November 1, 2002
Michael Sanson
No matter what kind of year you had, it wasn’t likely easy. The sluggish economy, the fallout of 9/11 and the growing threat of war have all played with your customers’ heads and your head counts. Some restaurant operators have stalled, while some have gotten smart. What follows are examples of what the smart ones did to drive profits to the bottom line.
TIP 1: EMPLOY MULTIPLE PROFIT CENTERS
On a national scale, a lot more restaurateurs have a higher profile than Matthew Prentice. But while they’re capturing the spotlight, Prentice and his Unique Restaurant Corp. have been building a 14-unit empire of independent restaurants in and around Detroit. Prentice says he’s made a concerted effort this year to diversify his portfolio through catering.
"This year we’ve really focused in on what our company can do better than anyone else and then expand on that strength. Since we are the largest independent restaurant company in our area," he explains, "we also have the largest staff. So we decided to focus on larger catered events that nobody could do as well as we can."
Prentice acknowledges that there are catering companies out there that will take on very large catered events, but most must bring in unskilled outside people to help. Unique Restaurants, he says, caters events exclusively with its own staff, which has been trained to deal with large events.
In January, for example, Prentice and his gang catered an event at the auto show for Ford Motor Co. The event took place over four days and called upon Unique Restaurant’s catering group to feed 20,000 people.
"It was a perfect event for us because, traditionally, after the Thanksgiving, Christmas and New Year’s Eve holidays, business dies during the first week of January. This year, because of that catered event, Unique had its most profitable week of the year," says Prentice. "Going from your least profitable month to your most profitable is quite a turn-around."
The focus on catering is part of Unique Restaurant’s overall diversification strategy. Prentice says he will no longer open a new concept in a space that can’t also accommodate other profit centers. When a restaurant experiences a slow night, Prentice says, he often has a banquet, a party or catered event taking place in an adjoining space dedicated for such activities. For example, Prentice’s flagship restaurant, Morel’s, "A Michigan Bistro," has, in addition to its restaurant seating, a rear banquet area and, during warm months, an outdoor garden area where it holds weddings and such. Prentice also uses the roof of the building for an herb garden. When the space next to Morel’s became vacant recently, Prentice jumped all over it and created a new restaurant, Shiraz, in the space.
"I will no longer focus solely on filling restaurant seats," he says. "I’m going to hedge my bet by creating as many profit centers as I can. If one is slow, another will hopefully be producing cash flow. And when all the profit centers are cooking, well, that’s just plain good."
TIP 2: FOCUS MORE ON WINE SALES
A CELEBRATION OF WINE
When you’re Italian, one does not merely eat. Sitting down at a table is a celebration of life. So, what better way to celebrate good food, family and friends than with a bottle of wine? Buca, Inc., the 89-unit "immigrant" Italian-American restaurant chain, has always served wine, but this year its focus on wine was notched up several levels.
"We’ve always sold a lot of wine," says Joe Micatrotto, the chairman, president and c.e.o. of Buca. "Up to 70 percent of our liquor sales is wine. But part of the whole experience of eating at Buca centers around wine, and we felt that we could take the sales of wine to another dimension."
Buca has an interest in a little winery in Tuscany and has been importing two wines, a white and a Chianti reserva, both of which bear the Buca name. It recently began importing a third wine that carries the Buca label. Serving a wine with the restaurant’s name on the label suggests to the customer that the restaurant is serious about the wine it serves, says Micatrotto. It also suggests that the customer seriously consider drinking wine with their meal.
"Despite a very tough year we ran the best food and liquor costs ever," Micatrotto says. "We attribute that to our increase in sales of wine by the bottle and glass."
It helps, he says, that Buca is an operation that serves only dinner, when customers are most likely to order wine. What also helped was the creation of a new wine list that increased the number of Italian wines by 50 percent, including a very good "entry-level" bottle of wine at $18.50.
"We have made our wines very affordable and accessible and it’s a big part of what’s driving our bottom line," Micatrotto says.
TIP 3: CREATE NEIGHBORHOOD TRAFFIC
WELCOME TO THE NEIGHBORHOOD
Since it opened a few years ago, One Sixtyblue has always been on the list of Chicago’s best restaurants. As the weekend approaches, a reservation is one tough ticket, despite its out-of-the-way location in a neighborhood called West Loop Gate. During the early part of the week, however, it’s another story.
To generate more early-week business, the restaurant began several months back to market itself as a neighborhood restaurant, says One Sixtyblue’s marketing director, Peter Klein.
"Even though it’s a bit out of the way, the neighborhood is becoming gentrified and it’s close to the United Center where the Bulls and Black Hawks play," explains Klein. "So it made sense for us to embrace the neighborhood to generate traffic during slow periods."
One of the things it did to entice customers was establish a fixed price menu from 5-7 p.m. The two-course option cost $28, while the tab for three courses is $33. Both are attractive offers and can be executed quickly (relatively speaking) by the kitchen for those going to a game. Customer counts have improved dramatically because of the fixed menus, says Klein
Its other ploy to recast itself as a neighborhood restaurant, he says, was to convert its walk-in cigar humidor into a chocolate dessert/retail shop called Cocoa Bar. "The cigar boom has faded, so we decided to convert the space into something more profitable and versatile for our customers," Klein says. Besides being able to buy gourmet boxes of chocolate, which can be paired with wine, coffee, nuts and cigars, customers can have dessert in the 40-seat Cocoa Bar.
Folks in the neighborhood now have the option of eating one of eight different chocolate desserts in the Cocoa Bar, rather than a large meal in the restaurant. The reaction from customers has been "awesome," says Klein, and this idea is fulfilling its mission to draw the neighborhood crowd.
The lesson here, of course, is to keep moving in a tight economy. If something is not working, change it. If there’s not enough excitement, create some.
TIP 4: TRAIN TO RETAIN EMPLOYEES
TAKE CARE OF YOUR PEOPLE
You don’t need smoke and mirrors to drive profits to your bottom line. What you need is to put the strongest team on the field. Too often, your best players leave because you simply didn’t pay attention to them.
Billy Downs came to that realization after seeing too many good employees leave his 20-unit stir-fry concept called BD’s Mongolian Barbeque based in Royal Oak, Michigan.
"Our turnover rate was much higher than the national average and I was concerned because, according to some statistics, it costs a restaurant operator as much as $25,000 when you lose a key person on your team," explains Downs. "Not only is it taking money out of my pocket, but the quality of service my customers should be receiving is hurt."
Downs says his company never had a detailed program to offset turnover, so he and his staff created one. "BD’s Retention Program" was born and it laid out specific procedures designed to retain its employees, particularly its star players. None of it, by the way, involves huge financial incentives to keep them from jumping to another employer, he says. Most of it centers on equipping employees to do the best job possible and frequently measuring their progress.
"By merely focusing on our employees and equipping them with the tools to do their job well, they are more secure and happy," says Downs. "The side benefit was also the creation of a family atmosphere."
The family thing is nice, in deed, but it also drove profits to the bottom line. Turnover at BD’s Mongolian Barbeque dropped from 136% to 93%, leading to a $375,000 bottom line savings since the program was implemented in the spring.
"We have saved so much by not having to continually replace team members," Downs says. "But there are also so many intangible benefits, too. Long-time employees develop relationships with customers that produce your best repeat customers."
Customer counts are up at BD’s, while employee turnover is down. Those are two benefits they’re taking to the bank.
TIP 5: CREATE A BUZZ
MARTINIS ARE UP
Sure the economy is brutal and the stock market has been a harrowing roller coaster ride, but you can cry about it or turn a negative into a positive. The folks at Constellation Concepts, which operates five restaurants in and around California’s hard-hit Silicon Valley area, chose to do the latter with a heat-generating promotion.
Called "The Market is Down, Martinis are Up," the promotion was based on the daily performance of the stock market. Each weekday that the Dow Jones Industrial Average closed on a down tick, the company’s California Cafes served Belvedere and Absolut martinis for just $3 between 4-7 p.m.
"Our bar business skyrocketed during the promotion (held during September and October)," says Sara Barker, the marketing manager for California Cafe. "We needed to stir some things up, especially at our restaurants in the Silicon Valley, which has become a dot.com abyss. And it worked."
All of California Cafe’s bars are equipped with televisions and patrons flood in to see how the stock market will end for the day. Even if the stock market doesn’t end on a down note, most people who have taken the time to come to the cafes stay for one or two drinks at full cost. If the market is down, says Barker, most customers stay the entire time drinking $3 martinis and even beyond when the price goes back up.
"There’s been some great benefits from this promotion," she says. "We’ve gotten a ton of publicity from this promotion, and it’s generating much more traffic than before. And a lot of customers are staying later to have dinner or, at the very least, they’re ordering small plates of food like potstickers from our bar menu."
Barker also points out that despite perceptions, the stock market has been down only about half the time, meaning the cafes aren’t giving away the house every day. On top of that, the restaurants have cut a deal with Belvedere and Absolut to get the vodka at a "special" rate in return for promoting the brands.
"This is a good example of how you can turn a negative into a positive and come out looking like a hero," says Barker.
TIP 6: SELL FOOD PLUS MERCHANDISE
A LITTLE MOMENTO; A LOT OF CASH
Shortly after the 9/11 terrorist attacks, City Tavern in Philadelphia lost $400,000 in cancelations. Walter Staib, the chef-proprietor, decided he needed to do something to generate revenues. What he came up with was an all-out push to sell everything on his tables.
"We are a historical restaurant and we were selling some stuff from the restaurant. But after 9/11, I got our entire staff involved and trained them to sell merchandise from the restaurant. Our retail sales have increased by 50% because we’re now doing a better job of selling," says Staib.
He’s not kidding when he says the restaurant sells everything on its dining tables. City Tavern is a historical restaurant that dates back to the late 1700s. Everything about the restaurant is authentic, including its pewter tableware.
"All of my pewter ware was produced from 18th century patterns, and many customers are interested in buying things like our baseplates, goblets, sugar bowls and salt and pepper shakers," says Staib. "But we also sell our breads, handblown crystal glasses, ceramic creamware, our shrub vinegar sauce, our hand-crafted, one-of-a-kind beers and our City Tavern Cookbook."
Staib says the restaurant now sells anywhere from $10,000-$18,0000 each month in merchandise, which is on display in a cabinet near the hostess stand. Anyone interested in buying merchandise is referred to the hostess, who gets a 10% commission for all sales made.
Staib points out that overall business is better than ever because of the post 9/11 patriotism and the interest in comfort food, which City Tavern excels in. Nevertheless, it took the slowdown of 9/11 to drive the merchandising side of the business. Staib says every restaurateur can do the same, though he suggests you find your niche and don’t deviate from it.
"Do not sell garbage, unless you want your place to look like a tourist trap," he says. "And if you do corporate dinners, weddings and other catered events, think about including the merchandise in the package. A lot of times people want a momento for the event, and you can sell it to them."
TIP 7: CREATE TROPICAL PROMOTIONS
A FISH STORY
Sometimes your best promotional ideas are staring right at you in the morning newspaper. That was certainly the case for Kim Klopcic, the owner of The Yin Yankee Cafe in Annapolis, Maryland. The newspapers were all over a story involving the Snakehead fish, a native of China that was found in a Crofton, Maryland, pond.
The fish, which grows up to three feet long and can crawl across land, is a predator that eats just about every fish in its environment. It has earned the nickname "Frankenfish." A few months back, Maryland’s Department of Natural Resources announced it would use poison to kill the Snakehead fish and everything else in the pond to stop the snakehead from spreading into other waterways.
Kim Klopcic had other ideas.
"Maryland officials decided to perform some type of aquatic napalm to get rid of the Snakehead. I thought we should get rid of the fish by eating it," he explains.
Of course, Klopcic wasn’t really trying to rid the state of fish by putting it on his menu. After all, state officials poisoned the pond, rendering all fish there contaminated and dead. But that didn’t stop Klopcic from using all the freaky publicity from the appearance of the fish to draw customers to his restaurant.
"I had never heard of the fish before the newspapers hit, but when I was in New York City I went to China Town and asked if they had the snakefish. ‘Of course,’ I was told. I brought a dozen back with me to the restaurant."
Yin Yankee Chef Jerry Trice created a special, "Chinese Walking Banana Fish." He wrapped the fish in banana leaves, doused them with a homemade Indonesian curry sauce and basil, smothered them with fresh tomatoes and then roasted them. Trice also prepared the fish as sushi and yakatori.
"The snakehead promotion generated a lot of publicity for us but, more importantly, it created so much traffic," says Klopcic. "On a day we would normally be slow, we had people fighting to get into the restaurant and taste the fish, which, by the way, tastes like halibut."
Customers are always looking for something to break up their mundane routine, he says. "There are so many ways we, as restaurant operators, can create excitement that draws people to us. And a lot of times, its right in front of our eyes in the newspaper."
TIP 8: REDUCE YOUR OPERATING COSTS
MAKING BREAD WITH BREAD
When you have 13 restaurants in the Columbus, Ohio, area like Cameron Mitchell, what more could you want? Well, maybe a 14th, 15th and so on. And, maybe a full-service bakery to supply all your restaurants with bread.
The 14th and 15th restaurants are most certainly on the horizon, but the bakery recently became a reality when Cameron Mitchell Restaurants bought Tapatio Bread Co., including its recipes and its nine-member staff. Before Tapatio became part of Mitchell’s portfolio, his company was buying bread specially baked for his restaurants from local bakeries to the tune of $250,000 a year. It’s a whole new story with a bakery now in his stable.
"We spent just a little over $150,000 to buy the bakery and refit it to our standards," Mitchell explains. "It took us about nine months to recoup the investment."
The bakery, which also serves as a retail market that serves soup and sandwiches during lunch, generates a healthy profit on its own. After subtracting the cost of producing bread for all of the restaurants, Mitchell estimates that he is saving $200,000 a year.
"Even though we were having bread baked freshly for our restaurants every day, we weren’t getting credit for it from our customers," he says. "Now, with our own bakery, customers are aware through marketing efforts that we are producing our own breads, which adds considerable value to their experience."
Mitchell says the bakery also gives his restaurants better control over what they’re serving to customers. And, and anyone time, his restaurants take on from two to three dozen apprentices, who now must spend time in the bakery learning the business.
"It was a great investment and it’s paying off beautifully," Mitchell beams.
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