Surprising insights from the Restaurant Leadership Conference
In the middle of April, in the middle of the desert, in the middle of an economic crisis, hope sprung for the restaurant industry. In Scottsdale, Arizona, some of the industry’s brightest gathered for the Restaurant Leadership Conference, co-sponsored by Restaurant Business magazine. The message from speakers and attendees was nearly unanimous: these are tough times, but we’re going to make it to the other end better and stronger than before. Over three days, critical intelligence was shared on how to weather this economic storm and how to find and keep success. On the following pages is some of that insight.
You’re not in the service business
President and CEO, Pals
Pal’s is the first foodservice company of any kind to win the prestigious Malcolm Baldrige National Quality Award. Winners of the U.S. Department of Commerce’s highest honor are required to provide access to their process for other business owners. For Pal’s, the choice was the creation of the Pal’s Business Excellence Institute. Over the past decade, the Institute has hosted many of the major foodservice chain brands as they sought insight into Pal’s secret of success. Tom Crosby explained the foundation of the chain’s success.
We discovered that from the founding of our company in 1956 through 1994 we had no clue as to what industry we should be categorized in. Everybody kept telling us, “You’re in the service industry. Read books, study material about how to improve the service industry.” It was a lie for us. We did the first full assessment, and we’re a manufacturer. We’re absolutely no different from Toyota.
I’ve been on stage with the Toyota people, known for the quality of their manufactured cars. They’ll give a talk about production processes, I’ll give a talk about production processes at the restaurant, and it’s the same talk.
The same kind of systems that we discovered really work in the restaurant world is what really work in the automotive world. They bring in raw product, they bring in some preprocessed product that companies have made for them. They have proprietary manufacturing processes and they put out cars. We bring in raw product, we bring in some product that’s been made for us, such as buns, put it in our proprietary manufacturing processes, and we put out Big Pal’s Frenchy Fries and Big Tea.
Then we learned that the second most important business we’re in is education. We have to take raw recruits, bring them in and engage with them, get them lined up and educate them in the ways of our systems to where they can be experts.
The third part of the business we’re in is hospitality. We have to obsess over the customer and provide world-class hospitality. So service is just a component that gets lost in the hospitality piece.
Man, it was like the scales dropping off our eyes [when we realized this]. We changed our management systems, we’ve changed basically the whole company. We changed the design of kitchens. All of a sudden we knew how to do it. We knew what books to read and courses to take and what kind of consultants to bring in. It was all based around either manufacturing, education or hospitality. Then we started to build our structure based on the leadership system to align with that. So where we see so many restaurants with GMs that want to focus on, “Boy, let’s get the schedule right, make sure that we order the right product, make sure the money gets to the bank.”
We decided, that’s crazy, that’s not what leaders should be doing. Leaders at Pal’s, aligned with manufacturing, should be building our brand. If we’re a manufacturer, one of the ways to build our brand is to really obsess on the processes and make sure the quality goes out right. Make sure the accuracy is right. Make sure we’ve designed the processes correctly to deliver the right goods and that we obsess about them.
[GMs at Pal’s] teach and train every day. I walk into a store one of the first things I ask a leader is, “Who’s your training target today? Who’s on your list, who is it that you’re personally going to train?” I have my own training targets every day. We built a structure where we send somebody else to the bank. You send a minimum-wage person to the bank, you send a minimum-wage person to do the reports.
Leaders and managers need to be up on their feet out on the front line.
R&D is your salvation, and other lessons
Chairman and CEO, DineEquity, Inc.
DineEquity, owner of IHOP and Applebee’s, has seen enormous growth since Julia Stewart took over eight years ago. IHOP has had over six consecutive years of same-store sales growth and last year it generated the highest sales in its category, as it became the leader in family dining. After reviewing these accomplishments in her presentation, Stewart began offering lessons on dealing with the current economic environment:
How did we know what to do [to rebuild IHOP]? The simple answer is we got this incredibly keen understanding of our consumer, and that’s also my first suggestion for succeeding during these difficult times. Be close to your customer, know them inside and out. Of course, this is always a key to success, but it’s never been more important, I would argue, than in this down economy. More than any one thing, I would say IHOP’s success in this last seven years is the result of investing quite a bit of time, money and resources into consumer research. We’ve had an intense focus on really trying to understand our guests and what motivates them.
The insight has allowed us to become flexible to act and to respond to any environment. You want to be able to anticipate consumer needs based on any number of scenarios, having a plan A, plan B and ideally even a plan C. And when I say this, I naturally think—I think most people do—of marketing. But you know, when you think about it, this is not really exclusive to marketing. From my perspective, this really begins with research and development. The R&D team must be challenged to have a robust pipeline [of potential new products] that can allow
for flexibility. I cannot stress this enough. If you don’t have a robust pipeline, at times like this, it is incredibly difficult. It creates, if you’ve got a robust pipeline, flexibility with price points, ingredients, portion size, plating, presentation, portability and the list goes on. It’s this chest of tools that will enable the team to be responsive to a shifting environment and consumer needs.
Okay, so it’s not easy. Keeping a team focused on top priorities while also asking them to build a pipeline with incredible flexibility, I admit it’s extremely difficult. The reality is from my perspective, it’s as much a mindset as it is a tangible tool. So what I mean is the R&D culture must support creativity and innovation in a tangible way and concurrently be visionary of what could be: “So, how else could you make that plate item? What other uses for the SKUs could you have? How can you combine those ingredients into other products?” All of these are things you have to be thinking about. And, candidly, we may never use any of them. That’s the part that gets a little tough.
Now I’m sure many of you in the audience are saying, “Look, Julia, I know all this. But I need more help. I need a higher level of partnership from the manufacturers. I need them to partner with me, to be on top trends, to demonstrate that creativity.” As restaurateurs, we are hungry for the manufacturers to make additional long-term commitments to this industry … to enable us to be more responsive to our consumers.
Another trait of companies who are successful during downtimes is their willingness to take calculated risks. The notion is we’ll take action while others may buckle down. That becomes a game-changing event. What’s critical is having a standard by which to evaluate that risk-taking. So, go back to your core strategies and guiding principles: Is the risk aligned with them? Does it allow you to leap ahead and make significant progress against your goals? I would suggest to you that incremental improvement is not worth significant risk-taking. It should yield substantial progress and results. So when evaluating, always ask feedback from others. Without input, anybody can fall prey to [over] excitement, being on cloud nine. If presented with a serious opportunity that entails serious risks, I think you need to be prepared to take that risk. I would suggest, don’t be blind or have blind ambitions guide you, but rather seek out those you trust.
Success during turbulent times also requires what I consider a far greater focus on people. Now, we inherently know it is critical that we put people first. During tough times employees are looking for reassurance. In a world filled with uncertainty, they can count on virtually nothing. They want to look to their employer as someone who can provide them assurance with clear direction and vision. Make no mistake about it: we’re in a battle, a battle with the external environment for the hearts and the minds of our people. They are living this 24 hour, 24/7 news cycle, and it’s very easy for them to get sucked into this doom and gloom that we hear about on television every day. So you have to provide a respite from all this bad news, and I think you have a chance to be a shining light. You have a chance to endear loyalty, and this is especially important during these difficult times. We were at a staff meeting last week and we talked about the fact that, you know what, right now no one is leaving because the reality is these are difficult times. But when things get better, people who are unhappy are bolting, and so we better make sure right now people feel good about the brand that they work for so that when times get better, they’re staying with you.
We can’t make promises necessarily, but we can provide our employees with regular, straightforward, open and honest communication. Your employees have a vested interest in your company. They want to know how the company is doing, why the tactics are changing and frankly what’s next. So in addition to keeping them up to date on the business, you need to seize the opportunity to personally connect. Your efforts don’t need to be time-consuming or expensive, but they need to be real and genuine.
As leaders, we have to determine ... what will make a difference to each and every one of our employees. It’s an incredible opportunity for us to grow our own leadership shadows as far as working with our employees. Our employees are looking at all of us like never before and they are watching our every move. If we exhibit the type of concern I’ve suggested during difficult times, we have a tremendous opportunity to create loyalty that will be long remembered after the economy recovers. Companies that let people know they are valued, that we care about their success and into the future, they’ll be with us.
At the foundation of all a company does should be its values and staying true to its values, and its never more important than now. So, by design, a company typically creates its values when things are going just fine, right? And it should stick through all types of environments. Values must be relied upon, but not just when they’re convenient. I have seen ... companies that rationalize away their values during difficult times. This type of behavior may serve for a temporary respite or a temporary fix, but it certainly doesn’t lead to long-term success.
The reality is that during tough times when the environment may be changing rapidly, or we may be dealing with new and unprecedented challenges, you need your values more than ever. They need to guide you. You need to use them to rely upon and to help you make decisions. Remember it was during the normal times and with probably a deep amount of reflection you actually created those values—now you’re taking advantage of them. Values need to be held dear and they need to serve as your guide and stand the test of time. A company that doesn’t stay true to its values, frankly will soon become rudderless, sort of adrift at sea with nowhere to go.
You shouldn’t own your restaurant—your customers should
Restaurant Business hosted a panel discussion with past members of the Future 50, our annual ranking of the fastest growing chains between $25 million and $50 million in annual sales. The panel included Clay Dover, president of Raising Cane’s; Andy Vap, founder and president of HuHot Mongolian Grill; and Brent Alvord, president of Lenny’s Sub Shop.
Sam Smith, editor, Restaurant Business: How do you build customer loyalty?
Andy Vap: You have to have great food. We tend to get a lot of customer buy in on [our build your own menu]. Every customer that goes through, they go through once and kind of follow the instructions on the board. But after they’ve done it once, they’re a pro. We have our prepared sauces, but they get really personal about their own recipes they create [by blending sauces]. We also did a recipe contest [where winning customer recipes were featured on table tents].
RB: So they take ownership.
Clay Dover: I think it’s important that you actually have a plan to create those fan disciples. We have what we call “Caniacs,” and it’s n actual program in which we’ve developed a strategy to create those evangelists. We attribute a lot of our success to that. But you have to map out a strategy and it’s OK to talk about it. We’ve got all these things, we’ve got media kits and plans for dropping coupons; it’s OK to say, “Here’s how we’re going to create those fans,” and have a plan about it.
RB: And what is that plan?
CD: It’s something where you sit down with not just your marketing group but your operators—those are the guys who have to execute it. You have to bring everybody in together because everybody has to buy into the program. One of our strategies, for example, is targeting schools in the neighborhood. We target high schools, colleges, we place our restaurants there. We’ll go out there and we’ll throw out T-shirts at the games. We’ll do what we call “Cane’s Challenges,” where we’ll go into a school, if a school scores, say, 80 points at a basketball game, everyone gets a free Cane’s sandwich. And with that, as it gets closer [to scoring the points] people start chanting, “Cane’s, Cane’s, Cane’s.” We get involved in our communities and that’s the way we feel we’ve been able to gather some of those customers. They feel it’s their restaurant and they have that connection.
RB: Again, ownership. The customers feel ownership.
CD: Completely. And it’s ok to have a plan and talk about that. Sometimes it feels a little taboo. Maybe you think it will just happen or that it’s a little too sacred to tread on that. Build a strategy around it, get those people, it’s OK.
Brent Alvord: For us it comes down to the premium sandwich and the premium experience. We do something a little bit different. We’re quickserve, and obviously our competition is Subway, Quiznos, Firehouse Subs. But we actually do things like clean up the trash for our guests. We don’t have trash cans in our restaurants. It’s a small thing, but it’s about, you’re in our home, we’re here to serve you. In addition to that, employees start to know regulars by name. People will come in, they’ll see them coming in the door and they’ll start making their sandwich [before they order it]. We’ve had situations where customers have been in the hospital and employees will bring food to that customer. We’ve got guys in Iraq wearing Lenny’s T-shirts. We train to say hello, goodbye, thank you, all that. But we train for a more sincere kind of relationship. We talk about putting yourself in that customer’s shoes. Knowing where they’re coming from. Trying to be a ray of sunshine in their day.
There is a formula for success
President, Technomic, Inc.
Technomic, Inc., is a premier foodservice research and consulting firm. Technomic began tracking the U.S. restaurant industry more than four decades ago. As part of its Restaurant Leadership presentation, Technomic offered a white paper on restaurant success, from which the following is excerpted.
The Winning Restaurant Formula is based on extensive Technomic studies that examined why certain concepts resonate with consumers while others remain perceptually undifferentiated. Findings revealed that concepts providing only “acceptable” levels of food and service don’t stand out within their competitive set. This “sameness epidemic” translated into slipping comparable store sales and diminishing traffic counts beyond what the current economic malaise can realistically have been expected to produce. At the same time, other restaurants in the marketplace have capitalized on current conditions, creating stronger customer bonds and setting the foundation for future success. These winning concepts have developed a two-part equation that creates a unique, consistent value proposition. It is a formula that blends “Consistently Solid Basics” and “Resonating Points of Differentiation.”
Consistently Solid Basics (CSBs)
Fundamental service touchpoints include:
- Timely greeting and seating.
- Prompt acknowledgment by server.
- Server possesses good product and concept knowledge.
- All meal components occur at the right time, spaced appropriately in relation to each other.
- Proper staff attention during the meal, so that no basic meal component is lagging.
- Check and payment are handled in a prompt manner.
The consumer presumes that the concept will consistently meet expectations around the following menu-related touchpoints:
- Expected taste and flavor profile.
- No “food quality” surprises.
- Hot food hot and cold food cold.
CSB #3—Unit Appearance
Consumers often consider the neatness, cleanliness, and look of a restaurant to be an indicator of the amount of pride and care that also goes into the food preparation. Clean dining and bathroom areas are essential.
Resonating Points of Differentiation
Resonating Points of Differentiation establish unique contrasts about specific restaurants in consumers’ minds. These are areas, often intangible, where concept and customer interact. They are either physically or perceptually/emotionally experienced during a dining occasion. Six major categories follow. No concept will typically create competitive dominance around every attribute in all six categories. Technomic studies have found that most “Winning Restaurants” demonstrate unique positioning around three to eight attributes across all categories.
Major Category 1: Lifestyle Integration
Consumers demand a satisfying restaurant experience that’s also a good fit with their specific time, resources and dining occasion needs.
Major Category 2: Hospitality
Does the staff genuinely seem happy to see customers? Do customers truly feel that this is the place where they should be spending their discretionary dollars for an “Away From Home” meal occasion?
Major Category 3: Menu Desirability
What combination of characteristics make the food and beverage offerings at this concept “pop” compared to consumers’ other meal solution options?
Major Category 4: Atmosphere
Does a visit to the restaurant just make the customer feel better?
Major Category 5: Concept Essence
Does the concept successfully communicate its core values, practices, and the foundational principles and elements of their unique operating business model?
Major Category 6: Manager Presence
Is it felt by both customers and employees? Customers want to feel like the restaurant (and its leadership face, the manager) genuinely appreciates their business. At the same time, this presence also provides employee support.