Running restaurants is not for the faint of heart. The price of entry includes an appealing menu, the right location, a compelling space, tight operations, strong staffing and effective marketing. All of which must be maintained and updated through regular reinvestment just to stay on pace with the competition.
And competition is fierce in the restaurant industry. Take the quick service segment in the state of Kentucky, for example. With 4.1 fast food restaurants per 10,000 people, there are more fast food restaurants per capita in the Bluegrass State than any other. At first glance that might not seem so bad. After all, a steady customer base of roughly 2,500 people who spend around $8 bucks on a meal at a fast food restaurant once a week works out to an average unit volume of around $1 million. That works for most concepts.
But there’s more to consider.
The USDA reports that nearly half of all meals are eaten away from home. The other half are eaten at home, so we need to cut the potential dining occasions by 50 percent. Now we’re looking at potential customer visit occasions of 1,250, more or less. But, only 75 percent of those who eat meals away from home do so at restaurants. We can’t forget about hotels, retail stores, recreation areas, schools and other places where meals are served, such as airplanes and hospitals. These places are taking share of stomach, too. So, if you’re a fast food restaurant operator in Kentucky your theoretical customer base is more like 940 people. But, there’s one more wrinkle.
Roughly 15 percent of those who eat meals away from home rarely do so at fast food restaurants, and another five percent never do. Lop off that group and our potential customer base looks more like 750.
If each of these potential customers spends around $8 bucks on one visit per week at a given fast food restaurant, we’re looking at an anemic average unit volume on the order of $310,000. That kind of annual topline revenue may work for a modest in-line sandwich unit, but it’s an unmitigated disaster for a stand-alone box selling burgers and shakes.
Of course, this isn’t meant to be a carefully conceived revenue model. It’s a highly simplified illustration that provides just a little insight into the red ocean traps faced by fast food warriors fighting for more than their fair share of market. And, it underscores just how critical it is to get the basics right from the jump. After all, even the best restaurant marketing program won’t offset the effects of poor decisions or poor performance in other critical areas. Restaurant marketing – like all marketing – works hardest when business fundamentals are strong. So, let’s go back to those table stakes from the top and take a look at how each has the potential to make or break a restaurant brand.
Menu – Focus is your friend when it comes to menu development. Take a page out ofIn-N-Out’s playbook, and concentrate on being the best at just one thing. Whether you’re personally enamored with In-N-Out’s burger is beside the point. Plenty of people are, and that’s because the chain is radically focused on doing just one thing very well. Too many chains see another’s success and try to mimic it. The next thing you know, menu creep has everyone confused, including the operators themselves. Stay focused on what you do well, and do it well consistently.
Location – It’s no secret in the restaurant industry that location alone can be a make or break factor. If you want more than your fair share of market, you’ll need to find that magic corner. Don’t let the real estate deal drive the decision. That happens far too frequently, and it’s not something marketing can overcome. On the other hand, if you’ve got the right spot it will do much of your marketing for you. Visibility is critical, as are ample parking and an honest appraisal of nearby competitors. Do your homework and don’t be impulsive.
Space – A restaurant’s atmosphere communicates more than any marketing effort ever will. People know intuitively when they drive by or walk into a place whether it’s for them or not. The only way to get your space right is to design it with your customers in mind. Chipotle is a great example of a brand that really got it right when thinking through its atmosphere. So have many smaller regional chains like Fuzzy’s Taco Shop. But, even the best designs grow tired and require updating. Upgrades and remodels are just part of business. Fall behind and sales will suffer.
Operations – Strong operators always win. Good food prepared consistently and served by friendly people creates a kind of restaurant marketing magic of its very own. Exceeding customer expectations for food quality, dining experience and value are the hallmarks of strong operators. And, strong operators can market their brands differently. For instance, the fast food industry is known for heavy margin-killing promotion and discounting. However, Chic-fil-A doesn’t have to play that game because their operational performance is so much better than most of their peers. Their customers know what to expect and they are rarely, if ever, disappointed. That’s worth full price and customers gladly pay it.
Staffing – Frontline staff are the face of your restaurant brand. Here again, Chic-fil-A has long been a superstar in the fast food space. The chain routinely tops the charts for friendliness and quality service. That’s no accident, of course. The company invests more in training and development than most of its competitors. But, founder Turett Cathy said in an interview years ago, “we don’t train people to say ‘please’ and ‘thank you,’ we hire people who say ‘please’ and ‘thank you.” Careful vetting of hourly employees is extremely important, but few do it well because it’s time-consuming and difficult. That’s good news for operators who are willing to do the hard work of hiring right.
Marketing – Restaurant marketing is most effective when the house is truly in order. When a restaurant is operating well and meeting and exceeding customer expectations driving more traffic with effective marketing will improve sales. On the other hand, if the house isn’t in order advertising can do more harm than good. As the old saying goes, nothing kills a bad product faster than good advertising.
If you’d like a deeper look at the factors that drive effective restaurant marketing, download our white paper, “The Restaurant Experience: What Customers Are Looking For.”