Changing Your Business During Our Current Economic Struggles

As I travel throughout the country visiting new restaurant and hotel facilities as well as stopping by my old favorites, I continue to hear that discounting, cheap and low-end value are the wave of the future. I whole-heartedly disagree.

As I have mentioned before, the economic downturn will allow only the strongest and best to survive. However, many more solid concepts with good locations may survive the short term, but because of the discounting and compromising on their concept - they will struggle to stay relevant in the long run. There are several concepts in and around my Orlando office and home that have done exactly that....they had a loyal clientele, a focused brand, quality service and offerings. Once they started listening to the so-called experts - they immediately changed the product - huge discounts, creating more "value", putting smaller/cheaper items on the menu and cutting every potential dollar. Again, on the surface this seems like the smart thing to do - but in reality it is the opposite.

The way successful restaurants and hotels create long-lived prosperity and success is based on having a solid/focused concept, great service and a great product for the level of value that the customer is agreeable to spending. The discounting, changing and watering down of the concept does nothing more than go against what we all know to be successful in the Hospitality business. When the economy starts to turn in a positive direction - what are these confused concepts prepared to do? Are they planning on raising prices, making the service return to the previous levels and removing the low-cost items back to the items that their customers used to love? This is where the pavement hits the road so to speak. Loyal customers who loved the concept and food before it was changed - are now gone to other concepts. The new "cost-only" customer will leave when the costs and product offerings go up - thus leaving a venture that is searching for any guest.... The other issue I have with discounting is the lack of financial sense it actually makes. Once you discount items lets say to a 2 for 1 deal - how many people that are taking advantage of that deal were already coming in? That number of guests in the beginning is pretty high - so the "new" or "added" guests that the promotion is bringing in must over-account for those people as well as pay for the "2 for 1" that they themselves received.

The great offerings that are out there need not change - they simply need to understand what they were, what the are and what they will be - IS what the customer wants - BELIEVE IN YOUR CONCEPT. The guests will return. So the easy to ask question is how to survive the 10, 20 or 30% downturn in revenues. Right now - if the concept can break even and survive - that is the goal. All of our previous thoughts of 10-15% return are no longer valid - until the economy shifts. Be patient - and do things that do not negatively affect the guests...things like removing layers of management! This is by far the best way to save costs and to give the guests a better environment. In the "old school days", owner's and management worked the floor - seating people, delivering wine, checking-in guests, being the "Sam Malone" at the bar - this gets a decision maker and responsible party directly in contact with the guest! Again - a novel idea. Having corporate structure is nice for your everyday work-life - but it is costly. Take the director of operations and move him to everyday management of a particular location, take your corporate chef and make him/her cook, make the restaurant managers host and tend bar. These are the people that understand the concept and the economics of the establishment the best - so they are your best ambassadors to the guests. It really gets back to a family run business model.

Here is another novel idea....provide better service, better quality and more focus during this time....the examples are all around us. Houston's did not suddenly start an appetizer menu, start welcoming kids with kids menus nor did they start offering 2 for 1 drinks. They know that we as guests love the simple menu, great service, great atmosphere and their attention to most every detail for a "value". Guests feel value based on everything - not just the price.

That is the lesson to be learned....Value is not just another word for price. I can go to the cheapest restaurant in town and feel no value while I can also visit a four star establishment and find value in the overall experience.

Get back to basics and do what you do - that is the way to succeed in tough times and great times! If after you have made sure that your concept is still intact - if you want to provide a conceptually-relevant special of the day that fits with your overall-quality statement - feel free! That will be additive in lieu of damaging.

And for the quote...."Health nuts are going to feel stupid someday, lying in hospitals dying of nothing." Redd Foxx


Raymond R. Schaefer, AIA / NCARB / IIDA\
President / Founder
Maverick Architecture & Design, LLC