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.
Senior marketing consultant, Eat Marketing