Restaurant Opening Case Study

Modena, an Italian restaurant opening in Brooklyn, New York, recently hired a consultant to assist with the opening of the new operation. The owners, Jeff and Nancy Brown, have never owned a restaurant before.

The space is a 38 seat restaurant, with an 8 seat bar, located on an off avenue between two very busy avenues in Brooklyn. The neighborhood is very gentrified, with little Italian food exposure, so there is serious upside to the property. Jeff is in real estate, so he secured a long term lease at a favorable rate.

The menu appetizers range from $8-$15, the entrees from $15-$22, wines by the glass range from $8-$12, beers are $6, and specialty cocktails cost $9. Hours of operation are; dinner service, 5PM to11PM Monday through Sunday, brunch on Saturday and Sunday from 10AM to 3PM, and a late night bar on Saturday and Sunday from 11PM to 3AM.

Hospitality Enhanced has been hired to do the sales projections for the property, and came up with estimated figures weekly figures, with assumptions expected for the first 60 days of operations.

Hospitality Enhanced also came up with projected labor scheduling needs to staff appropriately for the projected sales.

The cost of this labor is as follows:

This means that projected labor cost will far exceed the industry standard of 30%.

Jeff Brown, the owner, is upset at these figures, and demands an explanation. “How can we run a restaurant with such high operating expenses?”

What should the consultants at Hospitality Enhanced recommend?

Social Media Marketing; a New Paradigm

Media companies have yet to understand that the age of demographic data is over. We as a society are far more complex than traditional media organizations have yet to grasp.

Ad rates are still set using outdated, demographic information. Statistical grouping of consumer habits, combined with psychographics, are far better indicators of human purchasing behaviors.

Tablet Computing and the Coming Data Explosion in Food and Beverage

The iPad has not only invigorated the app industry, it has brought cheap computing to tableside dining. iPads are being used as wine lists, POS systems, and credit card processors; an entire industry has developed around these products. As Google moves into the market with Android tablets, the costs of this hardware will be further reduced, benefiting any hospitality organization who chooses to use them.

As menus transfer from paper format to digital form, the entire science of menu layout will be turned on its head, as interactive menu formats will give the consumer more information, and more interactivity. Innovative restaurants and hotels will take this opportunity to study consumer habits: How many clicks will lead to a decision? Can hotels track, using CRM technology, a customer’s clicked interest and therefore create a profile of his individual tastes?

Take the hypothetical instance of Mr. Smith, staying in Hotel G in NYC. Mr. Smith comes into his room from a long conference, checks his tablet room service menu, and clicks repeatedly on California Cabernets, the burger option, and the steak salad. He chooses not to order food, and instead leaves to a bar next door. The following day in Mr. Smith’s room, the tablet menu automatically offers him a discounted combination of a Cab and the steak salad, and Mr. Smith orders from this menu. Hotel G has captured revenue by making their price points more fluid, and technology was the conduit for this transaction.

Restaurants will have difficulty keeping track of customers on an individual basis, but they can find patterns in their customer’s clicks to help reword menu options, change the layout, or even remove them. Data’s role in the restaurant decision process will begin taking a greater role, and software solutions to assist with this process already exists mostly in Open Source format.

Hospitality Enhanced was created to help bridge the knowledge gap from the technology world and the hospitality industry. We offer tailor made software and consulting solutions to organizations large and small. Data is the new oil; its time you use yours to increase profitability.

The Modern Evolution of the Hospitality Industry

Over the past thirty years, the hotel and restaurant industries have evolved at a rapid rate, with the hotel industry coming to maturity before its less capitalized cousin. Hotels use a wide range of data analytics to set rate, staffing levels, connect with their customers, and bring that unique attention required to obtain repeat customers. Restaurants behave more like hotels did before the 1990’s; by relying on their staff to remember regular customer’s habits, by not differentiating their most profitable customers from least profitable, and by making decisions without the guidance of advanced data.

In the early 1990’s the US hotel industry was practically decimated. A change in the accounting rules during the 1980’s created too many rooms for the market to absorb, and the Savings and Loan crisis almost destroyed the industry. Many profitable chains went out of business, and some small operators were bought out at bargain prices. Business intelligence went from being an unlikely expense to becoming an essential unit for hotel companies. The industry is still evolving today; innovative hotel companies are using these techniques in their food and beverage operations, function spaces, and spa services.

Business evolution is inevitable, but it takes a major change in operating climate for most owners to recognize the need to change. That change occurred with the economic meltdown of 2008, and the ‘V’ shape recovery that many of us hoped for did not occur. Consumers are trading full service meals for quick service establishments (i.e. Panera), and corporate customers are rarely buying private dining spaces, cutting into restaurateur’s already slim profit margin.

Hospitality Enhanced was created with this paradigm shift in mind. We offer a Business Intelligence unit for hire, taking your data and turning it into something you can use to make decisions. We train you and your key staff in the concepts of data mining, and for more advanced users, even set you up to use these tools without us. We recognize that every profitable restaurant business will be adding these services over the next few years, so our client’s self-sufficiency is very important. We are a collaborative organization with very few fixed costs, and most of the software we use is Open Source. We embrace this unique, new operating environment, and strive to increase our client’s margin.

Evolution is inevitable, embrace it, or outsource the expertise of those who do. Data is the new oil; it’s time to start using yours to increase profitability.

Chip Conley: Measuring what makes life worthwhile

Hotelier Chip Conley's account of what makes his organization unique. We at Hospitality Enhanced strive to be at Chip's transformational level, and we strive to help our client's achieve it as well.

Data Mining for the Restaurant Industry

Data mining, also called data discovery, is the process of exploring and analyzing large quantities of data in order to discover meaningful patterns. Many different industries use this tactic to gain a better understanding of their operations; in the hospitality industry, hotels use it to differentiate their best customers and to make more informed revenue management decisions. Conversely, in the restaurant industry, very few operators are aware of or are using this essential information to make decisions, and are not as profitable as a result.

Hospitality Enhanced, a data driven decision-making consultancy, has been created to assist restaurateurs and their managers in utilizing their data to make more informed business decisions. According to the academic paper Data Mining on Time Series, an Illustration using Fast-Food Restaurant Franchise Data, “mining the large amounts of transaction data allows each restaurant to improve its operations management… and product management." The authors were referring to regression analysis, one of the principal tools employed by data mining experts.

For many restaurateurs, this information is not intuitive, and is therefore dismissed as not pertinent in their day-to-day operations. Many owners and managers are not grasping the extent of the paradigm shift that has occurred in this new economy; as a result, beginning in January we will be creating video blogs that introduce data mining techniques to the restaurant industry. Hospitality Enhanced’s goal is to guide the food and beverage industry in comprehending the advantage of fully utilizing the data at their disposal.

Our first video blogs will address the subjects listed below. Since collaboration is one of our key values, we want to know what you, the industry insider, would like to learn about. Please email hospitalityenhanced@gmail.com, or post ideas in the comments below.

-Intro to data mining
-Open source technology and the restaurant industry
-American eating habits and data modeling
-Data visualization and day-to-day operations
-Data and its use in a new (or potential) operation

Data is the new oil; it is time to start using yours to increase profitability.

Data today

Data today is every where, especially in the hospitality industry. Learning to use data visualization techniques in your restaurant will help you to see patterns, and give you an intuitive grasp on your organization that is essential for survival today.