You are in control of your own destiny.

January 31st, 2012

Successful business people keep their eyes on their own product, creativity, service, culture and execution. When they do their job right, they have an awareness of what other businesses are doing, but spend their time perfecting what they themselves are doing.

Quick service, fast casual, casual dining, fine dining. Think fast! There’s a good chance that you have been to all four recently, and enjoyed them all, though for different reasons. The owners of those establishments know that success comes from performing well within the niche they selected, not necessarily from selecting the right niche.

So I was surprised to hear that part of the strategy to re-launch Bennigan’s out of their bankruptcy was to take advantage of people being bored with fast casual. However, I have not detected that fast casual is on the wane. I went point-counterpoint with Bennigan’s Franchising Co. CEO Paul Mangiamele about it in the Dallas Business Journal last week. Like a throwback to CNN’s Crossfire, I took issue with his claim that casual dining will be profiting from fast-casual fatigue. The article, “Reborn Bennigan’s is in growth mode” by Steven R. Thompson, appeared in the Friday, January 27 issue.

To be fair, Bennigan’s still has a strong and meaningful brand. So the outlook is good for Paul’s comprehensive plan to relaunch the brand in this market. Though there are still a few vacant Bennigan’s on the freeways, the concept nearly vanished from the North Texas area during the 2008 bankruptcy. One of our clients recently converted an empty Bennigan’s to their own concept. Another intended to, but the landlord decided to go in a different direction. It will be interesting to see the latest life of Bennigan’s, and whether it will stand out in the casual dining universe.

The lesson for business owners of any type is to focus on what they can control. Factors outside of their control, like changing trends, are part of the operating environment.

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Restaurant Forecast? Sunny with Challenges.

January 18th, 2012

According to a recent survey, restaurateurs are optimistic about the future. The top priorities identified by respondents are:

  • staying true to their culture,
  • creating profitability, and
  • generating revenue.

The survey of restaurateurs was conducted by Surrender, Inc. in partnership with the Texas Restaurant Association. A full 86% of the respondents said they were optimistic about the future of their business. When presented with a variety of potential issues or challenges, most of the responses fell into the areas of ensuring their culture is represented in every interaction, maintaining or increasing profitability in a recovering economy, and building and maintaining revenue.

It might be surprising to learn that restaurateurs are so concerned with truly living their culture. However, it’s a good indication of their understanding of culture as a true point of differention in a competitive market. When thinking about how to build revenue, these business leaders know that perfecting their culture is their true differentiator.

A restaurant’s culture supports their effort to attract both associates and first-time diners. Culture and atmosphere are used to best effect to turn first-time guests into regulars.

Good examples of corporate culture include Friday’s fun, upbeat atmosphere and knowing you will experience great service at Nordstrom. Starbucks always feels like your “third place”. . . somewhere you want to return when you aren’t at home or work. At Urban Outfitter’s, you know you will find creative street-level fashion and people.

But, what is restaurant culture anyway? It’s one of those elusive things that is difficult to define, but you definitely know it when you see it. And you really notice when it misses the mark.

When attempting to define a culture, rather than recognizing one that is organic and authentic, it is wise to shoot for a realistic and attainable target. Companies that overreach end up getting the opposite of what they want – a brand that deteriorates or is not taken seriously by guests.

Last week, I noticed this when dining in two different restaurants. One had a marketing slogan that was very culturally oriented, all focused around an expression of emotion. Just one problem: there didn’t seem to be anyone representing the company in the dining room that showed that emotion.

The Lesson: Define how your company cares about the guest by hiring people who consistently display those characteristics. Alternatively, coach your people on how to show it!

The other restaurant has a name that promises quick service. However, it was being run by a manager who showed no concern for a lost order.

The Lesson: If you are going to promote your commitment to your guest, train your management and staff to treat the occasional breakdown in your system as a serious issue.

Like all business leaders, top restaurateurs are institutionalizing their culture through education, measurement, and an imperative to share anecdotal evidence every day on every shift. Leaders in these companies talk about their culture constantly, even if topics on the agenda seem unrelated to the “feel” of their operations. It’s a great way to emphasize what is truly important, which brings us back to the priorities and sunny outlook reflected in our survey.

While it may seem counterintuitive to see so much optimism among restaurateurs, they are naturally positive people, like most entrepreneurs. Most business owners know that the worst is over, and the future looks better. It’s much easier to achieve goals when you feel hopeful than when you are in despair. Recent upticks in employment and consumer confidence bear out the industry’s optimism.

Obviously, profitability and revenue are the lifeblood of every business so it’s logical that these are high among restaurateur’s priorities. The best operators perfected running lean operations through the recent downturn. Sales are increasing, albeit slowly, and they being compared to the new normal of the past few years, rather than the years before the Great Recession. Leading restaurateurs are taking smart, targeted actions to raise frequency, guest count and per-person average.

I look forward to opening a more wide-ranging dialogue about these issues in the future.

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Trust, But Verify.

January 12th, 2012

At the end of last year, I was talking with two restaurateurs who had experienced the pleaasure of IRS audits. These folks are very sharp operators with highly organized companies. They exemplify the kind of success derived from refined numbers that are drilled down into improved operations.

The audit results were shocking. Though they thought their payroll company had handled all reporting issues correctly, they were on the hook for more than $80,000 in taxes, fees and penalties.

Payroll services are standard operating procedure for good reason:

There is just so much to keep track of!

I have friends who work for payroll services and a friend who owns one, so I’m not one of those who think these companies are the enemy. The best business people know to check that these arcane aspects are being handled and don’t just assume they are.

In one case, the payroll company had figured server overtime incorrectly. It’s reasonable to assume that the payroll service would catch this, but using polled data, their system didn’t compute that they were dealing with tipped employees and tip credit issues.

Granted, server overtime is not very common. But, in this case, they had a specific operational reason for it. (It’s a long story for another time.) The payroll company was taking the tip credit amount of hourly wage at $2.13 and paying time and a half. The correct calculation for server overtime would be minimum wage x 1.5, not $2.13 X 1.5. Have I lost you here? Probably so. It’s no wonder there is a risk that this is being done wrong. The more I mention this in conversation, the more people tell me there is a lot of opportunity out there to clean up this common error.

In the other case, the fine was related to insufficient tip declarations and the failure to file a Form 8027 which details them. The restaurant assumed their accountant would file it. Their accountant assumed the payroll service, who had all the data, would file it. No one filed it. No one was watching that tip declarations were in compliance at the store level either.

So don’t let this happen to you. What do top restaurant owners, and all business owners do? Occasionally look at their bank statements online, payroll runs, credit card statements, and yes, even their Form 8027 Employer’s Annual Information Return of Tip Income and Allocated Tips.

The bottom line?

  • Spot Check. Ask questions;
  • Emphasize that you are on top of things;
  • That helps the people to whom you delegate stay on top of things, too.

We would be interested to hear what other services you may outsource. What are your best tips for monitoring the work of outside services?

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