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Profitable Menus

The following article comes from Entrepreneur Magazine Online

 

As you put together a plan for your food-service business, be aware of some of the trends in terms of menu content and design: These factors could--and, in fact, should--influence the type of food-service business you open.

Restaurant operators report that items gaining popularity include vegetarian items, tortillas, locally grown produce, organic items, fusion dishes (combining two or more ethnic cuisines in one dish or on one plate) and microbrewed/local beers. Pita dishes and wraps continue to be in high demand, particularly as an easy-to-consume alternative to sandwiches. You will also see a strong demand for bagels, espresso/specialty coffees and "real meals," which are typically an entree with a side order. Consumers are eating more chicken, seafood and beef entrees than they have in recent years. At the same time, they expect to see meatless alternatives on the menu. Diners also are demanding "comfort food"--the dishes that take them back to their childhoods, when mothers baked from scratch, and meat and potatoes were at the center of each plate.

Menus are also showing a number of ethnic dishes and spice-infused offerings. It's not surprising to find Thai, Vietnamese, Creole, Tuscan and even classic French cuisines on the same menu, and even the same plate.

At the same time, be sure to keep the kids in mind as you plan your selections. If families are a key part of your target market, you'll want a range of four or five items in smaller portions that youngsters will enjoy. If you serve snack items as well as entrees, note that kids are choosing healthier snacks more often than they did a few years ago. For example, while salty snacks remain popular, yogurt is the fastest growing snack food based on consumption frequency among kids under 13. The average child in that age group eats yogurt 11 times more today than five years ago. Fruit cups and applesauce cups are also growing in popularity among children and teens. While most restaurants still offer fixed kids' meals, you might consider allowing your young diners to make their own choices among a selection of nutritious options.

Though menu variety has increased over the years, menus themselves are growing shorter. Busy consumers don't want to read a lengthy menu before dinner; dining out is a recreational activity, and they're in the restaurant to relax. Keep your number of items in check and menu descriptions simple and straightforward, providing customers with a variety of choices in a concise format. Your menu should also indicate what dishes can be prepared to meet special dietary requirements. Items low in fat, sodium and cholesterol should also be marked as such.

Safety Regulations

Though we don't think of food service as heavily regulated an industry as something like medical services or public utilities, the reality is that many aspects of your operation are strictly regulated and subject to inspection. Fail to meet regulations, and you could be subject to fines or get shut down by authorities. And if the violations involve tainted food, you could be responsible for your patrons' illnesses and even death. Issues such as sanitation and fire safety are critical. You must provide a safe environment in which your employees can work and your guests can dine, follow the laws of your state on sales of alcohol and tobacco products, and handle tax issues, including sales, beverage, payroll and more.

Most regulatory agencies will work with new operators to let them know what they must do to meet the necessary legal requirements. Your state's general information office can direct you to all the agencies you'll need to be concerned with.

Restaurants are classified into three primary categories: quick-service, midscale and upscale. Quick-service restaurants are also known as fast-food restaurants. These establishments offer limited menus of items that are prepared quickly and sold for a relatively low price. In addition to very casual dining areas, they typically offer drive-thru windows and take-out service.

When people think of fast-food restaurants, they often think of hamburgers and french fries, but establishments in this category also serve chicken, hot dogs, sandwiches, pizza, seafood and ethnic foods.

Midscale restaurants, as the name implies, occupy the middle ground between quick-service and upscale restaurants. They offer full meals but charge prices that customers perceive as providing good value. Midscale restaurants offer a range of limited- and full-service options. In a full-service restaurant, patrons place and receive their orders at their tables; in a limited-service operation, patrons order their food at a counter and then receive their meals at their tables. Many limited-service restaurants offer salad bars and buffets.

Upscale restaurants offer full table service and do not necessarily promote their meals as offering great value; instead, they focus on the quality of their cuisine and the ambience of their facilities. Fine-dining establishments are at the highest end of the upscale restaurant category and charge the highest prices.

Selecting a Food Concept

Restaurant patrons want to be delighted, but not necessarily surprised. If they're anticipating a family-style steakhouse but find themselves in a more formal environment with a bewildering gourmet menu, the surprise alone may keep them from enjoying the restaurant. Concepts give restaurateurs a way to let patrons know what to expect and also provide some structure for operation. Some of the more popular restaurant concepts include:

  • Casual-dining restaurants. These type of restaurants appeal to a wide audience, ranging from generation Y to gen Xers and baby boomers with families to seniors, and they provide a variety of food items. These establishments offer comfortable atmosphere with mid-range prices. Many successful casual-dining restaurants center on a theme that's incorporated into their menus and décor.

     

  • Family-style restaurants. As the name implies, these establishments are geared toward families. Since they charge reasonable prices, they also appeal to seniors. They offer speedy service that falls somewhere between that of quick-service and most full-service restaurants. Their menus offer a variety of selections to appeal to a broad range of customers, from children to seniors. Family-style restaurants have prices slightly higher than those at fast-food restaurants, yet these establishments still provide table service. The décor of family-style restaurants is generally comfortable, with muted tones, unremarkable artwork, and plenty of booths and wide chairs. Booster seats and highchairs for children are readily available.

     

  • Ethnic restaurants. Ethnic restaurants enjoy a significant share of the U.S. restaurant market. They range from quick-service to upscale, and their menus typically include "Americanized" versions of ethnic dishes as well as more authentic food. The three most popular kinds of ethnic restaurants are Italian, Chinese and Mexican. Other popular types include Indian, Thai, Caribbean, English, French, German, Japanese, Korean, Mediterranean and Vietnamese. An even wider variety of ethnic restaurants can thrive in metropolitan areas that have a culturally diverse population.

     

  • Seafood. Quick-service seafood restaurants generally offer a limited range of choices, often restricted to fried fish and shrimp. Midscale and upscale restaurants in this sector offer a wider selection of seafood items, prepared in ways other than frying, including baking, broiling and grilling. Seafood can be a risky venture, as seafood prices are always changing and many kinds of seafood are seasonal. Beware: Quality can vary tremendously from catch to catch.

     

  • Steakhouses. Steakhouses are part of the midscale and upscale markets. Midscale steakhouses are typically family-oriented, offering a casual environment with meals perceived as good values. Comfort is emphasized, and Western themes are popular. Upscale steakhouses offer a more formal atmosphere and may serve larger cuts of better quality meat than those served in midscale eateries. Upscale establishments offer guests more privacy and focus more on adult patrons than on families.

     

  • Pizzeria. You have two primary choices when entering this $30 billion market. One is a to-go restaurant in a modest facility with a specialized menu highlighted by pizza and beer, limited seating and a self-service atmosphere. The other is a full-service pizza restaurant with a menu that features not only a variety of pizzas, beer and wine, but also Italian entrees like spaghetti, ravioli and lasagna, side dishes such as salads (or even a salad bar), and a few desserts. The foundation of a pizzeria is, of course, the pizza. If you don't know how to make a good pizza, hire a good pizza cook who does. Invest in top-quality ingredients and preparation methods, and make every pizza as if you're going to eat it yourself. Do that, and your customers will keep coming back for more.

     

  • Sandwich Shop/Delicatessen. One reason sandwich shops are so successful is that they enjoy high profit margins. Sandwich shops and delicatessens can also change their menus quickly and easily to adapt to current tastes. For example, with the growing interest in health and nutrition in the United States, sandwich shops and delicatessens have started offering more low-fat, healthy ingredients in their sandwiches, salads and other menu items. Also, many sandwich shops and delis have been able to keep up with American workers who eat at their workplaces by adding delivery and catering to their sit-down and take-out operations. Sandwich shops and delicatessens can be differentiated by the foods they serve. Most sandwich shops serve only sandwiches, possibly with some side dishes or desserts. A delicatessen usually offers a more extensive menu, including sandwiches, prepared meats, smoked fish, cheeses, salads, relishes and various hot entrees.

     

  • Coffeehouse. With more than 400 billion cups consumed every year, coffee is the world's most popular beverage. Today's coffee cafes cater to a marketplace as varied as the coffee flavors themselves--some targeting the breakfast and lunch on-the-go market, others operating as evening destinations, with food items and perhaps entertainment, and a wide range of styles in between. Most successful coffeehouses have heavy foot traffic and high-volume sales. Profit margins for coffee and espresso drinks are extremely high--after all, you're dealing with a product that's more than 95 percent water. At the same time, your average ticket amount is around $3, so you need volume to reach and maintain profitability. Besides specialty roasted coffee by the cup, most coffeehouses also have espresso-based drinks (cappuccinos, lattes, etc.), assorted teas, bottled water and fruit juices, along with an inviting assortment of baked goods, a selection of desserts, and coffee beans by the pound.

     

  • Bakery. With the emergence of strip malls and competition from supermarkets that have in-store bakeries, "bread-only" retail bakeries have almost disappeared from the United States. Bakeries today sell cakes, scones, bagels, cappuccinos and sometimes even offer full dining menus, including sandwiches, hot entrees, beer and wine. Consumers love fresh bakery goods, but the market is extremely competitive. As you develop your particular bakery concept, you'll need to find a way to differentiate yourself from other bakeries in your area.

    Before you can begin any serious planning, you must first decide what specific segment of the food-service industry you want to enter. While there are many commonalities among the various types of businesses, there are also many differences. And while there is much overlap in the knowledge and skills necessary to be successful, your own personality and preferences will dictate whether you choose to open a commercial bakery, a coffee cart, a fine-dining restaurant or other type of operation. Then, once you have decided what business best suits you, you must figure out the niche you'll occupy in the marketplace.

    For example, are you an early riser, or do you prefer to stay up late and sleep late? If you like--or at least don't mind--getting up before dawn, your niche may be a bakery or a casual breakfast-and-lunch operation. Night owls are going to be drawn to the hours required for bar-and-grill types of restaurants, fine-dining establishments and even pizzerias.

    Do you like dealing with the public, or are you happier in the kitchen? If you're a people person, choose a food-service business that gives you plenty of opportunity to connect with your customers. If you're not especially gregarious, you'll probably lean more toward a commercial type of business, perhaps a bakery or even a catering service, where you can deal more with operational issues than with people.

    Do you have a passion for a particular type of cuisine? Do you enjoy a predictable routine, or do you prefer something different every day? Are you willing to deal with the additional responsibilities and liabilities that come with serving alcoholic beverages?

    As you do this self-analysis, think about your ideal day. If you could be doing exactly what you wanted to do, what would it be?

    Once you've decided on the best niche for you as an individual, it's time to determine if you can develop a niche in the market for your food-service business.

     

    Working in a Restaurant

    Dealing graciously with customers and playing the role of elegant host are only part of a restaurateur's many duties. Food-service business operators spend most of their time developing menus; ordering inventory and supplies; managing personnel; creating and implementing marketing campaigns; making sure their operation is in compliance with a myriad of local, state and federal regulations; completing a wide range of paperwork; and performing other administrative chores. Certainly the financial opportunities are there--as are the fun aspects of the business--but starting, running and growing a food-service business is also hard work.

    Regardless of the type of food-service business you intend to start, the best way to learn the ropes is to work for a similar operation for a while before striking out on your own. Doing so will give you significant insight into the realities and logistics of the business.

    Successful restaurateurs agree that the best preparation for owning a restaurant is to work in someone else's first. Think of it as getting paid to be educated. Certainly you should read books and take courses, but you should also plan to work in a restaurant for at least a few years doing as many different jobs as possible. And if you're not actually doing the job, pay attention to the person who is--you may find yourself doing it when your own restaurant is unexpectedly shorthanded.

    Ideally, you should work in a restaurant similar to the type you want to open. You may find you don't like the business. Or you may find you're more suited to a different type of operation than you originally thought. Hopefully, you'll discover you're in exactly the right place.

    "As I started working in restaurants, I realized this was my passion," says Scott Redler, co-owner and founder of Timberline Steakhouse & Grill in Wichita, Kansas. Redler, 42, got his first restaurant job at 15, opened a Chinese fast-food restaurant at 26 that failed in eight months, and now has five successful steakhouses. He also opened two Freddy's Frozen Custard restaurants. "When you have a busy restaurant and you're watching everything happen as it should," he says, "it's a wonderful feeling of satisfaction."

    Armed with practical experience, you're ready to put together your business plan--the most critical element of your restaurant. Map out everything on paper before you buy the first spoon or crack the first egg. According to Melman, 80 percent of what will make your restaurant a success will take place before you ever open the doors.

    Your business plan should include: a clear definition of your concept; a description of your market; your menu and pricing; detailed financial information, including data on your startup capital (amount and sources) and your long-term income and expense forecasts; a marketing plan; employee hiring, training and retention programs; and detailed plans that outline how you'll deal with the challenges restaurateurs face every day. Including an exit plan in your strategy is also a good idea.

     

    Funding Your Business

    How much money you need to start depends on the type of food business you're starting, the facility, how much equipment you'll need, whether you buy new or used, your inventory, your marketing expenses and your necessary operating capital (the amount of money you'll need on hand to carry you until your business starts generating cash). It's easy to spend hundreds of thousands of dollars starting a restaurant. By contrast, when Jim A. started his first bakery in Maine, he rented a space that had been a commercial bakery and came complete with mixers, benches, ovens and other equipment. He was able to start with just $10,000 he'd borrowed from family and friends, and he used that primarily on inventory.

    Regardless of how much money you'll need, you'll definitely need funds to get your food-service business started. Here are some suggestions of where to go to raise your startup funds:

     

  • Your own resources. Take a thorough inventory of your assets. People generally have more assets than they realize. This could include savings accounts, equity in real estate, retirement accounts, vehicles, recreation equipment, collections and other investments. You may opt to sell assets for cash, or use them as collateral for a loan. Take a look, too, at your personal line of credit. Many a successful business has been started with credit cards.

     

  • Family and friends. The logical next step after gathering your own resources is to approach friends and relatives who believe in you and want to help you succeed. Be cautious with these arrangements; no matter how close you are, present yourself professionally, put everything in writing, and be sure the individuals you approach can afford to take the risk of investing in your business.

     

  • Partners. Using the "strength in numbers" principle, look around for someone who may want to team up with you in your venture. You may choose someone who has financial resources and wants to work side-by-side with you in the business. Or you may find someone who has money to invest but no interest in doing the actual work. Be sure to create a written partnership agreement that clearly defines your respective responsibilities and obligations.

     

  • Government programs. Take advantage of the abundance of local, state and federal programs designed to support small businesses. Make your first stop the Small Business Administration; then investigate various other programs. Women, minorities and veterans should check out niche financing possibilities designed to help them get into business. The business section of your local library is a good place to begin your research.

     

  • Depending on how much money you have to invest in a food-service business and the particular type of business you choose, you can end up spending anywhere between $30,000 and $1.5 million on a facility.

    While not every food-service operation needs to be in a retail location, for those that depend on retail traffic, here are some factors to consider when deciding on a location:

     

  • Anticipated sales volume. How will the location contribute to your sales volume?

     

  • Traffic. Consider foot and vehicle traffic. How many pedestrians and cars go by daily? How accessible is the location to passers-by?

     

  • Area demographics. Do the people who live and work in the vicinity fit the profile of your target market?

     

  • The rent-paying capacity of your business. If you've done a sales-and-profit projection for your first year of operation, you'll know approximately how much revenue you can expect to generate, and you can use that information to decide how much rent you can afford to pay.

     

  • Restrictive ordinances. You may encounter unusually restrictive ordinances that make an otherwise strong site less than ideal, such as limitations on the hours of the day that trucks can legally load or unload.

     

  • Customer parking facilities. The site should provide convenient, adequate parking as well as easy access for customers.

     

  • Proximity to other businesses. Neighboring businesses may influence your store's volume, and their presence can work for you or against you.

     

  • History of the site. Find out the recent history of each site under consideration before you make a final selection. Who were the previous tenants, and why are they no longer there?

     

  • Future development. Check with the local planning board to see if anything, such as additional buildings or road construction, is in the works.

     

  • Terms of the lease. Be sure you understand all the details of the lease because it's possible that an excellent site may have unacceptable leasing terms.

    If you're considering a location that's been the site of another restaurant, study its history so you know why the previous operation failed--and be sure it's something you can overcome.

    Layout

    Layout and design are major factors in your restaurant's success. You'll need to take into account the size and layout of the dining room, kitchen space, storage space and office. Typically, restaurants allot 40 to 60 percent of their space to the dining area, approximately 30 percent to the kitchen and prep area, and the remainder to storage and office space.

     

  • Dining area. This is where you'll be making the bulk of your money, so don't cut corners when designing your dining room. Visit restaurants in your area and analyze the décor. Watch the diners; do they react positively to the décor? Is it comfortable, or are people shifting in their seats throughout their meals? Note what works well and what doesn't.

    Much of your dining room design will depend on your concept. It will help you to know that studies indicate that 40 to 50 percent of all sit-down customers arrive in pairs; 30 percent come alone or in parties of three; and 20 percent come in groups of four or more.

    To accommodate the different groups of customers, use tables for two that can be pushed together in areas where there is ample floor space. This gives you flexibility in accommodating both small and large parties. Place booths for four to six people along the walls.

     

  • Production area. Too often, the production area in a restaurant is inefficiently designed--the result is a poorly organized kitchen and less than top-notch service. Keep your menu in mind as you determine each element in the production area. You'll need to include space for receiving, storage, food preparation, cooking, baking, dishwashing, production aisles, trash storage, employee facilities and an area for a small office where you can perform daily management duties.

    Arrange your food production area so that everything is just a few steps away from the cook. Your design should also allow for two or more cooks to be able to work side by side during your busiest hours.

    As you put together a plan for your food-service business, be aware of some of the trends in terms of menu content and design: These factors could--and, in fact, should--influence the type of food-service business you open.

    Hiring Right

     

  • Hire right. Take the time to thoroughly screen applicants. Be sure they understand what you expect of them. Do background checks. If you can't do this yourself, contract with a HR consultant to do it for you on an as-needed basis.

     

  • Create detailed job descriptions. Don't make your employees guess about their responsibilities.

     

  • Understand wage-and-hour and child labor laws. Check with your own state's Department of Labor to be sure you comply with regulations on issues such as minimum wage (which can vary depending on the age of the workers and whether they're eligible for tips), and when teenagers can work and what tasks they're allowed to do.

     

  • Report tips properly. The IRS is very specific about how tips are to be reported; for details, check with your accountant or contact the IRS (or see your local telephone directory for the number).

     

  • Provide initial and ongoing training. Even experienced workers need to know how things are done in your restaurant. Well-trained employees are happier, more confident and more effective. Plus, ongoing training builds loyalty and reduces turnover. The National Restaurant Association can help you develop appropriate employee training programs.

    There are several categories of personnel in the restaurant business: manager, cooks, servers, busboys, dishwashers, hosts and bartenders. When your restaurant is still new, some employees' duties may cross over from one category to another. For example, your manager may double as the host, and servers may also bus tables. Be sure to hire people who are willing to be flexible in their duties. Your payroll costs, including your own salary and that of your managers, should be about 24 to 35 percent of your total gross sales.

     

  • Manager. The most important employee in most restaurants is the manager. Your best candidate will have already managed a restaurant or restaurants in your area and will be familiar with local buying sources, suppliers and methods. You'll also want a manager with leadership skills and the ability to supervise personnel while reflecting the style and character of your restaurant.

    To get the quality of manager you want, you'll have to pay well. Depending on your location, expect to pay a seasoned manager $30,000 to $40,000 a year, plus a percentage of sales. An entry-level manager will earn $22,000 to $26,000 but won't have the skills of a more experienced candidate. If you can't offer a high salary, work out a profit-sharing arrangement—it's an excellent way to hire good people and motivate them to build a successful restaurant. Hire your manager at least a month before you open so he or she can help you set up your restaurant.

     

  • Chefs and cooks. When you start out, you'll probably need three cooks--two full time and one part time. Restaurant workers typically work shifts from 10 a.m. to 4 p.m. or 4 p.m. to closing. But one lead cook may need to arrive early in the morning to begin preparing soups, bread and other items to be served that day. One full-time cook should work days, and the other evenings. The part-time cook will help during peak hours, such as weekend rushes, and can work as a line cook during slower periods, doing simple preparation. Cooking schools can usually provide you with leads to the best in the business, but look around and place newspaper ads before you hire. Customers will become regulars only if they can expect the best every time they dine at your restaurant. To provide that, you'll need top-notch cooks and chefs.

    Salaries for chefs and cooks vary according to their experience and your menu. Chefs command salaries significantly higher than cooks, averaging $600 to $700 a week. You may also find chefs who are willing to work under profit-sharing plans. If you have a fairly complex menu that requires a cook with lots of experience, you may have to pay anywhere from $400 to $500 a week. You can pay part-time cooks on an hourly basis; check around for the going rate in your area.

     

  • Servers. Your servers will have the most interaction with customers, so they need to make a favorable impression and work well under pressure, meeting the demands of customers at several tables while maintaining a pleasant demeanor. There are two times of day for wait staff: very slow and very busy. Schedule your employees accordingly. The lunch rush, for example, starts around 11:30 a.m. and continues until 1:30 or 2 p.m. Restaurants are often slow again until the dinner crowd arrives around 5:30 to 6 p.m.

    Because servers in most establishments earn a good portion of their income from tips, they're usually paid minimum wage or just slightly more. When your restaurant is new, you may want to hire only experienced servers so you don't have to provide extensive training. As you become established, however, you should develop training systems to help both new, inexperienced employees and veteran servers understand your philosophy and the image you want to project.

     

    Check out www.entrepreneur.com for more industry articles.


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