Saturday, January 31, 2009

Success is never final:

This is so wrong. R&I magazine has a story about new moves by Starbucks

Perhaps the most surprising move, however, was Schultz's announcement that Starbucks soon will enter the value-meal race. Schultz has long belittled such a move and said that customers were willing to pay a premium for the Starbucks "experience."

But value-leader McDonald's has been on a tear. Its same-store sales grew 7.2% in the fourth quarter, and its new McCafe coffee bars -- slowly spreading nationally -- have stolen business from Starbucks with lower-priced premium coffees, lattes and cappuccinos.

Before every restaurateur jumps on this bandwagon they might want to do a Return on Investment analysis. Does a 7.2% same store increase justify the capital expended by McCafe?

The lure of the $1 Menu:

The vast majority of consumers and businesses have never experienced an economic headwind of this magnitude. Every restaurateur knows someone who has shuttered their operation or is holding on by the proverbial thread.

In this environment the lure of the $1 Menu popularized by the major chains is powerful. Customers are clearly pinching pennies if they have any. The recent GDP data showing a contraction (-3.8% which I suspect will be revised downward) adds empirical support to the declining traffic counts that restaurants are experiencing. The lure is even more powerful because by now restaurateurs have tried several promotional variants and none have had any positive impact. All that is left it seems is to go to the $1 Menu.

Simply putting your JR Whopper on the $1 menu is not the solution. If your restaurant got 14% of its revenue from the $1 Menu, I am fairly confident that the situation would not be sustainable. Create new cost effective items for the $1 Menu that enables you to offer the $1 Menu in a manner that does not cannibalize your entire pricing structure. You must provide value to your customer, however you must do it in a fashion that is sustainable.

Monday, January 26, 2009

The search for food and the process of survival:

Life in its simplest incarnation is a search for food. Business in its simplest incarnation is a search for customers. Without food the physical body dies, without customers the business dies.

I recently read a quote that the goal of man is not to be eaten by a predator. I disagree. The goal should be to expand the food supply. The goal of business should not be survival (i.e. not to be eaten by a predator), rather it should be the expansion of the customer supply.

Tuesday, January 20, 2009

New Hope, New Promise, New Confidence

“He who blames others has a long way to go on his journey. He who blames himself is halfway there. He who blames no one has arrived.”

Chinese proverb

Today a transfer of power occurs that is nothing short of marvelous in the annals of human history. A peaceful transfer between the political party currently occupying the presidency to a member of the opposition. This particular transfer is even more remarkable because it occurs during a time of great economic upheaval. Franklin Roosevelt captured the essence of the economic depression with his “we have nothing to fear but fear itself” proclamation.

President Barack Obama assumes the presidency and brings with him a new hope, a new promise and a new confidence. What is particularly ambiguous about economics is that it is really not about supply and demand of physical goods. Economics is really about how people feel about the future. If people are confident about the future the economic engine hums along, if people are less than confident the same economic engine sputters. For far too long the citizens of this country and the world have felt less than confident about the global leadership. Today January 20, 2009 that changes.

A new day has dawned with hope, promise and a renewed confidence in a brighter future. Is your business prepared to seize the opportunities that are available?

Monday, January 19, 2009

Innovate by leaving stuff out:

The best innovation comes from looking at a process and taking a step out, not from creating a process from scratch

Saturday, January 17, 2009

The Facebook – Burger King lessons

Burger King has garnered a considerable amount of attention and there are several lessons to be learned. Any political consultant worth their fees will tell you that negative ads work. Clearly Burger King received a short term bump by its drop ten friends get a burger promotion. Facebook for its part brought more attention to the promotion by shutting down the app on its site.

Lesson#1 Social Media is real.

Lesson #2 Negative ads work short term.

Lesson #3 Short term gain is always followed by long term pain. (i.e the current economy is an excellent example)

Lesson #4 Winning is always a function of inclusion and never a function of exclusion.

Burger King and their marketing gurus are wrong. Promoting yourself as the burger that is worth dumping your friends for is misguided and idiotic.


Ivana Taylor’s post “Top Small Business Marketing Trends of 2009” highlights:

AUTHENTICITY– In 2009, the focus is on “authenticity” and letting the real people behind your company be visible and show through — no more hiding behind a faceless website filled with the word “We.” Instead, it’s “I.” Consumers and B2B buyers expect to know who they are dealing with before hiring your company.

In the event of a problem with your products, consumers want a real person to reach out to… business people are connecting one-to-one through social media sites and this activity will continue.

How to take advantage of this trend:

  • Set up a social media presence in your real name on sites like, and interact with customers and prospects, mixing in personal information as well as business information.
  • Set up profiles and groups on Facebook and start recruiting customers to join.
  • Create at least one blog to keep customers educated either about your industry or your products and services.

The discretionary dollar of your customer is only going to restaurants that connect with them. Authenticity is the price of admission into your customer’s world.

Yes, we have no bananas

"Yes, we have no bananas” Frank Silver & Irving Cohn

The song offers a marketing lesson. Always state a negative as a positive. Accentuate the positive in everything.

Tuesday, January 13, 2009

I had heard there was a recession

Great piece about conspicuous consumption

The recession does not loom large for all

Sunday, January 11, 2009

Why there’re buying.

Mike Sigers’ post does an excellent job of distilling the key metric in business.

“It doesn’t matter what people are buying, it matters why they’re buying.”

If you want to make a decent living, sell what people are buying.

If you want to be wealthy, find out why they’re buying.

Start a newspaper:

I thought this was a restaurant blog? Seth has a great post about owning your zip code. Interview local businesses and personalities and publish a twice weekly email newspaper. Here’s how Seth says you should do it.
  • Interview a local business, a local student or a local political activist. You can do it by phone, it can be very short and it might take you ten minutes.
  • Get 20 households to 'subscribe' by giving you their email address and asking for a free subscription. You can use direct contact or flyers or speeches to get your list.

Twice a week, send out the 'newspaper' by email. After one week, it will have more than 500 subscribers and contain more than 20 interesting short articles or quotes about people in the neighborhood. Within a month, (if it's any good) every single person in town who matters will be reading it and forwarding it along to others.

So what do you think, should your restaurant publish a newspaper discussing local issues, interesting personalities and stories about your guest? Yes!

Friday, January 9, 2009

Income Substitution:

Chris Muller’s post about more restaurants opening than closing in 2009 is a very interesting insight.

Our explanation was that these places opened because when folks lose their jobs they sometimes make the decision to strike out on their own. People take their severance pay, or their retirement savings, or the more traditional route of borrowing money from friends and family and “buy themselves a job.” The small business researcher David Burch called this business model “Income Substitution.” You’ve heard it before, “I’ve always wanted to open my own restaurant. This seems like the time to make my move.”

The restaurant business, even in 2009, is a remarkably easy-entry business. With a small amount of capital investment, anyone can open a sandwich shop or pizza delivery store, a Chinese or Mexican restaurant, or a local saloon. With good timing and desire, finding a recently closed restaurant which is still fully-equipped is really not very difficult. In many markets retail real estate is 50% cheaper than it was a year ago, and “free rent” for a few months is easily negotiated. Landlords need tenants, and restaurants are hard to retrofit for other retail uses.

Now go open some restaurants, the global economy needs you!


Tom Peter’s has a fascinating post about reframing the discussion:

If you think of it as a recession, you may be tempted to "hunker down" and wait for the economy to cycle back.

If you think of it as a recalibration, you will be motivated to focus on what you have to do differently, since everything is different now.

Everything is different now and you need to recalibrate

Sunday, January 4, 2009

The secret sauce:

“Nothing in the world can take the place of Persistence. Talent will not; nothing is more common than unsuccessful men with talent. Genius will not; unrewarded genius is almost a proverb. Education will not; the world is full of educated derelicts. Persistence and determination alone are omnipotent. The slogan 'Press On' has solved and always will solve the problems of the human race.” Calvin Coolidge

“The Drunkard's Walk: How Randomness Rules Our Lives by Leonard Mlodinow offers the following nugget:

Successful people in every field are almost universally members of a certain set—the set of people who didn't give up.


Why does McCafe’s Free Coffee Monday work?

Reciprocation. It is pretty simple really, if you do something for someone, they feel that they need to reciprocate. For McCafe’s it is really easy because when the customer gets their free coffee or free latte they feel obligated to buy something. All those obligations add up to increased same store sales for the chain.

The bonus of course is that if you can alter a customer’s current behavior you can create a long term customer. Very few businesses have the resources to undertake such a project, much less sustain it. You can however undertake a much less ambitious project with some pretty outstanding results.

Reciprocation, use it wisely.

Walk around your restaurant:

2009 is here and it is time to walk around your restaurant again. The new year brings fresh perspectives. The first thing a restaurateur needs to do physically walk around the outside of the restaurant. This is actually something you and your staff should do every day. If there is litter, pick it up. If there is litter on the city street in front of your restaurant, pick it up. The customer walking by will not say, “Oh my, the city is doing a poor job cleaning the street”, they will say “this restaurant does not care.” Keep walking around, are there any physical plant issues that have gone on to long? The customer will only notice the imperfections in your building, not the ten thousand other things you do right. Have you really looked at your building with a critical eye? Ok, time to come in.

Forget that you built and manage the place, walk into your restaurant with fresh eyes. Try to experience what a first time visitor would experience. Smell the smells, hear the sounds, touch the furniture, see the place for the first time and finally taste the tastes.

Heck it is a new year, time for a fresh perspective.

What are you planning to do to make the world better in 2009?

“Be the change you want to see in the world.” Gandhi

A very simple question, not what are you planning to do to make your business better, rather what are you planning to do to make the world better? The only viable business model is one that exists in an environment that is conducive to survival and sustainability.