PRICE CUTTING:

THE LAST STRATEGY FOR

RESTAURANTS TO CONSIDER

JAMES C. MAKENS

Author of Marketing for Hospitality and Tourism,

leading text in this area in the world.

DURHAM UNIVERSITY

BUSINESS SCHOOL

REVIEW THE BASICS IN

RESTAURANT SUCCESS

• POSITIONING – critical to success

• POSITION IN MINDS OF PROSPECTIVE

– Guests

– Suppliers

– Investors

• Many possible

– Theme restaurants (Chuck E. Cheese, Rain

Forest Café)

– Ultra-snob (expensive)

POSITION FACTORS • SIZE OF POTENTIAL MARKET

• TRAPPED INTO FOOD TYPE

– Steakhouse

– Spaghetti Factory

• CHANGES IN GUEST PREFERENCES

– Counter service (Woolworths)

• HYGIENE MAINTENANCE

• EMPLOYEE LEARNING CURVE

• IMMEDIATE PERCEPTION

– Eskimo House, Wichita Fall, TX

• HIGH OR LOW FIXED COSTS

• EXPENSIVE DÉCOR; TO SELL LOW MARGIN

PRODUCT. - NO

• COMPETITORS

• NATURAL ADVANTAGES

– Location

– Current reputation

– Core competencies

• CORE COMPETENCY WEAKNESS IN

COMPETITORS AND POSSIBLY HOSPITALITY

PARTNERS

POSITIONING AFFECTS

THE BUSINESS MODEL

• BUSINESS MODEL AFFECTS:

– Productivity

– Efficiency

– Profits

BASIC

RESTAURANT MODELS:

RESTAURANT ECONOMICS

MODEL A:

TRADITIONAL Kitchen – Cooks – Clean Up

Crew – Order Control

Wait Staff/Pick Up

Dining Room and Menus

10 Tables Each table orders

4 Chairs each different dishes =

14 14 dishes

Wait Staff and Bussers

Cash register and hostess

MODEL B:

LINEAR CAFETERIA STYLE

Kitchen – Cooks – Clean Up – Replacement Crew

Serving Line – Limited Servers

Check given maybe

money collected

Dining Room

Wait Staff and Bussers Cashier

MODEL C:

SCRAMBLE CAFETERIA

Italian Chinese

Multi Servers

French BBQ and German

Food Steaks Food

Dining Room

No Wait Staff; Bussers

Cashier

MODEL D:

FOOD COURT

• Same as Scramble but each independent,

multi-owners, multi-servers.

MODEL E: WAFFLE HOUSE,

TRADITIONAL GRILLS

Kitchen/Grill Limited Menu

Wait Staff and Cashiers

Counter

Guests

MODEL F:

MONGOLIAN GRILL

Grill

1 or 2 Cooks

Raw Ingredients

Fish Pork Vegetables Rice Beef

Tables: 1 Wait Staff, 1 Busser

Cashier

MODEL G:

FOOD TRUCKS

Kitchen and Inventory

Order Window/Serving Window

Sometimes tables, sometimes not

Highly Profitable:

Most efficient Quick turn Few personnel

High margin products Limited menu

• Can you insure quality, great service,

customer satisfaction?

• Can you control food costs, waste,

shrinkage?

• Can you or new manager effectively

manage this model?

• Are you happy, motivated, RICH?

? ? ? ?

• Is your model correct for today?

• Can you achieve efficiency, cost savings,

high margins?

• Can you maintain quality, hygiene,

employee satisfaction?

RESTAURANT TRENDS

• OLD DRINKS ARE BACK – Manhattan

– Martini

• BREAD – Consumer reluctance

• FARM-TO-TABLE – McDonald’s, largest buyer of beef in the U.S.

– Chipotle

– Montford cruise lines

– Pollo Campero

• REAL ESTATE. OWN, NOT LEASE.

– McDonald’s is the world’s largest owner of real estate.

• ORGANIC AND NON-MODIFIED GENETIC

• ONLINE FOOD STORES

• RESTAURANTS IN SUPERMARKETS, CONVENIENCE STORES AND HIGHWAY “TRUCK” STOPS.

• FUSION RESTAURANTS

• DIVERSIFICATION FROM SEAFOOD, BEEF, OTHER ANCHOR FOODS.

• MULTI-ETHNIC ACCEPTANCE

• INTERNATIONALIZE COMMON FOODS

– Hamburgers

– Pizza

– Spaghetti

– Tortillas

• BRAND AND LINE EXTENSIONS

– Brand

Del Friscos

Double Eagle Steakhouse

– Brand extensions

Del Friscos-Grille

– Lead to restaurant groups

YUM

Del Frisco – Sullivans

Others

• MICRO-BREWS AND MICRO-WINES

– Trattoria, Austin, TX

• EXTENSIVE USE OF THE INTERNET

– Reservations

– Promotions

– New product intros

– Product orders

• SMALL PLATES AND SHARING

– Tapas

• INCREASED USE OF

– Sea salt

– Herbs

– Bacon

– Vegetables

• MIXING OF FOODS

– “ If it grows together, it goes together ”.

• NATURAL PRESENTATION OF FOOD

– Banana leaves

– Cedar board

– Baskets

– Simple clay dish

• INTERNATIONAL “COMFORT FOODS”

– Tacos

– Potpies

– Shepherd’s Pie

– Pastries

– Peasant food

– Pan Con Tomate

– Macaroni and cheese

– Beans on toast

• VEGAN

– Bold

– Tasty

– Fresh

• USE OF ALCOHOL IN COOKING

– Jack Daniels

– Champagne (top champagne brands)

– Guatemalan/Central American rum

– Ron Zacapa

• COMMON FOOD BRANDS. INCORPORATE

INTO FOOD AND FOOD PRESENTATIONS.

– Tootsie Roll

– Guatemalan DulcesTípicos

Canillitas de Leche

Tamarindos

Espumillas

Guatemalan snack foods

Antiguan products:

María Gordillo

El Sombrerón

El Rosario

Guatemalan Artisian Candies

• TRADITIONS

– Special dishes for ethnic holidays

Celebrations

Religious holidays

• MANAGE MENU ITEMS AS AN INVESTMENT

PORTFOLIO

• FOOD TRUCK / FOOD STALLS

• INCREASED USE OF INTERNAL ORGANS AND

INSECTS.

– Steak and Kidney Pie (England)

– Haggis (Scotland)

– Menudo

– Many, many more

Insects

Bamboo worms (Thailand)

Locusts (St. John The Baptist)

GUATEMALAN FUSION

RESTAURANTS

• 221 restaurants

– City

– Listed Fusion

Ikura Fusion

4.5 – 5 Rating Trip Advisor

Meli Melo, Fusion Peruana

4.5 – 5 Rating

Tamarindos

Jean Francois

• Fusion

– Asian/Western

– African/Mediterranean

– Barrymore (Las Vegas)

4.5 Rating, Trip Advisory

American, seafood, steakhouse, Fusion

Too many?

FROMMERS – FUSION RESTAURANTS IN GUATEMALA

• 221 restaurants in Guatemala City

– Tamarindos

– Kacao

– Ambia

– Mesón Panza Verde

– Verde (Antigua)

– Heston (Antigua)

– Hotel Atitlán – Panajachel

– Zoola, San Pedro

– Restaurante Mediterráneo – Quetzaltenango

– La Luna, Flores

– Casa d’Acuna, Cobán

– Hacienda San Lucas, Copán

– La Casa Rosada, Livingston

ANALYSIS

Know the facts

before

making decisions!

WHAT ARE YOUR COSTS

AND PROFITS PER

• Square foot?

• Employee?

• Guest table?

• Menu item?

• Product category?

• Appetizers, entrees, non-alcoholic and

alcoholic drinks, desserts?

INVESTMENT PORTFOLIO

ANALYSIS

COMPARABLE TO STOCK/BOND

PORTFOLIO ANALYSIS

Number

Sold by Day

and Hour

Gross

Margin

Estimated

Costs

Variable

Time

Preparation

Serving

Time

MENU PORTAFOLIO ANALYSIS

SUCCESS FACTORS:

SIGNATURE MENU ITEMS • 3 Each Category

– Appetizers

Location/Extension

Push carts in Jakacta Hotel

Select catering

– Entrees

Create new from old

Create new from open thinking

Food shows

Vegetarians

Other nations

– Drinks (Signature) Alcoholic

Non-alcoholic

Roy Rogers (NO)

Shirley Temple (NO)

New Registered Name (YES)

– Package Alcoholic and Non-Alcoholic Containers

Prizes

$50 winner

4 per night

Colors

Pussy Café

Flames

Music

– Bread and Butter (maybe No)

Many opportunities

Navajo Fry Bread

Tandoori Naan

Nowegian Lefsd

Ethiopian Injera

Abyssinia Injero

Expand product line and sales locations

Internet

Butter

Wrapped in aluminum foil (No)

Dairy (partner)

Butter with olives, garlic, jalapeño, Thailand spice, Sciams Spice Bread, unique table package

Non-Dairy

Olive oil

Many variations

Do it yourself

Multi-spice bottle

– Salads

New type, new name

Examples

Waldorf

Caesar

Salad bar (maybe, maybe not) » Waste

» Guest spoilage; avoid sneeze plate

» Personnel

Beautify your salad

LOCALIZE

WHEN POSSIBLE

• TRADITIONAL FOOD

– Modify

– Maintain basics

• PACKAGED SNACK FOODS

– Use as base

– Complimentary

Example: many desserts with crushed candy, cookies, nuts, flowers, tropical fruits; adopt for guest tastes.

• OTHER SNACK FOODS

– Example:

Frito pie (Fritos, cheese, chips)

Potato Chips, Canned Tuna, and Mushroom Soup

• ALCOHOLIC DRINKS

– Many opportunities

Appetizers, Entrée, Dessert

• NON-ALCOHOLIC DRINKS

– Juices

– Refrescas

Cheerwine (North Carolina)

Vernon’s Ginger Ale (West Virginia)

CLASSIC TRADITIONAL • HIGH-CLASS NAME

– Owner

– Place

Quebec

Vienna

Salzburg

Salamanca

– Famous Person

Contemporary famous

Intellectual

Athletes Dangerous

Theatre

– Basic Food

Waffle House (may limit expansion, product line)

– Name of Food

Steakhouse

Lobster or Crab house

Danger: changing preferences, cost and product

availability

THE OWNER /MANAGER PERSONALITY AND PRESENCE • #1 MOST IMPORTANT SUCCESS FACTORS

– Personal greeting

Learn and remember guests

– Product and service research

Wine preferences

Food, health problems (peanuts)

– Goodbye greeting

Exchange business cards

Small gifts

Photo with owner (great idea)

Follow-up greeting

ROSEN, Resorts y Hoteles en Orlando tiene un plan de

negocios, que uno de nuestros asesores financieros (Marcos

Skousen) pronostica como uno de los mejores en la industria.

Lo siguiente es de su sitio web.

Sobre Nosotros: Servicio de Excelencia

ROSEN - Servicio de Excelencia

Parte de la cultura de nuestra empresa radica en lo bien que

tratamos a nuestros clientes y nuestro trato interno. Nuestros

pilares son los principios de servicio que están diseñados para

guiarnos y definir lo que hacemos para ofrecer un excelente

servicio a nuestros clientes y a cada uno de nuestros asociados.

El Consejo de Servicio, en cada uno de nuestros hoteles, se reúne

mensualmente para medir el servicio brindado y garantizar la

consistencia de nuestro comportamiento hacia los clientes. Estas

reuniones dan a nuestros asociados la oportunidad de discutir y

compartir observaciones sobre nuestro servicio. Los temas

tratados en estas reuniones pueden afectar la toma de decisiones

de la empresa. La idea de una persona puede marcar la diferencia.

NUESTROS PILARES

• SONRISA: Salude a nuestros clientes y a nuestros

asociados con una sonrisa auténtica, establezca contacto

visual y llámelo por su nombre.

• APARIENCIA: Presentarse con orgullo y

comportarnos de una manera profesional.

• CORTESÍA: Mantenga una actitud positiva – siempre

utilizar “por favor” y “gracias” con nuestros clientes y

asociados.

• HACER UNA BUENA IMPRESIÓN POR

TELÉFONO: Conteste antes de que el teléfono suene

3 veces, sonría y claramente proporcione su nombre y

su departamento.

• CONOCIMIENTO DE SU EMPLEO: Pregunte,

anticípese a las necesidades del cliente, apréndase todos

los servicios de nuestro hotel y comprométase a una

formación continua.

• COMUNICACIÓN: Escuche con la intención de

entender las situaciones específicas y necesidades de los

clientes y asociados.

• RESOLUCIÓN DE PROBLEMAS: Pida disculpas

por la situación, hágase responsable de la solución y dele

seguimiento,

• ORGULLO DE SU PROPIEDAD: Trate al hotel como

si fuera su propia casa, preste mucha atención a los detalles y

reporte cualquier deficiencia.

• TRABAJO EN EQUIPO: Reconozca y anime a sus

colegas a prestar un servicio excepcional.

• REGLA DE ORO: Respete y trate a nuestros clientes

y asociados como a usted le gustaría que lo trataran.