OPERATIONS: Top five operational trends for 2004

March 3, 2004

Jim Moran is a pizza and restaurant industry veteran, and an industry consultant and speaker with Restaurant Trainers, Inc.

Last month I gave you my annual "Top Five Client Mistakes" list.  This month I'll stick to the positive and list the Top Five Encouraging Trends I've observed with my consulting clients over the past year. The criteria for making this list are the commonality of the trend and the benefit to the restaurant's long-term success.

5. Improved Vendor Control—Smaller restaurant chains are finally sticking up for themselves when it comes to vendor pricing. By concentrating groups of stores that can be serviced conveniently by a limited number of delivery routes and a prime vendor, they've earned a price break.

Smaller restaurant chains have really gotten shafted in the past, and many still are getting less-than-ideal contracts on drinks, cheese and wings.

In 2003, many of my clients have, however, negotiated more favorable vendor contracts for both product and non-product services. Before, too few of them actually knew they could negotiate their prices.

4. Image—The investment my clients have made in the image of both their stores and their employees is really paying off. Good-looking stores draw customers and repeat business. Stores that are dirty and/or in disrepair drive customers away.


Jim Moran

same goes for uniforms. If you're not enforcing uniform standards, the resulting bad image will cost you customers, particularly delivery customers. Consider it this way: When a customer places a delivery order, he agrees to open the front door of his house to a complete stranger. If the appearance of your driver makes that customer uncomfortable, he may never order from you again.

3. Creating an Experience—It's easy for your business to blend in with the rest of the pizza industry if you do little to distinguish your operation. Part of standing out in the crowd is to create an experience, something customers know they'll get only at your place.

My clients who commit to this are ecstatic with the results. Here are some suggestions for doing this:

* Stay out of the price wars and sell a high-quality product for what it's worth.

* Pinpoint the experience you are "selling." Some examples might be:

Freshness: "We have no freezers, microwaves or canned products—only the freshest ingredients."

Atmosphere: If you have spent a lot of money creating a great atmosphere in a sit-down restaurant, make sure your place looks great and the service is perfect. And don't attempt to beat a "carryout/delivery-only" establishment on price.

Size: Wendy's knew they couldn't be McDonald's, so it didn't try. Instead, it sold bigger burgers, charged more for them and became very profitable in the process. If you sell bigger wings or better pizza, make that your marketing focus.

2. Doorhanging—Restaurant Trainers, Inc., the consultant's group I work with, acquired a new client this year who told us his company was "happy" with the previous consulting firm they had used. In fact, he informed me his company had seen an 8 percent increase in sales! When I asked him why they had decided to switch to our firm, he said, "We were happy with the overall results, but we were negative in profit dollar." (How anyone can be happy with "overall results" that include being negative in profit dollar is beyond me, but happiness is relative, I suppose.)

The previous consulting company had a lot of marketing experience, but very little actual restaurant experience. The client's stores were put on a steady diet of direct mail and big discounts.

But by adding a doorhanging program, I led them to eliminate 80 percent of their direct mail. In the fourth fiscal quarter of 2003, they were 11 percent positive in sales, but more importantly they were 62 percent positive in profit dollar.

Doorhanging is much more cost-effective than direct mail when done correctly. This does not mean hiring a doorhanging service or dropping a bunch of kids off in a neighborhood and picking them up at a convenience store two hours later (see OPERATIONS: Doorhanging is for drivers, not for kids). There is a lot involved with a good doorhanging plan, but one thing is very important: The owner/manager should be a part of the doorhanging team. (C'mon, you can do it, and know you need to exercise.)

1. Stricter Franchise Approval—This is the clear winner for the best, most encouraging trend I have seen over the past year. Franchisors are getting more strict about who they approve as franchisees, something I view as a sound step towards long-term survival.

It has become clear that for a restaurant chain to be successful and grow it must invest in building a brand. Bad franchisees, however, hurt that brand.

In our increasingly transient society, many owners realize that the reputation of a bad store in San Francisco will hurt an otherwise good store of the same name in Los Angeles. In larger chains, that bad San Francisco store is could even spell bad news for that company's stores in Houston, Miami and Chicago.

I understand a growing company's difficulty in turning down franchise prospects who qualify financially. But what has happened too often in the past is that franchisors have taken the short-term pay-off and "hoped for the best." And as they've grow, they have come to regret many of those decisions.

I encourage my clients to treat every store as an important member of their family. That way, when you make the decision to put a family member in someone else's care, potential financial gain won't weigh so heavily in that decision.

* OPERATIONS: Top five client mistakes of 2003
* OPERATIONS: Protect your investment and people with store safety policies
* OPERATIONS: Take pride in your product
* OPERATIONS: Monaghan's maxim was never to put the cart before the horse
* OPERATIONS: Pizza-centered school fundraisers pay dividends for all
* OPERATIONS: Rule #1 in pizza is, 'The customer is always right'
* OPERATIONS: Doorhanging is for drivers, not for kids
* OPERATIONS: Everyone wins on the 'one per run' delivery system
* OPERATIONS: Cross-training lowers labor cost, boosts morale
* OPERATIONS: The secrets of running low labor

Topics: Operations Management

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