diners coming back to their favorite booth. Sinclair suggests implementing programs that don’t necessarily hand out freebies but still provide something meaningful to diners. Rewards can include priority seating, discounts or rebates on gift cards or–one of Sinclair’s favorites–the chance to sign up and win prize money. “The idea,” he says, “is to get customers involved in the brand and get them to feel a natural partnership with you.”

9. Get it out the door
Fast-casual establishments are striking a chord with Americans–the food is better than a drive-thru burger joint, but it doesn’t require an hour of time and a 20-percent tip. Full-service casual restaurants, however, can easily mimic fast casual. System-wide, Denny’s and IHOP are experimenting with fast-casual annexes attached to their restaurants, and Buffalo Wild Wings, which has dedicated takeout ordering stations, is successfully bridging the fast- and full-service divide. Tristano says providing alternatives to sit-down dining­–whether call-ahead, drive-thrus or catering­–is a great way to create new revenue streams. “The more you drive off-premises growth, the greater opportunity you’ll have to weather the economic storm,” he says. “You have to understand what the customer wants and adapt to this environment and this economy.”

10. Take time to train
In the constant rush of the restaurant business, sometimes it’s hard to stop and take a good hard look at the big picture. “We don’t always have time to train employees or go through a full menu evaluation,” Davis says. “Maybe, with the recession, we have that time now.” Don’t be scared off by the extra investment involved in training–when restaurants are fighting tooth and nail to earn repeat customers, exceptional service is a huge factor in their deciding where to go, and good training often leads to less staff turnover. “It will cost money,” he says, “but in the longer term, people who continue to invest in their businesses will succeed. Excellence always wins, top to bottom.”

Jason Daley is a freelance writer based in Madison, Wis.

www.jasondaley.com

Is W Hollywood A Scene Stealer?
By DAVID HALDANE – 2/15/2010
Los Angeles Business Journal Staff

Will the posh new 305-room W Hollywood Hotel & Residences supplant the nearby Hollywood Roosevelt Hotel as the hangout for hipsters?

Several of those who know the market believe that the two establishments may go head to head at first, but in the long run the competition will help them both.

Nonetheless, the historic Roosevelt on Hollywood Boulevard, as well as the more middle-of-the-road Renaissance Hollywood Hotel on North Highland Avenue, have wasted no time in making improvements to keep themselves in the game.

Among other things, the Renaissance has been adding musical events, and will soon remodel its restaurant and corridors, even though it just opened in 2001.

The Spanish colonial Roosevelt, extensively remodeled just five years ago, will feature “new nightlife venues” this year, said Jason Pomeranc, who is co-owner of Thompson Hotels of New York, which owns the Roosevelt. And next year will see some room renovations.

“People choose to stay at the Roosevelt not only because of its location, but because of multiple layers of physical beauty,” he said.

And while there’s nothing wrong with a little healthy competition from down the street, Pomeranc added, “people will continue to go to the Roosevelt because of its intellectual soul.”

Yet the splashy debut of the $360 million W last month featuring just about every power player in town and a host of celebrities – including Los Angeles Mayor Antonio Villaraigosa, TV host Jimmy Kimmel and Robin Thicke – put its hospitality competitors on notice.

And the arrival doesn’t come at a time when tourists are exactly swarming over Los Angeles. Last year, hotel occupancy rates dropped nearly 11 percentage points – to 66 percent – while the average cost of a room fell from $170.50 to $151.50.

With occupancy rates not predicted to improve this year even as room rates continue to drop, some analysts believe that, at least initially, the W’s two main competitors will take a hit.

“I think initially the Roosevelt will see a decline,” predicted James Sinclair, the principal at OnSite Consulting LLC, a nationwide L.A.-based hospitality consulting service. “The new kid on the block always creates that for the competition. As long as the Roosevelt rises to the occasion and understands that competition forces innovation, however, then its business will ultimately increase because of the buzz created by the W.”

Hollywood institution

In fact, as far as glamorous and hip Hollywood haunts go, the Roosevelt has long had the town to itself.

Opened in 1927, the 12-story hotel was at the center of the excitement and elegance of early Hollywood, hosting the first Academy Awards in 1929. Marilyn Monroe is said to have lived in Room 246 and her first photo shoot was taken on the diving board at the pool. But as happened to Hollywood in general, the hotel eventually experienced a decline.

Then, in 2005, amid the neighborhood’s resurgence, the 83-year-old institution underwent a $46 million head-to-toe makeover aimed at restoring its glory for a new generation. Led by hot designer Dodd Mitchell, workers stripped the lobby’s ceiling to expose wood beams and stuffed its interior with oversized leather chairs to give it a smoking lounge feel.

Several new watering holes were added to attract the young.

The effort was a definite success with the hotel attracting A-list actors and celebrities such as Kirsten Dunst, Cameron Diaz and the late Heath Ledger. Actress Lindsay Lohan had a birthday bash there in 2008. Robert Ritchie – known more popularly as Kid Rock – reportedly had an altercation there in 2006 that was breathlessly reported by the Web site TMZ.com.

The room rates run the gamut from $199 to $239 for a standard room, up to $1,500 for a two-bedroom suite and more than $6,000 for a penthouse. The 300 units include a heavy mix of 58 suites and 60 poolside cabana rooms with private terraces. All of which has led some to conclude that the hotel attracts a different enough crowd from the W to sidestep a hard blow.

“People who go to the Roosevelt wouldn’t necessarily go to the W,” said Kristofer Keith, the owner of Spacecraft Design which does hospitality design and construction in Hollywood. “The Roosevelt has more of a boutique-type vibe, while the W reeks of corporate. I don’t really see a conflict.”

On the other hand, the 632-room Renaissance Hollywood Hotel and Spa, owned by L.A. real estate developer CIM Group, has largely targeted the tourist and convention crowd. Rooms start at about $239 a night (though the hotel has 33 suites, including a 3,500-square-foot penthouse that rents for $7,500).

To make itself more competitive in the new Hollywood market, Dan Shaughnessy, sales and marketing director, said the hotel in the last year has added such attractions as Indy Thursdays, during which independent music artists showcase their talent in the hotel’s lobby, and Sunday Standards, a Sinatra-style show. In addition, the hotel is in the process of remodeling its guest rooms as well as two major suites. This fall it will begin remodeling the lobby, corridors, restaurant and meeting space.

“Where they’re pushing the edgier side,” Shaughnessy said of the Roosevelt, “we’re more in the middle. We’re just edgy enough to attract some of the hip crowd, but not too edgy to drive away the more conservative customers.”

Power operator

However, there is no doubt that the W will pose a threat. The brand was founded a decade ago by hospitality giant Starwood Hotels & Resorts Worldwide Inc., the operator of the Sheraton, Westin and other hotels, to respond to the fast growth of independent boutique hotels that attracted younger crowds.

The first hotel in New York was a smash hit and since then Starwood has opened 54 W hotels. The Hollywood property is part of a complex that includes 143 condos and an adjacent apartment building. It has a spectacular, cavernous lobby designed for hanging out, with rooms ranging from about $219 to $850 a night. It includes 40 suites ranging from $3,000 to $10,000 per night. Next month, a swank $12 million Las Vegas-style rooftop nightclub called Drai’s Hollywood is scheduled to open.

“The response so far has been wow,” said General Manager Jim McPartlin, who said occupancy has hit 50 percent and is growing, “It’s been a thrill ride for the last two weeks. We’re about double where we thought we would be.”

Still, Seth Horowitz, vice president of operations for L.A.-based Luxe Hotels, which operates several establishments on the Westside, is another who believes that that W in the end will be good for business.

“Our position is that the more hotels there are in a particular area, the more visitors they can draw,” he said. “There is a desperate need for quality rooms in Hollywood. The Roosevelt and the Renaissance pretty much owned that neck of the woods; bringing in the W creates a triangle that will benefit the economy.”

Inc. Magazine Logo

Will Your Texting Policy Stand Up in Court?

By Minda Zetlin

A new Supreme Court case casts a shadow on employee text messaging rules. The case involves an employer sued for reading an employee’s (highly sexual) text messages, even though he sent and received them using company-owned equipment.

You have a mobile workforce, so you issue mobile devices to your employees. You pay for their mobile service and make sure their equipment is working. Since it’s intended for business, you have the right to read employees’ text messages. What’s more, you have a policy that says so, in so many words. All employees must acknowledge this policy when receiving their Blackberry devices or other smartphones.

Legally, you might think you’re well covered — and you might be wrong. In Ontario, Calif., police officials reviewed an unusually large number of texts sent by a police sergeant named Jeff Quon. They found hundreds of sexually explicit texts. Quon sued, arguing that his bosses had no right to read the texts. The case made its way up the food chain to the Ninth Circuit Court of Appeals, which ruled in favor of the cop. Recently, the U.S. Supreme Court agreed to hear the case, with a final ruling expected this summer.

Whatever the court eventually rules, this is unlikely to be the last employment case involving text messages, and employers find themselves setting text and other communications policies in an increasingly confusing world. “Technology is changing fast and the courts are left to catch up,” notes Jason C. Gavejian, an associate at Jackson Lewis LLP. “The biggest challenge is the interplay between federal law, and state and local law,” he adds. “In one New Jersey case, the courts ruled that employers have an obligation to make sure employees are not viewing child pornography. That requires monitoring. Now the Supreme Court may rule that monitoring is illegal.” If it does, the two rulings will be in direct conflict, and employers in New Jersey will have to choose between disobeying state and federal courts.

It should be clear by now that setting an appropriate policy governing the use of mobile devices is a very serious business. But many small companies don’t take it seriously enough, says Michael McAuliffe Miller, partner in the labor and employment group at Eckert Seamans Cherin & Mellott, LLC. “The biggest mistake companies make is that they have no policy on texting and mobile communications,” he says. “Or else, they have an off-the-shelf policy that they’ve downloaded from the Internet. Then they’re inconsistent about enforcing the policy, especially with employees everybody likes.”

Develop a policy on texting

If the above is a good description of how not to handle texting policy, what’s the right way to do it, especially in light of the Quon case? Unfortunately, there’s no one right way, but here are some steps that may help:

Have the right people create policy. “In many companies we consult, these policies are set by an IT person,” notes James Sinclair, principal of OnSite Consulting, a hospitality industry consulting firm that specializes in helping financially troubled companies regain profitability. “I’m a big believer that these should be management decisions.” Top management should set mobile communications policy, with input from legal counsel.

Update the policy often. Especially any time you provide employees with new types of devices. “One of the issues in the Quon case is that the police force’s policy had been written to apply to e-mail, not texts.”

Reduce expectation of privacy. “Employers should have a policy that says employees have ‘no reasonable expectation of privacy.’ That’s the key phrase,” Miller says. The policy should be distributed to employees at regular intervals, and they should be asked to acknowledge their agreement. “Some employers make that consent interactive,” he adds. “It could be part of the employee’s log-in process.”

Specify who can change policy — and who can’t. In the Quon case, the police force had a formal policy that said texts weren’t private. But a lieutenant told Quon informally that if he paid for any texts beyond the 25,000 characters a month on his pager plan, no one would read his texts. “You should have in your policy that no one but a designated senior official of the company can change the policy,” Miller says.

Train managers about the policy. “You want to make sure managers get proper training so that when they inform employees about the policy they’re doing it in a uniform fashion, consistent with what the company wants to accomplish,” Gavejian says.

Specify how equipment is to be used. This is a tricky question. You can’t define unauthorized use too narrowly, Gavejian says. For instance, if you write a rule against sexually explicit text messages, it won’t apply to sexually explicit images. Instead he suggests a rule that company equipment be used only for business communications. At the same time, he acknowledges, such a rule may not be realistic. “You can’t stop someone from sending a message home saying ‘I’ll be late for dinner,’” he notes. “I don’t think there’s one universal policy everyone can apply. It has to be analyzed on a case-by-case basis, and depending what technology you’re using.”

Keep messages on your own servers. This is a potentially costly solution that isn’t right for every small company. But, because its clients’ data is always highly confidential, OnSite Consulting chose to route all e-mails and Blackberry messages through its own servers. “We worked with our general counsel and did a lot of research,” Sinclair explains. “By default, if you’re going through our server, you’re accepting our terms and conditions, and the messages are automatically copied and audited.”

This solution may become more popular in the wake of the Quon case: One of the questions at issue is whether his employer had the right to demand his text messages from their pager company, and whether the pager company was right in acceding to that demand. OnSite’s server is hosted and maintained by a hosting provider, but it does physically belong to OnSite. “We made it a priority and spent a significant sum for a technology we can’t see or directly use and that does not contribute to our return on investment,” Sinclair says. “But it provides another layer of protection for our clients.” It also provides a real-world model of how to most safely handle employee communications. “We have to do it,” Sinclair says. “We can’t walk in there as a consulting company and have a less-than-perfect system ourselves.”

The next big ‘thing’ is more often than not an old fashioned and tried and tested ‘thing’ with a shiny new layer of gloss and some lessons learnt thrown in to the pot. The same applies in management and in my view, the coming business year will see a greater focus on employee incentivisation, specifically how giving executives and/or employees some sort of shares in a company can be the key to unlocking your business’s potential. What greater way to motivate each and every staff member than by giving them all a little piece of the pie?

Employees share option schemes (ESOPs), pension plans (such as the USA’s 401k) or Enterprise Management Incentive Schemes (UK) are common in publicly traded companies across the globe. Share price data is publicly available information and those shares are therefore tangible and easy to buy and sell. Equivalent schemes in private companies are less widespread however a practical program for the business with a notional trading platform and ‘shares’ for staff is certainly implementable.

The economic challenges we are all facing compound the view that current incentives are inappropriate and can lead to problems triggered by a lack of short, medium or long term accountability for corporate decision making. Bonuses are generated by short term deliverables which may not be in the best interest of the company and a logical replacement to this practice is a more long term, golden handcuff arrangement. Share schemes are a safe and fair way to motivate staff whilst ensuring their goals are entirely aligned with those of the whole company.

The USA has typically led the way for such private share schemes, typically known as phantom stock options or stock appreciation rights (SARs). One of the founding fathers of such practice was UPS, founded in 1907. Until its listing on the stock exchange in 1999, the company was broadly owned by non management, management and supervisory personnel – a practice established by Jim Casey in the 1920s when he gave staff the opportunity to purchase company shares. UPS regularly ran a stock purchasing program before the IPO where staff could trade shares. In January 1997 the price was set at $29.25 and by March 1999 it had risen to $47.

In November 1999, the Company offered 10% of its stock to the public for the first time and on the first day of trading, the stock closed at $67.25. Not only did employees benefit until 1999 with the phantom scheme but with the IPO, they had a second and larger windfall with an even more liquid platform on which they could trade their shares. Hard work and loyalty were repaid twice over.

Why should you offer shares to your staff? It motivates employees, improves firm performance, fosters innovation and promotes sound financial health. It promotes staff loyalty and attracts and retains a high caliber of staff who want to have a vested interest in their future. To give staff the status of part owner of a business is a very powerful motivator.

There is of course a cost in implementing such schemes because you will undoubtedly need advice from specialists. There are accounting and tax issues at play here and it is critical to ensure that the framework you build takes into account local tax issues, accounting implications for your balance sheet and other miscellaneous issues such as ensuring that you allocate enough stock to a trust so that future employees can benefit, ensuring the vesting period is appropriate. Yes they cost money but perhaps the money spent on rolling one of these out would be made back, and several times over, by an all round improved performance by staff.

OnSite Consulting is a nationwide hospitality and consulting company to the casino, hotel & restaurant market. Providing immediate solutions for sites seeking turnaround, insolvency and concept repositioning. www.onsiteconsulting.com

On a daily basis we are required to explain to clients what we mean when we say that ‘a customer does all the work’ in a restaurant, not the operator. Whilst the concept is initially indigestible for an operator, it is nevertheless true. The customer does all the work.

The majority of our customers have focused time and effort contemplating everything BUT the customer. Handling and managing vendors, payroll, human resources and all the miscellaneous tasks that need to get done by someone running a hospitality venue. If these areas are either outsourced or run efficiently, the venues would see an immediate and dramatic increase in revenue – because they would have time to think about the key driver of their business: The customer.

As a restaurateur, you can only expect to get out (receive) what you put in and it all comes back to rewarding the customer for the work they do in arriving at your restaurant. Still puzzled?

When a customer decides they want to eat out there are hundreds if not thousands of different dining options that they can choose from. They made the decision to choose you. They are the ones who have to spend on gas and parking to get to your doorstep and they are the ones who chose to take a break from working (making money) or spending time with other family or friends to eat at your restaurant. They are the ones who took the time to rally the troops and make a reservation.

Once they are in the door, they are taking a risk with their family, friends, business associates or date: They are hoping that this experience and food will be a great one and will be worth both the money they will have to spend and the time. Additionally, the central customer is hoping that the choice of restaurant reflects well on him or her and as opposed to the embarrassment of having made a poor decision. A restaurant, meanwhile, has no risk. A customer walking in is simply an opportunity for them to provide the customer with the experience they deserve which will bring repeat business and/or recommendations to friends or online portals.

The customer is taking all the risk and can end up bearing the brunt of the restaurants mistakes, whether it be disappointment in the service, food, staff, wait times or overall experience. Every time a customer dines out, it is a lottery for the customer.  The price vs. value and the eventual opinion on the venue is not just about food but also experience.

Once they have left your establishment they continue the marketing of your restaurant through reviews on online review portals, sharing opinions with acquaintances and most importantly keeping it in the social arena – being talked about, for good reason, is the critical to keeping a restaurant popular.

This can obviously be a positive or negative for the restaurant depending on the customer’s experience. The positive side is the priceless and essential marketing: There is no better or more valuable form than a recommendation via word of mouth. Your customer needs to have had a very good time to feel compelled to recommend your restaurant.  Conversely, it can also be the kiss of death if the experience was negative. So this is how the customer does all the work. The customers bring in the money required to pay the owners, the customers work to make money to go out for dinner to pay your bills, your vendors, your landlord and so forth. The common error is an operator’s belief that it is the employees that are generating the revenue but this is simply not the case. It is the customer NOT the restaurant generating the tax revenues for the city and state and most importantly, they chose you. When a customer takes a moment to provide critique or opinion, they feel like they are helping the restaurant. Their advice, be it compliments or criticism, should be taken very seriously – because this is the most important of your revenue.

So all in all, the entire process in your restaurant starts and ends with your customer, the one person who does all the work …. and you are not focusing on him or her. So spend some serious time and effort thinking about your customer before, during and after their visit because responding to their needs and evolving with your customer base is the best recipe for success.

OnSite Consulting is a nationwide hospitality and consulting company to the casino, hotel & restaurant market. Providing immediate solutions for sites seeking turnaround, insolvency and concept repositioning. www.onsiteconsulting.com

Economic crisis, lower than average consumer spending, third party booking sites, commission based sales and tourism taking a  turn for the worse are all paths that lead to the same location  – lower average room rates (ARR). The strain from the online retail model continues to put tremendous pressure on rates, forcing operators to believe that even lower rates must be offered to these online consortia. We believe, however, that using online market places are in fact detrimental when rooms are too widely offered. Obviously judging  a hotel’s performance cannot be based on ARR alone as the single metric to determine success or strategy. One must look at other key indictors such as occupancy rates and REVpar to assess whether the lodging facility is performing against industry standards. However the hotel industry has long since been under attack by the very industry that sprouted to promote it.

Events took a turn in 2004 when American Express announced the BAR (best available rate) program which sought to assure customers that the rate quoted was always the best rate available for each night of a multi-night stay. It was often complimented with additional value add benefits (internet, breakfast, airport pickups). In theory a great new model for pricing, the reality is that it now requires a new level of management, control or forecasting that can quickly deflate the REVpar if left to untrained personnel.

It is the industry’s fault. It created mass confusion in the industry. The same hotel and 40 different websites with different pricing carried a room and suddenly booking directly with the hotel directly became more expensive over third partes. Hotel Booking Agents recommending a customer visit a third party site to get better rates and MOVING reservations to outside their control became the norm. What seemed like such a clever way to increase occupancy and ADR turned into a tool for lazy hotel workers and ultimately the problem we are in now.

This lack of pricing congruency has now left the hotel wholly exposed. This is compounded by poorly trained operators and sales clerks in hotel reservation departments mishandling direct calls from customers who have found a price online at a competing hotel or online retailer and asking the hotel to match it. Bringing the customer back to the hotels sales portals, often through the BAR program, is one of the projects every operator is working on. The smaller companies are, meanwhile, waiting to see the results of the larger hotel operators and will copy the model. Just when solutions are being found to bring back that price hopping customer to hoteliers with the assurance that hotel pricing is the same whatever the channel, along come companies who search the mega agencies and portals and hotel sites seeking best prices. Yet another intermediary tacking their commission and fees into your ARR.

The effect of this price pressure has been most felt  by hotels designed to appeal to the widest audience possible – thus in theory attracting a greater audience base. Satisfying everyone but delighting no one if the model or customer base are not loyal, or if the venue does not have a unique selling point, can be a formula for mediocrity.

These generic concepts created by brands for broad appeal without reward  programs or the benefit of an existing brand’s loyal customer base have had a very harsh reality check during this economic climate. Hotels with broad appeal are losing significant market share to more defined and concept positioned properties. Conversely, the boutique hotel phenomenom is less hit by these portals because customers are demanding alternatives to the mass market offerings. This creates significant opportunity for those who have planned and executed a strong concept and are able to differentiate themselves.

Customers are demanding / expecting more and taking their business where it is both fought for and wanted. Often customers do not want to be a number in a generic hotel but rather where their travel needs are best suited. Pricing is not always the primary driver. The demand exists for special and unique product offering to suit these individual travelers’ needs that mass market cannot fulfill.

By focusing on your brand and your USP’s, a hotel is often better able to capture the market. Of course as a developer or owner, there is a risk and potential exposure in being different. Multi unit hotel chains will not want to lease your site is if doesn’t conform to their mould. However the potential increased value from attracting the boutique market is the reward for those who chose to build a hotel in this style.  If there is a case for this model, think long and hard before you build a generic site.

In this circumstance, the operator has to work backwards. Assuming the  NEED / DEMAND for this sort of hotel has been determined and assuming your ability to deliver on the customers’ expectations then the steps to being unique are fairly simple. Of course strong analysis and financial modelling, marketing and sales are still required. Again, this is not the location, demand, product & coverage phase,  as we have assumed that this has already been determined through demand existing.

The process from differentiating your brand and creating loyalty from others is through allowing no-one to compromise on the level of service, facility and customer quality. This is concept positioning and the key to why two seemingly like hotels having significantly different ARRs.

Positioning the brand is positioning the entire facility and its outward and inward appearance to serve the customer. What is it that you are attempting to create and does it match what the customers need? This is just as much about the linens as it is about your restaurant or food offerings. You cannot compete with the large brands on marketing or advertising budget but what you do have the advantage on is press and that is where the attention should be focused.

Yes, we recognize the benefits of ‘outsourcing’ discounts to a third party. Getting rooms rented out is critical to the hotel industry and at times it is worth taking a hit on the ARR in order to have customers on site spending in the restaurant or golf club or room service. We recognize equally that with fixed costs and staff on site, sometimes it is worth selling a room at little or sometimes no profit to increase footfall. We also know hotels often do not want to be seen to be offering discounts directly to protect their brand name.

That being said, a whole sub-industry has grown which no longer serves the very hotel venues who subsidized their set up costs and acted as their first customers. If you are building or repositioning your hotel, slashing the rates is not the answer to increasing revenues. Your competitor and neighbor may be doing this but you do not necessarily need to follow suit. If your hotel lends itself to being slightly unique, if your location adds specific value to business or leisure travelers, if you have an ethic and tradition reflected in your fit out, let the customer know. Look at your customer service standards and whether you enjoy repeat customers. Look at the additional revenue streams your hotel could be benefitting from. Look at how you can reach customers directly and ask yourselves, should I be spending the same on targeted and intelligent marketing as I am losing on offering constantly reducing room rates?

Of course someone can fill your hotel tomorrow – rooms just need to cost $5. OnSite works with many hotel clients and our first job is to look at financial information. All too often, hotel directors have given us incorrect room costs, omitting to factor in deals with third parties. Costs often don’t include the fees incurred in renting out a room from a website or agency the data analysis is therefore inaccurate. Take back control of your pricing by knowing what your pricing is. Consider Opera or other software as a tool not a solution and instead, read the data and make decisions based on the correct information.

The lesson is that just because ‘everybody is doing it’, it doesn’t mean that the obvious solutions to cash flow or reduced customer flows is obvious. Gather the right financial information, take ownership of how you attract customers and how much you will pay to attract them. We know the importance of these lessons in stabilizing or growing a business and work with our clients to ensure they recognize this too.

OnSite Consulting is a nationwide hospitality and consulting company to the casino, hotel & restaurant market. Providing immediate solutions for sites seeking turnaround, insolvency and concept repositioning. www.onsiteconsulting.com

How a casino’s approach to staffing can affect the whole business

How slashing your workforce and promoting junior staff to senior positions saves cash flow in the short term …. But irrevocably and negatively affects the business as a whole in the medium to long term. OnSite look at how to take proactive steps to managing your workforce.

In the current economic climate, casinos – like all businesses – are having to contemplate cost cutting. With labor costs representing the highest area of consistent spend, casinos are slashing workforces at all levels, including senior management with significant salary packages. Employee benefits are being removed without explanation and salaries are being reduced. OnSite recognizes that communication and strategy are critical if workforce redundancies are being contemplated. Whilst the sudden relief to the cash flow can feel like a success and the business does not suffer immediately, the medium and long term damage can be irretrievable.

Casino after casino, from tribal gaming sites and card clubs to Nevada hotel and casino properties, are suffering. Financial positions are weakened with the economy taking the blame and in a panic attempt to restore profitability, poorly thought out redundancy programmes are often being rolled out, often causing more harm than good. As total business consultants brought in to turnaround the entire company, OnSite know that gaming and player loyalty are only a small section of the casino business. Many sites have strong F&B programs, lodging facilities, other customer attractions and a whole back office which are the backbone of the business and the majority of the work force. Staff are the main cost but not necessarily the main cause for concern.

We recognize that a casino business has many variables which can dramatically affect its financial position. We know that slot analysis and hold percentages are a factor requiring attention and that poorly planned multi-tier reward programs which do not appropriately reflect customer spend can be a key driver when reviewing losses in a business – but all these issues are intertwined with workforce management and the use of skilled talent within a site.

If a casino is looking at labor reductions, it must do so strategically and having regard to the whole business. With a focus on the turnaround of casino properties, all too often OnSite see venues taking a blanket approach to cost cutting and sites subsequently suffering from ‘the unskilled epidemic’. We believe this is never a means to an end but rather the beginning of a downward spiral, dragging down all business units with it.

As you slash the workforce, your all important customers will begin to feel and see the difference: With reduced staff on hand your venue is likely to offer a reduced quality of service and a declining player experience. Importantly, the company will likely be struggling to evolve: With a poorly thought out redundancy strategy, the casino will then left with a reduced ability to innovate and lacking the ability to dynamically react to the customers’ needs. This is a business struggling to stay afloat and trapped in survival mode. This sets out the logic behind our belief – this has reduced immediate cash flow spending but is evidently detrimental to the business.

The lesson to be learnt here is that taking a proactive and measured approach to reducing your labor force is never a waste a time. For economic reasons you may have to make changes to your business and fast – but at OnSite, fast does not equate to haphazard. We work with our clients to apply a lean strategy to identify how to change the workforce to reduce costs as well as seeking out those other issues which can have a dramatic and positive impact to the business. Sometimes small changes to a business can release profit – changing margins, looking at supplier costs, evaluating whether the plethora of third parties trying to sell their services and products to you are indeed value add. It may therefore be the case that the first step to reducing your cash flow issues is looking at staffing combined with releasing profit into the business as opposed to simply cutting a cost, especially as the aim is to improve the business and not stifle it. We have seen it all.

Other cutbacks to employee benefits, salaries and bonuses is also relevant. Clearly a business making no money has to make immediate changes but again, the question is how these are made and ensuring that this carried out in the most sensitive manner whilst securing the safety of your business. Some casinos in trouble introduce a mandatory salary reductions across all employees until revenue returns to a satisfactory state. The perception here amongst staff is often that the workforce is having to to bear the brunt of senior management’s mismanagement. This is naturally not always the case but perception here is important. People become disillusioned with their job and good employees question drastic changes which do not come with any clear message about the future and opportunities for growth.

Disillusioned employees who perform well often leave – simply to be replaced by their assistants or other junior level employees. In times of crisis, losing your best people, who are your best asset, is the worst outcome. Employees who are performing over and above must be rewarded or shown how, when the site improves, they will benefit – it is that simple.

Hewlett Packard avoided layoffs in the mid 1980’s with a successful mandatory pay cut strategy but it was implemented with an excellent communication strategy which employees understood. When announced, it was introduced as being for a limited time (6 months) and engendered strong employee morale through a marketing program which ensured no one felt isolated or hard done by. Instead, employees generally felt delighted to be a part of protecting the company and their jobs because they were all in the same boat and could see how they could ultimately return to their original salary – that being to grow the company.

On the issue of annual bonuses and employee benefits, again these require a strategic approach. Here, we are not just talking about financial benefits but also staff meals, parking, snacks available in staff rooms or venue traditions such as cakes on birthdays – often, the smaller the benefit in fact the greater the impact of that retraction to the employee.

Try telling a minimum wage employee that the cookies are gone because of managements poor performance. He did his job, he was never late and he just lost out. The lost loyalty and commitment of that employee through the removal of such minimal benefits costs more than the cookies ever would. Is that the right approach?

Instead, OnSite advises clients to use a redundancy programme as opportunity to show compassion and understanding through communication. A lack of communication with staff puts everyone on edge – ‘am I next?’, ‘what’s happening?’, ‘what’s the overall plan that management or ownership is not sharing with me?’. This does not lead to a strong and dedicated workforce willing to go the extra mile but instead an atmosphere of tension and a demoralized workforce.

Getting out of survival mode requires leadership with strategic and long term vision as opposed to a shoot from the hip mentality. A quick decrease in spending on the P&L can mean an equally quick decrease in turnover and profits.

The sites that we turnaround require a fundamental change in management style and a new approach. Our view is use the challenging economic climate as an opportunity to increase business through clever planning. What is our plan for growth and what steps must be taken to attract customers and realize profitability? This is an opportunity for employees to be a part of a success story and they need to understand in so doing, that their effort is appreciated and they will be rewarded. Incentivisation is critical to any business.

We are certainly not suggesting that your payroll is perfect! On the contrary we have rarely seen a lean payroll. Casinos should be seeking to find the “cost sinks” – the identification of revenue centers, processes and controls which through analysis will have an immediate effect on costs and the significantly swing revenue margins. Your employees are the only ones who are needed to execute the new vision and provide assistance in identifying such weaknesses.

We seek cost cutting opportunities in every site we visit: This often results in overall savings to the business of many millions, time and time again.

IS LACK OF TALENT THE ANSWER TO THE PROBLEM?

Often, decision makers in businesses have not lived through a challenging economy such as we currently find ourselves. Often the team has limited experience in turning around a business, may not be savvy with budgets and financial information. Additionally, and as a result of large scale redundancies, management is often poorly performing poorly due to lack of experience, training and/or ability. Now the entire company will suffer another blow as this individual, who is for whatever reason not qualified to ‘save’ the business, further damages the brand and the operation. OnSite works hard to ensure clients do not allow this to happen and instead focuses on finding the right areas to make cost cuts whilst supporting the best elements of the management and staff teams.

The trickle down effect of poorly resourcing your business can be seen at every level. When an executive is removed the loss begins. The position is often overlooked and not filled by ambitious management who wish to be able to ‘save that salary’ and add it to their savings analysis. But what about the unqualified staff being passed a workload he or she is not equipped to handle? This can ultimately set a company back months. Perception wise the business is still running – however this is superficial. Ultimately, the employee will make errors because he or she is unqualified – and if that person is a division head or in a management position, his or her decisions can affect the whole company.

This process is repeated constantly at casinos and businesses with high staffing requirements. A manager is terminated or leaves and is filled by an existing employee who is not a truly qualified candidate. So now as a casino, you are stuck with an upgraded employee facing a daily battle that lasts several months of how to do their job or make it seem like they are doing their job. The trickledown effect is simple to see to an outsider – a halt in the lifecycle of the department, the halt in effective new strategies, efficiencies and processes and a breakdown in the leadership of the department leading to autonomous workgroups and jobs not being completed correctly or with the overall long term vision of the casino in mind.

The site now suffers directly from an eager employee seeking a promotion and a poorly trained executive who thought it was a good idea. The trickle down continues as the casino now maintains a “status quo” whilst customer attrition continues and the team attempt to apply band aid solutions to deep wounds. The perceived benefits the casino thought it was getting by hiring from within – Kathy knows how to do Dave’s job it will be fine – has now turned into the casino paying more for an employee with no additional skills.

Hiring from within can be positive as the employee knows the business and staff may have good skills that make them worthy of promotion. Hiring from within simply because someone has been made redundant and that employee is vaguely familiar with the job required is, however, a death sentence for a business. How is a poorly trained executive to know better? One could liken it to the difference between manslaughter and murder – same result, different path.

What talent brings is innovation, strategy and a constantly dynamic business model meeting your players needs. What internally promoted and unqualified ‘upgrades’ bring is the huge loss in revenue from not being able to adapt. When hiring from within all we ask is you complete a SWOT analysis because knowing your business is not enough.

OnSite Consulting is a nationwide hospitality and consulting company to the casino, hotel & restaurant market. Providing immediate solutions for sites seeking turnaround, insolvency and concept repositioning. www.onsiteconsulting.com

When completing a casino cage audit, you are normally required through REGS and MIGS to undertake certain tasks several times a day, making sure that every cent is accounted for. Employees are held firmly responsible and have to undergo background checks, licensing and 24/7 surveillance. Reports are sent out to be audited, the process is repeated every few hours and there is not a second that the accounting department responsible for the cage do not know exactly how much is in the cage in both cash and chips.

Multimillion dollar software tracks money and generates reports, shows audit failures and identifies system weaknesses. A casino  will not open without gaming management be it a Japanese replica or the Ballys cream of crop. Not a penny moves without a form and a thing and a process.

Civilian vendors cannot even think of being able to look inside the cage without the granting of specific permissions and security and without being thoroughly vetted. Furthermore, if an audit shows a $90 short during a cashiers shift, there are rigorous protocols that remove that employee from the workplace, with he or she being suspended pending investigation.

The cashier’s float was only $25,000 so why, when a chef has an inventory of the same amount – or more realistically stock with a value of millions – are the same protocols not applied? A refrigerated produce order with a wholesale purchase value of $25,000 is worth $100,000 when sold – add margins, the cost of preparing the food, the notional cost and marketing of attracting a guest to eat at the venue – or $0 in three days when its lifespan is complete and the stock has to be thrown away. We therefore ask the important question of ‘why are the perishable supplies in your food & beverage inventory not treated with the same respect?’

The reason is because it is not a legal and regulated requirement: Indeed to many, food is an annoyance or necessary evil to satisfy the gaming customers. Often operated and managed by underqualified staff and those who do not think of the inventory as a currency, venue management are not treating this valuable stock as they ought to.

The Casino Floor has multimillion dollar software given the rate and speed of transactions and the automation of the gaming process. More often than not, Food and Beverage has excel spreadsheets at best. This is not about software. In these cases, software is mostly purchased as a solution to a problem when the problem is actually that very person formulating the solution. You cannot purchase food cost control, only people can. Software just cuts the man hours down and translates the data into more readable fashion for cross analysis.

Only in the last few years have many properties recognized the ability and indeed necessity for strong F&B presence to provide a significant new revenue stream not only from existing players but also the new customers who come purely for the F&B options. This therefore means there is also a new marketing benefit realized, however the value of strong F&B is not the purpose of this article. This article is focused on how the value of inventory got lost ‘somewhere’.  All too often we walk into mega million dollar sites who use MBWA (management by walking around), P&L and some spreadsheets to analyze their F&B when the converse should apply. The person running the F&B needs the analysis to run that department efficiently.

Our first message to management in these cases is to rethink how this valuable asset is handled and fast. Inventory is currency just like cash and should be treated as such. It should not be laying around in various storerooms, it should not be accessible to ‘just anybody’ and it certainly should have tracking. Unfortunately this is one of the biggest challenges we face in an F&B context: Getting someone to take a can of peas seriously, especially when they go through a palette a week. We genuinely don’t see the difference between a walk-in freezer and a safe. This overall shift in mindset is the largest hurdle to overcome but one that pays constant dividends when applied. Getting people to see it our way and recognize the weaknesses in the procedures in place is one of our key tasks in these situations.

We expect to swing the costs of goods downwards by about 7-12% of total gross program sales. So when our prospective customers ask us how we are so confident in our ability to make change without interrogating the numbers further, it usually comes back to us to see if F&B is controlled by MBWA. Generally, however, a problem in F&B is an indicator of a wider problem within the company as someone should have addressed this issue, fixed the issue or at least understood that at times, there is value in preferring $500 in guaranteed beef sales than $500 in cash.

Let’s not forget, however, the always tightly controlled liquor cage with keys, cameras and par systems for an inventory of $6,500 behind a bar. Managers often do what is at best common practice and at worst, easy …. and ignore the rest. Liquor being the more stolen commodity is a myth because no one knows about the food being stolen either through waste, bad portions or theft. How could they with no accountability or stock management in place?

The good news is that the solution is a simple one. Yes the department needs to be stripped and rebuilt, yes new controls and procedures need to be put in place. But there is one department already on site specializing in this for our cash currency. Accounting of course. Who better to protect our inventory currency?

There are many solutions that casinos should undertake but it all starts with Accounting taking control of inventory the second it arrives on the property. Wherever it may be stored it is owned by accounting and its movement into the supply chain should be through the standard purchase orders and audit logs. Two slips of paper and a controllable inventory has been started. From this one can then branch out into the other issues that require close inspection such as whether the site is holding too much inventory, cost analysis, vendor analysis, plate management and so forth …. but you must start at the root of the problem and move from there.

With inventory sitting in storage and now ultimately accountable to or controlled by an accounting department the process is clear, inventory and par maintenance. By using perpetual inventory as opposed to static, the par can be determined quickly as each unit has a “days on shelf” associated to it. More importantly, the property can now drill down on its costs and its uses to the individual purchased unit which is a key indicator of profitability and efficiency.

With these changes made, you now have an F&B department which need only focus on the cost of goods for the product they have transferred out of storage allowing for a much more isolated process and facilitating the all important checks and balances. This is a real cost system which gives your chef the chance to make an impact and be able to complete his job. The minute it leaves storage, accounting relinquishes responsibility for stock and the chef or section head is responsible.

You have now successfully changed the entire structure of your F&B department. Purchasing is now taking orders on product demand from accounting, receiving is now an accounting function, the chef is focused on food and managing the food offering in the kitchen rather than in the storage and each department has a more focused responsibility in an area they are most skilled.

One small tip – limit access to storage!!

OnSite Consulting is a nationwide hospitality and consulting company to the casino, hotel & restaurant market. Providing immediate solutions for sites seeking turnaround, insolvency and concept repositioning. www.onsiteconsulting.com

Onsite Consulting’s restaurant consulting division address areas of technology owners and managers should be looking at as a direct way to drive sales

In a restaurant market full of competition, what separates you from your neighbor? Service, ambiance, price, parking and décor can all be strong factors in swaying a potential customer’s decision. However one fact always seems to get lost somewhere and that is the ability for your customers to get in contact with you either to make a reservation, discuss special needs or even book their company holiday party. As restaurant consultants, we know that restaurant customer service is the critical and often overlooked as an area than can directly drive improved business when given appropriate attention.

People like good food at reasonable prices but every operator and owner knows that. We therefore advise clients to be one step ahead and engage with customers the moment they make contact in a manner that separates them from their peers.

When someone is looking for a restaurant and has specific needs (group of 12 for example) they start their day at home or the office visiting a few websites of restaurants they are interested in and attempt to make contact. Unlike the rest of the world, the dinner restaurant staff are not early risers and very often the potential customer is met with an answering phone message or an email to an inbox that resembles a black hole.

One of the first recommendations we make to our restaurant customers is to make yourselves more accessible via the web and website. Provide every opportunity for your venue to capture a potential client and most importantly, respond first. On the reservations page, contact page and events page there should be a quick and easy form for your potential customer to fill out spelling out their exact needs.

Now you have a HOT LEAD – someone that has come to you and expressed genuine interest and simply wants clarification on whether you can meet their needs. They have chosen to give you their name, phone and email address. You may or may not be the only person they have attempted to contact so the decision of where they visit now mainly comes down to whether you respond first – coherently and professionally. Of course you need to meet their requirements but the promise of good service and a restaurant that wants your business is a very compelling reason to chose your site. Grab that lead before anyone else and as well as focusing on inventory levels or special promotions that month, you have another very tangible opportunity to increase restaurant traffic and the health of your profit and loss.

Aside from the value of the potential sale you now have what is considered ‘promotions gold’; a live email address of a potential customer to use in your email marketing or other promotions. (It would be wise to ensure your privacy policy on the website expresses your intention to take any users form submission data for opt-in marketing programs).

In this economic climate you may not have an office manager or early office or restaurant staff who can go through and respond to these communications, nor may that person be the most qualified to answer your potential customers questions. It is critical that the person your potential customers are talking to can answer questions correctly and in the most beneficial manner for your business. Your management cannot work 24/7 and so about two years ago, after implementing this web form policy across our clients, we ran a series of tests by handing out a blackberry to the managers of the location.

When you hand a blackberry to your manager, express that you are taking care of their phone bill (if used reasonably, of course) but equally express that it comes with the added responsibility of responding to new business queries. The added responsibility, the perk of having no personal phone bill and, we would hope, the desire to see the venue successful and busy, should encourage that manager to respond to all email queries that come in promptly and professionally. If not, you need to question your choice of manager.

In owning your restaurant General Manager’s phone and therefore phone number, in the event of he or she leaving, the number, emails and communications role over to another member of staff in your organization. That handset and e-information belongs to the business which is another way in which providing this technology safeguards your business. Ownership of your customers is hot property and with ever increasing reliance on email marketing and promotions, the restaurant owner must under all circumstances not only own but also control any device used to interact with your customers.

We use hosted blackberry enterprise servers for our clients which synchronizes the users blackberry, email, contacts, calendar and sms messages to a server for backup and/or review. $14.99 per month is a more than reasonable price to secure your customers data and we encourage all our clients to understand the value of technology to increase productivity, secure data and therefore positively affect their whole business.

When a query comes in for a restaurant using this technology, a notional ticker starts with 30 minutes on the clock to respond, regardless of the requirement. “Table for 2 next Wednesday by the fireplace…” Whatever the message, customers appreciate a personalized email reply confirming their reservation and now more importantly a direct relationship has been created between the restaurant and potentially  the manager who will be onsite that evening. You have impressed and engaged that potential client before they have even booked.

We have all heard and seen the restaurants who are always too busy, unavailable and have the illusion of grandeur they are trying so hard to maintain. If you are so busy 24/7 then this level of bespoke response is not for you; if you are $$$$ dining you may want to implement stronger controls on communications and if you are a quick serve venue, this obviously does not apply. However for owner-operated mid level restaurants who are delighted to engage their potential customers, this is definitely for you.

There are times when the manager is unavailable and in those instances, there must be alternative mechanisms and people in place ready to respond. All responses should be sent with a set “template”, a style that leaves no room for errors – you must implement a top down policy regarding the manner in which your managers may speak to guests. We generally suggest an owner has access to the receiving and sending account in order to review communications in the early days. For our new clients, I ask to be cc:ed on all email traffic and that usually ensures rapid response and a little more thought on the manager’s part!

After running this test for only a few short weeks the results came back extremely positively. Not only did each restaurant report seeing a substantial increase in their email traffic from visitors coming to their website but also an increase of conversions from visitors to actual diners. This topic of conversions is the holy grail for restaurant e-marketing to be discussed at a later date.

The recipient of the email does not know whether the responder is sitting on a ride in Disneyland or behind a desk at the restaurant. To be frank, they probably do not care and whilst it is always optimal to be at your venue or office, it is even more important that this communication receives a response so at times, one has to be creative. The enquirer has a personal email and a name associated with the venue responding. Should anything crop up, need to be added or changed it is one simple email to the manager who confirmed the reservation or manager on duty which ensures the appropriate level of attention is bestowed upon the customer. This level of bespoke attention provides rewards.

“Running late – can you push the reservation 30mins?” is a common email and we are delighted to respond. This is not an opportunity for slang such as “np.” (no problem) and the veil of professionalism should never be removed, whether or not this is a repeat customer known to the restaurant staff.  In addition, we are alerted to special occasions and this contact provides a reason to make contact with the arriving guest, or for the manager to subsequently introduce him or herself to the table of guests. We delight in meeting new customers and install this at all staff levels at venues where we provide any element of food and beverage consultancy.

Placing the web form on the events page and keeping it very simple suddenly has traffic and emails daily requesting information on groups, birthdays, corporate parties and fun promotions. This is a hidden bonus for the venue.  As a restaurant owner you should also be tracking the number of visitors to your website, where they come from and what they search for – now you can track conversions into reservations.

Some restaurant owners have gone as far as checking in with the reservations the following day to ensure that their experience was perfect – a two line personal email is very different to automated review sites or other impersonal mechanisms. It creates a bond that makes people more likely to respond. We consult for a wide range of venues from casinos and hotels to restaurants and nightclubs. We do therefore recognize that this is time consuming. In restaurants where the check value is not reasonably high or in a venue which has high throughput of customers, this may not be best use of a manager’s time but if senior staff have capacity and the venue owner has an appetite for direct feedback.

What separates you from your competition is how delightfully easy it is to contact and do business with you and how attractive you make your restaurant and staff before a customer has even walked through the door. Technology facilitates this so we encourage clients to embrace it and use it.

West Hollywood reaches out to gay and lesbian tourists

The city is trying to shore up revenues by wooing a ‘very lucrative segment.’

Newest hot spot for a $78 steak: A shopping mall

by Megan Finnerty – Oct. 26, 2009 12:00 AM
The Arizona Republic

Malls are destinations for spending on new shoes, jeans and purses.

But now Valley residents are asking themselves if they’re ready to go to the mall for a $78 steak and a fancy cocktail.

Modern Steak opens today at Scottsdale Fashion Square with all the opulence of a high-end steakhouse – mirrored ceilings, glittering chandeliers and even a concierge desk. There are cozy leather booths for canoodling couples and an airy patio for those who prefer to be more conspicuously observed.

But the patio is topped with a white-metal awning that blocks the view of the parking lot. And, while diners at interior tables hear a trendy music mix, those who sit overlooking the mall get Muzak.

Yes, it’s a glamorous steakhouse, and it’s across from Banana Republic. But several signs say this might be just the right fit.

Dozens of high-end shopping centers across the country have added elegant dining during the past few years, and it’s worked when the restaurants are as swanky as the stores, says hospitality consultant James Sinclair. Malls want the new customers, and restaurateurs want the critical mass of prospective diners.

“More retail outlets are pursuing destination dining, name restaurants and name chefs, opening up the market for diners, tourists, dates, not just people going to the mall,” said Sinclair, president of Los Angeles-based OnSite Consulting.

Shopping at Scottsdale Fashion Square is decidedly luxurious: Shoppers might spend $975 on a sleek trench at Burberry or drop $395 on a Comme des Garçons dress shirt at the new Barneys New York.

The mall is one of America’s 10 most profitable, with $618 in sales per square foot vs. the national average of $420, according to a study by U.S. News and World Report and Green Street Advisors, a Newport Beach, Calif., investment-research firm.

Similar upscale dining-shopping mixes can be found at other top malls such as the Forum Shops at Caesars Palace in Las Vegas, with a Sushi Roku and a Spago, or the Ala Moana Center in Honolulu, with a Morton’s the Steakhouse.

So, when rebuilding the east wing as part of the Barneys expansion, mall-owner Westcor invited longtime Valley restaurateur Sam Fox to develop something to “wow customers,” said Greg Cochran, Westcor’s vice president of leasing.

“We want it to be one-stop shopping . . . the movies, bookstore, department stores and a unique dining experience. It keeps them in the mall longer,” he said.

Fox says it’s the perfect location. He has already been successful with Olive & Ivy (the destination for the trendy over-35 set) at the Scottsdale Waterfront, and the fast-casual pizza chain Sauce (six locations Valley-wide).

The corner of Scottsdale and Camelback roads is close to luxury resorts, expensive homes and similarly style-conscious restaurants. And that’s a mix that’s already proven successful for restaurant-and-retail pairings at less traditional Valley malls. Phoenix’s Biltmore Fashion Park has always been as much about dining as shopping, anchored by foodie favorites like Christopher’s Fermier Brasserie, now updated as Christopher’s & Crush Lounge. Kierland Commons is home to upscale eateries including Mastro’s Ocean Club, NoRTH and the Greene House. The latter two are also Fox’s.

But those are both outdoor shopping spots, not traditional malls, and neither has a restaurant with two “Conspicuous Consumption” wines at $140 per bottle.

So, at the 9,420-square-foot Modern Steak, Fox has tweaked some steakhouse conventions to speak to the mall crowd. During the day, it’s ladies-who-lunch friendly, with an $11 Cobb salad, a $10 Margherita pizza and a $15 maple-bacon-glazed salmon, placing it just a few dollars above the food court’s Pita Jungle.

Dinner is pricier but familiar, with an $18 warm Maine lobster salad, a $95 seafood tower, and that $78 HeartBrand Akaushi 8-ounce filet.

It’s the decor that makes this place as fancy as the sequined camisoles at the nearby J. Crew – and as appealing.

“It has to be used by all kinds of people . . . so it has to be gorgeous, welcoming, lush, vibrant and gracious,” Fox said.

Fox worked on the designs with Phoenix architect and interior designer Catherine Hayes, creating a space for everyone.

Older customers will like that many of the chairs have arms. Men will appreciate the extra-big stools at the bar. Moms will enjoy the stroller-friendly wide aisles and the airy brightness of a room finished in shimmering drapery, blue lacquer walls and a custom, white latticework ceiling. And fashionistas will swoon over the breathtakingly pink women’s restroom.

Eric Schaefer, writer of the Valley food blog Eric Eats Out, said he’s impressed with Modern Steak’s distinctive vibe.

“The common perception is that we don’t need another steakhouse,” said Schaefer, 36. “But (Fox is) making it a little more friendly, a little less stuffy, a little hipper and better for a wider range of price points.

“Bottom line, I would pay $70 to eat a steak anywhere if the food was good.”

The Up Side of Down Sizing

Restaurants can take a tip from retail brands that offer smaller portions and charge a premium. By Dale Buss

Like the slew of retail companies that offer 100-calorie, portion-controlled products to consumers, a handful of quick-serve operators are also jumping on the trend. Boloco, a regional burrito chain based in Boston, drove check averages up about 5 percent in the two outlets where it is testing a mini-size dinner-menu option.

But so far most chains have restrained from such a “better for you” marketing gambit and, in fact, show little inclination to back away from a recession-proof emphasis on volume as value.

“I see no evidence of chains using portion control for positioning, and I’ve traveled all over the country looking at quick serves,” says Elizabeth Howlett, a University of Arkansas marketing professor. Howlett recently co-authored a study in which the main conclusion was that many consumers have a poor understanding of the calorie, fat, and sodium content of quick-serve meals.

Even some chains who could tout new options as health-oriented are refraining from doing so. Burger King is mainly marketing its new Burger Shots, for example, as great for sharing with fellow diners. The Miami-based chain isn’t even mentioning the dietary benefits of consuming fewer calories than in its traditional meals.

Portion-control positioning is rare so far for a few reasons. First, the primary middle- and low-income market for most chains still largely equates ample food with value

“In the quick-serve environment, where quality is not as much of an issue, it costs next to nothing for [chains] to satisfy that criterion,” says James Sinclair, president of OnSite Consulting, a Los Angeles–based firm that serves the hospitality and foodservice industries.

Second, any pioneering chain that promotes a different value equation may have to “do a lot of consumer education,” according to Howlett, to get consumers to think otherwise.

New York City diners may appreciate the mandatory nutrition information on menuboards, but it only provides extra information to influence their decisions—the presence of the data itself doesn’t restrict their options.

Third, the potential margin and cost implications of portion-control initiatives are murkier than it might seem. Brands could arguably boost margins by offering smaller portions and pricing them at a per-ounce premium to regular and large sizes.

“You’re giving customers more choices,” says Darren Tristano, executive vice president of Technomic, the Chicago-based foodservice consulting firm.

“But the payoff might not be there because, after all, most consumers say they want salads but they still eat fries. And meanwhile, it’s more difficult for the operator because they have to prepare and deal with more items and more sizes and promote them all.”

But Boloco, with 16 outlets, has been offering mini breakfast burritos for a year and a half with great success. As a result, CEO and co-founder John Pepper is trying mini burritos in other dayparts as well.

“All these minis are higher-margin items,” he says. “People are paying a premium for them, but it’s allowing people not to have to think so hard about whether they really want to go get a Boloco.”