SHA507: Foodservice Management: Menu Planning and ... · PDF fileMenu Planning and Marketing & Merchandising Strategies ... Whether you are in independent restaurants, multi-unit restaurants,

SHA507: Foodservice Management: Menu Planning and Marketing & Merchandising Strategies

School of Hotel Administration, Cornell University

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Hello, I am Professor Mutkoski, and I want to welcome you to Foodservice Management: Menu Planning and Marketing and Merchandising Strategies. In this course we will focus on the critical operational systems of menu planning, and marketing and merchandising systems. We will be using real food service situations throughout the course, and we'll be exploring practical approaches and solutions to the challenges faced in each one.

Whether you are in independent restaurants, multi-unit restaurants, hotel, food, and beverage, or non-commercial food service, you all share many of the same challenges. I've been in the trenches as a food and beverage manager of a hotel, and as independent restaurant owner-operator. My goal in writing this course was to make it as practical and useful as possible. You are taking this course either because you are currently in food service management, or you are planning to be. Food service management is one of the most demanding and complex careers one can choose, but also one that can be very rewarding from both a personal satisfaction, and from a monetary standpoint. Making several hundred people happy for breakfast, lunch, or dinner really does make all the preparation worthwhile, and give one a feeling of accomplishment. After all, we are in the hospitality business, and we provide not only sustenance, in the way of food and beverages, but we orchestrate the experience as well. It is a great business to be in, but it is a complicated business to run successfully.

This course, and the ones that precede and follow it, are designed to look at complex food service operations with a very systematic approach. Understanding why things happen is essential to improving a system or an operation. As managers, you will spend a good deal of your time analyzing your operation. I hope you thoroughly enjoy this course, and that your new knowledge helps you conquer the challenges facing you today, and in the future.

Marketing System – Market Research & Market Analysis

It is the premise of this course that a successful food and beverage operation begins with a thorough understanding of the market. That includes the makeup of the customer base and the nature of the competitors in the marketplace. Once the research has been completed and the




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information analyzed, the findings should be used to drive the development of the concept, menu, service, and pricing models. In fact, it is the market information that influences the decisions that need to be made in each of the following systems. There are really two parts to the marketing system: market research and analysis and the marketing communications mix, which includes advertising, promotion, merchandising, and community relations.

Service System

No matter what kind of restaurant, successful establishments have service systems in place. A service system governs how you manage the customer experience, starting with the interactions they have with staff. From the service-systems perspective, the quick-service establishment shares similar goals and systems as a full-service establishment. People need to enter the facility, place orders, be seated, interact pleasantly with staff, pay their bill, and depart (although not necessarily in that order). Where foodservice operations differ is in the level of service and how the service is provided. These differences are derived directly from the needs and expectations of the target market or customer base. But the essentials of the job the service system must accomplish doesn't change: a service system manages every step of these interactions.

Human Resources System

Whether the foodservice operation is large and has a separate human resources department or is small and relies on the foodservice manager to perform the HR functions, this system is vital to the success of the foodservice operation.

The system is responsible for recruiting, interviewing, selecting, orienting, and training staff. It begins with an analysis of the labor needs, which are translated into job analyses and written job descriptions. In addition to staffing and scheduling, the system deals with employee evaluations and career development.

Menu Planning System

A foodservice operation is the sum of its parts. The food offerings, food style, and price must fit the concept. Customer perception of value is directly linked to what they see on the menu. So much is communicated about the establishment from your menu, it's no wonder so many restaurants display the menu in publicly-accessed places such as the front window, elevators, and in the lobby. The menu planning system is a way to make sure this critical element of your restaurant is designed with price, item variety, customer value perception, and the business's message clearly in mind. The menu is the foodservice operator's blueprint for success.




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Purchasing System

The purchasing system is the first link in a series of systems that relate to product acquisition and movement through the operation. This system is critical because it establishes the standards to ensure that the operation is getting the products demanded by its clientele. When ordering food products that are grown or raised rather than manufactured, the variability in product quality, size, condition, and price is enormous. The purchasing system must be designed to control the variability in the marketplace. If the purchasing system breaks down in any way, the impact will be felt elsewhere in the operation.

Receiving System

The receiving system is a critical quality and cost control function that ensures that the products being delivered meet the specifications as ordered. Too often, proper receiving is neglected because the operation is too busy or because a receiving system is viewed as too costly. There are so many opportunities for loss to occur as a result of inadequate receiving that it is essential to have trained personnel and adequate equipment.

Storage System

The storage system may not be exciting, but its function is essential. It is the buffer in the system that allows restaurants to operate with variable demand and periodic deliveries. Proper storage temperatures along with a clean storage environment will extend product life, maintain product quality, and prevent bacterial contamination or bacterial growth. Proper rotation of stock and inventory management are part of the storage system functions.

Production System

The production system is comprised of all the activities involved in the conversion of the purchased ingredients into the finished menu items sold to the clientele. The production system adds value to the product through preparation and presentation. It is responsible for maintaining or enhancing product quality while controlling yield and cost. The production system strives to find the proper balance between process speed and quality by implementing standardized procedures and by organizing work flow in the production area. Production systems vary dramatically, depending on the type of foodservice operation.

Control System

The control system has two purposes: To prevent loss from occurring and to alert management when a problem exists.




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Every system within a foodservice operation needs some form of control. Because all systems are interdependent, it is sometimes difficult to determine where the cause of a problem originated. The tools, safeguards, and monitoring devices implemented by the control system assist management to pinpoint the cause so appropriate action can be taken.

To prevent loss and achieve the returns forecasted, the control system must be fully functional. Product, people, and revenue all require some degree of control for a foodservice operation to be successful.

Management System

While each system within the foodservice operation will generally have one or more managers, the foodservice manager guides the overall operation toward its goals by establishing objectives, organizing and directing the workforce, and monitoring all systems to insure that they are fully functional and that they interact appropriately. There are two primary responsibilities in the management system: strategic management and personnel management.

Marketing System – Marketing Communications Mix

The second part of the marketing system deals with all efforts to communicate with the customer and to position the operation in a favorable light within the community at large. It includes paid advertising, public relations, promotional activities, merchandising, and community-service interactions.

Does the Menu Accurately Reflect the Restaurant's Character?

The components that define a restaurant's character—décor, lighting, place settings, service staff attire, food presentation, and menu—should fit compatibly to conjure a realistic impression of the restaurant's personality in the mind of the customer.

In this presentation, you're shown pairs of photographs from four restaurants. The first photo is the restaurant's menu cover. By studying the cover, can you describe the décor, service style, type of cuisine, and service staff attire of the restaurant? Can you estimate the price or define the market the restaurant is targeting?

Then look at the photo of the restaurant's interior. Is it what you expected? Does the menu project an accurate impression of the restaurant's personality?




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Think about a guest looking at menus in a hotel room and trying to decide where to dine and how to dress. Do these menus send the correct message?

Elements that Define a Restaurant's Character

As you look at the menu covers on the upcoming slides, think about what terms you would use to describe the restaurant's character.

Lasserre Menu—What Are Your Expectations?

From looking at their menu cover, how would you describe the character of the Lasserre restaurant?

Lasserre Interior—Does the Menu Send the Right Message?

Read through the comments from the Lasserre assessment as they relate to the list of character elements.

Décor: Classical formal The images depict a classic formal and somewhat baroque interior.

Service level/type of restaurant: Fine dining The table setting and atmosphere indicate fine dining.

Price: High The décor and design dictate high prices.

Type of staff: Full-time professional The slide of the server indicates a professional staff.

Service staff attire: Formal (tuxedo) The waiter in tails indicates formal attire.

Cuisine: Classical The food display is classical.




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Meal duration: Leisurely paced The atmosphere and service indicates a leisure pace.

Target market: Business and social obligation The décor, cuisine, and price indicate a market with a high-income level or company charge accounts.

Rostang Menu—What Are Your Expectations?

From looking at their menu cover, how would you describe the character of the Rostang restaurant?

Rostang Interior—Does the Menu Send the Right Message?

Read through the comments from the Rostang assessment as they relate to the list of character elements. Do you agree with the assessment?

Décor: Modern formal The more high tech appearance of the dining room is more modern but yet formal. Look at the wall ceiling and wall treatments and the photos.

Service level/type of restaurant: Fine dining The décor and atmosphere indicate fine dining.

Price: High The décor and design dictate high prices.

Type of staff: Full-time professional The décor and atmosphere call for a professional service staff.

Service staff attire: Formal (jackets or business attire) While no service person is shown, the staff would have to be professionally attired in a restaurant with this décor.

Cuisine: Modern The chef in the creative mode on the cover of the menu indicates the cuisine here will be innovative and modern.




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Meal duration: Leisurely paced The dining room décor indicates a leisurely paced experience to enjoy the creative cuisine of the chef/owner.

Target market: Business and social obligation Décor, cuisine and price indicate a market with high-income level or company charge accounts.

Turner Fisheries Menu—What Are Your Expectations?

From looking at their menu cover, how would you describe the character of Turner Fisheries?

Turner Fisheries Interior—Does the Menu Send the Right Message?

Do you agree with the assessment of Turner Fisheries? Are there any additional comments that you have?

Décor: Modern formal The décor is certainly more formal than the menu cover indicates.

Service level/type of restaurant: Upscale The décor indicates the restaurant and service level would be upscale.

Price: High The atmosphere and décor indicate a high price.

Type of staff: Full-time semi-professional The décor and atmosphere as well as price call for a semi-professional full-time staff.

Service staff attire: Formal (jackets or business attire) While not shown in the image the atmosphere would dictate a professional appearance of business attire.




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Cuisine: Seafood The name Turner Fisheries indicates the cuisine focus.

Meal duration: Leisurely paced The dining room décor indicates a leisurely paced experience.

Target market: Business and social obligation The décor, cuisine and price indicate a market with a high-income level or company charge accounts.

Dorchester Menu—What Are Your Expectations?

From looking at their menu cover, how would you describe the character of the Dorchester Restaurant?

Dorchester Interior—Does the Menu Send the Right Message?

Read through the comments from the Dorchester assessment as they relate to the list of character elements. Do you agree with the assessment?

Décor: Classical formal The table setting, rich wood interior, and tapestry indicate a formal décor.

Service level/type of restaurant: Upscale The formal atmosphere indicates a fine-dining operation.

Price: High The atmosphere and service level indicate high prices.

Type of staff: Full-time professional The image of the chef in whites and the server in a tuxedo indicates a professional staff.

Service staff attire: Formal (tuxedo) The tuxedo indicates formal attire.




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Cuisine: Classical The mixed grill image on the silver service indicates a traditional grill, which would be considered classical.

Meal duration: Leisurely paced The décor, service attire and the cuisine all indicate leisure dining.

Target market: Business and social obligation The décor, cuisine and price indicate a market with high-income level or company charge accounts.

What Constitutes an Effective Menu?

An effective menu should do the following:

Be a sales tool Highlight and promote the sale of the most profitable items Reflect the atmosphere and personality of the restaurant Balance the workload in the production and service areas Be easy to read and understand Provide enough flexibility to allow for changes Produce the desired service time, table turns, and profit

Who Designs the Menu?

The starting point of the menu planning process needs to be the target markets. A menu written without the customer in mind will not be very well received. Your business objectives must also be designed into the menu. If your market seeks a casual, quick-service experience at a mid-price point, this will dictate menu offerings that can be produced quickly, and that will facilitate preparation of the volume needed to meet profit objectives. Avoid creating menus that overburden one cooking station in the kitchen—this causes delays and production errors. If your sauté cook is working frantically to keep up night after night while your grill station is slow, take a look at the mix of items on the menu.

The image of the restaurant must be carried through and projected, in both the menu content and menu design. It should reflect the atmosphere and focus of the restaurant. Just as the menu must be executable in the kitchen, it also has to facilitate the appropriate level of service in the dining room. If the menu requires elaborate service, adequate space and the appropriate




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service equipment must be allocated in the dining room. An understanding of the supply side is important to ensure that the products needed to produce the proposed menu items are available and the costs are in line with objectives. Finally, someone with the culinary knowledge of food flavors, textures, cooking methods, and food presentations must be present for the menu planning process. All of this points to the importance of using a team approach to designing a menu. It's unlikely that any one person on your staff would possess the expertise required in all the areas necessary to produce a winning menu. A team that includes management/ownership, purchasing, marketing, production, service, and a professional graphic designer is needed.

Managerial Considerations

A food and beverage operation exists to make a profit by providing a targeted customer base with what they desire in the way of food and service. Managers need to make sure the business fundamentals are taken care of when a menu is designed, revised, and implemented. The management team should have a clear understanding of what their staff and physical surroundings are capable of accomplishing. The menu should utilize those capabilities without exceeding skill levels or capacity constraints. A well-designed and executed menu will provide a competitive edge in the marketplace. Consider some of the most successful independent and multi-unit restaurant concepts—The Four Seasons, Houston's Restaurants, P.F. Chang's, and The Cheesecake Factory. All have very different menus; all are designed with the menu planning principles we have discussed. Competitors have tried to copy these concepts, but few have succeeded.

Printing Considerations

Here is where a graphic artist or someone trained in design is needed to translate the menu content into an appropriate and attractive presentation piece. Management must remain involved to control the process, provide pertinent information, and make sure the outcome fits with the personality and atmosphere of the restaurant (lighting, color schemes, table settings, and theme). You've probably seen expensive menus that look completely out of place in the dining room because they were designed in an office and proofed under bright fluorescent lights. One such menu is shown in the illustration. It was done on a high-quality, but textured stock using a technique called reverse print (light text on a dark background), in colors that don't provide enough contrast to be readable in the ambient light of the dining room. The soft lighting is compounded by the highly decorative typeface chosen, which makes it even more difficult to read. The waiters have to carry flashlights to help customers decipher the menu.

Ask Yourself and Your Customers

Since it is difficult to be objective about your own creations, a simple way to get feedback on your menus is to show them to someone who has never been to your restaurant. Ask the




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person to describe the restaurant and what he or she would expect the dining experience to be like. Listen to the descriptors used and see whether they accurately portray your restaurant concept. Do this with several people to see whether you get similar responses or completely different ones. If you're getting similar responses, and they reflect the concept, your menu design is doing the job it should.

In addition to fitting the restaurant concept, the menu needs to generate the sales and profits forecasted. Tracking the sales mix and applying some menu engineering techniques will help keep your menu focused on meeting your business objectives.

Success Never Looked So Simple

For over ten years, Sincere Flattery consistently had crowds waiting for a table. The dining room was small, seating only 60 people. The dinner menu consisted of only four items: a bone-in-strip loin steak (plain or marinated), lobster tails, shrimp, and barbecued chicken. Side dishes consisted of a house salad, French fries or baked potato, and a seasonal vegetable. The steak was the best value around and accounted for 80% of the menu mix. This restaurant would do five-plus table turns a night, and people would start lining up at 5 p.m.

Enter the Copycats

Over the years, several copycats came into the market area and tried to draw off market share from Sincere Flattery. Some offered identical menus; some expanded the menu hoping to pull customers with new offerings. While all tried to compete with the menu price structure of Sincere Flattery, they eventually realized they couldn't. One by one, the copycats closed their doors.

Why Didn't These New Restaurants Succeed?

These new operations overlooked the fact that they were operating under a different business structure as a new enterprise. They also failed to understand the real reasons for the success of Sincere Flattery. While some of these reasons should have been obvious, some were definitely behind-the-scenes. Sincere Flattery's success could be attributed to a combination of all these attributes:

Small size Limited menu items Superior quality food




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Low salaries/high tips

How Small Size Contributes to Success

The debt for the real estate and building was completely paid off. In fact, the operator owned three adjacent storefronts and people constantly asked him when he was going to expand. He just smiled when asked this question because a major part of his business strategy was the small size of the dining room. This resulted in about a one-hour wait in the bar/lounge, where those waiting consumed an average of two drinks per person. The operation made much more money on the two drinks than it did on the strip steak.

How a Limited Menu Contributes to Success

The limited number of menu items allowed for low back-of-the-house costs. Three people could operate the kitchen, as they did a steady business of about one turn per hour from 5 to 11 p.m. The volume of business allowed the operator to pay very good wages to the cooks and still have a low labor cost for the back of the house.

How Superior Quality Food Contributes to Success

The operator purchased whole strip loins and had a butcher from a nearby supermarket come in twice a week to cut the steaks and grind the tail for fresh hamburger for the luncheon menu. The fresh ground beef was a by-product of fabricating the steaks, and was used to attract people in for lunch. The quality was superior and the price, again, was set at a level to attract a crowd. A beer or a glass of wine with the top-quality hamburger was a natural.

How Low Salaries and High Tips Contribute to Success

The wait staff (for a long time) were all relatives of the owner. With the number of covers served per night, they made more money in tips than any of the staff working at surrounding restaurants. So much, in fact, that there was no turnover of staff, although there was turnover of salary—their tips were so good that their hourly wage was inconsequential and they actually agreed to sign their checks back over to the operator. This meant that the front-of –the-house payroll costs consisted of salaries for just two bartenders. That closely guarded secret gave Sincere Flattery a competitive edge that the copycats could not have known about.

Lessons Learned

A new restaurant operation that simply tried to copy the menu and pricing of a competitor without looking at the behind-the-scenes factors will have serious difficulty achieving their operational goals. Pricing competitively is one thing; copying the competitor's pricing method is another.




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Pricing Methods

This scenario presents several methods for determining menu prices in foodservice operations.

Food cost method Prime cost method Gross cost method Actual cost method Base price method Volume-risk-profit method

These examples demonstrate the strengths and weaknesses of each method and allow you to compare the final results of the six most popular methods side by side.

Historical Data

These statistics were taken from an actual restaurant's profit and loss statement. The figures are used to work through each of the pricing methods that follow.




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Food Cost Method

The straight food cost method takes only one cost into consideration: the portion cost (PC), or cost of the raw ingredients used to prepare the menu item. It assumes that the portion cost is a fixed percentage of the final selling price. In this example, the historic food cost of 38% has been used to price three menu items. The difference between the selling price and the food cost is the contribution margin (CM). While the charts below show the actual calculation, the final selling price would be rounded up or down on a menu.

Disadvantages of the Food Cost Method

Although the straight food cost method is easy to use and fast, there are a few problems associated with it:

It is based on only one cost and assumes that if the food cost is met, the remaining 62% will cover all remaining costs and yield a profit.

It is based largely on historical data, which may no longer be accurate. While a 38% food cost for an overall menu objective may be reasonable, the individual

menu items need to be priced at different food cost percentages and more attention needs to be paid to the contribution margin and the balance of prices on the menu.

Prime Cost Method

With the prime cost method, both food cost and labor cost are used to determine the approximate selling price, so you need to calculate your actual labor cost per cover served. You might also want to assign degrees of labor intensity to individual items and vary the amount applied in each case or category. In this example, the same labor cost per cover was used for all three menu items.




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Assessment of the Prime Cost Method

Advantages Like the food cost method, this method is easy to use and relatively fast. Because it uses the two primary costs of doing business (product cost and labor cost), it is more accurate than the straight food cost method. It brings the menu prices closer together and the contribution margins for each item more in line. As with the food cost method, the food cost percentages should really be varied.

Disadvantages While the prime cost method takes more costs into account, it still makes an assumption similar to the previous method: that the 28% remaining after prime costs are subtracted will cover all other costs and still produce the desired profit.

Gross Cost Method

The gross cost method takes all costs into consideration: food cost, labor cost, and all remaining costs, which are lumped into the final category of overhead cost. In the example below, the historical data is used to determine the percentage that each of the three costs contributes to the gross cost, which totals 92% of sales. By using that percentage to drive the selling price, we obtain an 8% profit as an end result.




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Assessment of the Gross Cost Method

Advantages This method improves on the prime cost method by including all other costs in the calculation.

Disadvantages Profit, however, is what is left over rather than something programmed into the formula. Because these methods use historical information in the calculation, it is important to adjust the numbers based on current and future information. For example, if labor rates are going up in the next few months but the number of covers served will remain the same, the labor cost per cover will rise and a higher cost will need to be used in the formula.

Actual Cost Method

The actual cost method considers profit a cost of doing business, and therefore includes the desired profit of each item into the calculation by combining it with the overhead cost (OH). This essentially drives the prime cost (FC + LC) percentage to the level it must be to generate the desired profit.

As you can see from the calculations below, the prime cost is now 68%, compared to 72% in the prime cost example.




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Base Price Method

This following base price method is not widely used. It can be helpful in a price-sensitive market. This method works the calculation from the selling price backwards to determine how much the operation can spend on the raw ingredients to produce a menu item. Say the acceptable price limit for a given market is $14.00 and the desired profit is 12%; given the existing labor cost and overhead cost, the product cost cannot exceed $5.17 to produce the desired profit.




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Volume-Risk-Profit Method

The volume-risk-profit method was developed by the Texas Restaurant Association and adapted by Jack E. Miller in his book, Menu Pricing. It is based on the volume (popularity) and risk (costs and perishability) associated with each item. It requires the calculation of a base price, then the addition of a markup to account for the item's category of volume/risk. Every item on a menu can be classified into one of the four categories that make up the volume-risk matrix. Then the appropriate markup is assigned.




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Pricing Methods Comparison

Why Is Pricing Important?

Without a proper pricing strategy, it is impossible to meet the financial goals of any business. Price influences so many things. It establishes the restaurant's position in the marketplace and helps clarify the restaurant's concept. Price certainly has an impact on image. It has long-term impact on the operation's financial picture. If you establish a restaurant as a low-priced operation, it may be very difficult to change the price structure. Price affects the customers' perception of value, and therefore influences their decision on how frequently they will return. It is important to note, however, that when we speak about price, we're really referring to a range of prices customers find acceptable for specific items—they do not have one fixed price in mind. The key to pricing correctly is to keep testing this range of acceptability to be sure your prices are at the higher end of the range, without exceeding it. This reference price range is based on the customer's previous experience: the price most frequently paid or the price last paid. Obviously, this reference price can be changed as the customer has new experiences.




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When to Change Prices

Many operators are fearful of initiating price increases because doing so may affect volume and market share. Here are some helpful suggestions to minimize that risk:

1. Be sure everything has been done from an operational standpoint to make the production of the product as efficient as possible. This includes being more effective in purchasing and production areas.

2. Increase the menu prices when there has been publicity indicating a rise in the consumer price index or an increase in wage rates, interest rates, or energy costs. When consumers are aware that costs are going up, they are much more receptive to menu price increases. The consumer operates on what is called the principle of dual entitlement; that is, they believe businesses deserve to make a profit and that they, the consumers, are entitled to a fair price. When costs are going up, consumers are much more likely to view price increase as reasonable.

3. Introduce new items to the menu that will help improve overall profit margins. 4. Limit price increases to 5% on any given menu item when possible. 5. Hold prices for at least four customer repeat visits during inflationary times. 6. Switch to a daily menu, and change the menu items more often to facilitate menu price

adjustments, and also to make it more difficult for the customer to compare the prices to their reference price.

Psychological Aspects of Pricing

1. Package pricing: The customer takes the package into account, as much as the individual price. When going out to eat, customers expect to spend a certain amount, say $40 to $50, for a meal with a beverage. If the menu prices allow them to stay in that comfort zone, they are happy.

2. Category price spreads: The highest priced item on the menu should not be more than double the price of the lowest priced item. If you have 10 main course dishes on the menu, and the lower-priced items are in the $10 to $12 range, and the highest priced items are in the $28 to$32 range, the wide price spread may influence customers to purchase the lower-priced items, which probably yield lower contribution margins. To keep this from happening, limit price spreads. The exception to this might be a signature dish that gets prominent positioning and descriptive copy to indicate its higher value. Restaurateurs can use a technique that places the price at the very end of the menu item description rather than in a straight-line column. This makes price comparison a little more difficult.

3. First-figure dominance: Studies have shown that moving an item from $19 to $20 dollars may be viewed as more of a price increase than moving an item from $16.50 to $18, due to the change in the first figure. This may also be looked at positively if you're trying to increase prices in the range where the first number remains the same.




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4. Length of the price: Changing a price from $9.99 to $10.00 is perceived as a larger price increase than it actually is. Most menus in the U.S. have menu prices ending in 9, 5, or 0 as in $12.99, $13.95, or $14.90. Reducing the length of the price by rounding the prices to the next dollar ($13, $14, and $15, respectively) may actually have a positive impact on the guests' perception.

5. Menu price endings: A study called "Menu Price Endings That Communicate Value and Quality," by Naipaul and Parsa, was published in the February 2001 issue of the Cornell Quarterly. The article indicates that an ending of 9 is considered value, and endings of 5 or 0 are considered a sign of quality. This may be more of a consideration in quick-service restaurants, where prices are kept under $5. It is important to note that these numbers would be different in other countries, where certain numbers may have a negative connotation from a cultural prospective.

Demand-Based Pricing

Demand-based pricing is a revenue management technique.

This technique can be used to both maximize revenues and shift consumer demand through variable pricing. The technique is not new, it has been used in hotels, restaurants, airlines, car rental agencies, and even movie theaters for years. In restaurants, prices can be varied by time of day, or day of the week, and also on a seasonal basis. Here are some examples:

Differential pricing for lunch vs. dinner is an obvious example used by most restaurants. Some restaurants serve very similar, if not identical items, at lunch and dinner yet charge significantly different prices.

Pre-theater or early-bird specials usually featuring items from the dinner menu at reduced prices to entice people to come in when demand is low.

Post-theater or late-night menus, again provide an incentive for people to alter their normal routine.

Some operations charge differential prices for daily menus based on the day of the week, with higher prices set for high-demand nights than low-demand nights. This concept of demand pricing seems to meet with more resistance from operators than it should. The general rule of supply and demand states that when demand exceeds supply (or capacity) prices are too low. To avoid customer perception of unfairness when using variable pricing, several things can be done. First, establish the "regular" price as the high-demand day price, for example, the price on Friday or Saturday evening. Then refer to the lower-price nights as "special value" nights. Another technique is to alter the menu items slightly, and offer additional premium items on the high-demand nights.

The next several slides show how actual restaurants have used demand-based pricing techniques to increase revenues.




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Examples of Demand-Based Pricing: Frankie's Tomato

The menu at Frankie's Tomato shows it all: different day-part pricing and different pricing on different days of the week for the same buffet.

Examples of Demand-Based Pricing: Pierce's 1894

Pierce's charges different prices for complete menus for specific days on one side of the menu, with different (higher) à la carte prices on the other side of the menu. Note the Norwegian Salmon is available on both the complete menu and the à la carte menu for the same price, $18.95. Pierce's is offering a value-oriented meal price, while charging the regular price on the à la carte menu. They are therefore not discouraging guests from spending more, if they are comfortable doing so. This menu, written in 1990, shows you how long demand-based pricing has been around.

Examples of Demand-Based Pricing: Cité

The Cite's menu works at several levels. First, it shifts demand to the later hours. It also influences the customer's value perception of price by bundling the wine with the meal. The three-course meal for $49 comes complete with name brand wines for free after 8 p.m. during the week, and after 5 p.m. on Sunday, because the demand is lower on Sundays in New York City than on other nights.

Examples of Demand-Based Pricing: Atlantic Inn

The Atlantic Inn is located on Block Island, which has a short high season from late June to September. The demand-based pricing takes into account the heavy tourist traffic on weekends. The lower prices during the week are promoted to the local market as a greater value, which induces them to dine during the weeknights, when the crowds are lighter and the prices lower. More personal service on these slow nights adds to the value equation.

Examples of Demand-Based Pricing: The Four Seasons

The Four Seasons restaurant is a perfect example of a multi-faceted approach to demand-based pricing. They make use of a pre-theater menu to drive early business demand, while also offering different dinner menus and prices for the Grill Room and the Pool Room., This variable price strategy helps this fine dining establishment achieve the desired check averages, and between two and two-and-a-half turns per night.




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What trends have had an impact on menu planning, pricing, and menu offerings?

Phil Kendall

Over the course of the last, let's say, ten years, our exposure to international cuisine has been exceptional. You and I can probably sit and talk about herbs and spices and different curries today that I certainly couldn't have ten years ago. There's an incredible amount of opportunity because there is so much in the market. And we have such a huge advantage because across the country, we have so many different growing climates that you...basically, you can get whatever you want. I think that exposure, and knowing that the customer's exposure is also similar to yours, is what is affecting menus.

I think that the exposure of the guest is critical and I think that is particularly true in beverages. I think if you don't have ten vodkas on your bar today, you are behind. Now, you and I may have a favorite vodka, or we may have two favorite vodkas, but we probably don't drink ten vodkas. But there's enough information out there, and there's enough marketing energy behind it, that I think you're foolish not to. And what does it cost you to have a couple extra bottles of vodka? Nothing.

I think that people's exposure has created an incredible need to evolve menus and make menu selections. I think the market trends... The drought conditions in the Midwest and in the...basically, in the farm belt this year pushed beef onto the feeder lots early. We are already seeing an increase in beef prices. I think as far as what conditions are affecting the market, certainly has...you have to look at how that's going to affect your menu and your pricing strategy.

The trends should not affect your pricing. Your product should affect your pricing. Do I buy organic from the produce vendor and pay two or three times what I should for it? Or if I'm serious about organic, do I go make arrangements with Tutti-Fruity Farms in California and buy direct? And since I can't guarantee Tutti-Fruity Farms a hundred cases of tomatoes a month, you know what, maybe I need to partner with three or four different people. Alice Waters made this really popular probably fifteen years ago now, when she started going out and getting people to do things special.

I think organic makes sense in some menus. The problem with organic is—and it's really the problem with vegetables in general is—hey, when are they best? Well, they're best when they're ripe. And that's the other thing these farm connections give you is—whether they're organic or not, they give you this freshness, they give you this lusciousness that you just don't




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have. The problem is, how many tomato-mozzarella salads can you sell in the month of August? Because that's really when you should be selling them.

Doug Martinides

I think by design and by the focus of our department, we look at opportunities that have broad application and opportunities for deep penetration to our location, which gives us a natural bias towards trends. But it doesn't mean we don't play around. And it goes back to one of my earlier answers. When we look at the white tablecloth area, that's where a lot of what, potentially, where fads and/or trends start. David Burke's got lollipops, and I don't know if that's a fad or a trend. It's really unique and novel to his location at the Park Avenue Cafe, for instance. Another one is when...it was funny because I think it was Chili's that won a menu-innovation award for lettuce wraps. Okay? It's something that started in some white tablecloth, moved into a regional, you know, first-line chain. We developed a fast-track promotion against lettuce wraps, and it just fell flat on its face. It was ahead of the curve. It was too much of a... It wasn't mainstream enough for our customers to have been exposed to it, and, it didn't hurt us—we learned a lot from it—but it didn't have the kind of impact we would have liked it to have had. And I think part of the lesson that we learned there, was that the media, the advertising, the word of mouth, and the experience and exposure our customers were getting to going into more chains and more locations to try lettuce wraps, was the difference between that becoming a trend, which then was something we could integrate, beyond a promotional element, into our refresh or our new destinations or some of our other development.

I want to answer this trend question from another standpoint as well because there are some macrotrends out there that have had a tremendous impact on our menu planning and our menu offering. And that is, you know, one is convenience: we know that the average business lunch today is twenty-three minutes, and that's the time they leave their desk to the time they go back. So speed of service and grab-and-go and portability or hand-held foods are key in all environments, whether they're a student going between class or a business executive or a professional within a hospital environment. The changing demographics of the United States and the influence of—and celebrating really—the ethnic and cultural heritage and the cuisines from the melting pot that America has always been is phenomenal, especially from the Hispanic and the Asian standpoint. And talk about an impact on menu planning—not only with, us but I think in the industry overall. Years ago, Asian food was Chung-King in a can; well, today it's as diverse as you can get—not only in terms of number of countries, but also regional cuisines within each of those countries, whether that's Asia or even Mediterranean. And the trend towards more and more regional, and the influence that that has, and... This is a smaller planet today because of the Internet, because of travel, because of experiences that our customer base has. So their expectations, as far as authenticity and as far as variety in terms of that world flavors, is critical to our business.




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The other macro-trend—there's another key one and I almost forgot, and that is a need for "have it my way." You know, and it kind of shows you the difference why, in some respects, McDonald's is having a challenge today—because McDonald's is have it their way or wait a long time for it, as opposed to customers' wanting to be involved in the preparation of their food, customers' wanting to see the ingredients, and customers' wanting to have a say as to what's being done. That's why sandwiches have always been popular and will always continue to be popular in my opinion: because you can talk about a little bit more, a little less of this, and pick your bread, and pick your spread, pick your ingredients, and really customize your sandwich. And that holds true across all of our menu development and all of our concepts today, while at the same time trying to address speed of service and everything else.

So really the question is: how do you make the decision on when do you pick something new and decide to do something with it? Some trends are a lot harder to implement than others. A good example is a brick oven pizza. Obviously there's a big investment for a brick oven pizza: there's a cost of construction, there's a space consideration, there's an HVAC consideration, and there's a retraining issue—it gets into a skill issue. If you're have an Impinger pizza oven program, that's pretty simple and it requires a low-skill-level person: you put the pizza in one end, you wait till it comes out the other, and it's done. A brick oven or a deck oven requires a higher level of skill and more training as to know when it's done and how to turn it and where the hot spots are and how to position it in that oven. I think this is one of many examples and part of the criteria that people should consider when adopting or trying to adapt a trend to their location: skill, equipment, cost of entry, or the investment versus the return on it. Is it really going to drive your pizza sales to go from a traditional pizza to a brick oven pizza given the investment? Are you going to get that much of a lift in sales and profitability to warrant that return on that investment, in terms of dollars as well as time and resources to make that change.

A great example about talking on how trends impact menu pricing and how that's really an opportunity is to look at the hamburger segment today. Used to be that the model that we looked after...well, when we refreshed the grille three years ago, we modeled after the QSR [quick-service restaurant] segment. That was the area or the segment that was hot, that's where forty-five percent of all QSR dollars were being spent. And they'd sensed a model after what the McDonald's and the Wendy's and the Burger Kings were doing. Well, in fact, as we all know, they're having some challenges today. So the trend—in what we identified and where our grille refresh is going this year—is looking at fast-casual.

If you look at where the growth and where the opportunities... where the opportunities are to reinvent yourself is to convert your QSR-style grille concept to more of a fast-casual concept. You go from quarter pounders to six-ounce premium black angus burgers—you know, on a nice quality bun with some great toppings, and you get a little bit more innovative and creative in terms of toppings and sauces or condiments that go on it. You're no longer limited to, you know, two all-beef patties, lettuce, cheese, tomato, on a sesame-seed bun if you will. And




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obviously you can get a lot more for a six-ounce black angus burger with a fast-casual brand positioning than you can trying to match the QSR burger on the street.

Putnam Gibson

We have a basic belief: consumers are becoming more and more knowledgeable about what they eat in terms of nutrition and health, but they're still looking for pleasure in every dining experience. From that belief, we must improve more and more our offerings—strive to give both lighter food and high-impact flavor. It's a continuing trend.

Continuing with that emphasis on lighter food, high-impact flavor, we focus on menu items that are flexible, such as a la carte items, smaller items, giving the guest the option to pick and choose what they want to put together for their meal rather than giving them another free salad, or what not. All of this, rather than focusing on the pricing.

The American Harvest Restaurant

The American Harvest was an upscale restaurant located in the Vista International Hotel in lower Manhattan. It featured fresh menu selections that changed weekly to reflect the changes in products available in the marketplace throughout the year. The menu had 12 different menu covers to reinforce the concept of change and freshness.

The dining room was spacious and very comfortable; the food quality was excellent and consistent. The restaurant would be booked solid in the evenings, but was only drawing about 30 covers per day for lunch even though it was located very conveniently for the Wall Street crowd. The food and beverage manager couldn’t understand why the operation didn’t attract a brisk lunch business.

A competitive analysis was performed comparing the American Harvest to four direct competitors for the Wall Street market. The comparison was done on five attributes that were determined (by customer surveys) to be the most important to the Wall Street market segment for that meal period. The attributes (prioritized by importance) turned out to be speed of service, quality and freshness of food, convenience of location, space and comfort of seating (privacy), and status (customer recognition). This chart shows the results of the competitive analysis.




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A Marketing Strategy

The four marketing strategies presented provide insight to the benefits and possible issues involved in executing each plan.

Develop an advertising strategy to attract tourists, and give the menu a "New York" flavor.

While there may be a large number of tourists in New York City, it is a diverse market that is not generally concentrated downtown. In addition, with over 25,000 restaurants to choose from in Manhattan, it is unlikely that tourists would travel downtown solely for lunch. The normally have lunch near the areas where they are shopping or visiting museums and other tourist attractions. A more defined and suitable target market for the lunch business already exists closer to the restaurant.

Develop a three-course lunch menu that could be served quickly, and offer a time guarantee to attract business-occasion guests from the area.

The competitive analysis indicates that the American Harvest beats the direct competitors (3 out of 4) on food quality and freshness. Its location is equally as convenient as most of the competitors. Its space and comfort are better than the competition. It currently is on par with the competition in the customer recognition attribute. But the American Harvest clearly is not as good on speed of service. Since nothing can be done to gain a competitive edge on the location of the facilities, the two areas that could be improved to gain a competitive edge would be 1) to increase the customer recognition factor, and 2) to improve the speed of service. Because business on Wall Street requires timely decisions, the length of time away from the office is probably the number one factor for this market.

Promote the spaciousness and comfort of the dining room.

While this attribute is important to the business client, space and comfort alone would not increase participation because other attributes are still not competitive. At least two competitors had equal ratings on space and comfort and even higher ratings on speed of service.

Develop an advertising campaign to emphasize the freshness and quality of the products.

While this attribute is important to the business client, food quality and freshness alone would not increase participation because other attributes are still not competitive. At least one competitor had equal ratings on food quality and freshness and even better ratings on customer recognition and speed of service.




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Conclusion

Since service speed is critical for this market segment, it must be addressed to gain market share. The management decided to provide this market with exactly the assurances they needed: they designed a top-quality, three course menu that could be served in under 50 minutes, and guaranteed that they could deliver on this promise or would wave the charge. This campaign resulted in the number of covers increasing from 30 to 125 per day at lunch.

For more information about the marketing system, consult the rest of the resources in this section.

Strategic Use of the Communications Mix

These marketing techniques are the tools you'll use to promote your operation:

Advertising Personal selling Sales promotions Public relations Merchandising Advertising

Advertising is used to create awareness, interest, and demand, and to stimulate the customer to act, for example, to make a reservation, to visit, or to call for more information.

This form of marketing is a good choice when you're trying to reach a large audiencethat is dispersed over a large area.

Advertising is purchased, and the message is controlled by the purchaser. Advertising takes repetition to be effective—often three or four exposures before the

ad makes an impression. You must know what your market wants, and be consistent inwhat you say and do.

It is more difficult to advertise services, than to advertise products.

Advertising Criteria

Because we are bombarded by advertising, it's easy for the consumer to tune it out. For that reason, advertising should have impact, immediacy, image, and ingenuity.




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Apply this criteria to restaurant print ads you see in local newspapers, and you may be surprised to find they don't meet several of the criteria. Then, compare the criteria to Outback Steakhouse ads running on TV. These ads meet all four criteria, and convey a consistent message: "No rules, just right."

Personal Selling

Personal selling is primarily used in the banquet function and convention business segments, where a well-defined list of prospects, in a limited geographic area, can be reached by a sales representative, in person.

The one-on-one contact is costly, but the potential sales return warrants the labor, and the personal contact helps provide the prospective customer assurances that the operation can perform.

Sales Promotion

Sales promotions are used to stimulate initial trials and repeat business from a particular market segment, for a particular meal period. Sales promotions are usually one-time promotions that might include special menus, ethnic festivals, or a discount coupon. They typically have a short life span.

Public Relations

Public relations or publicity is a way of influencing public opinion. It can help to build awareness and interest, and improve the image of an operation. Publicity accomplishes this by getting other people—for example, the press, government officials, or citizens—to say positive things about the operation. Press releases, notifying the press when important events take place at your operation, and active participation in community service, all are part of crafting a public relations effort. While publicity is not paid for, it requires work and expense, and it is more difficult to control than advertising. For this reason, it is often not used by hotels and restaurants, even though when done properly, it is well worth the effort. Who should be on your public relations team? Your entire staff! How often have you checked into a hotel and asked a bellman where a good restaurant was? Did his recommendation include the hotel restaurant? Other people who can help send customers your way are taxicab drivers, concierges in hotels, real estate agents, and travel agents.

Merchandising

Merchandising refers to any technique used to stimulate sales internally in the operation. Some examples are: food displays in the lobby, wine displays in the dining room, dessert carts, table




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tents, chalk boards, wine-by-the-glass programs, and special menus. Merchandising efforts are usually more long-term, even though the emphasis may change periodically.

Merchandising Ideas

Hotels often neglect the opportunities to direct people to their food and beverage facilities through merchandising. Frequently, the hotel dining rooms are not visible to the guest. In fact, they may be very difficult to find, as you can see by the two images of hotel dining rooms located on the eighth floor of two hotels. The guest can't even see the dining area to get the necessary clues as to what the dining experience is all about. Signs showing the dining experience are needed to direct guests to these remote locations. Another wasted opportunity is the elevator. How often does a guest stand with nothing to do but stare at the elevator walls? This is an ideal location for a well-designed merchandising piece. A common error in advertising, promotions, and merchandising is showing dining rooms and banquet rooms empty. The customer isn't paying for the simple pleasure of sitting in the room—they're purchasing an experience. So show them what it's all about! People enjoying the food and the ambience, allow the guests to put themselves into the experience.

The hotel guest room is another area for merchandising the food and beverage outlets that are so often neglected. At the very least, sample menus should be placed in each room. Why not use the TV to give the guest a visual tour of each of the dining facilities? You can showcase the food, facilities, and the employees, but make sure to include the clientele since they are part of the image. This enables the guests to feel the dining experience.

Don't neglect in-room technology. Why not send a fax or leave a personal phone message for the guest informing them of a special promotion in one of the F&B outlets? Examples are the chef's tasting menu for the evening, a special room-service offering, or a glass of wine with dinner. You can use the fax as a coupon, and track the results of each promotion.

Setting Goals for Marketing Strategies

The objective of the marketing depends on the phase your operation is in of the restaurant life cycle:

Early Phase During this stage, the restaurant needs to engage in intensive promotional activities to get known by the market. It's important to advertise repeatedly to reach the broadest segment of the community in an attempt to build a base of volume. The major objective at this point is consumer awareness—raising consumer awareness about the products and services the operation offers, and how this will meet their needs. The message must contain the specific




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information that will convince the market to alter their purchase behavior because of the benefits offered, for example, better quality, a higher level of service, or greater convenience.

Growth Phase

Once the restaurant is established and is moving into the growth phase, use the operation's promotions to differentiate it from the competition. You can do this by:

Creating positive perceived value by emphasizing what makes the product or service different and better than that offered by similar establishments.

Enhancing brand image through the continuous use of the operation's name, logo, company slogan, and so on, to reinforce the brand identity.

Mature Phase

In the mature phase, the promotional activities are generally focused on current customers:

Building repeat business is less costly because it's easier to convince existing customers to return, than it is to bring in new customers.

Reinforcing consumer behavior is possible when you manage the customer experience, and develop loyalty programs.

Ten Steps to Developing Promotional Strategies

1. Set measurable objectives for the promotion. For example, a statement that indicated the objective of a particular promotional program was to increase business during the weekdays would not be specific enough. The statement should include the number of covers the promotion is expected to generate—say, 25 per evening, or a total of 100 for the week, Monday through Thursday.

2. Target a specific audience. Are the additional covers going to come from encouraging existing customers to dine more frequently, or are they going to be generated by new customers?

3. Choose the appropriate communications mix, and identify the media and methods to reach the target audience.

4. Identify key consumer benefits. The promotion should explain the benefit to the consumer. For example, a promotion focused on value might indicate the quality of the product used, and how it is better than the competition's.

5. Don't promote something you can't deliver. 6. Build internal and external support systems. Share the promotion with the staff and be

sure they are part of the program. Develop internal merchandising pieces that complement the external promotion. This ensures that the message given to the target market is consistent.




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7. Define the tone and manner of the communication. If the operation is classy and sophisticated, the message should be also. If the operation is promoting a fun atmosphere, the message should convey this.

8. Develop a timetable and an action plan. Create a schedule to get the promotion developed and executed, and set a specific time frame for the promotion. Identify who is responsible for each step, and when that step needs to be completed.

9. Develop a budget for the promotion. Based on the type of promotion and the objectives set, a certain level of funding will be necessary if the promotion is going to be successful.

10. Evaluate the effectiveness of the promotion. Monitor the results of the promotion and compare that to the objectives.

Describe the role of advertising, promotions, community activities, merchandizing, and CRM in your restaurant's marketing efforts.

Phil Kendall

You know what? This is one of those things that we know we're not good at. It's a budget issue. I mean, we don't do a lot of advertising and marketing on a property level as well as we should. What we do do—what we've done on the corporate level—is we've done a lot of market research that I think that just as recent as last week, through some programs that we were working on, can find their way, now, into the hotels and, so that the hotels can, again, benefit from that market research and try and maybe take a little different tack.

Carolina Lobo

Marketing for the School Support Services Division is a huge aspect of what we do daily and strategically. The way we look at our market comes in two forms. One is the client: the decision-making unit that actually has to make the buying decision on whether or not they want to outsource the foodservice's activities that they engage in for their school district. That is one of the biggest obstacles we face.

That client decision-making unit, as I refer to it, is usually comprised of your school administrator, which is made up of superintendents, assistant superintendents, business managers, chief financial officers, but more importantly, the external community that has an influence on that decision: school board, parents, students, and teachers. So that is a very interesting decision, again—this decision-making unit that we have to influence and convince on the value of outsourcing.




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After convincing them on that concept, of course, you have to make the decision clear that ARAMARK would be the sole—would be the only—right answer for that outsourcing activity. The second group that we focus on that really has a daily impact is that of the students. We need to segment that audience by age, and usually that falls into one to three or four categories: K-3, 4-6, 7-8, and then high school.

To answer the question of the importance of advertising and marketing promotion—it is huge for us, and with such an interesting user base, it has to be relevant for each of those age segments, because clearly a 6th grader is not going to be interested in what a 1st grader is interested in, and frankly, their aspirational and they want to be what high-schoolers are.

But at the same time, we have this other constituency base that we have to be mindful of: their parents, the ones that are funding the foodservice purchase for the day. So there are a number of things that we try to balance. We try to balance fun, we try to balance food, we try to balance nutrition, we also try to balance the fact that our user base only has a limited time frame to actually consume the foodservice produce that we make.

So whether it's breakfast or lunch, we have masses of consumers that have to come through a very constrained physical space in a matter of minutes. So the food line has to be designed specifically to tailor the right decisions at the right time; the food staff has to be properly trained; and then just the process of moving students through the line, in a customer-service-friendly way, but by the same token, getting them so that they can consume the product and be ready for the afternoon.

Putnam Gibson

We've always placed an emphasis on building Houston's brand and reputation through our guests' word of mouth, literally one plate at a time. Advertising efforts have only been on extremely limited basis and only directed at a very select market. In terms of promotions and merchandising, all the energy has gone into community activities.

What seems to be the most effective element in your marketing mix toolbox?

Phil Kendall

And again I think this is how you skin this cat if you are not as market driven, maybe, or as marketing savvy as you should be. And that's an internal promotions with juice, water, and wine. We did a promotion last year where, you know, the idea was that if you could increase your juice sales, your wine sales, and your water sales by 10% and baseline that over the year, what would you...what would we as Starwood net from that?




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We made it a six-sigma project, I think it was a six-sigma quick hit, and again, a process vehicle that we use and are attached to. And over a one-year period, we were able to catalog an increase of 7.8 million dollars in spend, by, again, focusing on those things. And the way we focused on them was, again, daily preshifts, people that were selling...you know, got highlighted, people that weren't selling got coached, making sure that we had a baseline that we measured ourselves against and as we increased that baseline, how we did it on a...what we did, that new baseline became our benchmark for the next month.

Carolina Lobo

Not only do we make that real in terms of the design of our menu and food choices, but we also give those teachers and students tools so that they understand what nutritional awareness is about. We do it in a stealth fashion. Because no kid wants to be told: You need to eat this, you need to eat that. It just is not relevant and it's not effective.

So we use a nutrition mascot named Spike, and he's this big, furry friend. He's an imaginary metaphor if you will, he's kind of part animal, part human that takes on this air of providing...kind of making the whole notion of food and nutrition fun. So he speaks to many different topics, mostly trying to educate children on nutrition through the food pyramid, which, of course, is a USDA standard that we follow, but also the value of exercising and sleeping right and some other aspects. So it is an interesting mascot in so far as for the K-3 market it is incredibly powerful. He's been made available to more than two million kids.

In terms of number impressions, and the only reason it becomes relevant for a foodservice director is that you all of a sudden start seeing Spike show up on the food line. So if this is a nutritionally sound menu option, there's usually a sticker next to the Spike sign...or a Spike sticker next to the food menu board option. And the whole reason that we built Spike is that, again, we tried to make him a stealth promoter of nutrition and sound meal choices, and the idea is that Spike is the vehicle—he's the enabler of the education. He's not going to be the reason kids eat better—he's just going to be this notion that we give them choices, that they understand: Yes, you can have a cookie, yes, you can have ice cream, but you need to balance it with something sound in other parts of your meal.

So, that's really what we try to do, because frankly, it has to be left with parents, and I don't mean too philosophical here, but what we can do to the extend that we have kids' attention and their mind share at school is promote Spike through various ways. And he shows up, by the way, in many ways: we have videotapes, we have lesson plans, we have monthly subscription programs that provide a kind of a ubiquitous presence of Spike for the teacher and for the student. So, he shows up once a month whether as a ruler, or an eraser, there is usually a little game card—and again, in a quiet fashion, he tries to reinforce the notion of good, nutritious meal choices in education. That's how we like to address the whole childhood obesity issue, and we've done so in various ways over the course of twenty years, but most recently Spike—




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certainly since 2000—has been kind of our flagship initiative with respect to nutritional awareness.

Alex von Bidder

It's very important that you are directly involved with your customer on a daily basis—every one of you. No matter what your position is, if you are in customer service—whether you're the general manager, or the room service manager, or a hall porter—you have to see your customer every day, and you have to talk to your customer every day, and you have to ask questions every day. So, obviously, when I see the same person come in four times, I want to know who that person is.

Now I know the name and I know the phone number, so if I don't want to approach him directly, I call and find out what company he is. I find out the correct spelling of his name, his title, and I drop him a note offering him a charge privilege. It's most often the best thing to do it personally. It's very easy. You walk up, say, "Hello. I'm Alex von Bidder. I run this place. I see you've been in here four times (or whatever how many times) and if there is anything I can do, here's my card and my direct phone line. Please give it to your secretary."

You know what happens? He goes back, he really can't be bothered at this time, I mean, maybe he was happy somebody said hello to him, but it doesn't mean that much. But, the card gets filed away, and the next time he wants to go to the restaurant, he remembers. He remembers, Oh, I met somebody. He doesn't remember the name or the phone number or anything, but he has the card and he will dial that number, and that number is my special line, and that special line gets only answered by me, by my name, and he reaches me directly: no secretary, no reservationist, nobody—not the guy who vacuums.

And whatever that customer wants, I will try to give it to him, because he went through the effort of calling me.

Please give an example of a successful advertising campaign.

Carolina Lobo

What have been some of our more effective advertising campaigns or marketing efforts, in terms of generating brand awareness and getting people to understand the value of outsourcing to a foodservice organization like ARAMARK?

The one thing we have found incredibly effective is—and it may seem very obvious—but it is that of a testimonial. It's doing a case study on a program that we have done before. There's nothing more gratifying than before-and-after numbers. You know, before, these were the




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participation rates. These were the number of free or reimbursed meals that were served. These were the number of hot, nutritious meal choices that were presented...and after.

And kind of, watching in a very gratifying and rewarding way—a company like ARAMARK—how they can "move the needle." And the best form of advertising for us is that that comes from a satisfied customer. And what we get usually is just more than satisfied, we get people that are just so happy to kind of report on their success that they've found. And it's not just ARAMARK—you'll find well-run organizations that provide that, but for us, specifically...for example, one of our huge, flagship accounts is Houston: the Houston Independent School District. That was run by Dr. Rod Page, the then superintendent of the Houston school system. He is now currently the United States Secretary of Education. Now, I will not put words in his mouth, but it has been documented from him the value of outsourcing.

So, it's these-third party endorsements, unprompted, where you capture either in video or sound bytes or with quotes, the value of a company's presence like ARAMARK in their school system. And how foodservice has improved. And how client satisfaction—as in the students' satisfaction—has improved, and then the test scores have improved. Just kind of the whole net effect of our presence there: that is for us the most effective way of advertising and marketing the value of foodservice brought to them by ARAMARK.

Putnam Gibson

Again, although we have not engaged in an advertising campaign, per se, we have at times focused our energy on a specific market for a short period of time; for example, we placed a Bandera banner on a center-field wall during the San Francisco Giants' spring training season here in Scottsdale, which actually was a charitable function as well. It turned out to be a huge success for our restaurant—which is only blocks from the field—before and after the game as far as the amount of guests that came in, as well as cross-promoting our restaurant in the Bay Area through the TV coverage of those games.

Please give an example of a successful advertising campaign.

Carolina Lobo

One of the flagship products that we have that we're awfully proud of is this concept of One World Cafe. This is a product that was born out of research that came in late '99. And there is a, and pardon the vernacular, a "no duh" kind of factor to this because you would think, My goodness, why hasn't anyone in our industry realized this? But, the whole concept of making the food delivery and the servery look like your mall food court setting, because if you think where kids are and where they are socializing, that is their frame of reference. What we had before One World Cafe, within ARAMARK, we did awfully good job at providing variety and trying to deliver proper nutritious food choices, and what have you, but it wasn't




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conceptualized in a holistic fashion. So, One World Cafe is this food dining solution that we provide, and it entails all kinds of visuals and all kinds of graphics, menu board design, food tray items, napkins—everything that kind of encompasses the entire food dining experience. But that is one way we helped put together the whole food dining experience for our students.

We try to co-brand with Papa John's or Subway. It is not for us something we do on a standard basis, but we will, in certain school districts, where they understand, progressively speaking, that the brand is important and they want to cater to their students' needs, so we do that pretty successfully. The other way...the other point I would like to address is that of brown bag lunches. So it is interesting because there's this concept of "share of stomach" which you will certainly find in other business units, like Campus Services, where you have students on campus and all day long they're eating, whereas with School Support you only have them in the morning or at lunch time. But there has been research that suggests that an appropriately designed food menu with nutritious ingredients ends up being a much more nutritiously sound option than you would find with your brown bag lunches. And it's interesting: there's been work at the University of Michigan and all kinds of studies that prove to that. And that's something we try to play to because that also addresses a convenience factor for parents.

You know, if you know that ARAMARK or any one of our competitors or a well-run, self-operated foodservice organization is providing healthy, nutritious meals that are warm and properly served and there all kinds of other benefits to it, then there's clearly no need to do a brown bag lunch. So that's an interesting thing that we try to present, and we do that through menu design; we do that through communications back to parents, where we try to stuff children's school bags with that so that, you know, they go back home and parents understand kind of what's available. We make the school menu available on line, just various points of distribution so that parents understand the foodservice that's being provided to their school is a viable and probably ideal choice for their kids.

Putnam Gibson

As a private company, we have always considered ourselves a collection of restaurants run by individuals. In an effort to maintain this culture, our focus of energy and resources has always been on evolving our operations rather than into any sort of promotional activities or merchandising.

Phil Kendall

Absolutely, we've done "dinner and a movie." Order a pizza from downstairs, or you can order a kind of a combination sandwich plate, or you can order a full dinner. And so, we've been very successful with dinner and a movie.




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I was just working on a project about room service that had to do with what do we want to do with room service? How can we really elevate this room-service experience? How can we really take this thing over the top? It is new china and silverware? Is it making sure that everything that you get in a restaurant you get in room service? You know? Pepper mills, cloches, you know, you just really go on out. We think that's what it is.

So we started to go to the focus groups with this and they threw rocks at me. They said, "Hey, I'm in my room. I'm going to watch a movie. I may want to work on my laptop. I may want to work on my laptop, but not necessarily. But, I can tell you what I don't want, is I don't want you in my room for more than a minute. So, you may just want to drop this off at the door."

Well, from that we started thinking—we said, "Hey, okay, here it is: we're going to toast the toast in the room for them." That was one of the big things for breakfast because, you know, it's difficult to take a hot piece of toast up to a guest room—even in your most expeditious manner—and have it like it would be a piece of toast coming out of the toaster in a restaurant or at your home, right? So, idea: last thing we do, we plug the toaster in and toast it for them. No, no, no. In the morning—I don't even want to see you in the morning. Matter of fact, you could just knock on the door and leave, because I'm, you know, I'm still getting ready to go to work here.

So, from that, though, we've decided what...what are some of the elements we could do to make this as...as...as convenient for them as possible? And so, it's going to be a quarterly room service dinner promotion, which is going to be one thing only: entree salads. Because our research showed us that the number one growing meal period in room service is dinner. It's still far is...much far less than breakfast, but it's the one category that's growing. Breakfast is pretty flat. And, though they love club sandwiches and burgers and things like that, the other thing that they want—because a lot of them are changing time zones and eating later—is an entree salad.

And most of our menus have the chicken Caesars on them, a cobb salad, or a chef salad, or maybe another version of a Caesar-type salad. But, they're saying, "Hey, I get that everywhere, so...what else can you do for me?" So we are writing a whole quarterly menu that will have three or four entree-salad specials that will be offered in room service. And again, what's it take to deliver a salad? Knock on the door, it's done. You know, so, those are some of the...that's some of the stuff we're working on right now. And you get that, by the way, by the front desk because when you check in, you get a piece of collateral that says tonight's entree-salad specials are x, and that's backed up by a little wine-merchandising piece.




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Please give an example of a successful merchandizing campaign.

Carolina Lobo

Sometimes it's interesting because it helps to partner with a brand. Whether or not it is Quaker Oats or Gatorade, we like to partner with brands that have nutritional value. You know, clearly, it would be awfully easy to go into some sort of chicken finger promotion, or you know, OreIda French fries. But when we can, our first druthers is certainly to go with a nutritious product.

But that actually plays a huge part of it because we have promotions that are aligned with the Quaker Oats, so you can see either the breakfast bar, or you can see the oatmeal promotion, at, you know, a third grader's four-foot, you know, eye level. Plus they can see the branding, and somehow there's some triggering and that causes a series of purchasing—whether it's milk, whether it's a piece of fruit. Ideally, you know, we hope for that and we push for that, but that is what kind of plays into some of the also...driving them to buy the right things or to help them to make the decision quickly as they move through the line.

How does your business keep track of and recognize loyal customers?

Carolina Lobo

We're using systems like point-of-sale, and the Web, debit cards to track the purchases being made by students. So you get a better sense for what are the "hot" items, even though we know what they are going to be, you can easily predict them.

But you know, as we try to do a better job of promoting nutritional awareness, are they buying more fruits and vegetables? Are they likely to kind of purchase more of those things that we're trying to drive them to do? But, beyond that, see that's like the data-modeling part. But in terms of rewarding them for buying the right things, you know, we do kind of build a better program, we do some other...we do what we call "build a better meal," which rewards them for purchasing nutritionally sound options, in addition to French fries.

So, it's interesting: like we come at it from a different perspective. There is something inherently given about the fact that you're going to get a stream of customers every day. So are we lazy? On some level, we are because we expect the stream of business to come through anyway, but in open campuses, we have to do a better job of making them want to come back.

Putnam Gibson

Well, many of our restaurants have developed their own programs for loyal guests. Our investment in long-term employees, as a whole, has yielded the greatest recognition of returned guests. We really believe the greatest impact is having employees who can recognize




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the opportunity to go the extra mile—whether it's a personalized birthday cake for an everyday guest or priority seating an expectant mother, we really find that our investment in our employees and their long-term employment has helped identify those guests.

Alex von Bidder

I wanted to send Christmas presents—personal Christmas presents—to everybody who spends more than $50,000 a year with me. The list was too long, too many customers. We narrowed it down. I think the cutoff was $75,000 a year. You're looking at a hell of a customer.

So without the computer, without the house account, I wouldn't know that because American Express doesn't tell you. American Express tells you your total volume, but...yeah, they tell you the zip code...big deal. I don't care what zip code a person has, I want to know who he is, I want to know what business he runs, so I can know where I can fit in because he might have a need for other services, not just my dinner. He might need to do parties, might need to do outside caterings, he might have a daughter that needs to get married, a son that needs a bar mitzvah. You want to plug into that because all it takes you is a customer base of maybe 2,000 people to fill a restaurant of our caliber. That's all it takes—2,000 good customers. Now think about it. It's nothing. But those 2,000 have to be very select, and you have to take care of them.

I like to...I'd like to facilitate...all kinds of things for those best customers. They know they can call me when they want a reservation in Paris. They know they can call me when they can't get on Swiss Air. They can call me when they have a problem with the limo company. Just like the concierge service. Just like a hotel that...that wants to...I'm sure when you go to the Ritz, or to any good hotel, the concierge who has been there 25 years, he knows exactly where you like to go and shop. Or he knows that you want to go to a show. He knows what theaters you like, and he has to...he has the connections to get you whatever you want in services.

And that's what I am doing with my special customers—not just me, but all our people. We have a list of recommendations for every city. You want to go to Venice for the summer, we give you a list of contacts—we say, "Go see Guido at whatever," and Guido knows that when a Four Seasons customer comes, more likely than not he'll come back.

The special customers...when...there are patterns of customer visits. The patterns are pretty regular. Somebody always comes for lunch...on Wednesdays. The first Wednesday they're not there, you should notice. You should notice because you are at the front desk or because you look at your computer printout. If you do your homework, you know that Mr. Leiberman wasn't there on Wednesday. And the next Wednesday runs around and he's not there either. What are you going to do about it?




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The average restaurant manager—or most restaurant managers—they don't notice. The good restaurant managers notice. And the very good ones pick up the telephone and call up and say, "Is Mr. Leiberman out of town?" And they say, "Why? Why are you asking?"

"Well, we noticed he wasn't in on his usual lunch day and we wondered if there was anything wrong, or if we offended him, or is he perhaps ill." All of a sudden, again, the secretary is on your side and says, "Gee, they really cared that Mr. Leiberman wasn't there." And she will usually tell you what happened, "Oh, the last time he was there he felt he didn't get the proper service." Well, again, you have an opening. You have an opening to write him a letter, call him up personally...make good.

Phil Kendall

Yes, that is the RSPG program, which is, again from an industry standpoint, really is probably the leader. It's across all brands and even if you're a Four Points customer and you gain all your points at Four Points, you can certainly use them throughout the brand.

And, that is, the lion's share of that is actually tracked at the front desk; through folio research and so on and so forth, we know who you are and what you are and what your needs are.

Hello, I'm Professor Mutkoski. Thanks for taking this course. I enjoyed writing it, because I

believe it covers some of the most essential aspects of foodservice management. Setting up the

systems properly and establishing a well thought out marketing strategy is critical to the

establishment of a smooth-running foodservice operation. I hope you found the real-life

examples and articles instructive and meaningful in presenting the topics addressed. Mastering

these systems is the foundation to your success in foodservice management.

I hope you enjoyed the course, and you personally benefited from the material presented.

Good luck with your career in foodservice management.

Documents

SHA507: Foodservice Management: Menu Planning and ... · PDF fileMenu Planning and Marketing & Merchandising Strategies ... Whether you are in independent restaurants, multi-unit restaurants,