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Two Types of Café and Restaurant Owners..

George Moen Says There are Two Types of Café and Restaurant Owners.. Those Who Cut Costs and Those Who Focus on Sales

Another good friend of mine whom I highly respect is George Moen, serial entrepreneur, former president of Blenz, and now co-owner of Rapid Time Networks. I also referenced a quote from him in my Business in Vancouver article last month, something he shared over dinner at one of my client’s restaurant’s last year.

George cited there are two types of coffee shops and restaurants owners – when things get tough at their restaurant you have those who cut (control) costs and those who focus on sales.

Those who cut costs start by cutting off any spending that doesn’t directly immediately impact their restaurant. This usually means marketing is cut and location improvements and enhancements are stopped or put on hold. Labour (staff hours) is cut both in front of and in the back of the house and the kitchen may go so far as to cut corners with the food. First it starts with smaller portions. Then is goes to less quality, less expensive supplies. Then…. who knows what.

These restaurateurs are looking at their balance sheet and trying to adjust for the lower revenue. All they can think about it how to cut costs to get out of debt. Yes, its minimalist thinking.

Conversely, those who focus on sales ramp up their marketing efforts, start thinking of ways to attract people through the door, makes sure the staff is cross selling and up selling, doing specials and promotions to create buzz around them again. They’re thinking of how to make their cash register ring, to improve cash flow into the restaurant.

On paper, it’s obvious which is the better route, take put more money into promotions and get more paying bums in seats to increase revenue. However, in the real world scenarios, it’s too stressful for restaurateurs, who are losing money by the day, to spend money on an unknown. Promotions and marketing isn’t a forte for most restaurant owners, thus it’s seen as a high risk investment that may not pay off (“I’ve tried it before and it didn’t work” – ever hear that before?).

The ironic thing is at some point, after the restaurateur has cut costs as far as they can, they then realize that they need to get more people into the restaurant. Those empty tables aren’t paying the rent around there. And now they start trying to promote and get customers in. Unfortunately, they’re not operating in desperation mode and frequently relegate to poorly planned and executed ways to market (I call this band-aid marketing), which they’ll try to cut costs/get a cheaply as possible as well.

Sadly, by this point, it could be too late, the restaurant is deeply in debt and could be a statistic soon. Don’t be one of those, be the restaurant that chases after more sales, and even after you are ok again, continue chasing after more.

You’ll have a happier time.

Ronald Lee
Senior marketing consultant, Eat Marketing

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Middle-of-the-Road
Want Your Restaurant to Survive Through Recessionary Times and Have a Smooth Ride Throughout the Year? Be Middle of the Road

Another insight that my friend Aaron has for the survivability of restaurants in the long term is to carefully define the scope of your restaurant’s concept to be…middle of the road.

That is, neither high end fine dining nor a low end low priced shack.

His reasoning is that when times are tough for the economy and people start scaling back their spending, high priced luxury purchases, such as fine dining, get quickly cut. Of course you could argue that those who can afford to go out to fine dining on a regular basis don’t pay attention to the recession, but I would agree that these restaurants will still see a massive drop in customers during economic downturns.

And when it comes to low priced restaurants…well, there will always be a market for these, but these aren’t necessarily the first choice for the majority of diners and low prices means low margins. It’s typical for restaurants that compete on price to have shallow pockets and be struggling with their cash flow month to month. The owner will probably survive, but he essentially has a more-than full time job.

**Now, I know this broad sweeping statement (that’s what it is, of course) may turn a few restaurateurs off. After all, perhaps you’re a high end restaurant and always do very well. Congratulations, if that is the case, specific case by case scenarios always trump generalities**

The best chance for survival in the volatile restaurant industry, statistically speaking, is to choose a restaurant concept that has some marketability, is cost efficient to run, has good food, and you can price just over the average of what your competition charges for similar food. Thus, when diners feel the recession closing in, they’ll forgo the fine dining experience and come to you. Your regular customers are happy just where they are and you’ll still have enough of a margin left over to pay off your debts and cash flow your business.

You still need to have everything else working in your favor of course, especially an exciting and good food concept, and including a plan to get people through the door. In fact, when things get tough, most restaurants start looking at ways to cut costs, starting with their marketing.

This is exactly the wrong thing to do, rather, restaurants should increase their marketing spend. I’ll talk about this in the next article.

Ronald Lee
Senior marketing consultant, Eat Marketing

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You Need Deep Pockets or a Plan to Open and Run Your Restaurant. Preferably Have Both.

As I shared in my Business in Vancouver article last month, my friend Aaron Koo was formerly a chef for many years, having worked at several high end establishments. He’s seen a lot and I enjoy hearing his insights on the restaurant business.

One such nugget of wisdom is when you start a restaurant, whether you are about to open or within your first year, you need to have one of two things: either a lot of money to burn through or a plan for how your restaurant will survive.

You’ll need a lot of startup capital beyond your branding and renovation costs as operating capital as you won’t know exactly how your restaurant will do its first year – it could be an instant hit or you could be sitting in an empty dining room most nights. No one/not enough customers are coming in but your operating costs don’t stop.

Or you’ll need a plan for how you’ll get customers through the door to spend money to cash flow your restaurant. Ideally the plan will account for trends, seasonal changes, and special events, and most importantly marketing.

Ideally you will have both. A long term plan on how to get your restaurant into the black as soon as possible and enough money to keep you going through that period; with enough set aside for your emergency fund for when things go awry and for unexpected costs (which always come up).

It astounds me how often restaurants in Vancouver open with only one or neither. I’d wager that the majority of owners have an idea only “in their head” of how things will work and just want to open their concept, expecting that once people hear about how good they are, they will come in droves and the restaurant will be ok.

These owners didn’t do any market research, didn’t audit their location, didn’t create a brand, don’t know how to market to bring people in, and in many cases, start over staffed and paying (wasting) way too much for food and kitchen.

What they should have done was talk to some experts first, get some other opinions, get real help in different areas, cost out their menu, get proper branding and a marketing plan…

It doesn’t make sense that a restaurateur will pour so much of their own money (and other people’s money as well) into renovating a location and opening a restaurant and not make sure they have every contingency covered, especially a plan how to get people through the door.

With the high failure rate of restaurants in their first year, it’s evident that many restaurateurs are doing exactly that. I hope you don’t become a statistic as well.

Ronald Lee
Senior marketing consultant, Eat Marketing

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Ronald Lee, restaurant Google Business Photos
We have an article in Business in Vancouver this week!

Marketing your restaurant has changed over the past three years…

Hi there! I’m very pleased to share that we are on page 35 of the Business in Vancouver newspaper this week (May 15th-22nd)! The article is called “Marketing your restaurant has changed over the past three years” and in it I talk about how restaurants are being challenged by the industry and what they need to be doing to market better today and moving forward.

“Ironically, for an industry that is almost entirely customer driven, the majority of restaurants don’t do marketing”

I had fun writing it and in fact I’ve only touched the tip of the iceberg. Stay tuned for a lot more writing about how restaurants and hotels and improve their revenue and bottom line in this blog.

PS: If you don’t have a chance to pick up the paper, you can find the Business in Vancouver article online here.

Ronald Lee

 

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Opening a Restaurant in Vancouver: What you Need to Know

Want to try your luck at opening a new restaurant in Vancouver? Before you do, I highly recommend you take a moment, and read this restaurant start-up checklist. There are many things to consider, whether you are opening a coffee bar, a hip bistro, a trendy sushi nook, or whatever your dreams lead you to. Here are some quick restaurant opening tips to keep in mind:

1) Do Your Research

Whatever your vision is, make your concept loud and clear. Defining a clear concept of what your new business will be, is the first step in making sure your business will stick for the long run. Keep it simple, keep it genuine.

Never lose focus from your concept, as many people try to do too much too fast, and that’s how they steer off the road, and fail to succeed.

Have a sense of an approximate area you want to start your new restaurant. Gather demographic data for that area, how much foot/car traffic goes on, who are some of your competitors, and where are they located. Find out how they differ from your restaurant, in terms of concept, price points, service, volume of business etc.

The more research you do, the more informed you are, and the less chances of you being surprised by unforeseen roadblocks.

2) Make a Business Plan

Write a mission statement for your restaurant. Come up with one sentence that really speaks how unique your concept is. Make your restaurant as distinguished as you can from your competitors. When someone reads it, it needs to be very clear that your restaurant is far more superior to other competing businesses.

Decide on hours of operation, and the appropriate management team that needs to be recruited to run the restaurant. Hiring and training of different positions should be considered, from servers, to cooks, to supervisors.

Consider what marketing strategies you want to use, whether it’s a website, Facebook, Twitter, a loyalty program, etc. Whatever you choose to use, it is important that a marketing plan is created well before you open the restaurant.

A detailed schedule of what you want to achieve, such as a weekly target of how many followers, or how many likes, is a measurable metric that makes it easy to see if indeed these marketing tactics are working, and if so, how effective is it working

3) Forecast your Financials

Do sales projections. Do them realistically. One easy way to do this is to visit a similar sized and priced restaurant, in the same area as you, and observe their operations. Take note how many customers come in, during lunch and dinner, how high is turnover of new customers, how much food people are ordering, and how much an average bill would be.

Estimate the cost of ingredients for meals, beverages and bar items. Also estimate the cost of labor, how much you are going to pay each of your employees, and how many employees is needed at certain periods of the day and week. Consider the costs of equipment, utility fees, rent, ongoing marketing costs, location expenses, and the list goes on and on.

What’s important at this step is that you are putting into account of all the possible expenses, and making a comprehensive restaurant startup costs spreadsheet. This will help you determine your costs of everything in order to open up a restaurant, but also forecast the break even point where your restaurant is making at least enough money to pay off all of its monthly expenses.

4) Plan your Menu

Create a simple list of menu items for each service (breakfast, lunch, dinner), or categories of the menu (i.e. appetizers, entrees, dessert). Determine an ingredient list for each menu item. Compare prices from vendors, and how to maximize cost efficiency.

Keeping your menu small is most likely going positively stand out to customers, as they won’t encounter the problem of having too many choices to choose from, and also your chefs will be more proficient delivering consistent levels of taste and flavors.

5) Don’t Forget the Permits, Licenses, and Setup Essentials

Getting the needed permits and licenses is very important, because without them you simply cannot operate your restaurant.

Always make sure and consult government agencies for a business permit, the health department, the local fire department, and liquor-licensing department so you can sell and serve alcohol.

There is nothing more depressing than declining customers drink orders. Once everything is roughly set, make sure you have the required restaurant insurance policies in place, to ensure a peace of mind, as if you wouldn’t have enough to worry about.

So to our future restaurant owners, I hope you found these five quick opening a restaurant tips helpful. Keep this start up restaurant checklist in mind, and we hope to see your upcoming operation be the talk of the town in Vancouver sometime soon!

If you’re planning on opening a new restaurant in Vancouver and are looking to for a marketing strategy that will drive sales to your restaurant right from opening day, then feel free to contact Vincent at vince (at) Eatmarketing.com

Guest Post Written by Nicole Cheung

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Your Restaurant Needs a Website

I’m still amazed at the number of restaurant owners that refuse to put up a website. Even though they know that customers are searching for them online and are losing tens of thousands of dollars in sales a year. When I talk to my friends it’s almost guaranteed that they are searching for restaurants on the Internet or through their mobile phone before deciding on a restaurant to eat.

In this blog post, I discuss why a website is absolutely crucial to your restaurant business.

1) Your Customers want Information NOW!

Potential customers search a website because they don’t want to wait for information or to call someone over the phone only to have that person sound rushed or busy. Customers want information conveniently and they want it NOW. They don’t want to call your restaurant to find out the hours of operation, or to call to find out what’s on your menu.

If you make it hard for potential customers to know about your restaurant, then they’re going to search for a similar restaurant or one in similar geography that delivers the information with ease.

2) You’re Giving Too Much Power to the Review Sites.

If you decide that you’re not going to have a restaurant website then you have made a poor decision to let review sites do all the selling on your behalf.

Whether your restaurant reviews are good or bad, they will never convey the message of what you want people to know about your restaurant. Your own website is a great medium for you to describe the history of your restaurant, the people who operate it, and any other messages you wish to share with your potential customers.

Would you let your own child was getting important information from hundreds of other strangers except from you the actual parent? That’s almost unheard of. Yet so many restaurant owners would rather let review sites (strangers) tell their restaurant story than do it themselves.

3) It Hurts Your Branding

I can’t stress this enough but people will judge your restaurant by the quality of your website. I’ve seen it on discussions on Yelp and it does make a difference. This is because your website is your host or hostess. Imagine having no hostess at the door to greet you, how would you feel?

And even if you had a host or hostess, how would you want her to represent your restaurant. Do you have a clear picture in your head? What type of tone would she have with customers? What type of smile would he have? What kind of knowledge would the hostess have? Now, that’s what your website should represent.

4) I’ll Steal Your Site

If you decide not to register your website name, what’s preventing me from actually buying the domain name of your restaurant and then deciding to use it to my advantage. When people search or type in a domain they type in what is easiest to remember.

Kyo Restaurant in Vancouver has this particular issue, where they have registered their domain name but it’s not a searchable or intuitive name to type. It’s easy for a company like me, or a competitor company, to buy out a name that’s easy to remember like www.kyorestaurant.ca. and use it. We haven’t done this of course but it’s not that hard for someone to buy that site and redirect them to their competitor Shabusen. Imagine how many loses in sales then for Kyo?

5) You Have More Control of Your Restaurant’s SEO

SEO stands for search engine optimization. This is where by performing certain activities you can rank higher among Google, Bing and Yahoo search engines. For example when people search for a term such as, “Top 10 Restaurants in Vancouver for 2011″ there are methods that allow you to be able to rank higher for such a search term.

However, if you don’t even have a site at all, then to rank higher for these terms is impossible. Having your own website is the first foundational step to being listed on the first page of search engines for specific terms.

6) You Miss out on a Whole Different Demographic.

I’m still surprised at the number of Chinese Restaurants in Richmond that don’t have a website. It really makes things intimidating for people who want to try out a new restaurant but want to know more information about it.

People get scared of what they aren’t familiar with. A great website will allow people to feel familiar with your restaurant. They don’t want to waste their money on a restaurant that they feel is a gamble. And so many Richmond restaurants miss out on those that are travelers, that are internet savvy, and those that don’t have Chinese associates to introduce them to these restaurants.

If you look at Kirin Restaurants’ website, you’ll see that they make it accommodating for non Chinese eaters to feel comfortable at their restaurant before arriving at the restaurant.

A website is a good investment because other than hosting, it’s advertising to people who are actually LOOKING FOR YOU! And your website has a huge potential to convert them to coming into your restaurant. You can put in so much information in there that you can’t put in a newspaper or magazine ad.

Think about it. A newspaper attracts people of different sorts, most are a big miss, but when people are searching for a restaurant and they search for your name, you know they are looking to be your customers. It’s exactly the same thing as the person who walks by a restaurant and takes a look a the menu. That person is more likely to come in to eat, then the person who just walks by.

If you don’t have a website and dont’ want to lose tens of thousands of dollars a year in sales then feel free to contact me, Vincent Ng from Eat Marketing at Vince (at) eatmarketing.com

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