Gauging Your Restaurant’s Competition
Benchmarking is the process of measuring the competition compared to your service and product to gain a competitive edge. It is an essential aspect of any business’s marketing strategy. You cannot survive in a competitive market if you do not know your competition. Fortunately, learning about your competition in food service is probably the most entertaining and enjoyable market research you could imagine.
Identifying Competitors
Generally, all restaurants within your trading area or a 5-15 mile radius compete with you. However, some restaurants will be competing with you more directly than others. For example, if you own a pizza place, other pizza and Italian restaurants will compete with you more directly than in a pub or a sandwich shop.
You can watch direct competitors closely.
Although you should consider any restaurant in your trading area a competitor, direct competitors should be more closely watched than secondary competitors. Direct competitors include any restaurants nearby with a similar menu, pricing, atmosphere or target market. For example, the National Restaurant Association suggests that all similar establishments within a 15-minute drive from yours should be considered direct competition.
Could you keep secondary competitors in mind?
Any business within your trade area that sells food should be kept in mind. Even the nearby grocery store can steal your business in certain situations. For example, if you own a sushi restaurant, and the nearby grocery store offers and displays sushi at their deli or take-out counter, they are probably taking away some of your business. It would be best to consider this as you develop a marketing strategy.
Indirect Research
It would be best to read any reviews of your own business and the competition. Read both customer reviews and reviews by experts like food critics. Record what you learn in a comparison chart.
Get online.
One of the best places to research the competition is on the Internet. Check out your competitors’ websites to learn about their online marketing strategies. Also, look for restaurant reviews. Customers have reviewed most restaurants on at least one website. The value of online restaurant reviews is that the customers usually write them. Furthermore, the reviews are often more truthful than the information you would get from a customer satisfaction survey or from asking customers directly. Begin your online research at some of the following sites: Yelp, Zagat, and Google Reviews.
Could you read your reviews as well as others?
This is one of the best ways to improve your product. Do not allow yourself to be biased or become angry. You must listen to what people say in their reviews to enhance your development and develop an effective marketing strategy. You must address issues found in polls that suggest online reviews since a recent study found that 89% of Americans have researched a restaurant online before visiting.2
Read the papers.
Most local newspapers will have a food section, which you should review daily for any mention of your competition. In addition, you should subscribe to the city journal and always pick up any free local papers. The free reports often contain reviews of restaurants, bars and events. Also, watch for local food and drink magazines that may be reviewing restaurants in the area and giving press to you or your competition.
Keep your ears open.
Many restaurants’ “reviews” only get passed on through word of mouth. Listen to what people say on the street and at your business. Often, customers in your restaurant will talk about the competition compared to where they are eating. Ask your servers and other staff to keep their ears open for comments like this.
Read restaurant guides.
Placement in restaurant directories and guides is critical if you are hoping to attract tourists. These include the AAA Travel Destination Guide, James Beard Foundation Restaurant Directory, Michelin Guide, Fodor’s Restaurant Guide, Gault Millau and Zagat restaurant guides. Good reviews and press are the best way to guarantee a spot in these books. You can also contact the creators or publishers and ask to be listed.
Get industry reports.
The Restaurant Industry Operations Report, published by the National Restaurant Association and accounting firm Deloitte & Touche, can provide you with statistics on the industry and can be found online or at a library. When benchmarking, an industry report will contain financial and operational statistics to compare your restaurant’s performance with the industry standard. By comparing the numbers, you can identify problem areas in your restaurant that may otherwise have gone unnoticed. For example, spending a more significant percentage of sales on labour costs than most restaurants could mean you have too many employees.
Could you talk to suppliers?
It may seem like a last resort, but asking your suppliers for gossip is always good. You should always make a point to develop a friendly relationship with them. They are also supplying some of your competitors and could have some inside information.
Field Research
It may seem counterintuitive, but you should consistently patronise the competition. Go out to eat all the time, especially at your direct competitors’ restaurants. Afterwards, you can write off the expenses on your taxes. Try not to be biased as you eat out since this will skew your research. Instead, try to enjoy yourself like any other customer who goes out to eat. Here are some things you should do every time you eat out.
Take notes.
Anything you notice, whether small or large, is worth noting. For example, are the croutons soggy? Is the booth’s upholstery sticky? Do the servers smile a lot or have a serious, no-nonsense attitude? Write down what you see, smell, hear, feel and taste, but try not to let the employees or managers know you are spying on them.
Watch other diners.
Please look at how other patrons react to the food, service and atmosphere. You could even wait outside and ask them questions as they leave, like, “Did you enjoy your time here? What was your favourite part?”
Could you perform a comparison?
You should evaluate the competitors’ concepts and operations with the same detail you use to develop your own. Compare their restaurants with yours. Here are some questions you may want to ask yourself about the competition:
Are we in direct competition? Do we attract similar customers or offer similar menus and atmosphere? How do our concepts differ? How does our pricing vary?
What is their location like? Do they have good parking, visibility and accessibility?
What is their unique selling proposition (USP)? How does their USP compare to mine?
What is the atmosphere like? Is there music? Can you hear or see what is going on in the kitchen? How complete is the restaurant?
Could you use a chart to organise the critical points for a comparison? Please fill out a chart each time you visit your competitors or simply update their past chart. Also, every few weeks, you should ask a friend or third party to fill out a chart for your restaurant to ensure the data you have on your operation is unbiased. Once you have filled out a chart that includes the pros and cons for each competitor, you can determine the best way to gain an edge over your competition by developing your USP and downplaying your own “cons” or turning them into “pros.”
Beating the Competition
You should usually avoid imitating direct competition. Instead, try to do better than them. However, sometimes pushing and imitating secondary competitors is a good idea. For example, when Roger Fields found that his New York City Mexican restaurant was not attracting enough business, he analysed and imitated Bobby Flay’s Mesa Grill, changing the theme of his Mexican restaurant to “South Western” and developing menu items based on Flay’s recipes.3 The change of concept worked, and his restaurant became successful.
Follow these steps to gain an edge over your competitors:
1. Compare yourself to the competition.
Try using the charts above and benchmarking techniques. Then, ask yourself which competing restaurants are successful, which are not, and why.
2. Fix any apparent problems.
You should do your best to fix any problems the comparison reveals. For example, you may find that one of the leading “cons” of your restaurant, compared with other similar establishments, is a lack of menu options. You can turn this “con” into a “pro” by adding more items to your menu. Another example of a disadvantage would be if you rate lower in the “atmosphere” category than other similar restaurants. To fix this, you could try redecorating your dining area, playing music over the speakers or inviting a band. Each problem area is unique and should be addressed separately.
3. Develop a strategic edge.
If you think you can one-up the competition and beat them at what they do best, then by all means, do so. However, for most restaurant operators, this is not feasible. Instead, focusing on developing your strengths and exploiting your competition’s weaknesses is much more logical. If you notice that a particular problem area is prevalent in your competition, you should make a point to turn it into one of your strengths. For example, if you run a Tex-Mex restaurant and other Southwestern-style restaurants in your area do not have a bar, you should start offering alcoholic beverages to gain an advantage over them.
