There are dozens of considerations when opening a restaurant, but these are some of the more important ones. Do your research, plan carefully, and seek to execute flawlessly.
Concept is Important
Vinnie (that’s his real name, not a stereotype) owns a string of successful Italian restaurants in Southern California, most of them based on the model of an upscale pizza format that serves a full menu of Italian food, all in a sit-down format. His one departure from this successful model was an Italian restaurant based on a fast-casual model. Customers ordered either takeout or dine-in meals at the counter, waited for their food, or were served in the casual dining area. The menu was great and just about everyone who walked in the front door raved about the food. They did a great catering business, too.
Vinnie had to close that location this past spring. “Closing down is not the right word,” he was quick to say on his last day. “Before the week is out we will be open again, but it’s a new concept.”
Despite the quality of the food, Vinnie found the demographics would not support an Italian restaurant of the type he was running.
“I did my research,” he explained. “We had happy customers – raving fans, in fact. Just not enough of them. This is an older area of town, but in the last decade there has been an infusion of new families, folks looking to avoid the higher real estate prices of the neighborhoods where my other restaurants are located. Their price point for Italian food is lower. The truth, I realized, was that the $5 dollar pizza was killing me in this location. Pizza is what gets most folks in the door, and when they could feed the family at the five-buck joint down the street, they just weren’t coming to me.”
True to his promise, the former Italian restaurant reopened within a week. The new concept is – chicken and waffles – and it’s a hit.
If someone was going to successfully run the new concept, they had to have a passion for the new menu. Vinnie partnered the new concept with a long-time associate familiar with the menu, worked out a business agreement, and then stepped back.
The lesson for those who want to open a new restaurant is twofold and a valuable one to restaurant entrepreneurs considering starting their own business. You can have great food, but often it is more about concept. If the demographic of people in your neighborhood is not drawn to your concept, the diners will not come in the front door.
Second, Vinnie made another tough decision in the process. He realized that his passion was Italian food. The co-owner/manager of the new concept was going to have to have a passion for chicken and waffles – basically soul food. He wisely stepped aside and let someone else take over.
To be sure, there are examples of restaurants that manage to convert their neighborhood to their foreign menu, but the success stories are few, and many of them relied on dumb luck more than anything else. The most successful restaurants are those that have a good concept and found the right location, with the right demographics, or visa-versa, they found a great location and then identified the correct concept based on its surroundings.
Fitting the Concept to the Location
Sometimes your success depends on seeing what no one else can see. Just a few miles from Vinnie’s new waffle and chicken restaurant, in a neighboring city, is a location across from the post office. This building and location have been a losing proposition for any business that moved in. For a while it was a dry cleaner, and then it was a furniture store. There were other tenants. Every one of them either closed down or went under.
Enter two local business women who realized the location was great, but until they came along, it had never housed the right business. The building is situated between a large regional hospital (the largest employer in the area), and downtown with City Hall and lots of small businesses, to say nothing of being across the street from the post office and the constant traffic there. Everything is within walking distance. After a lot of time and money remodeling the building, they opened as a delicatessen and sandwich shop. The traffic from the hospital and City Hall brings people in, and news of their catering service travelled fast. Even better, many of their customers are the influentials in town–city officials, businesspeople, service club and chamber of commerce members, doctors, etc. The kind of people who are well received when they give opinions. Word spread quickly of this new deli and sandwich shop and the great catering services they offered. Within months they were the talk of the town.
Their story is the same as Vinnie, but with a slightly different twist. It’s all about the concept and demographic, and fitting the concept to the location.
Promoting Your Restaurant
As mentioned before, with concept comes demographic, and with demographic comes how the people in that demographic communicate and how you can reach them.
So you have your concept. How do you promote this new brainchild?
Word-of-mouth is going to be your primary advertising vehicle because it’s most trusted and free. In retail businesses as a whole, and restaurants in particular, about seven or eight of every ten people who walk in the front door do so because someone told them about your place. The more people that walk into your restaurant, the more people they will tell. This kind of promotion feeds on itself.
But what about the other twenty or thirty percent of folks that walk in? How you reach them depends on the demographic that comes with the concept. For the deli/sandwich shop, their clientele are hospital employees, city employees and local businesspeople — these are folks are constantly scanning email, social media and texting. Many of them are very dependent on their smartphone. Email and texting campaigns are a good way to keep in touch with that type of customer. When it comes to social media, this older age demographic can be reached by Facebook and maybe Twitter. Instagram is reserved for teenagers and young adults.
The same is true for the chicken and waffles clientele, although because of their menu, they also lean more towards a destination restaurant. Customers are willing to journey farther to sample their food, and if they like it, they will rave about it. Restaurants that appeal to a specific ethnic menu rely on establishing knowledge within that local community. They will often cater public and private events to generate awareness.
Keeping Customers Coming Back
A Harvard study of the restaurant industry revealed that if you can increase the number of repeat customers by 5%, you can increase your profits by 25% to 125%. If your restaurant is new, then every customer is a new customer. Here are some tips for making a good impression on first-timers.
- Train your staff to seek out those first-timers. Ask them how they found out about you, and pull out the stops when it comes to service.
- Make sure their order is PERFECT. You only get one chance to make a good first impression. Greet them with a smile and confirm everything in their order is correct. If it’s a delivery order, double check their bag before the delivery driver leaves (a good online ordering system, such as NetWaiter, lets you know when you have a first-time customer).
- Once you identify that first-time customer, give them a coupon for a discount on their next order (getting them to come back a second time is critical to getting them hooked).
The other big question you will encounter will be that of technology. This is, surprisingly, a very important one. There are lots of technology choices available for restaurants – tablets at the table, reservation systems, loyalty platforms – the list is endless. A recent study by the National Restaurant Association cites that a third of all customers say technology options compel them to choose one restaurant over another.
The question quickly becomes one of which technologies to implement.
Towards the top of the list, if you will provide takeout and delivery, should be online ordering. Depending on your concept, takeout and delivery can be a sizeable chunk of your sales – 10%, 15%, 20% or even more. Takeout sales are great because they allow your restaurant to sell more meals without expanding your square footage or increasing your wait staff. The online concept is easy – customers place their order and pay on your website. The order comes into your kitchen, is processed, electronically confirmed, and the customer is advised of when it will be ready for pickup or when it will be delivered.
How big a factor is online ordering in the restaurant industry? Judging by recently released numbers, considerable. In 2010, telephone orders for takeout and delivery outnumbered online orders by more than 3:1 – 1.4 billion phone orders compared to about 400 million online orders. Today those numbers are almost equal – 1 billion telephone orders compared to about 900 million online orders. It’s worth noting the total market increased by about 100 million orders, but the bigger move was the percentage of traffic shifting to online ordering.
Industry experts predict that online ordering could grab 50% of all takeout orders, in all restaurants, as soon as 2022.
So, it’s clear restaurant consumers are choosing to order more online and that online ordering has become one of the most influential technologies restaurants can choose to implement. The next question for independent restaurants: What type of online ordering system do I implement? Services, like NetWaiter, provide fully-branded individual online ordering systems and work great with a restaurant’s website. The other option is a portal or aggregator site.
To learn more about your online ordering options, check out NetWaiter’s whitepaper – Multi-Restaurant Portals vs. Individual Sites. It’s free and full of valuable information.
Tim Sunderland is Marketing Manager at NetWaiter. NetWaiter provides online ordering and marketing tools for restaurants.