Stop blaming the economy

I’m sure getting sick of hearing that our problems are caused by the economy. Everyone keeps talking about the “economy” and how it has caused this massive mess we’re in right now in our industry. Others keep asking if the sky is falling…or not.

I believe that if you think this is just a ‘temporary economic trough’ we’re in…and it will pass just like all the others in the last 50 years….this time, you are sadly mistaken.

As Don Henley and the Eagles say in their latest album...you must have "...a failed grasp of the big picture...."

This is no time for Pollyanna Bulldust!

First, I am not the kind of guy who screams that the sky is falling; but I do believe in getting the facts straight; and making reasoned, not emotional decisions. That is why….this time….I am not so damned positive as I used to be.

Here’s why: this is just not about the battered economy. It is about a fundamental shift in the marketplace caused by a confluence of factors such as the Internet, cultural conflict, political mismanagement, war, corporate greed, and individual ignorance. We have a situation where the Internet came along and changed entirely the way we live, eat, what we eat, where we eat it; how much we’re now willing to pay for it, how we decide where to dine, what we believe when making those decisions, and how safe we now feel in both dining out and in the safety of the food we eat.

The beleaguered economy – by itself and in addition – just made it a lot worse.

Restaurants – chains and independents alike – are in big trouble; some are dropping like flies. That’s likely why you’re reading this, right?

Can you say Bennigan’s, Steak ‘n Ale, Uno Restaurants, Chevy’s, El Torito Grill, Acapulco Mexican Restaurants, Perkins, Marie Callender’s, Vicorp, Baker’s Square and Village Inns?

If the chains are having this much trouble, imagine how rough it is for the little guy…the independent restaurateur: without any head office marketing help, no big TV budgets and the same sky-rocketing food prices and labor shortages?

Additionally, when s/he spends that hard-earned money for traditional advertising, say in the yellow pages for instance, how does s/he know whether if worked of not? How does he measure and track the results of his spending? How can s/he determine if that expenditure was a good one…or not?

Everyone says it’s because of the lousy economy; but that was just the straw that broke the camel’s back.

It had to happen sooner or later. It’s been brewing for a long time. The deteriorating economy sped up the process. The castle of cards was already starting to teeter. Lehman Brothers, Merrill Lynch and A.I.G. were still hanging in there. Wendy’s was still on the selling block. But we really didn’t pay that much attention to the other “reasons” why our industry was starting to go south…fast.

Those are just a few of the “influences” that have come together to create the “perfect hurricane” of forces that are totally changing the restaurant paradigm and how it operates.

Make no mistake: this is not fear-mongering on my part. I hate that stuff. I hate those who practice it; and there are plenty of self-styled hospitality “gurus” out there who are doing that just to sell their products or services.

I believe in facts, reality; and some of these cannot be denied. Let’s just look at a few of them.

You may not want to read or hear this, but the Internet is integral to a restaurant’s future. (On this point, I may be preaching to the choir here at FohBoh). The general public has changed...in the way they look up their information, what they rely on in terms of where to eat out, how to check out a place before they spend their hard-earned money, venture out in weather, or a scary neighborhood, spend that extra money on gas, find a parking place…you know the drill.

The experts say that “when the paradigm shifts…all the rules change or go out the window.” When two Swiss watchmakers were laughed out of town by their colleagues…they took their invention to a trade show in Frankfurt to see if anyone else – not so close to the Swiss traditional watch-making industry – would pay any attention. Two companies did; only one decided to act on that interest…a then small Japanese company…named Seiko.

When was the last time you saw a Swiss jeweled movement wrist watch that you could afford?

The paradigm shifted, and the rules for making and marketing watches went right out the window…to create a new industry, where today, Seiko is the undisputed leader.

We may be seeing a similar paradigm shift in the restaurant business.

We have the Internet, labor-shortages, people on new diets, obesity, diabetes, the graying of North America, vegetarianism on the rise, resistance to ridiculous pricing, downward pressure on big expense-account-driven dining out; a push downwards from haute cuisine expensive meals to those that are more affordable to the general populace.

Don’t shoot me….that’s just the way it is.

All of these are trends that should not be ignored. For the most part -- except for the downward pressure on expense account dining – all of these new trends point to a sea-change in the way this industry works, who it works for, the profit dynamics in it, and how it will be operated and managed in the (near) future. So far, the “economy” is responsible for less than half these effects on the industry.

If you think you can ignore what’s REALLY going on here, you do so at your own risk.

So…What Happened?

Did you study history when you were at school? Do you remember what happened to the prevailing society (and economy) when such things as the printing press, sextant, steam engine, Morse code, railways, electric lights, penicillin, radio, television, FM radio and video tapes, were invented?

The restaurant business has had it pretty good for the last two decades. But the digitalization of the world has changed the entire paradigm of how we do business, how people patronize restaurants, what they want to eat, how they want to eat it; the list goes on and on.

Demographically, the world just got older. Along with that so did our bodies. No more were we interested in a burger, shake and fries. Our systems and waistlines would no longer tolerate the calories, preservatives, or trans fats. The baby boomers started to change their eating patterns; meanwhile pressures mounted to stop the escalation of overweight, obese children and teenagers. Everywhere you turned you were confronted with a ‘national call’ for healthier, lighter foods…not super-sized fries and drinks.

Concurrently, the labor market changed considerably. The new “high tech” industry that started in the middle 80’s, took off like a rocket in the mid-90’s with the advent of the Internet. Young people, who had been brought up with personal computers sought out this new way to be in this world. They were instantly attracted to the much higher pay scales, the future possibilities and the perceived better working conditions.

Who wouldn’t want to work in a high tech Internet start-up? The action was in the fast lane of the new information highway. The atmosphere was magnetic and collegial.

The restaurant industry, meanwhile, didn’t change much vis-à-vis its employees. Working in this business was still not considered a “career option”; but a stepping stone along the way to the top of something else.

The fast track was not in the ‘restaurant biz’, but in the e-Commerce and Internet Marketing biz. Hence we lost out in terms of attracting, training and retaining people.

Now we’re really paying for it.

Today we have a huge labor shortage…and we still pay much less than other more competitive options.

Society and Culture Changed Too…

Let’s not forget that our society and the way we co-exist in it changed too…radically, almost overnight.

We could now inspect and/or buy over one million different books, all online at Amazon.com. We could find old, foreign or obscure movies at NetFlix…the long tail of video rentals. We could find information in the flick of an eyelash…by simply going to Google, Ask, MSN or Hakia.com. Additionally, the speed with which we got our answers was now measured in one hundredths of a second!

Everything Speeds Up

Once these amazing search engines came on the scene, we learned that “words were key”. Words relevant to our business had to be chosen to work “just right” on our web sites, blogs and emails in order to attract the most attention from the search engines and to ensure that people “found us” in this new labyrinth called the Internet.

Boy, this sure has gotten a lot more complicated than in the 80’s or early 90’s!

This new ‘digital’ technology changed everything.

It changed life for the people who embraced it. Now their interests, health, communication, habits, sports, affinities, interactivity, mobility, and the speed with which everything now moved would never again be the same.

We have moved to the point where all you have to do is click a button on your cell, Blackberry or iPhone and receive the three most appropriate or relevant restaurants that meet your chosen criteria (price, type of food, parking, credit card acceptance, hours of operation, take-out, delivery, acceptance of online table reservations and/or ordering and such)…that are located within one half mile of where you are now standing on the street, holding that mobile device!

The Customers Changed Too!

Concurrent with these changes in our business and society, the customers themselves changed too. They now had tons of choices as to where to eat. Their expectations were high; but if the service, quality and value for money delivery were not met…there were always these new ‘review sites’ like Yelp where you could dump your emotional baggage on an unsuspecting restaurateur. The restaurateur was the loser. The disgruntled diner now had an ‘electronic megaphone’ to spread his negative word-of-mouth about a restaurant. This, too, was not good for business.

The Confluence of Woe

Then – if that wasn’t enough – along came multi-year wars, the mortgage financial fiasco, exporting manufacturing jobs overseas to low labor-cost countries, Lehman Brothers, Merrill Lynch and Wendy’s seeking refuge, climate change, hurricanes, and oil prices sky-rocketing; driving up the transportation cost of food and such. Food costs, for instance, started to escalate faster than any of us have ever seen before.

The economy finally just said: “Been there, done that…enough! I’ve had it…time out!”

Bam! Now we’re all in this same brutal soup. ‘Together.

I know what you’re thinking: “OK if you’re so damned smart, what’s the answer? How can we get ourselves out of this mess?”

I think the only way to answer that question is with two words: “music” and “marketing”. By ‘music’, I mean facing it. We must face the music and be honest with ourselves and realize that we need to change something…fast. They say that the definition of “insanity” is doing the same thing over and over again, expecting a different result.

The days of working harder, putting in more hours, doing it yourself, expecting the world to beat a path to your restaurant, relying on “word of mouth”; discounting the heck out of your menu; couponing like crazy and all the other has-been, cockamamie methods of getting and keeping new customers are over. Dead. Gone. Kaput.

The second word is self-explanatory: “marketing”. We must start to use marketing to identify, gather, communicate with, acquire and keep customers; and we have to do it at a profit. That is what marketing is all about really.

It’s the art and science of creating, operating and sustaining the environment in which a restaurant sale can take place…every day we’re open.

That means “everything” you do now is “marketing.” You must be a marketing-driven restaurant operator.

Even if you just start to think this way, it will be a major turning point for your focus. Stop thinking about it being about the food, or the ambiance, or the cleanliness, the menu prices, the music overhead, the waitpersons. It’s about all of those…and much more.

If you want to be successful in this business…NOW…in the mess we’re in, you will have to start working smarter, not harder.

You can begin to use the Internet and its digital automation of so many things: everything from blogs to auto-responders must be used to connect with those who would be your customers…or who might be tempted to leave you for another restaurant. You also will have to take a look at classical marketing and how it can help as well...along with the new tool -- the Internet.

Read everything you can get your hands on that shows you how to market your restaurant. Rely on those who have done it before...in previous downturns... those who know how to do it...again...in these trying times.

There is a way out of this morass. It’s marketing and smart thinking. If you’re lazy; or you hate change and want to continue to do it the old way – good luck to you.

There is an old adage in the advertising game; and it’s still most applicable today: “nothing happens until someone sells something.”

In order to sell more or enough things from your menu, you will need to change with the new paradigm, adopt the new rules of engagement; ‘go with the flow’; most importantly, you must change your entire focus...towards marketing as well as operations.

Remember which comes first...you don't have to worry about operations if you don't have any customers!

Or you always have the option to be one of the sad statistics that will surely pile up over the next two or three years. That’s not designed to scare you…it’s just reality.


© Roy W. MacNaughton, 2008