blog updates

Follow KSM
Search

KSM blog

KSM Blog | Katz, Sapper & Miller CPA

Blending the Past and Present: Restaurants Stick to Basics While Adapting to Industry Changes

Posted 12:00 PM by

Summary of Indiana Restaurant Association's event at Katz, Sapper & Miller

The needs of most restaurant guests are not shrouded in mystery – they want a consistent, quality product and an enjoyable experience. How restaurant owners choose to deliver on these expectations is where the opportunities lie.

Katz, Sapper & Miller recently hosted the Indiana Restaurant & Lodging Association’s panel discussion at KSM’s Indianapolis office to offer attendees perspective on the industry from local experts. I moderated the panel, which featured:

  • Ed Sahm, founder of Sahm’s Restaurants and Catering
  • Vicki Farmwald, president and COO of Hacienda Mexican Restaurants
  • Lennie Busch, co-founder and chief financial officer of One World Enterprises

While the initial focus of the panel was on ways to increase top-line revenue and expansion, the discussion shifted to the changing face of advertising, the impact of technology, and where they saw the industry trending locally.

Sales Still Top Priority

“When you have a healthy top line of your balance sheet, everything below it looks better,” said Busch.

Though each panelist offered different perspectives on what they look for in sales data to determine success, the necessary outcomes were consistent. Sahm said he likes to begin with floorplans and layouts to maximize square footage, which leads to effectiveness serving products and efficiencies resulting in high revenue per square foot.

Farmwald’s approach is more historical. “We’re always comparing to last year,” she said. “Our big picture is annual revenue, but I check sales monthly, weekly and daily. How did we compare to the same day last year?”

Busch has adopted a similar historical methodology. “We’ve instituted a 4-4-5 plan – for example, 4 weeks in January and February and 5 weeks in March – which we can categorize against past sales. It helps us compare apples to apples.” One World Enterprises also works to maximize efficiencies. Busch noted that kitchen design is important in supporting the seats in the front of the restaurant.

Word of Mouth Trumps Traditional Advertising

All three panelists concurred that traditional advertising has never had considerable impact on the bottom line. Most channels are expensive, the audiences are too fragmented and it is difficult to measure response.

For Hacienda, the most effective advertising has been through their outdoor billboard efforts. The irreverent tone of their campaigns has worked for them in the smaller markets in which the restaurants are typically located. “We don’t advertise products. Our goal is simply to support the brand image.”

Grass-roots efforts have been effective for One World and Sahms. Direct mailer coupons for college students, frequent buyer programs, promotional cups and dine-and-donate efforts have delivered the best response for One World. Sahms has focused on donating food to schools, churches, and events as a way to build goodwill in the community, along with a rewards program. The systems have worked. “Every restaurant is busy on Friday and Saturday night,” said Sahm. “I like to have the place that’s busy on Tuesday night.”

New technologies and social media have also contributed to the changing industry. Hacienda communicates to its followers through Facebook, Twitter and Instagram; Sahm’s posts videos on its channels. Both see social media as just one facet of the organic, grass-roots connections built with customers.

The rise of food delivery applications was also discussed. Hacienda has employed an independent food and delivery service for many years, so the issue was not on their company radar. But Sahm and Busch both expressed concerns about the new technologies. Legalities, adequate staffing and potential harm to product quality led both to voice their doubts on potential success.

The Secret to Growth

Sales, diversification and … boredom.

Sales, according to Farmwald, is still the key success factor. But the industry – and what consumers expect – keeps changing. Diversification is the way to identify growing segments and provide something new.

“We love the hospitality business,” said Busch. “But to always do the same thing is boring. Diversification helps the company grow and enables us to find ways to keep good people and provide them with opportunities. Our catering business began from that realization.”

Sahm shares in her belief. “We had good people working for us and wanted to promote from within. By opening restaurants and selling them back, it allows us to nurture others who have the hospitality gene.”

Whether that leads to greater competition going forward, he says, remains to be seen. “The market in Indianapolis is saturated right now, so we may see a lot of closings in the next few years.” But Sahm believes opportunities do exist in the area for newer concepts like brewpubs.

“Competition comes and goes,” said Farmwald. “Whether you’re 37 years old like Hacienda or brand new, you always need a point of differentiation. Restaurants must find ways to improve and stay relevant in the marketplace as customers evolve.”

About the Author
Jim White is a member of Katz, Sapper & Miller’s Restaurant Services Group. Jim guides restaurant owner-operators through tax compliance issues and helps them plan strategies to minimize tax liabilities and maximize savings. Connect with him on LinkedIn.

link
Comments (0)
Post a Comment
Name:
Email: (Not Displayed)
Website: (optional)
Comment (HTML tags will be stripped):
Please type the alpha-numeric code above (case sensitive):
Error