Two of the most iconic moments in film history are Thelma & Louise driving off that cliff and Butch and Sundance charging out the door to take on the Bolivian army.
They are scenes of people choosing their destruction.
There are restaurant owners and managers that do the same thing every day.
We wrote a blog about how GrubHub was hurting restaurants that weren’t ready for the sales increases. Restaurants would put themselves on GrubHub and start to get a ton of delivery orders and then not be able to keep up with the volume of both deliveries and in-house guests.
When Groupon first came out, there were stories of restaurants getting so slammed with Groupon customers, especially around expiration dates, that they angered many first-time visitors and in a lot of ways did more harm to their business than good. This happened to some amazing waffle guys in Denver that I spoke to.
When I first got on Groupon, I watched this idiot massage guy sell over 3,000 $39 90-minute massages in one day. I did the math, and it would have taken this guy over three years full-time doing these deeply discounted massages to get through all the Groupons he had sold. It was crazy. Ironically the next day he enlisted five other massage people to help him work all the Groupons and I don’t think my wife ever got hers.
Back in 2008 I ran the Franchise Assistance Program for a large sandwich franchisor. It was a tough job to have right at the beginning of the recession because a lot of our franchisees were hurting and required assistance.
I was only allowed to give qualified franchisees access to our delivery platform for free. Adding delivery makes a lot of sense for a sophisticated operator who has the bandwidth to market and successfully implement the program. Delivering food requires additional employees and can stress a team if you don’t have the proper set-up. Look at a Jimmy Johns, they have one sandwich line for their in-store customers and one just for delivery, they are set-up correctly.
Unfortunately, for most of our franchisees, delivery wasn’t something that could help them because they couldn’t implement it successfully. For those franchisees who did it half-assed, it probably hurt them more than it helped them.
My point is this. There are tons of new technology solutions being marketed to the restaurant industry that will help you drive new sales: table kiosks, delivery, carry out, mobile ordering apps, etc.. They can be great tools for your business if your operations are rock solid, you staff up, and you put the systems in place to handle the increased volume.
If you don’t plan for the increase, it is like sending out a coupon that is priced incorrectly, a coupon where you lose money on every redemption. The coupon is the best deal ever, and people redeem it. You feel great about all the business you are getting until you see your bank statement. You marketed yourself right out of business.
A lot of these tools get a service charge per transaction or take a percentage of the sale, so their motivation is to get you a ton of transactions. Your motivation as a restaurant owner is to take great care of your guests and run a financially successful business. Those motivations can be at odds with each other. I think a lot of Groupon’s early customers felt that way.
If you are going to open a new sales channel, then you should do the following things:
- Put together a financial plan to determine how much it is going to cost you in staffing, food inventory, etc.
- Make sure you can afford to start this channel for at least 30 to 90 day period.
- In some cases, you will get busy right away and the danger is in not being prepared.
- In other cases, you may experience the opposite, which is not enough sales and you have increased your labor and food costs. You need to be able to hold on and give this test a chance to be successful.
- Make sure you time starting the new channel correctly.
- Don’t just turn it on, plan it out and start slowly.
- Find out if the vendor can throttle you in their system to ensure that you don’t get slammed when you aren’t prepared.
- It’s always better to drink from a trickle than a fire hose.
- Focus on customer service and quality of product above all else.
- If you do that then the increased sales will come and be sustained.
- Make sure you are running safe and efficient operations before adding a new sales channel.
- Volume increases bring out hidden issues in your operations very quickly.
- Consider using an automated checklist program, OpsAnalitica, to ensure safety and readiness every shift.
Marketing and adding new sales channels can grow profitability and expand a restaurant’s trade area exposing it to new customers. Generating more cash and growth. This growth can only happen when the new channel is implemented flawlessly, and the quality of the product matches the customer’s expectations.
If operations cannot keep up with new demand, then the new channel can accelerate the demise of your business, and you can market yourself right off a cliff.