Restaurant Business Strategy

Straight Talk on FAQs

Target: Restaurant Start-ups and restaurants that want to reboot their operation

Focus: The middle ground of restaurant business strategy that focuses on the fundamentals of long-term growth and profitability.

I’ve heard a lot about social media like Twitter, Facebook, and Foursquare: should I start using it to build sales?

The key point to understand about social media is that social media are tools that must be carefully managed to be productive.

I suggest that you learn about social media but refrain from using it extensively until you can answer these two questions:
1.    How much time, money, and effort must I put into it before it will make a difference in my business?
2.    What will I have to give up or replace to invest in social media?

The middle ground of restaurant strategy suggests that you guard against investing in something that may not produce significant results, and to avoid being distracted from your core business.

Social media cannot be ignored, however. I suggest that you personally follow 2 or 3 social media for yourself before you follow it for your restaurant business (start with Twitter and Facebook). Engage your staff in conversations about social media (this will energize your daily meetings). Invite your staff to recommend how social media can be used to promote your restaurant and challenge them to gather relevant success stories to serve as models. Then set specific objectives and test.

It bears repeating: social media are tools that must be carefully managed to be productive.

Should I hire an ad agency?

This question has many facets to it. Many people and small organizations call themselves ad agencies, and what they deliver varies widely.  To start, it’s important that you know exactly what you need. For example:

•    If you want to create awareness in traditional ways-use an ad agency
•    If you want to create awareness on the web and establish an online presence-use a web agency
•    If you want help on an overall marketing strategy- use a marketing agency
•    If all you want is new merchandising pieces-use a graphics designer

Many organizations combine multiple functions and claim to be expert at all of them. Beware of overpaying for what you do not need, and be willing to pay for the expertise that will really drive your business.

The best way to answer this question is to be specific about your business goals, to educate yourself about different agency capabilities, and to have an agency or individual explain how their specific capabilities will satisfy your specific business goals.

How much should I spend on marketing?

The quick answer to this question is to spend what it takes to achieve your goals, within budget, and within your profitability guidelines that include acceptable margins.

Determining this level of spending is another, complicated issue. Reduce complexity by following these suggestions:

•    Use restaurant segment spending guidelines as a base. These guidelines exist because they have been validated over time.
•    Don’t spend without having some form of performance measurement.
•    Use customer count as your main indicator of performance.
•    Have realistic expectations: spending small sums to achieve large results is unrealistic, while spending large sums (e.g. merchandising design and graphics, website redesign, etc.) may never yield a return.
•    Become smarter and reduce risk by setting objectives, measuring results, and testing even in modest ways.

All my competitors are discounting? What should I do?

One of the ways customers decide on which restaurant to go to is on the basis of relative value.  When competitive restaurants discount, they narrow the value distance between you and them. To maintain value, you must do something to reestablish the value distance.


This does not mean you match discount for discount. Be aware of the negative math of discounting: for example, a 10% price reduction may require a 20% or greater increase in customers just to breakeven.

I suggest three actions:

1.    Change value perceptions in ways more favorable to your bottom line. For example, prix fixe meals provide the assurance of value and allow you the flexibility to up-sell and create add-on sales.
2.    Have tested backups that can substitute for discounts. Add popular items from your “specials” list to the menu and create a steady stream of new items.
3.    Use themed promotions to change the mindset of regular customers away from price.

How do I create a marketing plan?

Keep in mind that the purpose of a marketing plan is to help you manage your business more successfully. While there are many different approaches you can take (and you can find them in a Google search), start off simply with what works for you. At a minimum, use a yearly planning calendar to visualize major efforts; use prior year results as a foundation; adjust these results to account for your more recent sales, customer trends, uncontrollables like the economy, and special programs. Focus on how every part of your effort contributes to one of the following: increase revenue, reduce costs, and raises customer satisfaction. Set this up as a table. Then measure, analyze, test, and refine on a monthly basis.

What is the best way to increase customers?

First, think like a customer. Remove your subconscious biases and ask yourself, “What’s in it for them?”

Next, think like an enlightened owner: you’re already thinking about margins, sales, and customer counts. Now think about how you can employ your human assets to listen in on customer conversations, identify issues before they become problems, and serve as touch points to provide special consideration to your guests without adding to your costs.

What is the most important thing I can do to benefit from the economic recovery?

Retrain your employees. Ensure that they all know your standards. Teach them how to improve performance. Don’t take anything for granted. Energize them.

Should I rebrand my restaurant with a new website, logo, menu, and merchandising pieces?

The answer lies in determining what is substance and what is perception. Rebranding if often an unnecessary and large expense. Focus on the core restaurant experience and providing actual value.

Why are new items important? After all, they take a lot of time.

New items are opportunities to change the conversation from price, and direct it to what interests the customer.

How can I measure customer satisfaction?

Here’s a novel idea: analyze your check average and server tips. Customer satisfaction is often measured by the ability to increase prices over time, and for your servers to earn above average tips.