In Part 1 we discussed the customer’s tendencies and habits in a difficult economy. Now we need to examine how restaurant owners and managers need to change their thinking to match the consumer’s outlook.

Almost from the day an entrepreneur gets into the restaurant business, the term “margin” is tossed around freely. In the hotel, institutional and chains, the margin between food cost and selling price becomes fixed as the way to price the menu item. Everything is based on an acceptable percentage to maintain profitability. Independent restaurant owners need to re-think this process. Independents don’t have the luxury of a captive market like hotels, hospitals, schools and other foodservice operations that have fewer competitive forces and customers who can opt for convenience as opposed to price or value.

When tweaking your menu for consumer trends, balance is still a concern. You need to have items that will allow the diner to choose lower priced entrees  if that is their mood, while not deviating from your theme or concept. However, pricing becomes an opportunity to look at total plate profits as opposed to just a particular margin goal. For instance, if you are a steak house and price a New York strip dinner at $23.95, you may have costs for the total plate in the range of $11 to $12. You plate profit will be $11 to $13.

When looking at a lower price point for a new menu item or two, consider plate cost and profit rather than just margins. An example could be a Blackened Chicken Breast Fettuccine that has a cost somewhere around $2.50 to $3.50. Priced at $15, you will have about the same plate profit as the New York strip and be offering the diner a choice that is almost $8 less than the extravagant steak. It’s perception that counts. Do you care which dish your customer orders? Probably not.

A customer who orders a generous portion of a Pot Roast Feature with potatoes, onions and carrots can bring the same dollar amount to your bottom line as a lobster dinner. Bacon wrapped pork tenderloin medallions with a red cabbage and apple chutney can be as profitable as that fisherman’s platter at a much lower price. That grouper sandwich at $11 is no more profitable than a grouper cheek Po Boy. Same fish, different cuts and sizes. Turn your nose up at chicken livers if you must, but one of our units recently sold twenty pounds of chicken livers on a featured special in one night. The cost - $.80 a pound! The price $14. Comfort food right out of the baby-boomer’s childhood, but I doubt we could sustain those sales for a long period.

The keys to implementing this strategy are;

• Meet with your suppliers. They can offer insight into product alternatives and hints at what others are doing.
• Look at the lower cost items in your pantry rather than the normal routine of controlling the top 20% of your purchased supplies.
• Use the Internet to search for ideas using keywords like rice, pasta, beans, chicken and pork as ingredients.
• Time is not on your side. Do it now, while the consumer’s plight at the grocery store is fresh in their mind. Don’t lose guests because you failed to respond.

Creativity and spending time focusing on lower cost protein items will give both you and the consumer reasons to stay comfortable in a difficult economic climate.

Larry Edger, Author

The Restaurant Ebook 

Several months ago, when finishing The Restaurant Ebook, I wrote an Epilogue to the book that outlined a marketing program that we implemented at one of the restaurants. To briefly set the stage, I reported that through September of 2007, the restaurant had lackluster results with only a 2% increase in sales for the year. Even the 2% was questionable if price increases were factored in.

During September, I challenged one of our Managers to choose four or five new low cost marketing ideas from Chapter Seven, 100 Ways to Increase Sales and Market Your Restaurant, of The Restaurant Ebook and implement them. We wanted to keep track of costs and results. The goal was to report the effect on our sales and keep readers and buyers of the book informed of the progress. At the end of February, 5 months into the program here are the results;

• Sales over the same period in 2006-07 have increased a total of $60,312.
• Total restaurant sales have increased over 10%.
• The month of February had an increase of over $17,000 alone!

There is more great news;

• None of the marketing programs used discounts, coupons or margin cutting ideas.
• The total cost so far is less than $200.
• Not a single newspaper ad, magazine ad or other form of media advertising was used.
• It should be noted, although undocumented, most other restaurants in this area are reporting a difficult time as a result of the economy, cost of fuel and consumer’s reduction of luxury spending. Our restaurant is considered upscale casual and guests could certainly find less expensive alternatives.
• We firmly believe we are building solid repeat business, not some promotion that lasts for a few days or weeks and ends when the incentive wears off.

How was it done? Very simply. We created a six month Marketing Plan using the checklists and instructions in The Restaurant Ebook. We planned and implemented each step. We involved staff and kept our commitment to get this done.

There are no quick fixes to marketing. No gimmicks, no overnight magic and if you ever find a quick fix, please report it here for your fellow restaurateurs!

You can listen to the restaurant “witch doctors” or use your common sense to spend a few dollars on knowledge to build your business. You can be in the process of opening a new restaurant, buying a restaurant or just re-vitalizing an existing operation - solid marketing and planning works, even on an eight year old restaurant!

Larry Edger, Author

The Restaurant Ebook

P.S. Come back in a couple of months to get the final report before we begin our next six month plan.