3.3: Competitors - where to begin and weakness in hospitality

Competitors – where to begin

Having a clear knowledge of competitor tactics in a trading area, and marketplace in general, along with their strengths, and the opportunities any competitive weaknesses might present to you is one of the most important form of analysis that any new operation should engage in. Choices will have to be made regarding ‘who’ you intend to compete against and the more you really know about what a competitor does well and where weaknesses lie will help you to position your operation for success.

Weaknesses in Hospitality

Among the general weaknesses that habitually surface in foodservice operation, and as such should be included in the criteria by which you evaluate your trading area competitors, include:

• Location
• Areas served
• Facilities
• Amenities
• Poor price/ value perception
• Poor brand/image
• Poor reputation
• Poor or incorrect positioning
• Weak or lacking human resource talent
• Low financial resources
• Inadequate or dated technological resources
• Little repeat business

Ninety-five percent of all new restaurants cease doing business within two to five years of operation. The following are some of the reasons why they were doomed from the start.

Location and Areas Served

Finding the right location is one of the most important steps to building a successful foodservice operation. Convenience is a key aspect that drives consumer actions. Something as simple as being on the wrong side of the road, the outbound lane for example, when breakfast sales are a point of concentration, the inbound lane when its dinner customers you intend to attract. Consumers travel certain paths to complete the requirements of their day. Is the speed limit slow enough (40 miles per hour or less) to allow them to see your signage and safely into your parking lot? If you are, say, two blocks off a major thoroughfare where consumers go to shop, what will cause them to leave that path to visit your restaurant? In turn, what will you do to cause that change? To effectively market some individuals you would need to know where they reside (could be a different city) and their interests.

Being near one type of customer can leave you distant from another without a strong marketing plan. Consider a casual restaurant located among streets of medical offices and a large hospital. While this may prove to be a wonderful location for breakfast and lunch sales, the situation drastically changes when the neighborhood becomes empty when the offices close in the late afternoon. What will you do to attract dinner sales? A location needs to be viable in the present as well as the future. If the operation intends to attract customers during multiple day parts, the location must be viable for those times of day. A location is more than a building. It is also convenience and accessibility.

When McDonald's began to grow, they clearly defined children as a primary market segment. As such, they build restaurants in neighborhoods with children. Initially, the closeness to families was a major asset but in time things changed. They realized that their strategic location strategy was flawed. In five years, children grew and moved away leaving the company with facilities located in areas with little to none of the market when needed to attract. How do they position their current locations?

Facilities

The facility must be attractive and inviting to the consumer in some way. Elaborate building is typically not the answer. Quaint, quirky, modern, simple elegance, warmth, and so forth are all themes that attract customers. One important way to think about a facility as part of an overall scheme is to view it as a place of 'transition' for the customer. In the morning, the consumer is moving from sleep to activity and typically, the mood needs to be relaxing yet upbeat to transition them into the morning. For lunch, consumers are normally facing time constraints as they transition into the afternoon. In the evening, the customer is winding down from lunch the mood and a more relaxed pace is best for this day part. The service and mood of the restaurant facility in terms of lightings, sounds, and so forth should contribute to a calmer environment as the customers puts the tediousness of the day behind.

Amenities

An amenity is something that enhances the customers' comfort, convenience, or enjoyment. In a restaurant, an amenity could be mood lighting, seating with a wonderful view, free Wi-Fi and Internet service, amusements for children, and so forth. Physically, amenities could also include the attractiveness and value of area surrounding the restaurant or the actual restaurant structure itself. From a more aesthetic and subjective perspective, amenities can exist in a non-physical sense such as pleasant and agreeable service interaction. Attention, courtesy, pleasantry, and politeness are amenities in our field. As such, a memorable service experience is an amenity that all operations would like to offer to their clientele.

Poor Price / Value Perception

Most consumers are aware that 'something for nothing' is closer to be being a myth than a proverb. Thus, sandwich shops seek to be the home of the best 'over-stuffed' sandwich in town and customers arriving at restaurant are thrilled to see other customers leaving with 'to go' boxes, or 'doggie' bags. Excess is always associated with value in the mind of the twenty-first century customer. Of course, good food at a reasonable price is also value. A restaurant that offers fresh, well-prepared products that are grown or harvested from some other locale is also a valuable consideration - even at a higher price if price and value are reconciled.

Typically, restaurants within the same business segment should be relatively close in terms of price unless the reasons for a higher price are visible and believed justifiable to the consumer. If the customer does not perceive a legitimate justification for what they are paying in comparison to what they receive - value immediately becomes the issue that drives thee consumers away from a return visit. A lack of value rarely received a second change from cost conscious consumers. How would you rate your competitors?

Poor Brand / Image

A 'brand' is a name of a product or entity, or even an attribute that makes consumers feel a certain affinity for something or someone. Visual elements usually link to a name and that name is associated with and infers quality, value, youth, elegance, entertainment, and so forth. Another word that associates well with 'brand' or 'image' is reputation.

Sadly, not all foodservice operations establish endearing thoughts when you hear their name or see their facility and logo. However, it is not the fault of the consumer. They gave the restaurant the benefit of the doubt from the start. Every restaurant begins with a positive image. A poor image is something a restaurant acquires based on its actions - they control their image. A poor image is nothing more than the customers' reaction to poor performance by the restaurant.

Poor / Incorrect Positioning

Positioning refers to creating an image that the consumer visualizes when they hear your name, see your facility, or marketing. What the customer visualizes is your 'position' in terms of value, quality, current relevance, or numerous other attributes that individuals use to group and compare different people and places. To arrive at a positioning strategy, the restaurant must be able to describe a typical customer. Who are our customers and what do they want or need us to provide? What do they think of us now? Is it what we want them to think? What can we do to change what they think? What did we want to promote about our company? What should our marketing and promotions convey? These are some of the questions a company might address to arrive at, maintain, or repair a market image, or 'position' the consumer to think a certain way about the restaurant.

Weak or lacking human resources

One of the elements that makes a restaurant successful is a qualified labor pool. Typically, the acquisition of qualified workers become an after construction 'taken-for-granted' - a point of concern when needed but seldom considered from the planning stage. Labor positively, or negatively, affects a foodservice operation in four main ways. The obvious first way would include the production of the menu. The menu is useless without the eye-hand coordination and cooking skills necessary to bring it to fruition. Does a skilled labor pool exist within the trading area in question?

Secondly, without the proper personnel, the service aspect of your operation will generally fall short of the mark. Customer interaction is one of the most important roles and personality is only teachable to some extent. Good service staff understand when to approach the table and when to keep space between themselves and the customer. They understand people and situations alike.

The third reason for the importance of a qualified labor force is that they are the individuals who interact with the customer. They are both face and communication with the consumers with whom you wish to attract to your operation, and establish lasting relationships. The importance of communication is two-fold. Your employees transfer specifically selected information that you wish to convey to the consumer and equally, they also gather information 'about' the consumer that the operation needs to have on hand to evaluate its customer base, and to personalize the service intended.

The fourth way qualified labor aids the restaurant operation is in the form of efficiency. Efficient operation in terms of preparation, waste, the ability to multi-task, and the speed of task accomplishment are vital elements of successful foodservice - an extremely labor-intense industry.

Low financial resources

Financing the operation extends well beyond the facility, equipment, and staffing. The operation must have adequate funds available to be viable until customers become familiar with the operation and sales exceed costs into profitability. This involves an additional expenditure – execution of the marketing plan and advertising the business to acquire the aforementioned customers. One of the most frequent mistakes made by new businesses is undercapitalizing daily operation costs and thus the ability sustain marketing efforts. There is an old adage: “if you build it they will come” in food service this is true if to things are true. First, they have to know you are there. Second, they have to have a reason to try your concept. It takes funding to convey both messages.

Inadequate or dated technological resources

It is important to utilize the most current technology affordable. Technology can be a ‘competitive method’ and an edge in ‘efficiency’ allowing for lower costs and pricing than your competitors. Older competitors generally utilize older technology. As a new business, this can be advantageous to positioning your concept as both ‘value’ and affordability in the eyes of consumers. An additional benefit can come in the form of lower maintenance and replacement costs

Little repeat business

Something is affecting the customer’s decision to return. From the broad perspective, segmentation and positioning needs a critical look. Pricing may be an issue that bears examination. Another factor is the price and value relationship. Service may also be the key to unraveling the dilemma. When customers are not returning everything bears scrutiny. There may be one aspect, or multiple, aspects of the operation that are not passing the customer’s post-purchase examination of the transaction.