Chapter 15

Restaurant Business and Marketing Plans

Objectives• After reading and studying this chapter, you

should be able to:– Identify the major elements of a business plan– Develop a restaurant business plan– Conduct a market assessment– Discuss the importance of the four Ps of the

marketing mix– Describe some promotional ideas for a restaurant

Introduction• Business plans– Increase probability of success• Communicate to financial backers

• Restaurants– Are experiencing extreme challenges • Difficult times

Business Plan• Improve chances of operational success– Assist in obtaining financing– Communicate to potential investors– Define operational purposes

• Key ingredient:– Sustainability

Business Plan (cont’d.)• Elements– Cover sheet– Description of the business– Description of concept, licensee, and lease– Market analysis and strategy– Competitive analysis– Pricing strategy

Business Plan (cont’d.)– Advertising and promotional campaign– Other information– Financial data– Existing restaurant balance sheet– Appendices

Business Plan (cont’d.)• Mission statements – Generally do not change

• Goals – Reviewed as often as necessary– Established for each key operational area

• Strategies or action plans – Who is going to do what, when, and what order– Specific dates

Marketing• Based on a marketing philosophy– Patterns the way to relate to guests, employees,

purveyors, and the general public• Fairness, honesty, and moral conduct

– Finding out what guests want and providing it at a fair price

– Asks would-be operators:• Who will be my guests? • Why will they choose my restaurant? • Where will they come from and why will they come back?”

The Difference Between Marketing and Sales

• Marketing– Broad concept– Includes sales and merchandising– Determines who will patronize the restaurant and

what they want in it– Ongoing effort– Gets into psyche of present and potential patrons– About solving guest problems

The Difference Between Marketing and Sales (cont’d.)

• Sales– Part of marketing – Focuses on seller needs– Activities that stimulate the patron to want what the

restaurant offers– Sales mentality exists when seller thinks about only

of his or her needs • Pushes an item on a customer

– Closely related to advertising, promotion, and public relations

Marketing Planning and Strategy• Marketing plans – Must have realistic goals while leaving a

reasonable profit margin • Guest satisfaction, market share, sales, and costs

• SWOT analysis– Strengths, weaknesses, opportunities, and threats• Strengths and weaknesses: internal factors and can,

over time, be controlled by management• Opportunities and threats: external factors

Market Assessment and Market Demand

• Market assessment– Analyzes community, potential guests, and

competition – Helps to answer the all-important questions: • Is there a need for a restaurant? • Who will be the potential guests?

• Market demand factors– Population in the catchment area – Demographic split of this population

Market Potential• Estimated maximum total sales revenue of all

suppliers of a product in a market during a certain period– How many people in the market area are potential

customers? – What is the potential for breakfast, for lunch, for

dinner? – Will your restaurant attract guests from outside the

immediate market area? – Who is your market?

Market Segmentation, Target Market, and Positioning

• Market– Total of actual and potential guests– Generally segmented into groups of buyers• Similar characteristics

– Within these groups are target markets• Groups identified as the best for the restaurant

Typical Segmentations• Geographic– Country, state/province, county, city, and

neighborhood• Demographic– Age, sex, family life cycle, income, occupation,

education, religion, and race• Behavior– Occasions, benefits sought, user status, usage

rates, loyalty status, and buyer readiness

Positioning• Once the target market is identified– Important to position the restaurant to stand out

from the competition • Focus on advertising and promotional messages

• Key to positioning– How guests perceive the restaurant• Involves tailoring an entire marketing program

Competition Analysis• Analyzing competition’s strengths and

weaknesses – Helps formulate marketing goals and strategies to

use in the marketing action plan • Comparison benefit matrix – Shows how your restaurant compares to the

competition • You choose the items for comparison (e.g., name

recognition, ease of access, parking, curbside appeal, greeting, etc.)

Marketing Mix: The Four Ps• Every marketing plan must have realistic goals – While leaving a reasonable profit margin

• Cornerstones of marketing– Place (location)– Product– Price– Promotion

Place/Location• One of the most crucial factors in a

restaurant’s success• Ingredients for success– Good visibility– Easy access– Convenience– Curbside appeal– Parking

Product• Main ingredient: excellent food– People will always seek out excellent food• Especially when good service, value, and ambiance accompany

it

• Three levels of restaurant product– Core product: function part for the customer

– Relaxing and memorable evening

– Formal product: tangible part of product– Physical aspects, décor, and a certain level of service

– Augmented product: other services– Valet parking, table reservations, etc.

Product (cont’d.)• Product analysis– Covers quality, pricing, and service

• Atmospherics– Design used to create a special atmosphere• Experiencing greater emphasis

• Product development– Innovative menu items • Added to maintain or boost sales

Product (cont’d.)• Product positioning– Conveys the best face/image of the restaurant • What people like most about it• How it stands out from the competition

• Restaurant differentiation– Owners usually want their restaurant to be different in

one or more ways• Call attention to food or ambiance

• Product life cycle – Introduction to decline

Price (cont’d.)• Cost-based pricing – Calculates cost of ingredients • Multiplies by a factor of three to obtain a food cost

percentage of 33

• Competitive pricing – Checks competition to see what they are charging

for the same item• Price and quality – Direct correlation

Promotion• Goals of a promotional campaign– Increase consumer awareness– Improve consumer perceptions– Entice first-time buyers– Gain higher percentage of repeat guests– Create brand loyalty– Increase the average check– Increase sales (particular meal or time of day)– Introduce new menu items

Advertising• Types:– In-house– Tie-ins and two-for-ones– Loss-leader meals– Advertising appeals– Twitter and Facebook– Travel guides – Yellow pages– Mailing lists