Five Tactics to Create a Sustainable Restaurant Business
Using Traditional and Emerging Practices for Managing and Growing Your Dining Establishment
The restaurant business is facing its worst time in roughly 40 years, with fine-dining restaurants expected to decline by 12 to 15 percent. On average, 26 percent of independent restaurants fail in their first year of operation. As more consumers look to eat healthier and watch their spending, restaurants must increasingly compete for their stomachs and wallets. Undoubtedly, the overall restaurant industry will continue to suffer through this economic downturn.
The National Restaurant Association pegs the 2009 real-sales decline for full-service restaurants at 2.5 percent. That decline represents the first time in roughly 40 years that there have been consecutive, annual real-sales declines. Technomic, a leading Chicago-based food consultancy, revised their estimate of the 2009 real-sales decline for full-service restaurants from 6 percent this past February to 7.5 percent in May.
Technomic believes that consistently solid basics (CSBs) and resonating points of differentiation (RPDs) comprise the winning formula for a strong value proposition. CSBs are basic dining elements, such as service, food attributes, and restaurant appearance. RPDs consist of six categories that represent the unique aspects of a restaurant: lifestyle integration, hospitality, menu desirability, atmosphere, concept essence, and manager presence.
In addition, there are five tactics that must be incorporated into a restaurant’s overall strategy in order to maintain a competitive advantage: consistent food service, food quality and safety, embracing technology, marketing, and creativity. So how can you create and maintain a profitable restaurant while adding value, increasing sustainability, and providing fresh food for the consumer? Whether you want to start a new restaurant or improve an existing one, incorporating the aforementioned value propositions and tactics into your operations should improve your restaurant’s brand and increase its long-term profitability.
1. Food Service
Consistent service can be achieved through constant feedback—from customers and staff—as well as surveillance; however it begins with the hiring process. “Hiring for results” involves having goals that extend beyond low-cost labor, for example, higher per-table bills, lower turnover, and increased order accuracy—all of which can lead to better overall service at your restaurant. On average, hiring for results produces increases of 30 percent in productivity and 50 percent in retention.
According to the Society of Human Resource Management, 53 percent of all job applications contain false information, and unqualified candidates with criminal or other less desirable backgrounds often look for restaurants that do not prescreen employees. This makes investing in background checks necessary for hiring qualified candidates. Following strict hiring processes improves the overall image of your business, while increasing the productivity and retention rate of your workforce. Embracing technology should also apply to hiring, as is discussed below.
2. Food Quality and Safety
In August 2008, Technomic reported that 43 percent of consumers are extremely concerned about the safety of restaurant food. Training employees to wash their hands regularly and barring ill employees from work represent no-cost safety measures.
As a manager, it is important to consider that everyone learns differently. While some employees can be trained on the job, others may fare better with videos that teach sanitation practices. For example, when dealing with Generation Y employees (born in the late 1970s to late 1990s), it may be necessary to explain the “why” as much as the “how” as these employees tend to embrace practices more readily when they understand the implications of failing to do so. Most importantly, however, managers need to lead by example.
Preparation for food recalls, allergy attacks, and item shortages, as well as maintenance of heating, ventilation, and air conditioning (HVAC), cooking equipment, and restaurant cleanliness will prevent the likelihood of a shock to your restaurant’s image (such as a boycott or bad reviews). In their two-day workshops on crisis management, the United Fresh Produce Association emphasizes the importance of communication with the outside world, including the media, so that they know the value a restaurant puts on being honest with its patronage.
Training your waiters and waitresses to disclose ingredients and alert the kitchen when guests with food allergies are dining is critical in avoiding grave situations and possible financial liabilities. Alternatively, a bold or highlighted sentence can be included on the menu to advise guests to alert restaurant staff of allergies.
Contact information for emergency services should be placed near each phone. A checklist for staff outlining the steps to follow in the event of an allergic reaction should also be placed and highly visible in common staff areas. Managers should consider conducting drills to make sure staff are prepared for and well-versed in allergy emergency procedures. The Food Allergy and Anaphylaxis Network provide a free download of its 58-page manual on how to train staff for food allergies through their website: foodallergy.org.
3. Embracing Technology
The use of technology as a marketing tool can lead to successful, broad-based awareness of your restaurant and its personality. Using interactive social media tools, such as blogging, Twitter (a form of micro-blogging), and Facebook (a social gathering site), to post articles related to your restaurant’s food style, for example, may increase awareness of its resonating points of differentiation (RPD).
Blogs can add value to your website’s search engine ranking and visibility and are a convenient way to publicize updates about the restaurant and new promotions. Facebook is an excellent venue for creating fan pages and garnering interest from consumers about future events. In addition, many CEOs and business executives are now tweeting (posting short blurbs of a maximum of 140 characters on twitter.com) about their day-to-day experiences. They tweet to market themselves so followers can obtain insights into their lives, opinions, and interests. A restaurateur, for example, could tweet about his or her day out sampling fresh produce, the newly hired executive chef, the remodeled venue, or a new dish just introduced to the menu. Boloco, a burrito franchise in the northeastern United States that posts coupons on its Twitter page, has reported that it receives three times the response from Twitter compared to newspapers coupons.
Almost all major restaurant chains use the Internet as their gateway for hiring. Applicant Tracking Systems (ATS) help narrow the hiring process by enabling a company to see which recruiters and job boards provide low turnover staff. Claire Prager, a senior manager for The Cheesecake Factory, Inc., in Calabasas Hills, California, says that the company’s ATS reduced the time required to hire from 45 days to 14 days. In addition, using e-learning software to train newly hired employees is more cost-effective than creating proprietary videos, according to T.J. Schier of S.M.A.R.T Restaurant Group. However, as mentioned above, it is important to remember that not all employees learn using the same methods, so you may want to consider other forms of training in addition to e-learning software.
Productivity and Data Mining
The implementation of point-of-sale (POS) restaurant management software increases productivity, improves processes, and provides useful data on the popularity of certain dishes, busiest times of the day, and success of promotions, etcetera—all of which can lead to increased operating margins. POS differs from a simple electronic register in that it offers a visually based, highly customizable, touch interface that makes it easier and quicker for wait staff to input orders and other information. Using data derived from POS software and categorizing it into meaningful data groups can allow managers to make better purchasing decisions, reduce inventory levels, schedule staff appropriately, make informed decisions about future promotions and menu changes, and maintain accurate accounting data.
Restaurants can provide consumers with memories of family, friends, childhood, a great date, a memorable birthday, or a significant accomplishment. In comparison, fast food restaurants offer quick service and less expensive choices. Public relations (PR) campaigns are well-suited for restaurants as they offer patrons a sense of connection (as opposed to a sales pitch) and help to build long-term relationships. Examples of PR campaigns include: offering sponsorship and samples at a local fair, inviting a famous chef to cook at your restaurant, getting involved with your city’s Restaurant Week, or inviting musicians to perform. These options can then be promoted via Twitter, Facebook, restaurant blog and website, or email list. Offering occasional creative discounts such as rewards cards represent alternative yet sustainable incentives as they are more subtle—especially for those who prefer not to use coupons at a restaurant.
Understanding your restaurant’s demographic and psychographic profile is essential in capitalizing on your prospects. It also helps in deciding what is going to keep consumers coming back, like live music, rotating menus, guest chefs, or other events. For example, 43.8 percent of college and university dining programs have reported that panini (an Italian hot pressed sandwich) sales are increasing, so if your demographic is between the ages of 18 and 24, you may want to consider adding a panini to the menu.
If your intention is to be on the cutting edge, read restaurant magazines, articles, and research papers published by institutions and associations. Some options include Nation Restaurant News, QSR Magazine,R&I Magazine, Restaurant Hospitality,and Technomic. For example, the Restaurant Growth Index (RGI) published by Restaurant Business in April 2009 states that college towns and vacation spots are the best places to open restaurants.
The restaurant business, while growing in both creativity and quality, includes many concepts that are based on current fads. Creativity can come in the form of restaurant design, new dishes and drinks, presentation, and variations on service.
The National Restaurant Association reports that locally grown produce and healthy kids’ meals with vegetables and fruit side items are among the hottest national trends for menus right now, while inventive menu items, pricing, and design constitute the top trends for 2009. So if your restaurant has a theme or special focus, such as seafood, sourcing your seafood from sustainable fishmongers and distributors that catch non-endangered fish would be an important RPD that the customer should be made aware of.
Consumers say that to gain their loyalty, a restaurant needs to offer a better environment, that is, employees who deliver fun and friendly service, a good menu selection that fits the brand, new and seasonal offerings that create excitement for the customers and employees, and, finally, an appreciation for the customer’s business. Personal touches like having the manager or owner stop by a table to assure quality, or sending a complementary dessert for a birthday can leave a lasting impression and help to make an emotional connection with customers and instill loyalty.
Employing the five tactics above to help figure out what your restaurant’s RPDs should be (while keeping in mind your demographic’s wants and needs) will help set you apart, while leveraging your creativity as a manager or restaurateur. If feedback is positive, patrons will look to you as the creative director and designer, and commend you for a job well done. This, in turn, will increase the overall sustainability of your restaurant.
 Michael Sanson, “State of the Industry 2009: Survival Mode,” Restaurant Hospitality, (February 2009): 26, 28, 30.
 Tom Feltenstein, “A Fundamental Focus on Driving Sales is More Crucial than Ever.” Nation‘s Restaurant News, 43, no. 12 (April 6, 2009): 18-18.
 William F. Hauswirth, “Know Your Employees,” Restaurant Hospitality, (January 2009): 20.
 Kate Leahy, “Best Face Forward: Concerns About Food Safety Don’t End When Plates Leave the Kitchen,”Restaurants and Institutions, (March 2009): 72–74.
 Scott Hume, “Simple Safety: Teaching Hand Washing and Excluding Ill Workers Are Food-Safety Starting Points,” Restaurants and Institutions, (May 15, 2008): 57.
 Richard F. Stier, “Are You Truly Prepared for a Crisis?” Food Engineering, (May 2008).
 Welcoming Guests with Food Allergies: A Comprehensive Program for Training Staff to Safely Prepare and Serve Food to Guests Who Have Food Allergies, Food Allergy & Anaphylaxis Network [FAAN], (2008): 1–58.
 Minda Zetlin, “Use Twitter to Find Customers,” Inc. Magazine, http://www.inc.com/news/articles/2009/07/twitter.html.
 Nora Caley, “Embrace the Future of Human Resources,” Nation‘s Restaurant News, (January 26, 2009): 34.
 Christine LaFave, “Higher Learning, Higher Dining,” Restaurants and Institutions, (November 2007): 89–90.
 Terry Muñoz, “The Best Places to Open Your Next Restaurant,” Restaurant Business, April 2009: 24–47.
 Annika Stensson and Mike Donohue, “What’s Hot?” National Restaurant Association, http://www.restaurant.org/pressroom/pressrelease.cfm?ID=1708.
 Jonathan Jameson, “Restaurants’ Secrets to Success Are Written in Their ‘Brand DNA,'” Nation‘s Restaurant News, (April 9, 2009).
About the Author(s)
Kasra Ferasat, is the first place winner of the Second Annual Graziadio School Student Paper Competition presented by the Graziadio School of Business and Management and the Graziadio Business Report. An MBA candidate concentrating in marketing and entrepreneurship at Pepperdine University's Graziadio School of Business and Management, he has experience in several industries, including international freight forwarding, private equity, and import/export. Ferasat received a bachelor's degree in international relations global business from the University of Southern California. He credits his curiosity in the food business with his extensive travels and his interest in culinary traditions around the world. He believes the food industry needs young managers to help develop healthier and more sustainable food businesses.