By Harris Eckstut
The restaurant business is a retail business – the one major difference, however, is that we manufacture the product as we sell it. Most marketing and merchandising rules and concepts of restaurants are therefore based on retail models.
When it comes to dining, our tastes as a culture are always changing; much like the style of the clothes we wear. Accordingly, restaurants should always be one step ahead of the game in taste, service, and marketing.
Certain segments of the general public may think blue jeans are always in style and acceptable, so the good old-fashioned staples of diners and burgers joints will always be in fashion. However, those wanting to bring in customers based upon innovative trends must have the edge on new concepts and promotional ideas.
In the past few years, cyber marketing – especially to the younger generation — has become the most dominant form of out-of-store promoting: Facebook, Twitter, and the all the other Internet stuff we old folks don’t quite understand yet.
Here’s a classic example of today’s marketing for entertainment in restaurants and bars: In the old days, restaurant and bar owners would listen to the band, track a its previous performances, determine whether it was popular enough to bring into the his/her restaurant/bar and then pay for ads in the papers, print and distribute flyers, etc. Today, bar and restaurant owners will ask the band to justify their popularity by sharing how many people it has on its Facebook. If the desired critical mass is insufficient, the bar owner doesn’t even bother to hear the band play before saying, “No.” If it does have the minimum – let’s say 1,000 – then he or she will listen to the demo or see the band play to determine whether it would be the right fit.
Marketing expenses is an all-inclusive line item. For most table service and quick service restaurants, the rule of thumb for a marketing budget is 5% of sales. I no longer call this line expense “advertising”. Nowadays I try to stay away from that term because it has the connotation of expenditures for paying for the traditional media of display print, radio, etc. And, although these “advertising” expenses are a part of the marketing expense equation, for restaurants – because of other promotional expenditures – it is limited. These other costs would include maintaining the website, cyber communications, and coupons/discounts/comps.
Usually for table service restaurants, and especially bars, the largest component of the 5% marketing line item expenses are the coupons, discounts, and other “freebies” we in hospitality “give away.” They are a critical component of promoting the business, but must be monitored carefully before one winds up paying people to eat and drink for “free” in your business.
These “freebie” expenses are dollar for dollar line item expense. Do not fall into the illogic of thinking that the hamburger only costs 25% – the price to you of the meat and roll – of what you charge for that burger. All the other costs of servicing that hamburger to the customer are always in place: the costs of the cook, server, dishwasher and server, the utilities, the rent, the insurance, etc., etc.
To further explain: A salesperson for a discount coupon book pitches his “book” by telling you that a $10 coupon only costs you the $3.00 for the food. He/she is very wrong. The $10 coupon costs you $10 – unless you have a profit margin of 5 or 10% — then it costs $9.90 or $9.95. Always remember that the costs of labor, utilities, rent, insurance, and all the other costs of doing business are connected to an item such as this discount coupon. So, if the ad costs you more than 5¢ or 10¢ a person, you are paying the customer to eat at your restaurant.
The other way to look at it – especially if you have a Chef working on a bonus by meeting the food cost budget - is “don’t charge (blame) the Chef for your marketing and advertising expenses.” (He or she is already temperamentalJ)