Some practical tips on assessing your restaurant’s performance

Restaurant revenues are based on science, numbers and economic modeling. Achieving the maximum yield per square foot and perfecting labor efficiencies per minute takes time and attention as opposed to a mere visual glimpse of a restaurant.

There is a key performance indicator for every restaurant function but sometimes it can be difficult for a new operator to extract, digest and indeed navigate the data and understand the results. From years of restaurant turnarounds, we have our own list of layman’s tips from the trenches not based on science or theory but based on experience and actions. These are practical pieces of advice that we share with our clients based on our longstanding experience of the dynamics of the sector. Items we pick up by walking around venues day in day out which you can apply to your venue too.

(1)    BUSINESS MODEL

The financial statements are an instant insight into a business model but at times, they do not tell us everything we need to know. Many restaurants with cash flow issues are forced to juggle bills, delay terms and are always ‘waiting for the weekend’ to catch up and cover payroll or rent. Perhaps a lease signed five years ago was perfect at the time but with a 3% CPI increase annually, the value proposition no longer exists during these challenging times.

We use a very simple metric to determine a concept’s viability either pre-opening or during operations. Can you pay each of your critical, large expenses each month based on one weekend of sales? If you can cover rent in one weekend then you are not forced into saving for rent throughout the month or trying to build a reserve.This also means that whatever occurs during the course of the month, you can be certain your rental obligations can be met as opposed to the worry towards the end of every month. Similarly, if you can cover your net payroll in one weekend you are not floating the checks or using the week day cash flow normally reserved for operational costs. If you cannot pay either of these in a single (but different) weekend then we believe your business model is flawed and needs to be tweaked.

There are obviously variations for different models but the weekend concept is a good rule of thumb.

Restaurants generally cannot afford to pay more than 5% to 8% of gross sales in rent and still have net operating income left over to provide a return on investment in the business.

I have observed over the years, as a restaurant owner, consultant, and appraiser that full-service restaurants grossing less than $1,000,000 to $1,500,000 per year in revenue have a difficult time operating profitably after paying rent and all expenses incurred in the operation of the business. High-grossing restaurants can show a profit of 10% to 20%, after occupancy costs, because the cost of labor decreases as a percentage of sales as the existing staff becomes more productive with each incremental customer served over the break-even point. When a restaurant operates with a full staff at a high sales volume, labor becomes a fixed cost, although it is usually considered a variable cost because management can control it to some degree by scheduling dining room and kitchen staff to meet the expected demand, i.e., more employees are scheduled for a Friday and Saturday night than on a Monday night when fewer covers are expected to be served.

(2)    LABOR MODEL

We recognize that the perfect schedule is hard to anticipate however for an owner/operator who works in the restaurant, there are a few ways to measure whether your staffing rotation is reasonable. In some instances, an additional server could bring greater revenues whilst other times the restaurant could run just as well with one less employee. How do you know when this is the case without ploughing through the data?

You know you are overstaffed when you walk through your restaurant and don’t have anything to pick up, don’t notice anything that needs doing nor is there any customer or function to attend to. Whether it be seating a group of people, grabbing a spoon for a customer or picking up a napkin on the floor, if there is nothing to do, what are the staff doing? Do you need them all there at that time?

Despite toilets being one the most important reflections of your venue, if every time you walk in the restaurant you do not have a piece of paper to pick up or a sink to wipe down you are likely overstaffed, or truly do have a perfect customer! One can clean the bathrooms every fifteen minutes but they are still minutes away from being turned upside down.

You know you are understaffed when you walk through your restaurant with your head down because you are conscious that the moment you make eye contact with an employee or customer, they will need you for something. You are understaffed when you look through your restaurant and see tables constantly looking up for a waiter or drinks empty on a majority of tables. Usually I look for an indicator such as an empty soda glass because in many situations, the venue’s staff should have replaced it before it was empty.

“Restaurant food & beverage purchases plus labor expenses (wages plus employer paid taxes and benefits) should account for 62 to 68 cents of every dollar in restaurant sales. The combined total of these two cost categories, referred to as your restaurant’s “Prime Cost”, are where the battle for restaurant profitability is truly waged.”

(3)    CLEANING

You can walk through the restaurant, run your hands under the bar and use a flashlight to look behind a fridge and above a door ledge but the one indication that your staff are wiping not cleaning are dirty floor drains. It’s that simple: Clean floor drains usually mean a clean restaurant.

(4)    SERVER SALES AND EFFECTIVENESS

This is very much a laymans method and does require the availability of some data but you can pull what you need from the terminal of your POS rather than digging into the back of house spreadsheets. Print a quick PMIX or item sales report for the night to see how many entrees you sold? 100? How many appetizers, desserts and or cocktails did you sell?

Look at the ratios the information provides you with and use this easy to access information in a number of different ways. If you sold 100 entrees and only 15 desserts then you have a number of questions you need to be asking. Firstly, are your servers offering customers desserts? Secondly, are some servers upselling significantly better than others? Thirdly, if the numbers suggest that some servers are not providing value add and encouraging customers to try desserts, can they be retrained, are they merely lacking in customer facing skills which can be rectified or are they not right for their job? Also, are some desserts of significantly higher margin than others? If so, are those desserts being suggested to customers?

These sorts of statistics require limited work by management but are exceptionally telling when paid attention to. Customer facing staff need to be continuously monitored as they are critical to the success of the business. Equally, don’t forget other customer facing staff such as the host or hostess. Ask him or her twenty questions and see what answers you get. Are they confident under pressure whilst maintaining excellent customer service policies?

(5)    CUSTOMER SERVICE

Go on YELP. I understand and have been subjected to terrible Yelpers who claim our cucumber martinis are overpriced when we do not even sell them. However the fluff is normally just anger about something that probably did happen. Somewhere in the Yelp commentary are some truths – some truths that prompted a customer or two to write the review which contained some criticism. A manager’s excuses don’t change the fact that people read Yelp and make decisions based on what they read and what they hear, whether it is from friends, acquaintances or a website.

Learn from the comments you receive, where appropriate respond to them and certainly, attempt to rectify them. It is often said that it takes a lifetime to build a reputation and a moment to lose it. These are wise words so make sure people are saying good things about your venue and if they are not, assess why not. Arguably they will have good reason to have complained.

(6) PAR / YEILD INVENTORY

So many operators read about the value of restaurant inventory and how it can spot stealing, measure cost of goods and is the backbone to profit. In reality, this once a week or once a month process serves only the accountant and perhaps provides a macro glimpse of your restaurant. Par/Yield Inventory is based on an acceptable loss percentage which is far more valuable to your bottom line and much easier to implement, act on and improve.

Take your top 10 best selling individual items and track these daily against sales. If you start the day with 50 beers and end the day with 20 then you sold 30, if you sold less than 30 you have a problem – there is no acceptable reason for a missing beer. This same technique can be used for your major proteins and other items which do not require selling pieces of but rather are purchased and sold as one unit. These items would have a 0% acceptable loss because you either sold the beer or you didn’t, there is no margin of error.

It is often said that 10% of your restaurant inventory is 90% which is why these ticket items are so critical to track daily.

You can take this one step further and on a weekly basis have inventory of items that you allocate an acceptable loss to. A good example may be French Fries or Ground Burger which may have a slight variation in portion size and therefore a 10% acceptable loss on the purchased vs sold volume.

This can get even more technical as you have monthly items such as bar napkins of which you know how many cocktails you sell and you may have a running average of your purchasings per month therefore any major variation of your napkin use to liquor sales requires further analysis.

A chef steals a case of steaks on a given night and you can immediately see a problem, check your video cameras or investigate. The key to this process is providing you information that you can react to immediately. I track, judge and reward staff based on meeting or beating my acceptable loss ratios and I have my daily par/yield emailed nightly in the closing reports.

These are all quick and immediate ways to evaluate monitor and effectuate change within your restaurant without depending on data from an accountant or months worth of POS data. This is certainly not the “how to run a restaurant model” but rather a quick glimpse into items you can be looking at right now. Profit is made from customer to customer, but losses occur by the second if not monitored continuously.

Do you have a simple, easy and standard tip to run a better restaurant? Please leave a comment.

5% Revenue Increase from just 7 letters?

Hotels, airlines and other industries have seen great success from revenue management systems (RMS). They have determined that the best way to measure revenue is based on the available inventory or asset in question. For the hotel industry, RevPAR is based on an available room night, for the airline industry RPSM is based on the available seat-mile and the metric for shopping centers is Sales per SqFt.

Companies in many sectors have become more efficient in analyzing and monitoring their revenue capacity to give a true determination of productivity. The dine-in restaurant industry, however, consistently fails to embrace a scientific technique (RMS) that can reap significant rewards which is an error, notably as restaurant owners are trading in a challenging economy.

Understanding how restaurant revenue management (RRM) applies to the restaurant is about understanding what it is you are tracking and why. RRM, simply stated, is selling the right seat to the right customer at the right price. Generic mistakes often made by operators are looking at number of customers, average check or many of the other statistics that simple restaurant data generates. This is the equivalent, unfortunately, of looking at the average amount you sold your rooms for in a hotel without first looking at how many rooms you sold. An hotelier aims to fill all rooms for the best rate – or some rooms at a better rate – and that data allows that hotelier to assess how to do better. How to improve revenue and ultimately profit.

It is understandable that looking at a “meal” as an inventory item can be considered more of a challenge. Unlike the airline industry or hotels who sell their specific product based on a fixed period of time, restaurants do not have this luxury. When you are selling a meal, you may have an idea of the average meal duration but that information is somewhat less relevant because the meal time is not fixed and you are certainly not selling time (unfortunately).

The food and beverage industry as a whole is guilty of failing to use simple KPI’s (key performance indicators) to address revenue modifications in their restaurant. How can one accurately determine what and how changes need to be made without having a “correct” metric that accurately represents your current performance?

If you have 25 customers in your 100 person restaurant spending on average $50 dollars you may be happy with this average check but when you look at it per seat it represents only $12.50. Are we sure average check is the correct metric still? In the same light when you are at 100% capacity, at what point is it more beneficial to focus just on average check and not time, when you have customers waiting to be seated?

Taking a scientific approach to your restaurant and its operations not only creates efficiencies and assists in revenue maximization but it also passes a better service and consistent experience to the customer which typically has them returning more frequently.

Operators who are starting the process of understanding restaurant economics are at a significant advantage to those operators who monitor performance with gut, basic statistics and an onsite presence only i.e. those who have chosen not to recognize that RRM and success as a restaurant operator is about one thing only:

Maximizing revenue per available seat hour by creating a perfect mix of price and duration

As table turns increase and the length of time per customer at the table decreases, the “revenue per available hour” increases. RRM strategy roll out has seen, in field studies, a 3-5% increase in revenues. Moving a restaurant operation to a scientific process whilst maintaining its ‘personality’ and  specifically the draw has serious advantages that cannot be ignored.

RevPASH is one key component to Restaurant Revenue Management and has its application across all hours (day parts) a restaurant is open, irrespective of demand. It is also an ideal method to track comparable sites rather than using gross revenues or check averages. More importantly, it can also highlight specific times when new strategies need to be implemented by highlighting flaws or ‘room for improvement’. For franchisees comparing units and needing a like to like comparison, RevPASH can be used on a local and national level and provide surprising insight and results.

Why is this so important to a restaurant operator?

Quite simply, for new restaurateurs the answer is weekends: We all know that the restaurant busy period for most is the weekend. All too often, operators focus their strategies to boost sales volume during off peak days or hours which may have the perception of making their venue ‘work harder’ but given the discounts or promotions this traffic cause a similar net result but with a higher workload. RevPASH is an ideal calculator to determine if you are achieving value from such happy hour promotions and has its benefit across all hours, driving changes to attract customers and increase revenues. But for operators taking a first plunge into restaurant economics and RRM they must refocus on their busy period to ensure they are maximizing the “rush” rather than taking it for granted and then applying its application during the remaining off peak hours.

It is two factors, price and duration, hand in hand with the key components that create a strong RRM strategy, that can lead to an increase in RevPASH.

Right seat to the right customer at the right price.

What is the right seat, customer, price and how can one determine what, at first glance, seems to be impossible to control? What is so critical is the balance between “good value” and “taking advantage of” your customer. It is of upmost importance that your value creation and the perception of that value by your customer is aligned. Ensuring you engineer your venue to create profits is entirely reasonably – you are a business not a charity – however it is critical that a venue remembers that any analysis is futile if you do not have customers so keep them in mind at all times.

How are you judging success?

To the front of house managers, using average check value as his or her benchmark to the back office owner using labor cost or cost of goods as their metric to determine performance, this system offers no correlation to your revenue performance or maximization.  In fact, many locations have maintained strong food/labor margins yet the unit is still unprofitable. This focus on using food cost as a KPI shifts the focus unnecessarily to minimizing costs which in many instances can also minimize revenue: This is clearly not the intention. Neither food nor labor costs have any bearing on the profitable use of your seat capacity (critical mass) and therefore cannot be a metric for performance measurement.

Alternatively, the metric many may otherwise choose is “busy restaurant”: Many would argue that a restaurant with seats filled at high capacity is surely a profitable restaurant. This is simply not the case because if the menu items are not well priced to ensure profitability, the number of customers is irrelevant.

Each KPI has its place as part of an overall restaurant revenue management system but none so focus on profit and maximization of your capacity and how effectively a restaurant is using its inventory (seats) to generate revenue as RevPASH.

We must therefore find a metric that combines the price with the occupancy and the costs which is exactly what RevPASH seeks to do, to clearly demonstrate the revenue cycle of the restaurant. Given the two indicators one must now focus on what strategies can be implemented to “price” and “time” to provide the operator with the largest benefit. It is a huge tradeoff, a customer’s time spent in a seat and the amount they are spending, when in perfect balance, can increase PROFITABILITY even when there is a lower check average but higher occupancy.

Reducing meal times is not hurrying your customers (unless you have unreasonable expectations): It merely a tool for becoming more efficient. A simple example is in a 100 seat restaurant, a reduction in meal time from 60 minutes to 59 minutes over a four hour “dinner period” would allow for an additional 6.8 customers.

That 1.7 percent increase now affords you, as an operator, either greater profit or a new carved out budget to re-invest into new off peak promotions or a lower average check to offer value to your customer but still receive a higher margin – and that is from shaving ONE MINUTE off your service cycle – surely you can find a way to clean the table, drop the check, set up the table, deliver the food combined one minute quicker? Of course this example applies to a busy venue where there is a high footfall of customers.

With an understanding of RevPASH it is now essential to identify how you can best implement it to your specific operation. There are many ways to reduce meal times range from the first few minutes which are always easy to find (the speed at which you ‘greet & seat’ your customers, drop the check or altering the flow or sequence of service). The battle is when to achieve greater RevPASH investment needs to be made either with greater staffing or additional equipment and for each case; a unique ROI needs to be formulated.

Implementing a strategy to maximize RevPASH is a restaurant wide project from the host to the server to the kitchen to the manager. Everyone has a role to play in streamlining your guest visit and getting the correct items ordered dependent on day part. Some newer Point Of Sale systems can even provide this information to your servers directly, recommending items with quick cook times in an effort to bring a new customer into that seat. The direct margin on the food being recommended is based solely on RevPASH, where it may make sense to move a lower priced item just to shorten meal duration. This focus on customer turns is why for new operators focusing strategy on the “busy” period is the best place to start. With customers waiting for tables how much quicker could you get them into a seat if your staff pushed fish instead of steak, or offering your first few turns wines by the glass and your final turn by the bottle?

For pricing, almost all operators already have some form of system in place, be it specials or promotions. More sophisticated manipulations of price include day-part pricing, day-of-week pricing and price premiums or discounts for different types of party size, tables and customers.

The general rule of thumb for RevPASH is as follows: During low periods, either attract more customers or rely on suggestive selling to drive average check. During high periods, reduce meal duration to increase the turn or increase price.

How you choose to use RevPASH in your environment is based on the unique factors which attract customers to your restaurant. It may be hourly or even half hourly and the decision you make off you RevPASH may also be used for a variety of purposes. The critical component is understanding how to apply these principles – and subsequently applying them and teaching your managers how to understand and modify them. This leads to a leaner, more efficient business model with economics working in tandem with restaurant operations – something every operator and owner should aspire to.

Many thanks to Sheryl Kimes of Cornell University who developed RevPASH.

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 under performing 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 responsibility to subsidize 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 rent in 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.

Bringing in an experienced restaurant consultant can save money, find money and create money.

Restaurant consultants have long argued that the food and beverage industry is overdue a major adjustment. Relentless growth over the last five years has led to over saturation in the food and beverage sector. In a buoyant market, anyone and everyone can take advantage of sustained high per capita spend on dining out and cover over the cracks of a flawed business model.

In a tougher climate, however, the laws of the jungle apply: only the strongest will survive. Food and beverage businesses are suffering and restaurant consulting services can help to find and ‘fix’ those fundamental flaws these business had previously been able to ignore because customers were spending money. Whether it is poorly thought out concepts, unsustainable leases or a lack of financial control, the recent economic downturn has provided the much needed catalyst that the sector needed to clean up its act and it is restaurant consultants who can provide the experience a management team needs to guide them through these murky waters.

OnSite Consulting expects the economic downturn to enable operators with strong concepts, consumer orientated focus and back of house diligence to survive and prosper and force those who do not, to take a serious look at their business – or suffer the consequences. The economic reality is inescapable and whilst economic doom and gloom has been the flavor of the month for some time, the outlook can be positive with assistance from OnSite.

Arguably, a recessionary environment can provide a platform for innovation and economic growth through entrepreneurialism and creative thinking. This climate provides an opportunity for lateral thinkers and those with entrepreneurial flair to excel. For those operators, a restaurant consultant provides an independent view on how the business can improve – because there are always improvements to be made.

Conversely, those businesses with flawed models who are struggling for any number of reasons can benefit from a detailed review of every element of their business and troubleshooting – indeed their survival may depend on it. How can a struggling venue justify paying a restaurant consultant when cash is tight? We advise our clients, whatever position they find themselves in, to stand back and look at their restaurant from a fresh perspective. We emphasize the need to go back to basics and evaluate each and every revenue stream or cost center from the bottom up. Through this exercise of intense scrutiny, we know that almost all of our clients have the ability to improve or achieve profitability from existing revenues, without reckless and short term promotions that their cash flow cannot sustain, and safeguard the future of their business.

All too often, we see companies implementing strategies with a ’shoot from the hip‘ mentality, without thinking of the repercussions of those strategies. Quick fixes to get customers through the door with too good to be true offers do not solve long term cash flow problems. Whilst labor is always the biggest overhead, getting rid of good staff to the detriment of customer service is also a short term solution which tends to lead to medium term problems.

With experience in dealing with struggling and often insolvent businesses, we are able to provide an emergency review of a business. During a first phase, we can identify immediate cost savings and reduce pressure on a cash flow. Whilst this is critical, equally critical is phase two of our review which entails creating the foundations for that business to run efficiently when we leave.

When we meet potential clients, we discuss ways to save money: vendor negotiations, procurement and inventory systems, dynamic labor recommendations. All too often, these customers simply go back to their business, slash costs and expect the business to right itself. The trouble for such companies is that slashing costs is not the answer. It is one of many benefits our services provide to immediately relieve the pressure however it is the ability to maintain this change and tighten up procedures that is a consultant’s value.

When we cross the road, we are taught to ‘stop, look and listen’ before we do so. Fixing a business should carry the very same message.  OnSite avoids short-termist strategies and focuses on the fundamentals of the business; a bespoke review of profitability, efficiency and sustainability.

This market is providing restaurant operators with an opportunity to revisit their business and conduct an audit from the ground up, identifying wasteful cost centers and untapped revenue opportunities. A good consultant is someone who walks in the door with information, teaches it to the client and leaves that wisdom behind. An experienced consultant can also save money, find money and create money and it is these benefits that OnSite’s clients capture by bringing us on site.

Restaurants rarely recover from not opening into profitability

For years I have witnessed restaurant owners open their doors intending on building a unit with healthy sales, with a solid business, an interesting product and a healthy cash flow – all at the expense of profit.  The common misconception seems to be that once open and with these cash flows, strong sales and a credible brand, the unit can be latterly “tuned” for profitability. Not so: Profitability should be a priority from day one.

The operator’s show us the glowing reviews, the positive customer feedback and the tremendous volume of business as proof that the concept must be economically viable and that the model just needs some tweaking.

Rarely do these businesses stay open long before their owner is mortgaging, selling assets or borrowing money to cover not only today’s debt but also the historic deficit that has been accumulating since the day the restaurant opened.

To those lenders, they hear the same story: “If capital can be secured, prices can be raised, payroll modified, operational efficiencies implemented and the restaurant can be brought into profitability – no problem”. To those unable to secure financing, the same attempt to correct the loss making is made albeit having to rely on the existing cash flow only.

Throughout this period, when the owner or operator knows that the venue needs ‘tweaking’, the experience suffers. Running at a loss means something needs to be compromised whether that be staff numbers or quality of the food or sequence of service – and the draws that arguably made your restaurant such a hot commodity start to fall away because a loss making restaurant is generally not a stable restaurant. Your business cannot survive or continue to be built on cash flow that is costing you more to generate than you receive. And that lack of cash infusion will eventually close your business.

This theory of fixing the venue once open seems to have merit at face value. A great venue has opened and is busy with customers: The hard part has been done and now paying attention to the economics seems a manageable next step.

The operator will be juggling dollars between payroll, cost of goods, advertising, fixed costs and in many instances, taxes. If it is costing you more than a dollar to make a dollar sheer logic dictates that there will not be enough cash in the bank to operate the business. Which again leads to that same conclusion – that the restaurant will have to close its doors quickly.

Unless the owner or operator is intending to fund the deficit on a consistent and long term basis, the only way to support the explosive growth of your restaurant and keep the doors open is to have that unit generate a profit, from every dollar earned. Furthermore, even with any extra cash reserves being used to support the venue, the lack of immediate focus on profitability means that the staff, management and others are acting oblivious to performance and commerciality from day one. Perhaps now it is clear that this is nonsensical and that profitability should always be at the top of the agenda.

The task of suddenly asking a workforce, never before judged on performance or profitability, to make this shift without impacting the customer experience is more than a challenge. The entire customer experience has been built on loss making practices. How can one then change the infrastructure and habits of the venue without changing the experience? One cannot.

We at OnSite can therefore only emphasize the importance of opening your unit with commercial principles from day one. Start with a profitable customer from day one, focus on efficiencies and profit maximization from day one. With the profits generated, invest those into your business for marketing, advertising and growth and creating an even better customer experience. Refine your margins, refine your operations, streamline your back of house but with these principles, you will be refining an already profitable model as opposed to fixing a model which operates with flawed economic foundations.

I am not suggesting that you focus only on profit at the expense of a customer. There is a fine line here and it requires providing your customers with value for money and a great experience – and in return for this you should receive not only revenue but profit. This is a business not a charity, so operate it as one with credible financial intentions.

Opening restaurant which is immediately loss making and with no clear plan as to how to reverse that immediately creates a sense of false security. Great cash flow, a busy restaurant and fantastic reviews give, as we have noted, a false impression. You are building a restaurant and a customer base that you will quickly have to disappoint. Consider this: your lack of detail on the cost of your stock, for example, may mean your customers are paying lower than market price for a meal you offer them. You may be undercharging because you are not clear how much that plate cost you.

Those customers may not be so loyal when the product or the price changes (when you realize you are not charging enough to create a viable restaurant). You have created a benchmark for your experience, service standard and product and any modification could drive such customers elsewhere. Again, this emphasizes that the ‘tweaking’ of your venue should take place before you open and not afterwards.

There is no value or point to opening a restaurant and charging your customers for an experience that loses you money. Once created it is difficult to change and often alienates your customer base. Employees benefit (salary), the landlord benefits (rent) and the vendors thrive (stock), but you’ve lost money.  This is clearly not the intention.

Busier restaurant, bigger losses. You may think you need more customers to meet the break-even point based on your existing business model so now you are turning your attention to driving revenue, turning tables and sheer volume. Unless you are a quick-serve, this will never work.

Your ability to juggle the increasing number of angry vendors calling daily takes a huge proportion of management time. However it may be that this feels manageable … until a major obstacle arises.

The “obstacle” is usually in the form of one bad weekend, a need for immediate cash for a marketing program, a sudden sales decline or a big bill that has finally become due. You will suddenly understand the need to work profitability into day one at this point. You cannot pay your ‘today bills’. The snowball effect from there can be dictated as the standard process of decline and is now too late to effectuate the change and now a cash infusion only solves yesterday but does not fix tomorrow.

With every dollar you make there are now three requirements; pay yesterday’s bills that have amassed from your time as an unprofitable restaurant, pay today’s bills and pay into growth for tomorrow’s revenues. How can you cover yesterday, cover today and build for tomorrow when you are waiting for tomorrow’s sales? The answer is simply that you can’t.

Now perhaps you will believe that grow first, profit second a recipe for failure. You must operate your business from day one with a focus on profit- irrespective of gross revenues. You must build your growth and your business on profit – not cash flow. This is not overzealous capitalism but merely sensible and practical business advice without which your restaurant will not survive.

Restaurant Turnaround aka A Controlled Train Wreck

As restaurant consultants we see similar scenarios on a daily basis. You borrowed money from the bank, you took delivery of vendor products, you used employee’s time and services, you set up shop in your landlord’s building, you are using the utility company’s products and received money on behalf of the state. You are now legally obligated to pay for it all.

You have no defense except to plead poverty which holds no value unless you are intending on entering bankruptcy protection. You cannot pay for the goods, money and services you took and it is doubtful that there is any FFE (furniture, fixtures and equipment) that has not already been secured by one of the parties involved and owed funds.

Every third party company from whom you procure goods and services or for whom you collect monies on behalf of will have its own methods and processes for collecting what is owed and the level and scope of their enforcement practices will vary on a case by case basis. Bank accounts and payroll accounts liened for their entire balance, credit card monies held back, keepers and sheriffs collecting your daily receipts, foreclosure actions, ‘pay or quits’ and even an investigation into your own personal assets are some examples of enforcement policies you can expect in difficult circumstances.

This can be followed by multiple lawsuits, some with pre-judgement writ of attachments which allow seizure of your monies in advance of your court date. In many cases, we see owners and operators ignoring some of these writs and in these cases, the writes will automatically turn into judgments. Collections actions can move very quickly and once initiated, can spiral out of control almost immediately, as you continue to lose leverage, if not given proper and urgent attention.

The number of restaurants we have walked into that have a “lawsuit pile”, many of which owners have no intention of responding to and many with default judgments already in place, is startling. Quite possibly you are behind in your payroll and sales taxes – both of which have a trust tax element that you can be personally liable for – to add to the list of problems.

As a restaurant consulting firm that focuses on restaurant turnaround, we have our handbook, our contacts and our defenses which are based on a healthy mix of legal statute, experience and commercial savvy. For each debt, there is a specific plan to settle, offer in compromise or stipulate – but the ability to use such defenses is directly proportional to the time we are brought in and how long these challenges have been known. Bring us in early and we have much to share. Bring us in late when things are at their most critical point, and the options available to you will be dramatically reduced.

There is nothing we can tell you that could possibly prepare you for a turnaround workout – especially one with so many moving parts, so many legal challenges and so many areas that need urgent attention. The job is not a pretty or indeed a painless one – but it is one we are well versed in.

Half way through the turnaround you may feel like it is getting worse and no doubt this is because there are so many issues that have to be confronted head on. Burying your head in the sand is not an option any more if you want to save your venue. Unfortunately we have to address the issues that can no longer be ignored, make plans for the debts that are otherwise liable to foreclose and face every issue with strength. Equally, we bring a fresh pair of eyes and independence to assist in solving issues with third parties, whether or not they are bodies with whom we have an existing relationship.

We are not brought in to sugar coat difficult problems; we are brought in to ascertain how to fix them. As such, the key to facing this difficult ride is understanding that we are navigating an existing disaster with you and attempting to manage an already out of control vehicle. Clearly our turnaround services team is called in because your restaurant is not sufficiently profitable, if at all, which will have been the major cause of the problems.

This means that in addition to urgently managing the debt, we equally have to bring your restaurant into profitability so that we have positive cash flow to work with, buy time and gradually pay the historic liabilities – as well as ensure an infrastructure is in place for a successful future. We have to continue paying for today’s operational requirements and ensure the level and quality of service does not suffer – even when you are faced with a workforce who are not sure they will receive their paycheck and are therefore hard to motivate.

You will know, at times like these, that a train wreck is only moments away and all we are attempting to do is manage and control, advise and engage, direct and resolve. With all our planning, experience and contacts, the process is never easy: There is no magic wand to resolve issues of this nature. It is never pretty and is a difficult path for any operator to watch. We cannot turn everything around overnight, there will be more problems before there are less problems and they may, perhaps, be worse than those you are currently experiencing. You hired us just before or in the middle of that train wreck and at times, things get worse before they get better. We can contain the issue but stressful events can and will happen, so the key is being ready with a plan to handle these and move on. Swiftly.

A turnaround is one of the most brutal experiences a restaurant owner can be a part of. There are no guarantees of success and the challenges should never be underestimated; but through the pain and challenges the restaurant will emerge, over time, in an improved, profitable, stable and managed state with our help. Restaurant consultants performing turnarounds or workouts are the last line of defense. This is what we do, this is what we know and this is where we excel and this is why we have the client list we have and are referred into tenuous and tough situations nationwide.

We know the pressures, we know the problems and we know how to handle them. Taking in a consultant may feel like a leap of faith but in every area of life, one looks to experienced parties to guide us. This is what we know, this what we do and we will catch you when you fall.  Because we have the experience.

By Stephen Zagor

Your sales are melting faster than a scoop of mango gelato left on the marble over night. The once exuberant profits your business was throwing off have gone the way of the Welch Rarebit. Your first call every morning is to your bank’s customer hot line to check on the days cash balance. You are not having fun any more. Jarringly the phone rings and you answer expecting a lunch booking when the voice on the other end says, “My name is Joseph is my dry cleaning ready?”

Most operators are often too immersed in the daily battle, too unskilled in new areas, or simply too over confident to call for help.

“No,” you, respond courteously, “You have the wrong number. This is Name Café.”

A long pause on the other end and the voice asks, “Are you a new place in the area?”

“No, we’ve been here for over 3 years,” you answer less warmly.

Exasperation! What is there to do? Do you prepare the patient for death or do you tighten your toque, turn on the burners and gird for a fight?

These choices and many others are the difficult decisions that often put even the most successful food operators into unknown canyons. Whether it is salvaging a business that has gone in the wrong direction, defining or refreshing a brand, developing a plan for expansion of services, or deciding on a new location, most operators are often too immersed in the daily battle, too unskilled in new areas, or simply too over confident to call for help.

Help is on the Way

If help is needed it can take several forms: possibly a call to a friend who has a well intentioned point-of-view; maybe a valued industry colleague can assist; or, what about your mentor who has selflessly helped you in the past. These are all possibilities but the best may be a consultant who is experienced in your area of business and know what you need. In fact, the use of a good consultant – a disposable/temporary help – can be the best of all alternatives. Among the qualities of a good consultant are:

• Independent – that is, he/she has no other agenda than to help you succeed;
• Creative – an outsider who is not bound by past efforts or preconceived ideas;
• Experienced – has not only done it before, but has taught other to do it and has a track record to prove it;
• Paid a fee – creating a fiduciary arms length value based relationship;
• Energizing – a fresh new influence shaking up a business/ operator that has been running on autopilot; and,
• The Bad Guy – in a good cop bad cop world a well placed consultant will absorb the heat and let an operator keep peace among the family.

Where Do You Find a Consultant?

In today’s world, where do most of us go to find anything? Google. But that may not be the best place to go. Like hiring a lawyer or doctor, the first stop should always be a personal recommendation from friends, associates, acquaintances, etc. Asking around may be the best start, but it’s a good idea to know a few basics before beginning.

1. Find someone local – he or she knows the market and the competition, and will be there when the engagement ends.
2. Experience counts – it may cost more but you get what you pay for. Make sure the consultant has intimate knowledge of your type of business and that the results are obtainable quickly.
3. Compare big names versus little name companies. Often the best consultants are self employed. They will provide the best value and the most experience. A big name will give financial recourse if a job goes wrong, but it still may not be worth it.
4. Insure the person actually doing the work is the one you want. Often a consultant will network and may only supervise the project.
5. Get a written proposal with a clear work plan, timing and fee statement. Discuss expenses and maximum, not to exceed amounts.
6. Look for professionalism. Be sure a consultant is a consultant and not an equipment store, a broker, or a search firm that consults on the side. If you need a surgeon do you want one who also sells hospital beds?
7. Don’t be afraid to ask for fee back up.

Remember, anything you can do to reduce a consultant’s time, either by minimizing the scope of work, or doing some ground work will save money.

If no one you know has used a consultant, try the local restaurant association or even the FSCI – Food Service Consultant International group. Then use Google and see how that works.

How Much is it Worth?

Now for the big question – how much? Consultants either charge by the day, the hour or the project. Occasionally there are engagements where the fee is composed of a company ownership piece, or a percent of sales or savings, but these aren’t the norm. In general the more experienced the consultant the higher the fee. In the end the fee is based on time the project takes. Experience may mean a shorter time frame but not always. Hourly rates that I am familiar with may run from $50 to $350 per hour depending on the type of engagement. Travel time to a site may or may not be included. Basic expenses also may or may not be a part of a fee. Anytime a consultant produces a written document, fees for a project will be higher. Remember, anything you can do to reduce a consultant’s time, either by minimizing the scope of work or you or a member of your team doing some ground work will save money. Also see what the consultant’s current work load is. You need to be the star of their show.

In the End

A good consultant, like a doctor can add experience, knowledge and even motivation to any situation you encounter. To structure a turn around, create a new menu, change a physical look, expand a business, create a brand image, find a new location, develop a plan for financing, tighten an operation or in general – to make more profits, achieve higher sales or both – a consultant can be an important part of a success team in the short and long term.

About Stephen Zagor

Stephen Zagor is the Director of Management Programs at the Institute of Culinary Education in Manhattan and a freelance Restaurant/Specialty Store Consultant. He previously owned and operated several major restaurant and retail food businesses and was Manager of Restaurant and Food Business Consulting for Coopers & Lybrand. He has been an independent consultant for over 15 years.

Opening A Restaurant In A Down Economy?

Harsh economic times favour people who do their research, especially those opening restaurants, as most start-ups fail.

22 November 2010 | By Vanessa Drucker

Eating lean

Many wannabe entrepreneurs like food, enjoy playing host, and have long nurtured a dream to open a restaurant or bar. When they suddenly lose their job security, why not give it a shot? There are plenty of reasons not to. Failure looms large. Of the 600,000 ventures started in America every year, 500,000 close up shop within 12 months. Restaurants are notoriously iffy.

There are advantages though, to starting out in lean times. New owners can obtain cheaper equipment and less expensive leases, with landlords more inclined to make deals for tenant improvements. The workforce pool is larger to choose from, while managers and chefs (minimum wages for other kitchen and table staff may have less impact) expect less money, according to James Sinclair, the principal of OnSite Consulting, a nationwide firm focused on repositioning in hospitality assets.

One of Sinclair’s clients has forsaken a senior executive job at Disney, to start a mid-level casual dining establishment in Los Angeles. The place is scheduled to open within days. The former executive found friends to back the venture, and was able to hire an architect at half price. His initial model, however, was flawed.

He did not realise he needed to build profitability from the start, rather than sacrificing revenues to lure people in. He has redefined his plan, accepting that his early customers would lose loyalty if he changed his concept midstream. “He will succeed, because he’s done the research,” Sinclair confidently predicts.

Slower times provide a laboratory for designing a business that is streamlined and perfectly efficient, so when the economy picks up again, it will be poised for growth. If you can hunker down and weather a difficult period, it can be the ideal time to give customers perceivable value, which encourages them to keep returning later. Sinclair would rather make adjustments in an economy mired at the bottom. “In boom times, volume hides sins.”

(Featured in the UK edition of HedgeFund Strategy, use of English spelling)

Menu engineering and menu layout is about guiding them through the entire dining experience. From the appetizer all the way through to dessert and all the detours along the way that can provide you up-sell, side-sell and link-sell opportunities.

As Gregg Rapp, a well-respected menu engineer, said:

“When you open that menu, we know that you’re going to order an entree. My goal is getting the person to look for the more profitable items.”

Good menu design comes down to a few key points. In almost every restaurant where I have been a consultant, the owner has not thought about using menu design to steer the customer to more profitable items. However, this can achieve immediate results and real money. Data analysis from experts around the globe show this works and, as such, is worth your time making the necessary changes.

Menu Font and Price Display

Make your menu font legible, clear, simple, and easy to read. Keep the data organized neatly in columns, presenting a clean picture to your customer. The biggest mistake that restaurants make is in how they list their prices. DO NOT LIST ALL YOUR PRICES IN A NICE COLUMN ON THE SIDE OF THE PAGE. This makes it too easy for your customer to identify the cheapest item on the menu before even reading the actual items. They have already isolated their choice to the two cheapest items, losing you the other 80% of your menu. Instead, the price should be at the end of the description or on a new line centered under the description. This forces the customer to read the menu items and then read the pricing. They already think the pork shoulder sounds amazing, so price is not so critical. As with wine, buzzwords come into effect with the menu, too.

Pasta, salad, sandwiches and other obvious and cheaper items should not be glaring you in the face when you open the menu. You do not want your customers to order the simple stuff. You want your customers to choose the tuna tartare before the baby green salad. The bottom left of a standard two-page menu is reserved for these everyday items. The PRIME REAL ESTATE is the upper right hand corner of the menu—this should be reserved for high-profit items.

Rapp also describes how the simple items should be hard to find on a menu:

“This is akin to the grocery store putting the milk in the back; you have to walk by all sorts of tempting, high-priced items to get to it.”

These simple menu engineering techniques work EVERY TIME. If you have a $6 swing between your entrees, a move into this menu design system, when done correctly, will provide much greater volume on the “prime real estate” items. If only five people complete this upgrade on a nightly basis, we have another $30 in new revenue which is still $10,850 every year.

What is the swing between your entrees? A simple menu redesign, a greater conversion rate, and sales analysis will allow steady revenue increases. However, you can track the effectiveness and make progress only if you have data to analyze. As you start this process, it won’t be perfect the first time, but watching the numbers and seeing the customers’ habits change provide the indications you need.

For your customers, their dining experience starts when they park their car. Every interaction with your restaurant until they get back in the car can have an impact on their overall experience and willingness to sing your praises or complain on YELP!

It is all to easy to leave a minimum wage employee to do what seems like a very simple job that requires little formal training. However the gum chewing, cell phone talking, lack of eye contact and genuinely disinterested host can make a guest leave that moment or be the subject of discussion the entire meal.

Take the steps to formalize the training and expectations of a host to provide a strict system that must be adhered to, and allows you to identify failures or lack of performance quickly. From answering the phones to greeting guests, the process can be on paper. The host is now merely replicating a set process rather than creating the process “on the fly”.

One of the greatest tools in the training toolbox for a host is role-playing. Allowing your host team to experience real life situations in a simulated and controlled environments will allow your staff to be better equipped in handling situations, and can provide better results than handing a host your sequence paperwork and expecting that to suffice.

The group buying model is unstoppable however beware: it is unsustainable for struggling restaurants with cash flow challenges

The fact that fine dining and celebrity restaurants have joined the “crowd sourcing coupon” game has now encouraged every other restaurant who thought a coupon program could damage their brand to jump on the coupon bandwagon as well. If Gordon Ramsey is offering it then surely you should be to?

Groupon, InBundles, VillageVines, BlackboardEats, Dealon, Yelp, American Express (NYSE: AXP), Opentable (NasdaqGM: OPEN), Zagat, Gilt Group and all the other coupons and offers on the market have never been so popular but what are the implications for restaurants?

I like these coupons. I like the concept, I like the discounts, I like the technology based platform to share it and I think it has merit for many restaurateurs. I have also recommended them to many of my clients. When applied correctly they can drive traffic, they can drive repeat business and they can kick start a new promotion and get a previously unknown restaurant’s name ‘out there’. Businesses signing up to the process find it to be quick and efficient and most importantly, the check arrives the day they say it will.

The coupon discount system is nothing new: It has existed for decades in the form of periodic (time limited) discounts, two for one offers and such, to attract customers during off peak and/or low yield hours of operation. The happy hour is a great example of this concept, attracting pre dinner traffic with a discount on drinks or food. This works because the operator can target a specific window of time for the offer to be valid thereby ensuring that these “discount” customers are not replacing the full paying dinner customer.

As restaurant consultants, we recognize the extraordinary marketing and footfall that these coupons can create. However, we also recognize that many in the restaurant industry are suffering in this economic climate. For those restaurants currently suffering and with significant cash flow challenges, these coupons must be used with caution. This article deals with the risks for restaurants in trouble, operating on a week to week basis with limited if any profits – for restaurants fighting to stay open where one bad week could collapse their operations, they must use coupons with caution.

Financially stable restaurants are in a position to market themselves with coupon offers because they know the coupon customer may visit again, whether that be next month or in three month’s time. The Groupon deal, for example, offers a customer a $50 coupon/gift certificate for $25. In these cases, the restaurant only receives 50% of that $25, minus the administrative costs tagged on (such as credit card processing fees). This leaves restaurants with circa $11 of gross income per $50 worth of credit in their restaurant. If 3,000 coupons are sold providing customers with a retail coupon for $50 worth of spend, that equates to $150,000 of goods the restaurant must provide (albeit their menu will carry a margin) for which they will only receive $33,000). One must therefore be acutely aware of the cost of customer aquistion in this scenario.

There is indeed an opportunity for restaurants here, that being finding the incremental revenue opportunity that coupon guests bring and being able to turn the apparent net loss of doing a coupon offer into a net gain: Recognizing that every dollar spent above your retail coupon amount can counter the net loss of the discount and one hopes, ultimately create a profit. This incremental spending above the retail value of the coupon includes income from the bar, for example, where customers wait to be seated before he or she eats or after dinner entertainment when customers stay after their meal.

The crowd sourcing sales pitch of these coupon companies makes sense. Andrew Mason, CEO of Groupon, expressed that the purpose of their coupons are to get non-customers off their couch and into your restaurant and suggested that there has to be a cost associated with this. It will drive new traffic as they tell you to look at it as a marketing expense because you have the opportunity to ‘display your wares’ to the customer. The pitch says that this turns them into repeat customers and at a much lower conversion cost than alternative advertising. Given that you are only potentially bearing a cost for each coupon sold, you are not incurring any costs for non customers as would be the case if you advertise in a magazine or newspaper. This is undoubtedly targeted marketing.

But what of the restaurant in trouble who believe that increased footfall means a surge in cash flow. Is this the answer in these cases? A stable restaurant can handle this strain on their cash flow. A financially unstable restaurant simply cannot. Whilst the coupon customers bring with them a short term cash flow boost, unless you are breaking even or making a profit with each and every coupon you sell, you are in fact merely delaying the inevitable. You will be worse off.

As a restauranteur trying to turn around your venue, you must remember to focus on profitable customers rather than growth without regard to financial impact. RevPASH (revenue per available seat hour) will likely plummet when your venue is crowded with discount customer. Ask yourself how this can help. Remember the old adage ‘sales is vanity, profit is sanity’? That certainly applies here. For restaurants operating with a slim margin, financial liabilities and a relatively inflexible fixed cost base, the anytime coupon is a difficult value proposition. Proceed with caution.

According to their website, the majority of Groupon customers are 18-34 year old single females with a bachelor’s degree and an income exceeding $100k. This seems an ideal demographic for any restaurant owner; however it transpires, from experience, that demographics are not necessarily relevant. In many cases customers are deal hunters; moving from venue to venue with no regard to loyalty and arguably limited intentions to purchase additional items which ensure the offer is profitable for that restaurant. They walk in with a coupon worth $50 and that’s exactly how much they spend.

Furthermore, whilst Groupon allows restaurants to impose a number of limitations on coupon use, customers often attempt to circumvent these. Whether this is complaining about the restrictions or negative commentary on social media, your restaurant may now be under attack. Again, this is arguably the risk and the cost of a coupon marketing exercise which many restaurants chose to embrace because it works for them. However that risk – those loss leading deal hunters who may or may not return to your restaurant – are not the solution to your cash flow issues. Yes, coupons can drive increased traffic through your door. However, if you are a restaurant experiencing financial difficulties – whether that be construction loans or sales tax delinquencies – think again.

There is another often ignored downside for the restaurant ‘in trouble’. With the issue of a coupon, comes a sudden and significant increase in traffic. Do not underestimate how many people will come through your door in the days following your campaign. Your restaurant now has to operate with the same standard of service which requires more staff to handle this load. Notwithstanding the potential loss you are incurring having sold a $50 coupon for $11, you may now find that your operational costs have increased – again with no benefit to you. Arguably, in fact, this adds to the loss leader that the coupon imposes. For how long can you operate with this increased burden in addition to the slim margins which characterize the restaurant sector and in a troubled venue?

The coupon market continues to evolve. Opentable’s recent launch into the coupon market has the potential to finally offer restaurants in all stages of financial stability, consumers and their own business with a fair value proposition. Opentable already manages restaurant reservations for millions of consumers nationally. This means that they have a huge database of restaurant diners including each diner’s cuisine and price point preferences. By marketing to them directly, a restaurant is potentially able to attract a more appropriate and discerning customer. Common sense dictates that the Opentable customer is a more attractive one than the Groupon customer who clicked on a banner ad touting extreme discounts and is simply looking for a bargain.

Additionally, Opentable has an existing reservation system and technology platform already installed in many restaurants which could offer more targeted and customized coupons with designated time slots or limitations on use of coupons per meal time or day. Arguably, Opentable has the capacity to dominate the coupon market because their coupons can ultimately send your restaurant exactly the guest you want to target as opposed to any consumer looking to eat out (which includes the bargain hunter).

Should you offer these deals at your restaurant? The answer depends on how you approach their use and whether you have taken the time to run the numbers in detail and work out what you should be offering and how – as opposed to only having your eye on a cash flow spike.

The onus is on you as an operator to make it work. You can only thank a coupon company for giving you 5,000 new customers however if you yourself have agreed to an unfair deal, a very low margin deal or a no margin deal and your restaurant is at risk, in the near term, of insolvency – then use coupons at your peril.  It’s a marketing strategy in its infancy. Meantime, restaurant should use them, but use them wisely.

Restaurant-industry sales average about $1.6 billion on a typical day in 2010. For those aspiring to get into the big-money game, much must be done before the doors even open.

by Nayeli Rodriguez September 22, 2010 Alex Brandon / AP

Photos: 10 Things That Changed the Way We Eat

10 Things That Changed the Way We Eat

According to the National Restaurant Association, industry sales are projected to reach a record $580 billion in 2010, a 2.5 percent increase over 2009. So while a postrecession economy may mean consumers watch their pennies more than they used to, enough of them still enjoy going out for a good meal. For those who are set on getting into the multibillion-dollar restaurant game, James Sinclair, principal at OnSite Consulting, a national hospitality consulting firm, says it’s going to take more than passion to succeed. He spoke to NEWSWEEK’s Nayeli Rodriguez about what every new restaurant owner must consider before opening the doors. His advice:

AS THE OWNER, KNOW EVERYTHING

The best types of owners are the ones who know how to run their restaurant back to front. That means you know your way around the kitchen as well as you do around the register. The reason this is critical is because you’re essentially giving up your life, as you know it, to make this restaurant succeed. A large part of that success is based on your staff. You can’t hold your staff accountable if you don’t understand what’s going on. How do you even begin to evaluate them? Plus, having this kind of knowledge goes a long way in terms of respect from your employees. You also need to know how all parts of your business work so that when you have to make important decisions, you can do so without hesitation.

Small Biz: Running Your Restaurant

• Bobby Flay’s Tips for Restaurant Owners
• How to Succeed As a Top Chef
• Opening a Restaurant? Seven Tough Decisions
• 10 Things that Changed the Way We Eat

HAVE A SOLID BUSINESS PLAN

If you’re thinking about jumping into this business, you’ve got to think about your location, what you’re selling, the number of customers you need in order to make a profit, and what you’ll charge for food. [That said,] anyone can create a business plan that “works” in theory. That’s why when someone comes to me with a concept, I break success down as money made per weekend, because that’s when you tend to do the best. One weekend should pay your rent, one should go to payroll, one to pay fixed costs like utilities, and one weekend should be straight profits. We ask that first-time restrauteurs look at this [as a measure for real-world success], and if it cannot be met, then they should reevaluate their idea. To drive the point home, restaurants can survive from bad midweek days; they cannot survive from bad weekends. This weekend strategy is gritty and never the model reflected in a business plan, but this is the reality for most restaurateurs, especially for individual operators.

HAVE AN EVEN BETTER MARKETING PLAN

According to the National Restaurant Association, word of mouth is still the best form of marketing for restaurants. So, when you’re thinking about marketing, it’s got to be based around giving the customers what they want. For restaurant owners, it’s important to stop looking at things like half-price discounts. That’s not where you’re going to make money, and that’s not necessarily what customers want. From the moment you open your doors, it’s about branding. The focus should be on creating a dining experience that fits the location and the customers in your area. Also, it’s a given that customers are going to order an entree, so put as much focus on everything around the entree, which can double or triple your transaction.

SCOUT YOUR LOCATION

Pick a location based on demographics and economics, not because you “love” the neighborhood. It’s got to be a location that works with your food concept and that is not surrounded by several similar competitors. You also have to think about how location affects things like alcohol, which tends to be great for your bottom line. For example, if you’re in a corporate area and your primary market is lunch, you’re probably not going to sell a lot of beer because people will be going back to work. And don’t waste your time on obscure locations either. They tend to only work for name-brand destinations. And equally as important, pick a place you can afford, and factor in any construction the place needs to accommodate what you are trying to do. This is why you have to lay out the financials long before you pick a place, then work backwards. This way you know how much money you have to spend.

BE CLEAR ON CUISINE

Your cuisine type should be based, in part, on how much money you need to make per customer. In a lot of cases, your local competition has done this research for you. If they’re doing it well, look at how you can do it better. Once you decide on cuisine, make sure you take the time to look at market prices for ingredients. As you put your menu together, try to keep it clean and simple, and stick to options that are going to increase your per-head revenue.

PLAN FOR INVENTORY CONTROL

Do inventory of every product you have and look at it on a weekly basis. You do this so that you know how many steaks are being ordered, how many are being sold, and where the difference is coming from—like they’re being wasted because they got old. You have to order food based on what works for you. I tend to prefer that owners order food two or three times a week rather than do one big load and have to throw away a lot. You should also pay inventory expenses weekly, so should you have an issue at some point, you’re only a week behind.

SELECT STAFF WHO CAN SELL

You can teach someone how to smile, how to sequence their service, but you can’t teach someone to sell. To do really well, you need someone who’s good at service and selling. Keep in mind that everyone in the restaurant is an extension of you. You’ve got to know they can fill the shoes you want them to fill. So don’t be afraid of removing someone for underperforming. Remember, this is your livelihood.

For more Small Business INC., click here.

Buying a Franchise with a Family Member

Siblings Tim and Deb Jones spent most of their careers in the ad world — Deb in media planning and buying, and Tim in account services. But they were looking for a change and found it in a 2006 New York Times profile of 1-800-GOT-JUNK, a waste removal service franchise. Just a few months later, the sibling duo found themselves in business.

Buying a franchise with a family member can seem as natural as buying one with a spouse, but it can be fraught with even more potential problems. “I think the major pitfall is an obvious one: You can’t fire a family member, and business problems can quickly erode lifelong relationships,” says Andrew A. Caffey, a franchise legal specialist who has served as the general counsel for the International Franchise Association.

Untangling yourself from a toxic business experience with a family member — in a franchise, no less — isn’t just a logistical, financial, and legal nightmare; it could wreak havoc on your entire extended family, especially if they like to take sides.

So how can you make sure your relationship with your future franchise partner and family member is strong enough to withstand the pressure of entrepreneurship and create a successful partnership?

Plan ahead. Knowing your business partner your whole life just isn’t enough. It can be tempting to do handshake deals with loved ones, but not only is this a bad idea, it’s also impossible in the tightly regulated land of franchise ownership. But beyond the legal and financial due diligence you must complete when buying a franchise, you should also make sure you and your partner’s visions align and that you enter into this business partnership with clear expectations.

“We all know that family members may tend to let too much go unsaid or, without thinking, fall into unhealthy relationship practices, and the business will be the first to suffer,” says Caffey. “Family members have more reasons than most to hire a good advisor who can help them see around these corners.”

Define your roles. “We thought the best way to run the business was to divide and conquer,” says Tim Jones. He manages the business’s truck teams, commercial sales and marketing, guerrilla marketing, training, and on-site supervision. Deb develops the business plan, oversees paid marketing campaigns, and manages finances. Together, they make purchasing decisions and plan their paid marketing goals. “We don’t micromanage each other,” says Tim. “We may disagree on some issues, but we have been able to come to a decision after talking about the issue.”

Brothers Jim and Bob Slattery, who own several Valpak franchises together in Ohio, Pennsylvania, Indiana, and Kentucky, actually do the same job: sales. With so many franchises and the ability to work in different offices, it works.

“Bob and I are the two oldest in a very large family of 10 kids,” says Jim. “Early on, we learned you have to just get along and figure it out. Of course there are times when we have our own opinions about how things should be done, especially when it has to do with the sales world. We both have sales backgrounds and run that aspect together, so figuring out how to co-manage sales operations has probably been our biggest challenge.”

Delegate wisely. While it’s important to define what you and your partner do best and therefore what your roles should be, it’s also crucial to make sure neither of you are wasting your valuable time and efforts on tasks that could be handled by an employee.

“In most family environments, each person takes on a set of jobs or responsibilities, but in almost all examples, most of those jobs would be better served being performed by lower-wage employees,” says consultant James Sinclair, whose company, OnSite Consulting, specializes in turnaround, insolvency, and repositioning in the hospitality industry. “The issue with families is lack of trust for non-family members. They tend to do all the work instead of delegating, which places their earnings per hour quite low. They also are so involved in the micro that they forget the macro.”

Keep in mind, it’s not just minor tasks that should be delegated; you also need to hire experts when you need them. “We have left administrative responsibilities to others who have more expertise in them, such as [delegating] accounting to the CPAs,” says Jim Slattery.

Fight the urge to engage in nepotism. “I am continually surprised at how many family-owned franchises there are where the family unit is quite dysfunctional,” says David Mahmood, whose firm, Allegiance Capital works with small and mid-sized businesses, including fast-food franchises. He particularly sees this problem with parents and children.

“It is difficult for parents to look at their children dispassionately when it comes to judging their management competency and capability,” says Mahmood. “Every parent wants their child or children to succeed. But it can be soul-killing for good workers who are employees of a family-owned company to see themselves passed over and a promotion given to a family member who is not as competent or as capable.”

However, if your family members are qualified, you can make “keeping it in the family” work. “Our parents were instrumental in raising us to believe in the importance of family,” says Deb Jones. “We know that our sisters, brother-in-law, and nephews [who we’ve hired for our business] all care about our business as much as we do. They genuinely want us to succeed. We trust them all implicitly. We have always had fun as a family and that has carried over to the business.”

Don’t take work home. The last thing you want the extended family to discuss around the Thanksgiving dinner table is an argument you’re having with your franchise partner about a business matter.

“An important lesson we learned from the beginning was to keep personal business separate from our work business, which isn’t always easy since we share families,” says Jim Slattery. “Living in separate cities has also helped in keeping things running smoothly [Jim lives in Toledo and Bob lives in Cincinnati]. We also chose to not have our immediate families directly involved — it makes things less complicated and family parties more fun.”

By planning your business thoroughly and separating your family relationship from business issues, it is possible to create a lasting and strong franchise with your family. Just ask the Slattery brothers: They’ve been business partners for 27 years.

“When family operators can divide up roles and responsibilities correctly,” says Sinclair, “it works like no other management team could.”

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.”

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.

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

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

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.’

INTERNATIONAL

PHILADELPHIA. Two of the 17 chefs on the sixth season of Bravo’s “Top Chef” hail from Philadelphia. Even more surprisingly — or, perhaps not — both are women.

Jennifer Carroll, the chef de cuisine at Eric Ripert’s 10 Arts inside the Ritz-Carlton, and Jennifer Zavala, who left Northern Liberties’ El Camino Real this month and is now working at Xochitl, will battle it out on the popular reality show.

Meanwhile, Alison Barshak (Alison at Bluebell), Luciana Spurio (Le Virtu) and Marcie Turney (Lolita and Bindi) are among the other female chefs putting great dishes together around the region. Philadelphia, it seems, hosts a growing hotbed of respected female chefs.

“Most of the time, delivery people still go right to one of the male line chefs, assuming that he’s the head chef,” says Sheri Waide, the chef at Southwark, in-between prepping for a dinner shift. “So I think anything in the media, like ‘Top Chef,’ helps make people more aware of women in these jobs.”

Running the kitchen of a fine dining establishment has it’s own unique challenges for women. Many see it as one of the firmest glass ceilings out there.

“A female executive chef is probably 10 times stronger than any male based on what she has probably had to endure to get to this point,” says James Sinclair, the Los Angeles-based author of “How to Save Your Restaurant in Ten Days.” “Young women who see female contestants on ‘Top Chef’ in fierce kitchen environments, which are traditionally a bastion of testosterone, have new role models.”

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I have received a number of emails and phone calls recently in regards to the impact restaurants have seen from what is, without question, an extraordinarily slow period. Operators are finding that they are not just having to deal with the annual, seasonal revenue cycle, but that they are faced with a simultaneous and overlapping crash on consumer confidence, the likes of which have not been witnessed for over a decade. On the assumption that it will not be getting better any time soon, immediate planning can allow for both current and future survival.

I. THE PROBLEM

When consumer spending and confidence hits this kind of dip, the first industry to suffer is the hospitality market.

It’s not very complicated: Consumers have a lower disposable income which, when combined with their view of the market leads to them moving any disposable income they do have to the warm hiding place under the proverbial mattress. As the time of writing, even the banks are under pressure. I was sitting in a client’s office when news broke that Washington Mutual had collapsed and the FDIC was seeking an emergency solution. My client raced to the bank to withdraw his maximum available amount and was freaking out about what would happen tomorrow. His worry was not losing his money – it was obviously protected – his worry was the potential interruption to his business operations.

After all, it is cash strapped businesses like bars, nightclubs and restaurants that write checks and pay bills on tomorrow’s merchant drop, and with credit card sales now making up the overwhelming majority of the transaction base, an interruption of any kind has a domino effect.

We have all seen it and been there; first the Sales tax does not get paid, followed swiftly by the payroll deposits to the IRS and EDD. You are faced with spiraling balances to your NET 30 vendors and, suddenly, within 60 days you are purchasing from a supermarket. Once you fall behind, catching up and becoming current become ever more remote. You are not the first and certainly will not be the last.

II. FOLLOWING THE MONEY LINE (FML) – A BIG PART OF THE SOLUTION

FML has been my strategy from day one – the solutions and options are obviously dependant on size and scope, but with many clients being single or few-venue owner-operators, my suggestions are geared to that market. Here are a few:

Get Your Hands Dirty

Many owner operators have not really jumped back into the hot seat of being their venue General Manager since the first six months of opening. The wear and tear of an NSO and the first months of operation have made hiring a competent manager (who allows you a day off) a delightful relief. From there we all get busy on our next venture, and it is all to easy to forget about the small things – while you may have spent a lot of time at your location generally, you find you have only returned to back-of-house operations and management, when there has been a larger problem.

By retaking your position at the wheel of back and front-of-house operations, you will immediately see a million things that need to be fixed – most of the time, there will be a solution to remove the problem in entirety and save money, or a cost/benefit analysis will show that you will actually make money by spending a little.

So, first things first:

• Your office should be moved directly into your venue if it is not already.
• You should have access to all your accounting data including vendors and payroll.
• You should be working adjacent to your management team.
• You should be on location day and night for a short period, having a hand in every decision, action or dollar spent.

Share the Load – Motivate Your Managers

If your staff are not aware of the cash crunch you are facing, now is the time to bring your upper management up to speed – they are the executioners of your objectives and the motivation of being involved in the solution will have them looking for ways to save or become more efficient, which will produce better results.

Set Your Targets and Chart Your Progress

The first item I generally always try to create is a “money saved spreadsheet” with simple columns: ITEM and then money saved into columns of DAILY/WEEKLY/MONTHLY/YEARLY.

Once you have an item and the associated saving, the number can be placed under the appropriate column and excel can generate the savings in either direction. This spreadsheet, which should be shared with management also allows for tracking progress, so that you actually see the direct result on paper – seeing the saving itself helps bring about the goal.

Don’t Ignore the Little Things – They Grow

The accumulated results of small savings are IMMENSE. A recent client provides a nice case study of how you can achieve immediate savings (not including payroll and COGS):

CASE STUDY: Of course every venue is case specific but in this instance there were so many small items that they actually represented a majority of the wasted expenditure. Just moving to a larger CO2 tank instead of the smaller ones saved $8,000 annually, and having the cleaning crew removed and using existing staff instead saved over $42,000.

Paying attention to very small line items can deliver fantastic savings when amortized over the course of a year. In our case study, cancelling directTV saved $1,400, and having the staff use their own knives instead of using a service saved $1,200.

That’s over $52,000 saved right there, without even trying very hard.

But it’s more than just the money – by forcing yourself back into every nook and cranny of the business, you will find other problems of inefficiency and leakage.

Cross Utilizing Your Staff

In the current climate, a venue operator would do well to use a dynamic scheduling strategy – a scheduling process that can adapt to slower nights without degradation of service.

On a slow Monday can your:

• Busboy also bar-back?
• Second bartender also be a server (and vice versa)?
• Runner be used as a busser?

The payroll is the largest single expense you have and by being on site you can see the opportunities for cross utilization. 30 minutes after you close, why are there still hourly employees clocked in? 2hrs before you are open who is clocked in, what are they doing and could they come in 1hr later and just work harder?

CASE STUDY: A client of mine with revenues of $2.3m was able to shave $350,000 off its annual payroll after 15 days of evaluation. That’s 15% of revenues saved using a dynamic scheduling method. Obviously there was significant data analysis and historic number crunching required, but the only important factor is whether the customer noticed any difference to the level or quality of service. From small bar to fine dining, every operator has uttered the magic words “if the customer had any idea”. Plunging a toilet of one of our client’s restaurants last week I wondered the same thing!

Staffing is and will always be a problem area, but time served preparing, analyzing and creating a solution will recoup serious dividends.

Remember: Vendors and Operators Live in the Same Space-Time Continuum

It’s simple really: your vendors are suffering under the same economic conditions as you are. They don’t live in a parallel universe. And their only insulation from the downturn is for their customers to stay in business.

By way of example, Sysco Food Services are experiencing one of their highest months of returned checks and delinquent accounts – so much so, that they now have a delinquent account specialist who can keep you ordering, even with a past due balance. Smaller vendors with large balances can be asked to move deliveries to COD with 5% of the past due balance added to each order. Sysco is well aware that you still need your product, and will find it from somewhere, so they may as well try and recoup the loss and mitigate their exposure by helping you work your way out of difficult times. So many clients just stop answering the phone when their best bet might be to maintain the existing relationships they have (however strained they may be).

If, however, you are a good or at least quasi-decent customer, now is the time to negotiate with your vendors. Maybe if you change your terms from net 30 to net 10 they will give a larger discount? Smaller vendors would love to shorten their exposure to loss and bring down their AR. Maybe if you consolidate your meat, fish and produce under one company, they will provide savings that surpass the smaller vendors. These are all questions which, if addressed, could provide immediate savings.

Get Smarter About Your Inventory – Product on Your Shelf is Money not in Your Bank Account

Almost every site I walk into has thousands of dollars worth of inventory they rarely use. It doesn’t matter whether we are talking about incessant liquor promotions or just plain bad weekly ordering – the net effect is the same.

So one of my most important recommendations in tough times is to manage your inventory better:

• Order Just-In-Time for the week or half week.
• Pick a vodka brand and stick to it (by ordering more of a single product you can generally get purchasing discounts per case).
• For the akward bottles that no-one drinks, simple solutions can include a drink special for a slightly reduced price or a custom cocktail to a small private party so they believe they are getting a good deal. (In a more up market establishment, a custom cocktail list may allow for the products to be sold for a premium.)

CASE STUDY: Our mixologist took a recent client who had a huge amount of non-moving inventory including a terrible (lets keep it un-named!!) vodka and created a cocktail which sold off the shelf for a premium and forced the client to purchase more product. The end result was the creation of a “Specialty Cocktail List” which works very well.

However, before one races to create this, the costs of the other ingredients, the shadow costs of training staff in preparation and up-selling and the education of customers costs real money and must be properly analyzed prior to execution.

CASE STUDY: A recent Mexican restaurant we worked with was suffering from low sales and generally poor returns so, before they phoned us they added a tequila bar and an inventory of rare and expensive tequilas. None of them sold and now they just have boxes of tequila on a shelf.

CASE STUDY: In a recent nightclub just taking the excess product and creating a fun shot was an easy and quick way to get rid of the product and still see a return. It may not have been the return they originally envisaged when they first purchased the product, but they certainly received more cash than they did when it was sitting on the shelf gathering dust.

The Lesson: There is a method to adding to menu items or twists / extensions of the concept and not following them has as much chance of leading to failure as to success. Many fine restaurants do the same thing with their wine list as the Mexican restaurant did with tequila, but such a one-dimensional approach, if used in isolation, will almost certainly fail every time.

Remember the Point – They’re There to Enjoy Themselves

The product being offered to the consumer and the overall dining experience MUST BE flawless. No ifs, no buts and no maybes. In this market with so much competition, there is no margin of error for a bad dining experience.

II. YOU NEED MORE THAN JUST AN ARTICLE

It is so important to read this article as a guide to the kinds of things you should be thinking about, not a comprehensive step-by-step to instant success. The suggestions set out here have been proven to produce some immediate results, but you will need more than a few tips. A serious process of evaluation, planning and execution is an absolute must. And in the final analysis, I have found the key to lie in constant, honest and intense scrutiny of the data delivered from back and front-of-house. No amount spent is too small or too sporadic to merit your full attention.

- James Sinclair, OnSite Consulting

James is an expert in maximizing returns from hospitality venues, whether in relation to a start-up new venue, redeveloping an existing venue or saving problem venues from insolvency. In addition to owning a number of successful bars, nightclubs and restaurants himself, his advice is sought around the country by owners and operators who need his specialist expertise when tackling the specific problems they face.

If you are interested in any of our services, please don’t hesitate to contact us.

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