Independent Restaurant Survival in a Mega-Chain World

In the 1970's you could count the number of regional or national-chain, full-service restaurant operations in most any given town on one hand. The restaurant landscape was literally dominated by independent, primarily family-owned and operated restaurants and diners. Success seemed easier; independent restaurants created and managed the changes and the future of the restaurant industry.

The market has radically changed since the 1970's. Today, huge national mega-chains seem to control the very direction of the restaurant industry. An abstract from the Lebhar-Friedman Chain Sore guide reveals that only 12% of high-volume, full-service restaurants are independents. Multiple concepts, aggressive management hiring programs, extensive advertising campaign, mergers and resources to obtain the best estate all appear to give mega-chains the distinct advantage, now and well into the future.

So how do independent restaurants survive in the next millennium? Based on years of observing and tracking the restaurant industry and working with restaurateurs to develop highly successful operations, we believe there are five key points for continued success for independent restaurants.

1. EMPHASIZE QUALITY

Remember that quality food and quality service is what keeps customers coming back. Additionally, remember that most chain restaurants do not have an owner in the store, giving you, the independent restaurateur an advantage - the care and passion of the owner involved in the day-to-day operation of the restaurant. Your attention to detail and emphasis on quality will transfer to your employees by their understanding and striving to reach the standards you set and exhibit. And again, talk to your guests, make sure they are receiving food and service that is beyond their expectations.

2. FLAUNT YOUR UNIQUENESS

As an independent operator, you are not a cookie cutter replica of fifty other restaurants. Let your current and prospective customers know what makes their experience at your restaurant unique. Play up the elements which constitute the magic of your restaurant.

3. EMPOWER YOUR MANAGEMENT STAFF

Independent restaurateurs must compete with chain restaurants for the best and brightest managers. Chain restaurants can promise upward mobility to other units in the chain and attractive benefit packages; features that are not as predominant at independent restaurants. To counteract this, you need to give your managers a sense of ownership of the restaurant and a meaningful incentive compensation program which rewards them for your joint success.

Empower your management staff by giving them the responsibility and authority to run all aspects of the restaurant. Involve them in all areas of the operation including menu item selection, hiring personnel, equipment purchases and the compensation program details. Provide your key managers with financial information to make effective decisions. Giving your managers a pivotal role in the success of the operation, allowing them to take care of the business, results in increased commitment from your managers and a well-managed operation.

4. BE WARY OF DISCOUNTING

Independent restaurants are the primary target of numerous coupon books and other discounting schemes. To restaurants in trouble - tax problems, supplier problems, mortgage problems - the money offered by discount houses seems appealing. However, after you've given out food (and been paid approximately 50% of its value by the discount house) and the old debts are paid off, new debts have arisen and you think about starting all over again, and again and again...

Coupon clippers are loyal to the coupons, not to your restaurant. Discounts water down the value of your product. Remember, coupon clippers are paying what the meal is worth. Everyone else is overpaying.

5. UNDERSTAND THE BUSINESS OF YOUR BUSINESS

Go beyond the passion you have for good food and a great dining experience - understand the business part of the business. Independent restaurateurs do not have the advantage of a well-staffed accounting department to watch the financial statements that chain operators have. You need to create a management information system that provides you with meaningful, accurate and timely information. Standardize your numbers so you can compare them with industry averages and previous performance.

The industry standard is based on the Uniform System of Accounts for Restaurants (a handbook is available from the National Restaurant Association). We've seen too many swell-established restaurants go out of business due to poor business practices.

Remember - it is not only your great food and service - it is your uniqueness and enthusiasm that excite restaurant patrons and keep them coming back. Follow these recommendations and both your customers and checkbook will notice!

Restaurant Advisory Services provides full-service consulting services to the restaurant and hospitality industries. In existence for more than six years, the firm offers a full menu of advisory services focusing on every aspect of the life cycle of restaurants and other hospitality organizations, from pre-opening and conceptual planning, to day-to-day operations, to design and brokerage.