Restaurant Design and Development, and Concept Development

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Better Restaurant Project

The restaurant market is in transition, with rapidly shifting customer preference, labor costs, food costs, healthier options, and making the restaurant eating experience a better one.

One reads of McDonlads losing market share and same store sales going in the wrong direction, of Darden Group trying to unload or close Red Lobsters, TGIF unloaded by the Carlson Group, Sbarro pizza chain going bankrupt twice in three years and writing of more than $ 500 million in debt.

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Then on the other side, we see Chipotles never ending sales and store growth, Panera and Starbucks continued success and expansion, not to mention Shake Shacks and its IPO. And new regional start-up restaurant concepts expanding year on year (Cowboy Chicken, Zoe’s Kitchen, Tender Greens among others.

How do we make sense out of these market movements:

There are two points of view we can take:

1. Customer: With a lower income group with less disposable income, a millennium generation of professionals and entrepreneurs who are more , looking for healthier options, and are eating out more, or getting more take out, and financial market doing well,with expense account budget increasing, the market is shifting

2. Existing restaurant groups: Many of the traditional Quick Serve Restaurant groups and Full Serve Casual Dining mired down in their traditional way of doing business, offering cheap food in big protions, with an inability to get out of their known business models, and new young entrepeneurs creating new, young, healthy and fresh concepts.

My take by market segment is as follows:

Quick Serve (also known as Fast Food):

The largest two in this segment are McDonalds and Subway, and both of these have been following the same model.

Low labor and food costs, heavy reliance on big marketing budgets to bring customers in, with TV advertising, coupons, dollar meals, also increasing the menu offerings. Subway has done a great job positioning itself as a healthy option, which is probably true if compared to burgers and fries, but with large loads of starch, nitrate preserved cold cuts, it is hardly a trully healthy option.

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Labor costs are rising, and the dependence of these concepts on low labor, no medical benefits, part time employees is changing, as healthcare becomes an obligation and the federal government and states raising the minimum wage over $ 10 per hour, it will drive them to a similar labor cost as the fast casual concepts such as Starbucks and Chipotle.

Some of the smaller footprint concepts, such as Subway, become a way for immigrant family groups to start their own business, and control their labor cost running their stores with family members, will probably be able to duck the rising minimum wage and medical insurance costs.

Food costs are also rising, and the demand from customers for better, healthier food will oblige some of these concepts to pay more to upgrade their quality to compete with the fast casuals.

Some of these concepts have seen success in the last few years, mainly due to their expansion into China, India and other emerging markets, McDonalds and KFC been prime examples), but this has led to a false sense of security, and postponed actions they should have taken to change course earlier.

The direction they have taken in the past, of an ever increasing menu offering, trying to capture market share isn’t working. If compares KFC with Boston Market, their menus seem to have become very similar over the years, each one offering the other ones successful items, and not doong any one very well.

The one bright star in the QSR market is Taco Bell, that has focused on their primary market in the US, and has had great success in rebranding and repositioning, while making very healthy profits.

The QSR market is heavily franchised which brings on a whole other set of problems, especially when market share and profits start going in the wrong direction, making them very difficult to turn around.

Fat Casual:

Much has been written about these concepts and their success. In the fast casual restaurant category, we should make a distinction as to the service model each one follows, as follows:

Self Serve and Pay: Pret a Manger is the prime example of this type of concept. With service times of less than 2 minutes, serving over 300 customers and hour, ideally suited for high volume areas. Pret has been very successful and has stuck to their primary model, although with small detours, like when they offered panini/hot sandwiches that were toasted behind the POS/Cashier.

High quality food, served fast at reasonable prices.

pretamanger Better Restaurant Project

Serveline Assembly: Chipotle is the example to follow, with the capability to serve more than 250 customers an hour with one or two POS. Base food offering is limited, but with the ability to assemble as you go, the resulting combinations make it more varied.

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Sweetgreen design

Many other serveline assembly concepts try to emulate this model, and usually fail, due to some complication added to the line, or making the food offering to big, or by trying to have one server follow the customer down the line assembling his order (Freebird Burritos).

Order/Pay/Serve: Most of the Better Burger Concepts (Five Guys, Smashburger, Shake Shack) as well as concepts like Noodles & Co, COSI, Panera. This is a variation of the QSR model where customer pay, and cahier takes order and assembles it. Although very successful, there is usually a limitation on output.

my ceviche Better Restaurant ProjectNoodles and Co Restaurant Better Restaurant Project

Most of these concepts have seen success in the market. The one interesting factor, is that none of these have come out of one of the large QSR groups, and when they have been bought over by one of the large QSR groups, the merger is not successful (for example Baja Fresh).

Hybrid Model: Starbucks is the prime example, with a Pret type self serve, a coffee/tea service, teh nthe POS cashier, and the more complicated items that have to be made, sent to a pick up area.

starbucks Better Restaurant Project

All these models have worked well, and when analyzed and designed as a system, can be very successful, especially when combin ed with good branding, good food and healthy options.

This market segment is gaining market share from the QSRs and from the Casual Dining segment, and will continue to do so, as the concepts have the ability to change and adapt to their customers needs.

Usually have good branding, pay above average wages and benefits, and above all over healthy food fast at a reasonable price.

Casual Dining (Full Serve): Here we find the biggest transition, with loss of market to the Fast Casual Concepts, and to the newer, fresher, simpler concepts (Houstons, Fishbone among others).

Bonefish Better Restaurant Project Houstons Better Restaurant Project

If one looks at the typical multiunit casual dining concepts, such as TGIF, Applebees, Rube Tuesday and Chilis, each one originally had its moments of success, and then changed their concepts, lost their direction, trying to capture new customers, by expanding the menus, and looking for their competitions successful menu items and adding it to theirs. A good example of this is BBQ ribs, all offer it, none do it well.

Menu becomes extensive, impossible to execute well, and with a heavy reliance on the food manufacturers. Offering the “jalapeno poppers” and “mozzarella sticks”, that are bought frozen and deep fried, with a resulting product, that is not only non-distinctive, but also not very good.

Then their is the marketing plans that rely heavily on coupons and happy hours promotions to try to lure customers in. The results are concepts that are not very good, and parking and accessibility becomes the distinguishing factor of one store against another.

The new successful ones, typically have a distinct theme for the food, a simple one page menu, produce great food, and build a great ambiance, making them distinctive destinations for diners.

Steak houses are also a perfect example of focused, high food quality concepts

Add to this a focus on healthy, sustainable, locally sourced, seasonal, and you have a winner.

Can the traditional casual dining concepts change? Difficult, as most of them are heavily franchised, and the franchisee is reluctant to spend money recreating something that is losing him market and profits. He will probably put those dollars into a new fast casual concept.

Fine Dining:

There will always be a market for fine dining, and its success will parallel the success of the economy. In good times more fine dining restaurants are built, when the economy slows down they suffer.

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The traditional customer is either affluent with a taste and knowledge for good food and wine, customers that need to be seen in those settings, and last but not least, the expense account customers.

What makes a good fine dining restaurant: great food, great setting, polite efficient staff, and above all an attention to details.

Do fine dining restaurants have a good profitability? A few do, most don’t.

In many cases, the Chef/Owner/Investors will create a great restaurant, work to get a great reputation, and then create spin offs in the casual dining market to make money.

Conclusion:

The restaurant concepts most likely to succeed and make good profits with which they are able to grow those concepts are in the Fast Casual and Casual Dining markets.

Simple, focused concepts serving great food.

 

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A successful restaurant concept losing its way? McDonald’s Franchisees Are Furious About New Menu Items Hayley Peterson Mike Blake/Reuters McDonald’s franchisees are furious that the company has been rapidly expanding its menu and ramping up promotions like offering two weeks of free coffee, according to a recent survey. “Our menu is a disaster for both employees andContinue Reading