"Do The Unexpected" - AOL Small Business

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By STEVE STRAUSS, AOL SMALL BUSINESS

Q: Hey Steve -- I feel like my business is in a rut. We are successful and all, but I want to try some new things. The problem is 1) what, and 2) cost. Suggestions? Thanks!

Joe

A: Let me begin to answer your question this way:

I was in New York recently on business and upon checking into my hotel, the clerk said to me: "Mr. Strauss, we are not full tonight. Would you like a free upgrade?" The next thing I knew, they handed me a goody bag of bottled water and chocolate and then took me up to a gorgeous suite. As I was not a frequent guest of this hotel or chain, I was very surprised. Will I be back? You bet!

All businesses fall into ruts. That is quite common. But the best businesses, the exceptional ones, do like the hotel in New York -- they do the unexpected.

Doing the unexpected in your business can pay tremendous dividends -- for your customers of course, but also to you. Doing something different or unexpected shakes things up. It revs up the 'ol creative juices. And that, in turn, can create a domino effect of other positives. As they say, if you keep doing what you have always done, you will keep getting what you have always gotten.

Here is what I am talking about:

Unexpected customer service: This is one area where doing the unexpected can make the biggest difference. Customers expect that you will offer a good product or service at a fair price and be pleasant in the process; that is a given. But it is when you go above and beyond and do something special that they take notice and you begin to create exceptional loyalty.

Here's an example: I recently read a story about a gentleman who took his car to the repair shop. On the way home he realized that something was still not quite right with the car. He called the repair shop from home and they offered to send someone out to pick up the car, they stayed open late to fix it right, and they delivered it back to him a few hours later. The customer was delighted at this unexpected service and the shop turned lemons into lemonade.

Unexpected marketing: You have a couple of cool marketing tricks up your sleeve. You must -- you are still in business. But the problem is that by doing the same marketing campaign again and again, year after year, the same people see it.

But by doing something new and different, you ensure that new people will become aware of your business. Maybe it's putting up some Facebook ads or starting to tweet daily specials. Maybe you start advertising on the radio. Whatever the case, unexpected marketing will yield unexpected results.

Unexpected products: I see that some airlines are starting to offer in-flight WiFi. That is new and unexpected and nice. What about Jet Blue giving everyone their own TV set on the seat in front of them? A unique product can be a difference maker. Just ask the Chia Pet people.

Unexpected policies: Nordstrom's return policy is world famous. And the diner down the street that won't let you substitute a salad for french fries is evidence of the power of the unexpected policy for the wrong reason.

Unexpected priorities: Great businesses are about more than making a profit. When he died, Joe Wilson, founder of Xerox, was found with a small blue index card he kept in his wallet. It said, in part, "To attain serenity through the leadership of a business which brings happiness to its workers, serves its customers, and brings prosperity to its owners."

"Bring happiness to its workers?" Wow.

Doing the unexpected helps you stand out from the crowded field because it is, well, unexpected.

Nation's Restaurant News Article

8 ways to build full-service sales

By Ron Ruggless

WASHINGTON (Jan. 22, 2010) While full-service restaurant sales aren't expected to rebound as quickly as in other industry segments, the National Restaurant Association offers eight ways that table-service operators can weigh the odds of recovery in their favor and build much-needed sales.

In its "2010 Restaurant Industry Forecast" the NRA expects full-service restaurant sales in 2010 to grow at a lesser pace than the industry as a whole, like it has for years as the segment takes big hits from consumers trading down and quick-service competitors increasing quality offerings.

Full-service sales are expected to total $184.2 billion in 2010, a 1.2 percent increase from 2009, while industry sales are expected to total $580.1 billion, a 2.5 percent jump. Even worse, after accounting for inflation, real full-service segment sales are expected to decline 1.5 percent in 2010. That follows on the heels of a 2009 decline of 6.2 percent.

“One of the primary differences in this past recessionary period compared to historical recessionary periods is that the higher-income households — the prime table-service market — reported substantial decreases in net worth as well as confidence,” said Hudson Riehle, the NRA’s senior vice president of research and knowledge.

Indeed, full-service operators, from lower-priced casual-dining chains to high-end independent operators have bore the brunt of this latest recession. Casual-dining chains have posted the largest same-store sales declines throughout the industry, and high-end independent operations have posted the largest numbers of closures.

Here are eight ways the NRA suggests full-service restaurants can build their business in a flat segment of the industry:

1. Offer value. NRA surveys found operators expected a third of fine-dining customers, 46 percent of family-dining patrons and 40 percent of casual-dining guests to be more value conscious in 2010 vs. 2009. Frequent-dining or loyalty programs are likely to be more popular.

2. Use social media. Among operators not using Facebook, an NRA survey found four of every 10 plan to create a presence in 2010. About a fifth of full-service operators planned to use YouTube or similar video-sharing sites. Users of social sites such as Yelp and Twitter are expected to increase this year.

3. Market via e-mail. Already seven of every 10 fine-dining establishments keep in touch with customers via e-mail, but only half of casual-dining operators and a third of family-dining operations do so. An NRA survey found 41 percent of customers say they try a new restaurant because of e-mailed promotions, and 54 percent learn about restaurants on the Internet.

4. Create events. Restaurants can offer private tastings or events. The NRA found 64 percent of adults surveyed would attend chef’s table dinners and private tastings.

5. Boost off-premise offerings. Nearly three in every 10 adults surveyed by the NRA said take-out food is essential to the way they live, so to-go and catering has sales-growth potential.

6. Market green initiatives. About four in 10 consumers said they were likely to pick a restaurant based on its conservation practices, and about seven in 10 were more likely to choose a restaurant if it featured locally produced ingredients.

7. Tap technology. Online ordering offers room for growth and less than 2 percent of full-service restaurants provide a tableside ordering or payment option.

8. Emphasize health. Half of adults surveyed said table-service restaurants provide easy ways for them to choose portion sizes.

Article: The Accidental Hero

BusinessWeek

The Accidental Hero
Subway's $5 footlong, the brainchild of an obscure Miami franchisee, is the fast-food success story of the recession

By Matthew Boyle

Stuart Frankel isn't what you'd call a power player in the world of franchising. Five years ago he owned two small Subway sandwich shops at either end of Miami's Jackson Memorial Hospital. After noticing that sales sagged on weekends, he came up with an idea: He would offer every footlong sandwich (the chain also sells 6-inch versions) on Saturday and Sunday for $5, about a buck less than the usual price. "I like round numbers," says Frankel, a brusque New Yorker who moved to Miami in 1972 and owned a drugstore before opening his first Subway outlet in 1988.

Customers liked his round number, too. Instead of dealing with idle employees and weak sales, Frankel suddenly had lines out the door. Sales rose by double digits. Nobody, least of all Frankel, knew it at the time, but he had stumbled on a concept that has unexpectedly morphed from a short-term gimmick into a national phenomenon that has turbocharged Subway's performance. "There are only a few times when a chain has been able to scramble up the whole industry, and this is one of them," says Jeffrey T. Davis, president of restaurant consultancy Sandelman & Associates. "It's huge."

In fact, the $3.8 billion in sales generated nationwide by the $5 footlong alone placed it among the top 10 fast-food brands in the U.S. for the year ended in August, according to NPD Group. That puts the $5 menu's success just a notch behind KFC (YUM) and ahead of Arby's and Domino's Pizza (DPZ). It helped privately held Subway, of Milford, Conn., lift U.S. sales 17% last year at a time when most restaurant chains, save for industry leader McDonald's (MCD), struggled. Actually, make that soon-to-be-former industry leader McDonald's. Subway's low-cost franchising model and mainstream appeal have allowed it to add 9,500 locations in the past five years, for a total of about 32,000 outlets. At its current growth rate of 40 new stores a week, Subway is poised to surpass McDonald's in worldwide locations sometime early next year. (Measured by total sales, McDonald's $30 billion still dwarfs Subway's $9.6 billion, although Subway has now supplanted both Wendy's (WEN) and Burger King (BKC) in market share.)

...cont.

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Marketing in an Economic Downturn

Marketing in an Economic Downturn
By: Tony Fannin - President, BE Branded

Category: Marketing and Brand Development

In a down or tight economy the most rational thing for a business to do is conserve cash, cut costs, and invest less. Just hang on tight and hope your customers remember you and how wonderful you've been to them in the past. It happens time and again that I see the first thing to go is marketing budgets. Many believe that the best time to market is during the boom times.

The counterintuitive thing to do, and the most strategic, is to market as aggressive as you would if the economy is doing well. Here are several points why:

1. The chatter is down – what I mean by that is "everyone" is pulling back their marketing dollar, including your competitors. This opens up opportunity to be one of the minority of voices heard in the market space or your market niche.

2. The cost goes down – many media vehicles, including web, are ready to make deals. With the same marketing dollar you'll be able to garner more value from your investment because of simple supply and demand. With more supply, you'll be able to demand greater value.

3. Consumers find refuge in brands – this gets a little tricky because you'll need to have established your brand during the good times. When the economy tightens, research has shown many consumers fall back to brands they are familiar with and trust. Of course, there are always exceptions in various industry categories such as food (price is king here, but brands still dominate. i.e. McDonalds, Spam, Campbell's). But, if you've established your brand when the times are good, you've helped insulate yourself some when times are not so good.

4. You'll be stronger when the economy changes – because you've stayed visible while everyone else went dormant, your brand awareness and value will have given you an established platform to launch from when the economy gets going again. Plus, it will take less because your marketing machine is already in motion and hasn't stopped. Others will have to re-establish their brand and market value from a dead stop which means spending even more money and paying premium rates across the board because their will be less supply and more demand from magazines to web banners and everything in between.

Here are a few examples and comments from other marketers:

P&G, Colgate-Palmolive, Kraft Foods, Kellogg Co.

In a testament to how important advertising has become to their businesses, Procter & Gamble Co., Colgate-Palmolive Co., Kraft Foods and Kellogg Co. all have boosted or at least maintained their marketing budgets, even as they've had to implement cost controls elsewhere. And that trend looks set to continue as these giants are forced to hike prices in response to rising commodities costs – a move that will require them to continue pitching consumers on the merits of their brands.

P&G and Colgate last week reported stronger-than-expected organic sales growth, at least in the U.S., along with strong earnings growth. Both said private-label market shares were flat to down in their categories. The spending hike appears to have helped P&G pull out a surprising 6% sales increase in the U.S. last quarter, more than double the 2%-3% growth in retail sales it tracked in its categories and ahead of its 5% organic sales growth globally."

Bounty paper towels. It may reside in a commodity category where private label has been making big gains, yet Bounty has been gaining share throughout the downturn. Parent Procter & Gamble reported in January that Bounty's U.S. value share grew 1.5 points to more than 44%. The brand has continued to innovate within its premium product line without ignoring its lower-priced Bounty Basics line. Bounty has also maintained a strong marketing presence and honed its value messaging."

Anne Bologna – CEO, Toy

"In the Great Depression, Kellogg continued to market its cereals while rivals cut budgets. Kellogg pulled ahead of Post in sales, a change that has never been reversed. Point is, what you sacrifice now, you pay for later. Every thinking business person knows that, but few have the courage to invest. Be brave. You'll never regret it."

Joe Tripodi, CMO – Coca-Cola Co.

"Don't waste this opportunity to enhance brand love. This is the time to engage people and deliver experiences that excite them in unexpected ways. As an example, we recently introduced a new global marketing campaign around the idea of 'Open Happiness.' We are bringing it to life not only through traditional advertising but through the release of a music single, online experiences, social media, impactful point-of-purchase materials and the integration of the core creative idea into all of our existing properties, like the upcoming Winter Olympics in Vancouver. This is not the time to stop talking with consumers. If you use this opportunity to broaden your dialogue with the people who love your brands, you will come out of this period with a much stronger and deeper relationship with them."

In the end, it's about keeping your value and uniqueness out there, regardless of the conditions. In every downturn, there's opportunity. Being brave, bold, and unwavering in your brand and value your company brings is the only way to take advantage of the situation and not just trying to react to it.

Restaurants, Franchising and Discounting

Restaurants, Franchising and Discounting
by john a. gordon

In a June 23 New York Times Business article, Discounts Have Restaurants Eating Own Lunch, the woes of chain restaurants offering discounts—and the possible long term effect of doing so, was well outlined. The following passage caught my eye:A T.G.I. Friday’s promotion in April and May offering $5 sandwiches and salads led to a small-scale revolt among franchisees. Ross Farro, who has seven T.G.I. Friday’s restaurants in Ohio and Pennsylvania, said the promotion included salads that normally sell for as much as $10 and a steak sandwich priced at $11.89 on the regular menu. The ingredients alone for each steak sandwich cost about $4, he said.

The promotion was supposed to run at lunch and dinner, but Mr. Farro said he and some other franchisees put away the $5 menu inserts at night to stop the bleeding.

This was not the first such example just this year of such issues plaguing chain restaurants and franchisees. Sonic (SONC), for example, has been struggling for almost the entire last year by promoting either drinks or its $1 value menu, and having declines in average customer ticket, not offset by increases in customer traffic. It reported earnings on June 23, which were still weak. And Burger King (BKC) and Subway franchisees have also noted the same problem. But Subway units, with their overwhelming US presence, seem to be visually busy, and seem to of the right scale.

Routinely, in my field visits of restaurants so far this year, I find situations where the company’s central marketing thrust is all but hidden or ignored by misplaced restaurant outdoor posters, in store merchandizing, OR where cashiers actually “trade down” customers to the more discounted offers, from a higher margined item. Either action results in a very sub-optimal outcome.

In the example above, the TG I Friday’s franchisee pointed to a gross margin of only about 20% on that particular steak sandwich item. That’s far below the typical 60-70% margin. I’d bet that not every item in the mix resulted in such a steep discount. But any discount means that incremental sales traffic must be generated to offset the lower margin resulting from the promoted item sales.

Franchisees are more margin centric in their needs and outlook, while the large publicly traded companies are more comp sales oriented, because that is a key metric The Street is looking for.

A lot of that tension is due to the franchise model, where franchisors get royalties based on sales but franchisees make profit the old fashioned way, taking what’s left after expenses are paid. Also, franchisees generally have higher cost of capital (if they can get credit at all right now) and have lower potential margin structures, as they must pay a royalty to the franchisor off the top, usually 3-8%.

Very clearly, deal and value is very important in retailing, but how do you drive it optimally?

One, is that you avoid the mistakes noted in the TGI Fridays example above: work to make the discounts meaningful but not such that individual item sales are slashed beyond feasible (rule of thumb: 50% gross margin is a starting point).

Another is that Fridays could have limited the discount to lunch only—most casual dining operators are slower daytimes and are much busier in the evening. Work to fill in your gaps but play to your strengths.

Another is offering attractive, limited time offers with the price point and margin you can tolerate. Both Brinker (EAT) and Darden (DRI) have kept their product development groups busy lately, creating and rolling out such items.

About the author: John A. Gordon is with Pacific Management Consulting Group, an analytically oriented chain restaurant management consultancy; focused on restaurant economics and earnings

Location, Location, Location?

It is an axiom that in retail it is location, location, location that breeds success for a business. However location is just one part of the equation, of equal or more importance is marketing,marketing, marketing. In this day of economic challenges I think a more accurate description is promotion, promotion, promotion of the business in cheap and creative ways. Carefully examine the ways in which advertising dollars are being spent and that a good return on investment is indeed being realized. Satisfied customers and word of mouth are still the cheapest form and most effective form of advertising. Capturing of customers e-mails and loyalty programs can be effective and inexpensive tools. Spend more time in employee training and education to insure that each customer has a good experience. In a down turning economy there is an increasing supply of truly qualified employees--no excuse except owner laziness not to take advantage of this economic reality and upgrade staffing, if necessary.