Credit Card Processing Fees...Boo Hiss!

Here is a 4 part series that helps you identify if you are paying too much for the processing of your credit cards. This series is by one of the best people I have heard on a subject that occupies nearly 20% of every conversation I have with owners and operators!

http://www.getgame.biz/Cost%20Controls.htm

Blog Entry on Passion

You have to wrap your brain around something outside your restaurant once in a awhile in order to look at the world and apply the lessons being learned at the moment. These are not necessarily "Best Practices", I call them best lessons! And like any other lesson in you life it gets molded, reshaped, reformed over and over again based on the intelligence of the moment. Here is one such posting I think you should devour and chew on for a while.

http://brandautopsy.typepad.com/brandautopsy/2006/04/ghosn_gets_it.html

Radical Mentoring! Quote of the year!

"People don't grow if you're soft with them."
-Candice Carpenter , Cofounder and CEO, iVillage

Mr Restaurant Owner, Your Marketing Stinks! Guess Who Is To Blame?

This piece comes from the blog of John Jantsch, Duct Tape Marketing.

A little tough love today I guess, but the reason so many small businesses struggle is because they are unwilling to change. The marketing strategy, if there is one, is to do what everyone else in the industry seems to be doing. If that's your marketing reality, that little safe place, and it's not working, the first thing you have to come to grips with is that it is your fault.
But, but, but. . .
Okay, I'll cut you some slack, I didn't say that you wanted it this way, I just said that you're the reason it is this way.
So, now I should explain. The only marketing strategy you need to worry about as a small business is to find a way to be unique. To offer something that is different, package a service like nobody thought of, focus on a tiny portion of a market or create an entirely new way of doing something. And then - communicate that and only that.
But there in lies the problem. What I just described means, for most small business owners, that you are going to have to be willing to change almost everything you do, the culture of your entire organization, the manner in which you get in the way and the constant chatter of doubt that is going on inside your head.
Think you can do that? I suggest that your business success depends on it. Create a strategy that allows you to stand out, put every message into communicating it and stick with it fearlessly.

It's Official! WOMM Is The Real Deal!!!

Fast Company says so too!

Restaurant Owner Jailed For Understating Sales Receipts

North Country Gazette

A Brooklyn restaurant owner has pleaded guilty to filing false corporate tax returns and drastically understating his restaurant’s sales receipts.

Read Article

A question about top line performance ratios.

The question: what inefficiencies cannot be determined through overall labor, food and beverage cost ratios?

The answer? All of them!

Your overall labor cost is a wide-angle, aggregate view of all labor. It cannot tell you where the problems lie because it is too general in nature. Secondly, they are historical and after-the-fact. Finally, they are distorted by increases and decrease in sales. For better control you need more focused metrics such as covers per labor hour, labor cost per hour and labor cost per cover.

Labor should also be broken down into more than BOH and FOH. It should be by each area of production. In the BOH it should reflect your operational design - prep, line, steward, dish, etc…and by each daypart! FOH can be broken down by position – Host, Server, Bus, bar, bar back, etc…and per daypart.

As for sales per labor hour, there are several things to consider when using it to analyze productivity.

• Menu price increases can affect it greatly.
• Fast-food drive through windows can skew the effect as well.
• Different average check amounts per daypart.
• This ratio is used to schedule to sales revenue when you should actually schedule to anticipated transaction volumes.
• Late night and early morning operations.
• Experience levels of staff.

For food and beverage costs, there are four metrics that should be utilized: maximum allowable, actual, potential and standard and you need to break them out in categories like produce, dairy, meat, beer, liquor, wine, etc…even further if you have larger volumes.

Cost controls are first and foremost proactive means of preventing losses and maintaining control, not reactive or corrective. Only by categorizing your COGS and utilizing focused metrics in each, can you truly understand where the opportunities lie.

Have Fun Today!
Jeffrey Summers

Smart discount campaigns!

What is a good offer?
Do not lose your shirt by failing to build a solid ROI into your offer, no matter how many guests show up with your coupon in hand! Your campaign margins should grow simply due to economies of scale as your offer is passed around. If you lose money on the first coupon, you will lose money on the 10,000th. Likewise, if you make money on the first, you will make it no matter how many get passed around. Contrary to popular opinion, a good campaign does not plan to lose money with a single coupon.
Planning is crucial for all offers of this type. I wish I had a nickel for every time I get a call or email about trying to stop the hemorrhaging from coupon fiascos that were poorly planned - or not at all – and afterwards it was necessary to reorganize entire marketing efforts in an attempt to recapture lost ground and momentum.
Knowing the margins of your menu items is critical too. You must use items where the margins are large enough to still be able to make money with your offer. In addition, since these items have a positive ROI also, they will tend to be items that have above average demand and that means the guest sees value in the offer.
Bundling is a good type of offering that works well with this type of event. The chains have used this to great advantage. Choose from 2-5 of your value items from each section of the menu to put together for the guest to have a complete 3 course meal – appetizer, entrée and dessert. Price them appropriately so that the value is clear. If you have items with margins that can be trimmed $1 each, you could run a “Save $3 on a 3 Course Meal!” or some such offering.
If you know the numbers when it comes to your menu, you should be able to plan an offering that has good value for the guest, will create some really good word-of-mouth and give you a good ROI on the effort.

Abuse issues.
If you are concerned about abuse, then expire the offer or place a sign-up notice for the offer on your web page. Also note only one offer per person/per table per visit. We all know the people who will try to ask to get away with whatever. If your codes are displayed properly then there should be no question. These people will always be a small portion of those redeeming the offer and as we all know, you will have these guests no matter what offering you employ.
Require their participation in signing up for your newsletter or whatever, as a prerequisite for the coupon. This will allow you to track people and not allow them to download it more than once. A corollary to this is for people who have already signed up for your free offer and whose name will already be in your database, for them you can simply have them log in or re-direct them to a different page.
This can get complicated fast if you insist on screening 100% of all possible abuses schemes. My suggestion is don’t even try. You have bigger fish to fry than to play coupon police every time you do one of these offerings. Create the best offer you can, put it out there, measure the results, then plan you next one based on your results. Over time you will get really good at it.

Tracking from your website.
Go to SiteMeter sign-up and get an HTML tracking code for free that you can put on your coupon pages and then you will be able to track numbers. Constant Contact also offers several key metrics for your email campaign including noting how may times your email was forwarded and to whom.
If you really want to get creative, send out you offer to you data base list, then offer them a “reward” for forwarding it to as many people they can AND who sign up on your website for the offer. The more people they get for you, the bigger their reward. I have utilized this type of campaign for new store openings and it works really well!

Auto-responders.
If you are looking to send a response to your guests who request the offer, an “autorespoder program” will do what you need. Constant Contact and others, offers this service in their packages and is extremely cheap to utilize. They also have a free 60 day trial program that you can use just to try it out first.

Have Fun Today!
Jeffrey Summers

More on why discounting sucks!

The scene is a typical "slow period" between rushes in almost any restaurtant. The question is whether or not to offer discounts to just get anyone in to cover the costs of business.

Of course there are many factors at play here, not the least of which is that this scenario leaves the reader with the impression that you only have 2 options – empty seats or discounts. This is totally misleading and doesn’t really show an understanding of how to effectively create a marketing strategy. But to go into all the variables that go into this type of analysis would be exhausting for even the most interested cost information junkie.

Another point is that some businesses who operate during all 3 major dayparts – breakfast, lunch and dinner – have at least 3 distinct “slow periods” as well. This puts dramatic pressure to maintain margins during the peak times to make up for them, and can strain productivities needed to not only service the guest but the operation also.

Suffice it to say that there are many, many options based on the understanding and execution by the operator of what a strategic marketing plan will do for those “slow times” and the business overall.

One option, which I call the “fresh fish” idea (because it basically answers the same question of “why does fresh fish cost the same one day later?”) is to simply have different prices during different day parts. This is not for the sake of masking a discounting strategy, but simply as an ongoing strategic pricing option that takes into consideration the idea that prices do not have to be static during each daypart. Nor anything else for that matter. Different size portions, different cost structures, different menus and the like can be creative answers to the “slow periods”, and can be utilized no matter what size operation you manage.

Another option is to target guests who would normally take advantage of off-peak dining periods. Who ever said that you cannot focus on specific guest demographics for specific dayparts? Business managers, teachers, shoppers, moviegoers, housewives, househusbands, college students, etc…It is done all the time, but independents do not seem to understand this marketing reality. Think “Happy Hour” but better!

How about scheduling larger gatherings (like parties or business meetings) or cooking and wine classes that not only offer some revenue but great marketing as well?

The corollary to the marketing side is of course cost containment. Looking at the eservice needs of the guest and the operation and begin to creatively attack the cost structure of labor, food, menu etc… to help support margin pressures.

The biggest obstacle is that of immediate gratification. Operators want it now and in their rush to “just do something” they limit the effectiveness that a well-planned and executed marketing strategy can make – for the entire business and not just slower periods! If you limit your thinking to something vs. nothing, most of the time you still get nothing because the cost of desperate and deep discounting to simple “pay the bills” always creates more problems than it solves.

Marketing the Basics in 2006

The bigger picture…if you really want to use couponing in your marketing mix (and cannot put together a USP campaign), simply accept your competitions’ coupons! It is that simple. Your ad budget will shrink because you are not printing or distributing but of course your food cost will go up somewhat.

However, coupons do not work for long term success.Study after study has shown they do not. Who they help is the transient guest who goes from place to place because they have coupons. No loyalty there – and loyal, raving fans are who you want! Advertising just for the sake of keeping your name in front of the public is a strategy for disaster. A shotgun approach to marketing will only waste your money and give you little in return. This is the “old advertising” approach that has all but given up the ghost. Your marketing should be focused on keeping your name in front of a those guests who;

1. Visit you.
2. Are most likely to visit you.
3. Fans of those in #1 and #2.

While also remembering the only three ways to increase sales are to;

1. Increase the number of guests who visit you.
2. Increase the number of times they frequent you, or
3. Increase the size of their purchase with you.

Sadly more operators focus on number 1, at the expense of 2 and 3. A study by Marketing Metrics™ tells us that the probability of selling something to a new prospect is only about 5-20%, while the probability of selling something to an existing customer is 60-70%! Wow! Bet on those numbers!

You build volume in our business, one guest at a time and you do this by creating a marketing plan that focuses more on the intrinsic value of what you offer guests versus your competition. Your marketing campaigns should be focused on reminding guests of that value. Even more numbers? Studies also tell that the 80/20 rule is very much alive in our restaurants. 80% of your revenue will come from 20% of your guests. So to which group does it make more sense to focus on? This is the reason for the explosion in rewards programs. It is not new either.

There is more value in a lifetime fan as a guest than chasing new guests every two weeks. It is also less expensive to reward those guests who frequent you than to spend on finding new ones!With couponing you focus on the pricing aspect of your relationship with your guests, when they really want value - YOUR value! or the “What you do best”! Pricing strategies turn your product into a commodity, and you get killed by “sameness” – no differentiation! No Unique Selling Proposition (USP)!

“Everyone coupons so I must also!” I hear it everyday. But then I ask operators, if they do the same thing everyone else does, how do guests pick you out of the multitude of options they have today? How do you sell the guest a better experience than your competition, when everything else you do yells, “I’m just like they are!” You can’t because your brand is now trapped by the “pricing” stereotype. It will take even more work and effort (and ad dollars!) to get out from under it when the sales driver in your market is determined to be value.

My usual question is, “How many places in you market sell a chicken sandwich?” The answer is always high as you can imagine and most of the time the answer as we all know is “everyone”. So the follow-up is, “Why should people buy yours?” This is always followed by large amounts of silence or stuttering or,” because it’s better!”. “Why is it better?” “Because it is made from scratch”…or some such nonsense. The answer lies in the fact that people will buy from you because there is a better value in buying from you than your competition. If you make that value a pricing decision, then he with the best coupon wins that day, but loses in the long run because someone will build a better chicken sandwich experience and now the best value isn’t one based on price – and all your guests have come to know you as the “discount chicken sandwich” King!

You must create a USP based Marketing plan for the long term that “synergizes” and compliments each piece so that a congruent message is communicated to those in the three categories above. The sum of your efforts must therefore exceed the cost of the efforts combined or else you lose money! You only achieve this through a concerted marketing effort towards value for your guest utilizing a USP to create a point of differentiation between you and your competition. Use any marketing effort that encourages a “be all things to all people” approach and you get drowned out by all the noise.