Ron's Tip Jar/Insights - Published by Ron Santibanez   

December 5, 2012


In This Issue:

Tips and Things - Overtime 

Cost Control

Observations - Part 2

Restaurant Start Up - Site Selection..The Principles 



 Tips and Things


 A common misconception in the restaurant industry is that paying overtime is a sign of either bad management or poor scheduling. Not necessarily. Overtime can also be a sign that a tight, well-conceived schedule was prepared and the restaurant was just busier than anticipated. Consistently operating with no overtime can be a sign of a padded schedule or that the restaurant has more employees than it really needs. Consider too that paying a little overtime each week can be an excellent incentive and reward for deserving employees, particularly kitchen personnel (who don't earn tips). In today's challenging labor environment, anything you can do to keep good people happy is a wise investment.


Thought For The Day

 I have found that being honest is the best technique I can use. Right up front, tell people what you're trying to accomplish and what you're willing to sacrifice to accomplish it."

~ Lee Iacocca 


What Is Your Objective?


Cost Controls

You have all read that businesses that pay attention to quality also seem to do other things right, and costs generally fall in line. But the opposite is also true. Those businesses whose costs are excessive and out of line presumably are not doing the other things necessary to make their business successful. When food and service quality is suspect, sales volume will surely suffer as well.

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Observations - Part 2

 Another client of mine is the opposite of the one I discussed last week. Even though he has some operational challenges, he understands the importance of customer loyalty.

His customers not only come to his restaurant to enjoy a great meal, but they also come to see him. They ask for him by name. If he's not in, they ask how he is doing and to tell the servers to make sure they let him know they asked about him. His is a restaurant where many of the regular customers seem to know each other. You can visualize them calling each other saying, "lets meet tonight at "_____'s."

Very few of the restaurants I have consulted with over the past 18 years have this type of following.  To be successful in this business requires you have a love of people. They don't refer to it as "the hospitality industry" for nothing.

This owner/operator loves people and he passes on that love of people to his staff. It's infectious.

 Restaurant Start Up

Site Selection - The Principles...continued...

Below are the Principles of Restaurant Site Selection. Over the next several issues I will examine each one of these principles in detail.


  1. Know Your Operation - It goes without saying that you must know and understand your operation. Moreover, knowing your operation is a pre-requisite to any expansion you have planned. In fact, this is the strength of the of the food business. Food operators can usually recite and compare food costs, labor costs, controllables, and uncontrollables. Numbers are traded and widely discussed. Daily tallies, transactions, customer counts, meals purchased, and, hopefully, profits fill numerous notebooks. Nonetheless, as mundane as it sounds, you must truly grasp the complexities of your operation and accurately gage your management ability before expanding or starting out. Have you done your homework? If you are entering the food industry for the first time, have you studied successful food operations, and do you feel thoroughly familiar with their techniques? 
  2. Determine Your Customer Profile - Customers are attracted to any food operation for numerous reasons. As a food operator, you should know why your customers choose your facility. Also, identifying the characteristics of your most frequent customers is essential. Without such data, you are going into a fire fight with a BB gun. I am continually amazed at the number of food executives , responsible for spending millions of dollars, who don't really know their customer profile. At least once a week, a major food operator or officer of a major restaurant organization tells me his or her customer is "everyone." When I ask, "How do you know that?" the usual response is, "Well, I observe," or "My managers tell me." That is absurd! I cannot overemphasize enough the need to determine who your potential are, why they would come to you, or why they wouldn't come to you. One of the primary secrets for successful site selection is targeting areas with demographics that match your "most frequent visitor" characteristics.
  3. Delineate Trade Area - Numerous factors, including the following, dictate the size of a trade areas: Type of food facility, type of location, income, topography, competition, traffic artery, physical and psychological barriers, activity generators, consumer patterns, visibility (sometimes), and socioeconomic characteristics. Historically, restaurants have focused on a five-mile trade area, while fast food restaurants have settled on a three-mile radius. In many instances, these distances are realistic; just as often, however, they are not. It is important to analyze the type of location and the extent of the trade area  that might result from a new operation. In a major urban area a "special occasion" restaurant may attract customers fro 10 to 15 miles away, and rural locations with the right type of restaurant can attract customers in a radius of 60 to 100 miles. Moreover, fast food restaurants near major regional shopping centers often take on the trade area characteristics of the mall. In reality, trade areas are not rigidly round, square, or rectangular. Instead, they are positively influenced by the attraction of the restaurant and negatively affected by factors such as competition and physical barriers. 
  4. Establish Locational Criteria - Examples of locational criteria include the following: Types of locations, traffic arteries, trade area size, speed limits, number of moving lanes, adjacent uses, traffic flow, traffic counts, ingress, egress, visibility, competition, employment, topography, demographics, ethnic characteristics, and perhaps a liquor license. For someone who is starting a new operation and has no locational experience, the site attributes of other similar and successful food operations can provide very important guidelines. Examine the experiences of other operators and competitors. How have they fared? Where are their most successful units? Why are they the most successful units? What is common to their locational success?
  5. Analyze The Market Structure - Every market, whether it is a neighborhood, a small city, or a major urban area, has a structure that partially determines the extent of a trade area, the patterns that exist, and travel times. The structure includes the shape of the city, or an area, the road network, barriers (physical and psychological), income, topography, zoning, sewer and water availability, ethnic and socioeconomic characteristics, and climate. Structure plays a role in directional growth patterns, employment concentrations, development, eating-out patterns, and other factors that have generally influenced past and present development. Furthermore, the same structure is likely to influence future growth in the community. Understanding market structure is essential in selecting good locations for food facilities.
  6. Gather Factual Market Resource Data - Restaurant operators compete for eating-out or eating and drinking dollars, usually generated by resident population, traffic, daytime working population, or some combination of these groups. Market resources include population, socioeconomic characteristics, age structure, income, eating-out expenditures, lifestyle, and household size. Through an orderly procedure, you can determine the extent of the present and future market.
  7. Ensure Adequate Accessibility - Accessibility within a metropolitan area includes the ability of motorists to move from one part of the area to another. Locationally, accessibility represents the ease with which people move into and out of an area, and more particularly, in to and out of the specific location.
  8. Recognize the importance of employment - Many restaurant require lunch and breakfast business in order to be successful. Therefore, it is important for you to understand the employment patterns in your specific area.
  9. Identify Generative Areas - Generative locations means sites that are near major traffic generators such as malls, office buildings, hotel, industrial, and other commercial facilities.
  10. Clarify Attitudes, Trends, Habits, and Patterns - Consumer attitudes and trends are constantly changing. They are influenced by such variables as our ages, income, lifestyle, professions, aspirations, opportunities, social trends, household composition, and size, and our feeling of well being. Most of us, for example, are very much aware of current emphasis on health in our diet. We need to be cognizant of present and future trends in considering locational opportunities.
  11. Evaluate Competitive Facilities
  12. Understand Visibility and Exposure
  13. Estimate Sales Potential
  14. Evaluate Site Economics and Physical Characteristics


What's Keeping You Up At Night?


 If we're all thinking alike, somebody isn't thinking.


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"Ron's Tip Jar/Insights" is a newsletter discussing issues that affect your restaurants profitability delivered by Ron Santibanez. You may also view past issues of "Ron's Tip Jar/Insights" by clicking here.

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