Know How To Grow

RH Staff

By the Editors
Photography by Joe Glick

THE 2006 VERSION OF RESTAURANT HOSPITALITY’S CONCEPTS of Tomorrow Conference put the process of concept creation and expansion into perspective, with seen-it-all veterans like Lane Cardwell and Richard Melman weighing in on the big picture, bolstered by the skinny on the details from admired independent operators Danny Meyer and Michael Bonadies and growth brands like Noodles & Company and Fresh City.

Cardwell, a former Brinker International executive who now sits on a variety of boards, kicked off the program by sharing 15 lessons he learned during two decades in foodservice.

“This industry is a simple business,” he observed. “We like to pretend it’s complicated because it makes us seem more important.” But there is no denying the essential role restaurants play in society, he added.

“People aren’t cooking any more; we’re their kitchen.” Because of that, the first and most crucial lesson he mentioned was how food is the most important element of the business. A restaurant without it, he said, “is “like rearranging the deck chairs on the Titanic—it’s a waste of time.” Many of Cardwell’s observations concerned cost cutting (it only goes so far) and quality (it should always be improving). He also stressed that operators should look at profit dollars before they consider percentages.

Cardwell, who estimated he dines in 600 restaurants a year, said restaurant owners should always be checking out the competition and looking for ideas—and they should be willing to adapt.

With so much culinary talent out there, the competition has heated up for restaurants and “a good roast chicken and good service are not enough” to ensure a loyal following, observed Danny Meyer, president and CEO of New York’s highly respected Union Square Hospitality Group. In his remarks to the COT conference attendees and in his just-published book, Setting the Table: The Transforming Power of Hospitality in Business, Meyer argued that restaurants need to focus on “hospitality,” not just service, to stand out from the crowd. What’s the difference? “Service is how well the product was delivered,” Meyer explained. “Hospitality is how you made the people feel while that product was delivered.” He said companies that thrive do so because they understand the distinction.

Putting the right people in place is at the heart of providing true hospitality, Meyer said. He recommended hiring staffers with a high “hospitality quotient,” people who are:

Understand Your Guests
On average, half of all restaurant seats in America remain unfilled on any given day, and that’s money left on the table, says consultant Bill Main. To help fill those seats, he thinks operators should shift their focus to be in the customer loyalty business.

Main suggested a strategy stressing awareness, trial, repeat and frequency, with the ultimate goal being loyalty.

One prime opportunity for restaurants to build their business is by appealing to new area residents. Nearly half of all Americans moved between 1995 and 2000, Main pointed out, and 80 percent of those who move are likely to try new products and services.

How are you different? Better? Special? Figure out those qualities, since those are the things that reinforce an emotional bond with your guests. And don’t forget your staff: It probably can’t be said enough that “people connect with people,” Main noted, and it’s essential to find employees with a good attitude who can be trained correctly.

Andrew Freeman, a marketing consultant, preached a similar message. He counseled restaurant operators to look at their operations every day and ask “How do you stand out?” Look at the total experience you offer—not just the food, but the table linens, the tabletops, the uniforms, he advised. “Go back and evaluate all these touch points in your restaurant, because people are getting more savvy.” As a consequence, all of these elements have taken on more significance.

Freeman also suggested collecting data on regular guests and using that data to contact them via personalized e-mails (although not too frequently) and to recognize them when appropriate in the restaurant. “People want to be wowed all the time,” he observed.

Finally, Freeman said community involvement is a must for any restaurant. “Align with charities and community groups that align with you,” he suggested.

Heather Costello, senior vice president with Harte-Hanks, also stressed the importance of collecting as much data as possible to construct a profile of your best customers—then targeting them. Because we are bombarded by messages, she said, restaurants must tailor their offers to those guests.

The most accurate way to collect data, Costello explained, is mining credit card transactions (without tracking credit card numbers, which is prohibited). They can provide key information about a guest’s visiting frequency, check average, tipping habits and history as a customer. All of that can be used to produce personalized promotions, develop loyalty programs, implement menu changes, choose new sites and more.

Dwayne Chambers, vice president of marketing for Noodles & Company (named a RESTAURANT HOSPITALITY Concept of Tomorrow in 2000), agreed with Bill Main’s assessment that customer loyalty comes through emotional connections with employees. Increasingly, Chambers observed, “people are searching for some interaction” in their lives, and Noodles & Company’s corporate culture revolves around meeting that need.

As a result, the brand does everything it can to equip team members to do their jobs and get them excited about what they do. They are also empowered to right wrongs. Noodles & Company will probably hire 5,000 new workers this year; to Chambers, that means the brand is hiring 5,000 marketing people.

Real Estate—and Beyond
Brian Stys, vice president of Shawmut Design and Construction Restaurant Group, acknowledged that the process of targeting a good location for a new restaurant is getting tougher. He advised following the pack, or locating near clusters of other restaurants, because they create synergy and customer traffic.

Stys also suggested looking at partnerships with hotels and casinos, which are increasingly on the lookout for quality foodservice operators.

Site selection may be a technical process that calls for a specialist, but anyone can start scouting out potential sites on their own, Stys said. Qualities to look for include foot or car traffic and easy access points. Before making a final choice, it’s important to understand the zoning and legal restrictions governing such items as signage and liquor sales that might affect the business.

Larry Reinstein, president and CEO of the fast-casual Fresh City concept, described his family’s careful, deliberate approach to expansion by summing up what he considers four keys to success: real estate, franchising, expansion and hiring.

When it comes to real estate and expansion, a concept like Fresh City needs a concentrated population and lots of volume to thrive. Rein-stein said developing concepts need to consider what dayparts they’re targeting, whether most guests will dine in or take out, how far they might drive and how often they will visit. Reinstein, who has operated other concepts in the past, said he’s learned to open one location and get it running smoothly before moving on. He added that it’s important to have sufficient financial and human capital to support the expansion.

Thinking of expanding through franchising? Reinstein recommended dealing with partners who share your vision and have the financial wherewithal to pay for marketing. Fresh City has taken a guerilla approach toward marketing, with an emphasis on sampling to lure guests.

In hiring decisions, Fresh City’s philosophy is “hire slow, fire fast.” It’s better to focus on the top performers and cut the cord when it’s clear a new hire isn’t working out, Reinstein said.

Pouring and Flavoring for Profit
“As restaurateurs, it’s our sacred duty to help people spend money.” So pronounced Michael Bonadies, by way of introducing his presentation on building a better beverage program. Bonadies, a founding partner in Drew Nieporent’s Myriad Restaurant Group and the author of a book on selecting wines, said it’s acceptable to teach servers that it’s okay to sell alcohol—even more than one drink—and that your beverage menu can do as much to sell your restaurant as the food.

“You want to give people as many reasons to go to your establishment as possible,” Bonadies said. One way is beverages.

When it comes to wine lists, several factors determine their success: good perceived value, especially since many of your customers know what that bottle costs at retail; and servers who understand wine and get the concept that selling it will boost their tips. Having a staffer or staffers with a passion for wine doesn’t hurt, either, “and that passion is contagious,” Bonadies observed. And don’t assume that just because a great wine list is in place, it will sell itself. Staff tastings are essential. A confident wait staff will sell more wine.

Bonadies noted that it’s important to match the beverages you serve with the menu; look at entree prices as a guide to your guests’ expectations. And don’t ignore the setting or presentation. Nobu, one of Myriad’s restaurants, happens to serve a lot of sake, he said, because of the stylish way they serve it.

Steven Kaun, who heads Temecula, CA-based Flavor Solutions, offered a lively and informative session filled with ways attendees

could approach flavor and use it as a business-building tool.

As Kaun demonstrated, stretching one’s mind to flavor marketing possibilities enables restaurant owners to tap into the many opportunities inherent in flavors. Flavors impart taste, excitement and variety in a dining experience—all things restaurant customers seek.

“Flavor is to food what hue is to color,” Kaun said. “Flavor is the adjective, food is the noun.”

His pyramid of how to approach flavor has emotion at its base, and works up to appearance, aromas, textures, sensations and ends with basic tastes. He suggested ways operators can create a flavor culture, learn to correlate flavor with a restaurant’s brand and employ flavor as a filter for decision-making in the operator’s business.

View from the Money Men
Looking for someone to invest in your idea? Robert Hill, principal with investment banking firm J. H. Chapman Group, said entrepreneurs starting up new restaurant concepts need to keep in mind a number of qualities when they start fishing for money.

Successful new concepts, Hill said, are characterized by three things:

And, if you’re expecting to be bought out by a large chain, think again. These days, Hill says it’s more likely that an equity fund headed up by a former chain executive will find you first.

Paul Cantieri, vice president of brand financing for GE Capital Solutions Franchise Finance, quickly reviewed some of the trends in restaurant financing. One of the strongest, he said, was the comeback of the sale/leaseback, which “has created a very good source of alternative capital.”

Another option is the development line of credit, which Cantieri called “a slick product” because of its ease of use.