Loyalty from Locals Are Gold in Marketing Your Restaurant

You’re a full-service restaurant in a destination locale or a small hotel with dining room service; your business can only rely on something other than out-of-town guests to keep the operation viable. Fully booked rooms around town may occasionally fill your restaurant, but typical occupancy averages tell another story. It would be best to have locals for steady business and vital word-of-mouth referrals. Let’s look at promoting your food establishment through improved service and a reasonably priced menu. I’ve talked about improving the quality of service in a previous article, “Delivering 5 Star Service,” so I’ll leave that to your exploration. Pricing your menu based on ‘ideal food costs’ may affect your ability to gain support from your community because you won’t be able to compete with fast food, limited service, and other lesser-priced menu options. So, let’s work with higher food costs to keep menu prices down while increasing guest counts. Sound crazy? Not really! One of many points I learned years ago from a successful multi-restaurant operator on the Monterey Peninsula is that food costs are of little importance when you first open. If the food and service are great, the crowds keep returning.

Now, the menu needs to deliver quality, fit a niche in your town, be modestly priced, and be diverse to encourage people to return and try many different items. If you’re serving a New York Steak Sandwich, it must be better than the limited-service diner down the block. It may be a few bucks more than the competition, but there should be a recognized value even at a higher price.

Allow me to present a simple process that can get you on track to build a large customer base while promoting your site as the local favorite. Ideally, locals become frequent diners. They talk to other residents and, if your town is a popular destination, often interact with out-of-town guests. Once you build this base, you keep their interest by introducing new menu items and specials. You can also reduce overall costs with better purchasing, higher-end desserts, wines, or appetizers. Eventually, you will see an increase in the average check.

“…provide consistently good food at a great value even though it involves a higher-than-normal food cost.”
Here is how it works:

1- run higher food cost- attract the locals as a reasonably priced dining spot.

2- locals fill your dining room and talk you up, keeping your dining room packed with the added perception to incoming visitors that you are a great place to dine.

3- build check averages through new and distinctive items, signature desserts, appetizers, and odd or rarely seen local wines & beers.

Let’s explore the concept in more detail. You strive for and succeed in an average well-established restaurant if your food cost is 30–35%. The national average for full service is 32%.* Run a 35–40% cost and make up in cash flow what you don’t get in net profit. Stay with me, and it’s not as crazy as it sounds.

Here’s an example: Take an entree with an $18 menu price at a 30% cost.

20 dinners at $18, at 30% food cost = $5.4 (360–108= $252)

30 dinners at $15, at 36% food cost = $5.4 (450–162= $288)

In this example- your profit difference is negligible, but your cash flow is near $100 greater, and with only ten more meals, you won’t need any additional staffing.

You could overthink this with a bell curve chart to see a point where the higher guest counts, with the added staffing costs, equal higher sales, and reasonable profit. Because of each growth of 20 extra meals, you will have added costs for staff and linens, etc. But imagine if you were able to double your volume in full dinner service, plus add another handful of patrons only looking to hang out in a busy place with a beer and appetizer?

The point is this:

You provide consistently good food at a great value even though it involves a higher-than-normal food cost. You build traffic and repeat guests. It makes your restaurant full when out-of-towners arrive and see the place busy. Higher food costs may reach 35 to 40%, but volume can compensate for better cash flow vs. higher profits. You must commit to this concept for at least three months with additional staff training to keep service standards high.

Without increasing pricing, add new items and build guest check averages. Add hard-to-find wines, better desserts, and more diverse appetizers. The same couple who has come in and spent, on average, $22 per person now ends up spending $28 or $30 for meals and beverages. Create a loyalty program, so they get a bargain every once in a while by offering a second ‘daily special’ meal at half-off, or a free appetizer, when they order the wine of the month. A variety of promotions can create the value locals want. Use a comment card to ask opinions or request menu ideas, and through email or direct mail, and you can keep guests in the loop.

‘Statistics shows that higher check averages in the $15- $25 range have the highest profit range of 3.5%’. * So, although the first goal is to build guests’ loyalty with value pricing, the ultimate long-range goal is to increase check averages. This selling technique for a higher check average becomes a routine for your servers selling to the out-of-town day-trippers and overnight hotel guests. It’s a method to better sales and finally more stable profits.

Locals want a better place to eat. If you can get them in the door at a price that is ‘perceived value’. “It’s way better than a $9 hamburger at a local take-out”. Wow them with good service, and you’ll have them eating with you several times a month. Lowering the price will create a sense of value. They will come into your place more often and spread word-of-mouth accolades to every tourist and friend they encounter. You can even eliminate the cost of some of your expensive advertising.

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writer: David B Townsend

www.dbtownsend.com

* -from article by Aurelio Locsin