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Archive | April, 2010

Restaurants Report Customers Coming Back

Restaurant Sales Coming BackSome of the largest players in the food service industry, including Brinker International, McDonald’s, Chipotle, and The Cheesecake Factory are reporting sales and guest traffic up for the first quarter of 2010.  That meant good news for the rest of the sector, which had been hurting particularly badly after consumers went into recession mode last year.

The news brought back to the forefront a trend that has been observed in past recessions: restaurants tend to be the first to suffer in a down economy but also the first to come back after the worst has passed.

Over the past couple weeks more and more reports have found that the restaurant business is moving again.  And as spring kicks into full gear, along with Mother’s Day, the sailing should get a little smoother for most restaurants out there.

It appears now that customers have returned to the dining scene, they are patronizing their favorite haunts first – familiarity being the first thing customers want to experience.  That means restaurants should definitely target their regulars with any marketing and promotion weapons left in the arsenal as they will be the most likely to come in and visit after a long absence.

That doesn’t mean there aren’t opportunities out there for grabbing some market share.  Now that the market has come back, there are definitely fewer restaurants to service it.  If you are in a position to pursue new customers, now is the time while competition remains lower than it has been in past years.

Let’s hope the storm has truly passed and better times lay ahead!

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The Age of the Groupon: Does It Make Sense For Restaurants?

Deep Discounts For RestaurantsGroupon, along with and a whole array of other discount coupon websites have proliferated in the last year as restaurants struggle to get customers through their doors.  These sites operate by getting large discount vouchers from restaurants (usually in the 50% range) and then marketing them to a large list of potential customers through email and the internet.

The argument made to restaurants goes like this: bite the bullet on this deep discount coupon and you’ll earn a repeat customer who comes back for more, making you money in the long run. It’s a compelling argument, and already many restaurants have tried it.  There is still quite a bit of debate, however, about how effective these deep discount coupons actually are at getting a restaurant repeat business.

The first school of thought is that butts in seats are better than empty chairs, no matter what it took to get them there.  These restaurateurs are indeed biting the bullet and hoping for some repeat business down the line.

The second school of thought takes a more skeptical approach.  The biggest fear with bringing in customers on such deep discounting is that all the new business is there because of the once-in-a-lifetime deal being offered by the restaurant, not because they have or plan to have any connection with that establishment.  Without repeat business, the Groupon concept is completely sunk, because there’s no money in that first visit for restaurants.

Naturally, Groupon claims a 90% return rate for customers who use their coupons.  That number hasn’t been independently verified.  It’s also a bit of a logistical problem to track customer visits after they redeem their Groupon coupon.  The fact that coupons are good for a year on average also makes it difficult for restaurants to track exactly how successful their discount program is, since it can take a long time for all coupons to be redeemed.

The X factor in making a calculation about using a deep discounting coupon service for your business is the number of guests who actually redeem their coupons versus the number who purchase a coupon.  This is known as the “breakage rate” and can really help a restaurant get back some of the money they’re giving away on coupons that are redeemed.

Unfortunately, statistics are spotty on breakage rates.  Many restaurants hope for 30% (i.e. 30% of customers who bought a Groupon coupon for their restaurant never redeem it), but since it takes up to a year to find out exactly who is redeeming these coupons, business owners may have to wait awhile to find out how high their breakage rate actually is.

Thus it comes as little surprise that many restaurant owners view these deep discount sites with a healthy dose of skepticism.  That’s not to say these coupons can’t ever be an effective tool for restaurants.

Some restaurateurs have used deep discounting sites like Groupon or BlackBoardEats to promote grand openings or significant additions like a new dining room or patio or a new menu.  In situations where it’s important to build a lot of buzz very quickly because you’re offering something new, a deep discount program can be a great way to reach customers en masse.  You’re not as worried about getting repeat business as you are about filling your establishment for a specific reason.

The jury is still out about deep discounting, but in certain situations, like opening night, it can be a surefire way to pack your restaurant.  For restaurants with an established brand and customer base, deep discounting appears to be a much more risky proposition.

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Could The iPad Change Food Service?

iPad could change food serviceThe unveiling of the iPad earlier this month left a lot of people wondering what all the hype was all about.  For many, the mini-notebook looks and feels like an oversized iPhone without the ringtones.  But as the iPad hits the market and continues to sell well, more and more people have started to consider how to use the iPad in new ways.

Some tech savvy restaurateurs were among the first to see the potential effect of the iPad on their business.  Already some restaurants have explored the possibilities of replacing menus with iPads, turning a laundry list of entrees into an interactive experience for guests.

These iPad menus could feature entire albums of pictures spotlighting each entrée from many angles, the ingredients before they go in, and even video of the dish being prepared.  And after a guest has explored all of this digital eye candy to their heart’s content, they could even order directly from their iPad menu with a simple touch of the screen.

For now the cost of the iPad makes it a pretty expensive menu, but the time is not very far off where a handheld device similar to today’s iPad could be affordable enough to make it a very compelling option for restaurants.  Like most technology, high-end establishments will probably be the first adopters, followed by the rest of the industry as price points fall.

An interactive digital menu has many intriguing effects on the operation of a restaurant, effectively digitizing the marketing of entrees and automating the ordering process.  This could free servers to focus on achieving top-notch customer service for every guest – and make their experience in your restaurant truly unique.

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Induction Cooking: The Future Of Your Restaurant?

Induction CookingThe presence of a large multi-burner gas range at the heart of the cooking line is about as fundamental as it gets in any restaurant.  That iron and stainless steel behemoth uses a lot of energy, throws a lot of heat, and requires a dedicated ventilation system just to keep the cooks from getting overwhelmed.

For decades no proper chef would have it any other way.  That’s beginning to change, and the catalyst of that change is the induction range.  Induction cooking works in a completely different manner than traditional gas or electric ranges.  Instead of using a superhot medium like burning gas or an electrically heated element, induction ranges use the energy created by two opposing magnetic fields driven by an electric current to make the metal in the cookware itself become hot.

Sound a little geeky?
It is, in a cool science project kind of way.  For professional chefs, the most interesting thing about induction cooking are the practical advantages it can bring to the process, including:

Precision temperature control.
While there is certainly a steep learning curve in the beginning, once a chef gets an induction range dialed in based upon the numbers on the knob, you can be sure you’ll get consistent, perfectly even heat every time.  This is especially beneficial for low temperature and simmering applications, because an induction range can maintain a much lower heat than a traditional gas or electric range.

Speed. You’ve never seen a pot boil faster or oil heat up quicker than on an induction range.  Because the metal of the pot or pan sitting on the burner becomes the heating agent instead of the medium, induction is by far the fastest way to heat whatever you’re cooking.

Efficiency. An induction range uses a fraction of the energy used by a traditional range.  There’s also almost zero energy waste since the energy used to heat food is created in the metal of the cookware instead of below it.  This energy is also created by a relatively weak electrical current, which can be much more inexpensive than natural gas.Induction Range

Safety. An induction burner that’s turned on to full heat is still cool to the touch.  As it heats metal cookware it will become hot, but the burner itself creates no heat.  This makes induction much safer than traditional ranges.  Some induction ranges even have automatic detectors that shut off the burner when there is no pan present, when the pan is empty, or when foreign objects fall onto the surface of the range.

Because induction ranges don’t burn fuel like a gas range, minimal ventilation is needed, and much less heat is created, even if you’re running induction all day on a busy line.  This can save any restaurant a boatload of money on the ventilation and cooling costs normally associated with a traditional gas range.  Make sure you consult the local regulations in your community when deciding how much ventilation you need to install for an induction range.  In general, however, the requirements should be a fraction of those for a gas range.

Induction cooking isn’t for every restaurant.  Some chefs don’t like the fact that cookware cools off rapidly when it’s not in contact with the burner – a distinct disadvantage for techniques that call for using the pan to flip or sautee ingredients as they cook.  Induction also supports only certain types of cookware – usually stainless steel or cast iron – which means your aluminum cookware will be useless on an induction range.

If you are interested in induction cooking, Vollrath has been a pioneer in developing induction rangescountertop burners, and even chafers for the food service industry.  So far another factor slowing the widespread adoption of induction technology in restaurants has been the cost of equipment.  As energy prices, especially natural gas, continue to rise and the cost of quality induction equipment comes down, however, induction cooking starts to make more and more sense.

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The Yelp Drama Continues

yelp dramaI’ve written several times about Yelp – a San Francisco based website that collects and publishes reviews about local small businesses in many cities across the country.  Naturally, restaurants are one of the most commonly reviewed businesses on the site.

Over the past year a steady grumbling has risen about the way in which Yelp pursues advertising revenue – by calling small business owners and offering some small review manipulations in exchange for a $300 – $1,000 monthly fee.  That grumbling arrived at a crescendo last month when several businesses filed a class action lawsuit accusing the company of extortion.

For their part, Yelp has always maintained they do not manipulate reviews and that they are simply trying to provide a service to consumers and an advertising channel to businesses.  Yet two factors have left the majority of business owners suspicious: the fact that businesses who pay the monthly fee get to pick the top review on their company’s Yelp profile, and the murky process the site uses to filter reviews (many have long been suspicious that advertisers get preferential treatment).

Last week Yelp decided to address these two primary concerns with an important announcement.  First, advertisers will no longer be able to choose their top review.  Second, Yelp is throwing open the door and shining some light on the process they use to decide which reviews get deleted, which ones stay, and how the site decides to rank them.

Yelp’s leadership remains confident these measures will exonerate the company from the myriad “conspiracy theories” with which they feel the public has victimized them.

Yet as far as I can tell, Yelp’s practice of using hard sell tactics (calling up business owners and pressuring them to become advertisers) will remain.  As I wrote in February, the trouble with Yelp is not their murky review ranking process, their hard-charging salesmen, or their preferential treatment of paying advertisers.

The real problem is the inherent negative motivation the company’s business plan creates: pay Yelp to get people to stop saying bad things about you on Yelp.

No one likes how that feels.  And I imagine Yelp’s public relations problems will continue unless they change this basic truth about their approach to online reviews.

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