HOTELS

Bob Puccini

3 Components To A Successful Concept
July 17, 2008

The only way to create a financially successful restaurant, in any market, is to have sales great enough to cover your costs--including your development costs. Today’s blog topic is my follow up to last week’s thoughts on seeing the unseen.

Sometimes coming up with a concept seems like magic, but generally it is a result of a lot of research because seeing the unseen is more than hocus pocus. There are three components to examining a market and coming up with a successful concept:

Economic Feasibility
The economic feasibility is first looking at demographics and psychographics (sometimes values and lifestyles), some of which is statistical and some of it is pure observation. As an example, if the per capita income for San Francisco and Berkeley are the same, what really separates the two neighboring cities? The answer: Lifestyles.

In San Francisco, you see the car of choice being BMW’s and Mercedes Benz, in Berkeley it would be Saabs and Volvos; for clothing in San Francisco it is probably Armani and Zegna, in Berkeley it is Levis and Patagonia. San Francisco values urban cool environments and in Berkeley it is sustainable and responsible kitchens. Everything works but the kind of restaurant you would do in Berkeley may not be as successful if done in San Francisco, or Kansas City or Atlanta.

Part two of the economic feasibility is looking for the “best demonstrated” performance. Examine your trade area to see who has the best and most popular design, and who is doing well and how well. If a restaurant is full and has a waiting list in your trade area, you need to believe that you can do that, too. When you observe the best demonstrated design, that level begins to set the standard for a successful level of design.

The truth is, as far as consumers are concerned, ambiance is free, or minimal, as it is partially connected to the check average. If in a given market, you go to a Macaroni Grill and it is the busiest restaurant in town, you need to at least meet that level of design, or balance it with incredible service, because for the price you get great value. If on the other hand, your trade area has several high-end, chef-driven restaurants that are doing well, you need to understand how deep the market is and the opportunity to compete via check average and décor level.

Part three is to create a pro forma statement of sales to estimate what your sales opportunities are because that is the fuel that keeps you going.

An Intelligent Operating Model
The operating model of a restaurant is really about labor. Most of the other costs in a restaurant are variable costs per customer--for example, linen, food and beverage costs, china, glass and flatware. Labor is variable up to a point where it becomes fixed and at that point “flow through” sales become profits.

Creating an intelligent operating model means looking at your sales potential, check average and estimated customers per meal period and creating the operating concept. Are you going to be able to have an expensive chef and rely on a fabulous menu and quality to gain check average? Are you going to have a pastry chef to create breads and deserts that are mouth watering, or do you buy those items? Is your service going to require a sommelier or simply wine knowledgeable servers?

Once you come to terms with the operating model and your sales forecast, you should be able to see if there is going to be a profit or not. One of two things happen at this point: either you make money and you are happy or you don’t and you need to start over until you find the right combination of your observations and your operating style that will make money.

NOTE: This is where people make their fatal mistakes. Either as a result of ego, or lack of due diligence, or in my humble observation most often in hotels, that the right answer is incompatible with their hotel's style.

NOTE TWO: You may have noticed that I have not spoken yet about food style as at this point it still could be anything.  Either one of two things will happen: you will have noticed as you have surveyed your market that there is a hole in the market for a certain style of food and its service, or you are going to do whatever your heart is set on. All food styles come in low, medium and high quality and style, so at this point your market survey should tell you where the greatest opportunity is. There is no use in going up against a steakhouse if there are already three in the market.

Consistent and Coherent Design
Design should be the package that wraps your economic and operating models together coherently. This is where your design package and concept come together with the needs of the marketplace to deliver a concept and design that will slide elegantly into the competitive set and provide you with not only a restaurant that is full of people, but one that can make money too.

Posted by Bob Puccini on July 17, 2008 | Comments (1)