3.6: Other Attributes to Consider

Age of the operation

The age of an operation is important from several perspectives. Typically, most operations must rejuvenate their physical operation as well as their internal operation every five to ten years. Facilities begin to appear stale and menus a bit boring as new competitors enter the marketplace with new and vibrant operations. Stale operations not keeping up with shifting trends or styles are targets for new entrants into the marketplace. Does the competition appear current, or in need of a face lift? On the other hand, age does have its merits. Have certain competitors been around for so many years that they have achieved 'generational' status - appealing to several generations of families?

Chain or independent operations

Is the competitive terrain comprised of large chain operators, independent operators, or a combination of these two different type of competitors? Chain operations typically have strong plans and structure while many independent operators have formal training and thus less structure. That is not to say that, in the case of food quality, one form of operation presides over the other in all cases. Having more structure for instance, can restrict a company's flexibility in the face of a changing environment. It can also result in menus that are more generic and taste offerings as the company strives for similarity across geographical areas. A well-informed independent operation is mobile in comparison to the more stringent corporation way of thinking and acting. Large companies typically do not offer ‘comfort’ food specialties, and likewise, the typical independent operation lacks the organizational structure and marketing prowess of a large nationwide operation. Look carefully at your potential trading area. What forms of competition exist there, and evaluate the strengths and blindsides of all.

Competitors - successful or less so

Most trading areas have foodservice operations that are highly successful and some that have not enjoyed success the extent of other in the market. This is an important assessment that to make as one considers whom they will compete against as a primary competitor. Understanding which companies have arrived, are up and coming, or past their prime and trending downward is key to positioning your own operation strategically into the area and structuring a scheme for success. Who are the successful operators in the area? What products and services do they offer, are they new, have they maintained a successful operation over time? These are key questions necessary to evaluate with accuracy where your company should be in a market.

What companies are doing - or can do - to garner success is paramount to your operation because at some point, you will enter the market and some competitive reaction will be forthcoming from these competitors. Understanding what strengths they can bring to bear in a competitive struggle strengthens your ability to plan and move against them. For example, if a strong market competitor is a low price leader, structuring your new operation with new technology kitchen equipment which reduces labor cost and allows for low pricing would be your initial 'counter' to the pricing strength of that company. If they attempt to reduce prices - you are ready. If another large competitor has strong capitalization, and spends large sums of money on television and radio advertisement, you develop a strong Internet, social media, and coupon strategy - effective and less expensive to meet your budgetary requirements.

When are they busy?

Knowing when your competitors are at their best is vital to competing. You will also have to engage in a marketing scheme to attract and maintain you customer base and knowing what days, and day parts, require the most attention is key to structuring a marketing scheme that produces result for your operation. Marketing is an expensive process and having the knowledge regarding where you will spend your precious dollars will certainly help to increase the impact of your marketing efforts and help to keep advertising expenditures at reasonable spending levels.

Indirect Competitors

When considering a trading area, it is important to evaluate all of the competition doing business there because in the end, it all comes down to the amount of disposable income the potential consumer has to spend at any given point in time. This particular aspect of competitor evaluation often goes unconsidered in the haste to enter a market. New operators tend to look only at those companies they feel are similar to their own. If you are in the quick service segment in a smaller community and a large buffet style casual establishment enters the market and garners a sizable income stream from the existing consumer base, would you not consider them a competitor even though they do not have drive-thru or counter service? How about a multiple unit supermarket chain that does a huge take out business at very reasonable prices? ‘Who’ are they competing against - the practical answer is everyone! Have a keen knowledge of every competitor. Will you always confront or sustain injury from one competitor at a time, or will it be a nibble here and a nibble there that becomes quite noticeable in dollars and cents at the end of the month. The only thing worse than sustaining financial injury from a competitor is failing to know which competitor(s) injured you.

New entrant potential

What is the potential does the trading area offer to other foodservice operations that may want to enter the marketplace after you? Can a marketplace appearing quite favorable in the present allow others to follow your example? The answer to that question is neither right nor wrong in the sense that you will always have to compete in some way against someone. However, understanding the potential for other new entrants is key to protecting your own operation.

How fast is the area growing and in what direction is the growth occurring? If the grown is happening along a major thoroughfare where land prices and space is at a premium, your potential new entrant will in most case be well-capitalized, said differently, a chain operation. This does not have to be a negative, but it must be a consideration. Starting a new business is an expensive process and knowing and evaluating what might occur down the line beforehand help to protect your investment in the future.

Under-served customers

Do underserved customers exist in the trading area that might attract new entrants, present you with an opportunity to lock in a portion of the trading area rather than the entire area? Underserved could mean a lack of foodservice operations in a particular portion of the trading area, or it relates to a type of cuisine not offer by any of the area competitors. This is also an important reason for truly evaluating your marketplace - niches often simply go unnoticed.

Growth restrictions

While the opportunities for additional grown in an area might possibly be detrimental to you operation, the reverse is also true. A new operation is at its best in a trading area in a growth trajectory rather than on the decline. Remember the importance of where the consumers in a trading area receive income and the security of that income - they will supply your revenue. If your consumers are not stable, neither is your operation.

Another form of growth restriction is a restriction on space. Can a location under consideration expand at that site to accommodate a growing clientele? Is there room for say patio seating, or another floor? One of the most dangerous situations a restaurant can face is the need to grow. If grown can occur in a current location, this is the best-case scenario. Think of the situation from this perspective. An operator can achieve success for numerous reasons that pertain to the current location such as the 'feel' of the building, lighting, parking safety, view, and of importance in many cases, the personality of the wait staff, and the chemistry in the kitchen. Growth that requires a new location always runs the risk of failing to duplicate the elements of success that exist in the initial location. Thus issues such as space, zoning, and possibilities for expansion for all key initial considerations. How you intend to staff a new location has a direct effect on the ‘internal chemistry’ and production standards of the current operation.

Other type of restrictions would include ease of entry for other competitors including ‘your’ own potential entry into the market. A lack of real estate space can be both a protective and prohibitive element for an operation. How easy is it for new competition to locate into the trading area? Are licenses for alcohol or gaming available or difficult? Would waste disposal be a restrictive issue?

Labor force

Does an adequate amount of available labor reside within the trading area under consideration? Not having enough available workers can seriously restrict both the operation as well as the growth of any foodservice operation. Another issue is the quality of the worker's skill level. Unskilled labor could easily restrict the speed of service, and the very items your operation could offer. A complicated menu requires skilled labor to execute it. Thus, un-skilled labor can jeopardize speed, product quality, and at its worst, cause question as to whether the menu desired can be prepared without workers with higher skill levels. If skill levels are low in the marketplace, where could you find higher quality workers? Is there a solution to that issue? If not, you might have to re-think what you offer to the consumer, and how you prepare it - which could involve some make or purchase decisions that will ultimately speak to the quality of your operation.

Competitors have a say

Finally, in the end, you should always evaluate your competitors in terms of their potential competitive actions toward your operation at some point in time. Thus knowing your own abilities and weaknesses is where evaluating the competition actually begins. Always be truthful and realistic with yourself and your operation. The first step in sizing up or fending off a competitor is to understand your own ability to withstand the competitive element inherent to this industry. Strengths do not exist in a vacuum; doors open and close; and if truthfully acknowledged, weaknesses can generally move toward a successful conclusion. Before entering a marketplace, spend time thoroughly evaluating your competitors, their strengths, weaknesses, and of importance, their ability to respond to your actions.