The Daily Rail: Are you thinking like a restaurant investor?

August 19, 2016

Today's Specials

How Hollywood Sees Us: Is Katz's Diner the center of NYC?

Working at a restaurant can be a really interesting place and what scene better illustrates that than the Katz's Diner scene from When Harry Met Sally?

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Why it’s important to you: At the end of the day, without staff how does your restaurant run anyway?

Nowadays, all of the signs are pointing towards increased spend on dining out. But there are always two sides to every story, aren’t there? In fact, some might say that staff turnover is the Achilles Heel of the industry. And “some” might be right. Here are three simple steps for building a restaurant staff that’ll charm and delight your guests for days to come!


The Good

Good news for the restaurant industry. According to a recent Gallup poll, the restaurant industry is the most popular industry in the US. Two-thirds (66%) of Americans think the restaurant industry is just swell, while just 7% viewed it negatively. It’s been one of the most popular industries since 2001. Great work, everyone! 

The Bad

Ever have a pest-infestation problem at your restaurant? Every wonder if it was just you or an outside force? Here’s a cool (yet disgusting) infographic on America’s most pest-infested cities. Are you operating in one of them?

Infographic: Rats & Roaches: America's Most Pest-Infested Cities | Statista
You will find more statistics at Statista

If you are considering starting a pest-control business, you should probably establish yourself in New Orleans. According to 2013 American Housing Survey data reported by the Seattle Times, The Big Easy has the highest percentage of pests of any American city. 2.5 percent of homes reported seeing a rat over the previous 12 months, along with 35.6 percent who found evidence of cockroaches.

Even though New York City is well known for its rat problems, it actually ranks lower than many other American city's for rodent-related problems. Memphis (2.3 percent), Austin (2.1 percent), Miami (1.8 percent) and Dallas (1.8 percent) all reported more rat sightings over the past year than the Big Apple.

The Ugly

Rogers Park Social, a bar in Chicago, is diving head first into the political pool by selling anti-Donald Trump beer. The beer is called Chinga Tu Pelo (and yes, it’s a blonde ale), which translates into not-so nice things about Trump’s hair. Mudslinging aside, they are donating $1 of the proceeds of each beer sold to their local ACLU chapter. 


Why it’s important to you: Who knows, maybe your food will end up on an episode of True Crimes.

Everybody loves a mystery solved and with the new technologies developed since the mid-1980s more of them happen every year. Specifically since 2015 there have been a spate of murder cases where restaurant food left behind at the crime scene was pivotal to getting a conviction. In one such case, two half-brothers got stuck in a snow bank as they fled a bank robbery. As they dug out of the snow, one of them dropped an unfinished Wendy’s burger on the ground.

Improvements in DNA testing have now made food a viable place to collect incriminating samples. This, according to US Attorney for Michigan, Patrick A. Miles Jr, was, “very persuasive to the jury.” Another case in Washington DC had a man implicated in the quadruple murder of the Savopolous family. Investigators point to their better understanding of crime scenes and less on technological advances. Crime scene experts now realize food left behind at the location is a credible option for testing. The trick is to get it to the lab quickly because bacteria and moisture are threats to the integrity of the sample. I think I smell a spin-off series here — CSI: Culinary!


Why it’s important to you: Further proof that discounting doesn’t work.

Given Chipotle’s woes over these last 18 months, you can understand why they would consider giving away $70 million in food as a good idea. Well, in a letter they wrote the Securities Exchange Commission they acknowledge they can’t make the slightest connection between an increase in sales and all that discounting. This further supports a trend away from discounting and towards better marketing and improving the guest experience.

For example, Bloomin’ Brands CEO Liz Smith announced that the chain was dramatically reducing their discounting in favor of focusing on improvements in the guest experience and better marketing. The key takeaway is when guests pay a discounted rate they perceive the price to have changed and the value proposition to have cheapened. Discounting was a key issue in the demise of chains like Fox & Hounds and John Carino’s, both which filed bankruptcies recently. The harder road to growth has always been through quality operations and the guest experience. Building loyalty, rewarding your guests’ behavior, and providing a terrific experience will always be the basic ingredients of success. It’s time we revisit discounting and focus on the service we deliver.


Why it’s important to you: Shouldn’t you look at your own restaurant as an investor would?

If you aren’t a savvy investor then you probably don’t know owners of stock are allowed to influence the operations of the companies that hold their money. This was the case on Wednesday, when Marcato Capital Management, a fund which holds a 5.2% ($162 million) stake in Buffalo Wild Wings (BWLD), delivered a letter to the company’s Chairman, James Damian, demanding significant changes in their management structure and practices. 

While we offer no judgements on how BWW is managing their business, there is a lesson here for all operators. Look at your business as an investor would. An investors expressed interest is return on their investment (read: profit). Isn’t that yours as well? We sometimes get so caught up in the granular aspects of running our restaurants that we can’t see the big picture of profit protection. So take a moment today, step back and look at your business’s whole health. Are you being thoughtful in your strategies? Do they result in profit increase or real cost decrease which lead to better profit? It’s an exercise we can all benefit from regularly.