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The New Prosperity Requires True Value

The global recession has had a tremendous impact on the restaurant business. Never have I experienced such a downturn in my 36 years in the business. This downturn has affected all aspects and all types of restaurants from Fine dining to the road side cart. Oftentimes in recession, people trade down to weather the storm, but this time has been different. Usually, the inexpensive places are protected as people move down from the more expensive restaurants and go to more casual and street-type vendors. This time, however, even the low cost establishments were severely impacted. People simply stopped going and started eating at home and doing without.

Once, and if, we return to some state of normalcy, myself and many economist and restaurant professionals agree we will enter a whole new paradigm. We enter a world where it will become increasingly difficult to make the types of returns we have been used to. This new environment will weed out the weaker players, but will be an opportunity for those who have the wherewithal and financing to expand into new horizons. The new paradigm brings a new prosperity, but a prosperity that is based on true value.

Here in the states for the last few years restaurants have been falling over themselves offering price reductions, two for one, and lower cost options. And for the most part these efforts have been unsuccessful. Why? Their value equation is off. Value is much more than just a lower price.

So what is value and how do we calculate it ?

Value is goods x services x experience divided by the price. We are talking “true value” here which goes far beyond price of the goods sold.

It is critical to pay close attention to core measures affecting customer satisfaction. They are atmosphere, variety, service, food quality, cleanliness, convenience, variety and value. When you consider these closely, they all fit under value. If any one of these measures is off, it will hurt your value score and from now on we will live and die based on our value score.

Goods — too often in the food business we go by our gut and often this works. In our new paradigm this becomes harder and harder. So what are our goods, who or what do they compete directly with, what would someone replace them with? It used to be you could take a quality position or a price position; no more … you must have both. You need the best quality product within your target, not the most expensive, but the best as defined by your customers.

Services, in the restaurant business service is thought of as the servers. Are they well trained, knowledgeable about the menu, do they know the specials, do they actively act as passionate salespersons for your place. What are the other services you offer? Is décor a service? Of course it is. How does the decor make your customers feel when they walk in the door? What is the color, the lighting, the seating; does it all match your target positioning? Are the bathrooms clean; do you offer hand towels; is there music? The atmosphere of the restaurant is a service and determines directly how customers feel even before they sit down.

The first two elements of goods and services all flow into the total experience. The goods and services must be correct to attain our goal of a pleased customer. And we have not even discussed Food yet.

Being a chef by training, of course I view the food as the most important element of a concept. Even if all other elements of the concept are right on, you will fail if the food is off and not consistent with what your stated brand identity is. Have you made every effort to present your offerings in a manner that excites and pleases the guest? Does it show expertise, creativity and innovation; does it say we are glad you’re here! Is your food consistent? Consistency is probably one of the most important aspects of food preparation. Can you do it over and over again with the same results?

Now and only now do we consider the price. Based upon all these elements what is a market-based price for your product? When we are starting a restaurant or new menu, we should attempt to answer these question. We can grade our concept as well as our competitors on a ten-point scale for the core measures listed above. We then measure how these fit into our value equation.

Some diligent homework will help you develop a position of true value. This, for now and into the future, will help you to “outshine your competitors and position you well for the new prosperity to come”.

Tony Lagana

Culinary Systems Inc

Windermare, Florida 34786

Email. tlagana@culinarysystems.com

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