The Hedgehog Concept and Foodservice Businesses

In Jim Collins’ seminal book, Good to Great, he outlined what enterprises have done to go from a good company to a great company. One of these principles, the Hedgehog Concept, can be perfectly applied to foodservice businesses in any stage—whether just starting up or expanding.

The idea is simple in concept but trickier in execution. It consists of three parts: being the best in the world, being passionate, and knowing what drives your economic engine. In this Enterprise Insight, we’re going to look at the three parts and how they apply to a foodservice business.

Being Passionate

This is the easiest for some and hardest for others; you have to be honestly excited and in love with what you’re trying to achieve. The type of restaurant an owner operates is largely driven by what they’re passionate about—whether that’s a great hospitality and a café, high-end cuisine and a fine dining restaurant, or coffee and coffee shop. If you’re not passionate about coffee, your coffee shop won’t be as good as it can be; you’ll never get to be the best without passion for what you’re doing.

Being the Best in the World

“Best” is subjective and someone’s world is tied the context of what that person has experienced. So, what we mean here is simply doing what you’re passionate about better than anyone else in your market. The goals for a local-favorite, third-place café are drastically different from a restaurant like Noma. However, they both are executing on what makes them great; warm service and familiarity with the café and cutting-edge, locally-driven cuisine at Noma.

Knowing What Drives Your Economic Engine

This is the integral third leg on the stool because all the passion and expertise in the world won’t guarantee that you turn a profit. Jim Collins explains the economic denominator as the “Profit per X”—the metric that would have the greatest, most sustainable impact on cash flow over time. In the foodservice industry, the most obvious economic metric that comes to mind is average check, and this is certainly valuable information. However, you can understand and drive your business in a more specific direction by choosing the metric that best reflects your ability to make money, because your average check is limited to your type of business.

For example, a coffee shop that’s focused on being the best in a given market would want to capitalize as much as possible on repeat guests. The average check at a coffee shop is not going to be able to increase drastically over time simply because of the product category. However, you could drive more sales per repeat customer per, say, week, by focusing on quality and service, thus compelling more customer visits. So, in this case, the average sales per repeat guest.

In a fast food or quick service restaurant, again, average check won’t rise over time. A better metric to push might be profit per labor hour. Limited-service restaurants need to run lean in order to be profitable, so finding the balance between maximizing sales while minimizing labor could drive you in the right direction. Meanwhile, a full-service casual restaurant should consider profit per seat, because it needs to maximize the number of turns per shift.

Applying Jim Collins’ Hedgehog Concept to your foodservice business can help to define or reposition your strategy. It is important to remember that the three items are reliant on one another: being passionate, being the best, and knowing your economic denominator, and when applied simultaneously, can be a powerful tool.

American Chains To Expand In The U.K.

In the U.K. as in America, health and lifestyle restaurant and fast casual concepts are becoming increasingly popular. The demand for innovation is high in both countries as the customer is mainly concerned with convenience, customization and movability. The fast casual segment in the UK had a year-over-year sales growth of 8.3% in 2013, and a five-year sales growth of 12.6% according to Technomic’s Top 100 U.K. Chain Restaurant Report.

Some fast casual concepts in the USA also operate in the U.K. such as Nando’s, the portuguese grilled chicken piri piri concept, and Pret A Manger, the healthy sandwich chain who is also currently the second largest fast casual operator in the U.K. Pret’s customers are very loyal because they appreciate the healthy recipes and preservative-free ingredients that are sourced fresh daily. In 2013, the 270 Pret A Manger stores generated £391 million. Of the Top 100, the fastest growing U.K. fast casual chain is Patisserie Valerie. The patisserie’s units grew by 24% in 2013 and sales increased 25% to £53 million. The concept is a patisserie/café that is known for their handmade celebration cakes, sandwiches, pastries and gelato. The design differs from restaurant to restaurant but the general decor theme is influenced by the 1950’s and some outposts have outdoor seating available.

A few American chains are considering expanding their unit counts in the U.K. such as Shake Shack, Smashburger and Five Guys Burgers and Fries; all budget chains whose main competitor in the U.K. would be Gourmet Burger Kitchen. The concept consists of made-to-order gourmet hamburgers that use only high quality ingredients. Total sales in 2013 for Gourmet Burger Kitchen were at  £46 million. Over the next years Technomic predicts that sales and unit growth for the segment will continue to grow and will perhaps promote an implementation of more global foods and advanced technologies.

To read more about the fast casual segment in the U.K. and America, click here

Webinar Event: Branded Restaurant Apps

Restaurants can really benefit from having a branded smartphone app for their marketing campaigns. It is also important to know that many customers now expect a mobile app and when it is not available for them to use for payment, loyalty programs, promotions or online ordering, it could cause some frustration.  The most important thing to a customer is that all systems are efficient and run seamlessly, and this webinar will help to achieve these goals. A few things that will be addressed are:

  • How to introduce an app and encourage adoption
  • How to engage the customer with the mobile app and impact customer behaviors
  • Promoting effectively via the mobile app
  • The appropriate times to use traditional marketing tactics and when to use mobile promotions in lieu
  • Integrating messages and promotions so customers have a consistent experience
  • Optimizing mobile promotions by segmenting users (new, lapsed, best customers)
  • Transferring contact information and behavioral data between existing marketing systems and mobile/online platforms
  • How much control should your franchisees have for setting up mobile marketing?

The webinar is hosted by an enterprise level SaaS platform for ordering, payment, geo and trigger marketing, and a leading technology integrator to create ‘super apps’ that include in-store and app loyalty, stored value cards and mobile wallet technology called Splick.it. The panel includes founder and CEO of Fishbowl, Scott Shaw, and CEO and President of Splick.it, Vijay R. Bangaru amongst other important figures in the digital marketing realm. To read more about the panel and to watch the webinar, click here

 

Cinnabon Taking Action Against Single Product Branding

The fast-food chain Cinnabon is exploring the idea of setting up stand-alone shops serving artisanal bon bons called Bon Bake Shop. Beginning mid-Sepember this year at Willowbrook Mall in Houston, Cinnabon will test the waters with the new Bon Bake Shop. The goal of this experiment is to have smaller, less caloric items that will attract guests who wouldn’t normally be customers at a Cinnabon. Taco Bell did a similar experiment and opened an eatery near Los Angeles called U.S. Taco Co. which is a higher end equivalent to the Mexican fast food chain.

Chief of Marketing for Cinnabon Kristen Hartman explains that, “The next big thing in indulgence is small…people are all about bite-sized and sharing, ” so the smaller bon bons will include fun frostings such as Birthday Cake, Maple Bacon, Wild Berries & Cream and S’mores. The shop will also be offering Whoopie pies and some savory items as well, such as cheese rolls and twists. The “minibons” will also be sold in small 4-packs as well as a 16 pack and will have rotating flavors such as Toasted Coconut and Bavarian Cream Pie amongst others. These would be a great option to bring to the office or as a gift or even just an afternoon snack.

The whole look of the new shop will also be different to its parent company’s blue and white theme; it will have warmer color tones with a more understated feel.  Although there will only be three locations in the first year, it will be a great opportunity for Cinnabon to extend the brand and attract franchisees by showing how they can reach a new audience by still using the same supply chain. If the first location in Houston shows a great success in sales, Cinnabon may end up deciding to implement some of the minibons into their current Cinnabon menus. Overall the move towards diversification is fueled by the risks that come with building a brand around a single product; which is essentially what led to Crumbs’ bankruptcy.  To read more about how Cinnabon is attempting to broaden their appeal with the new Bon Bake Shop, click here

 

Chick-fil-A Revamping Coffee Offerings

As Chick-fil-A grows their breakfast business they have decided it was time to upgrade their coffee brew. David Farmer, Vice President of Product Strategy and Development for Chick-fil-A states that the chain’s diners, “might put up with our coffee, but that’s a limiting factor in growing our breakfast business.” Breakfast is currently the fastest growing day part in the QSR food business and having a great cup of coffee is crucial to be considered a top player.

Yesterday Chick-fil-A announced that they would be substituting their current brew for a new specialty-grade coffee from a supplier that shares its revenue with farmers called Thrive. Chick-fil-A will also add a breakfast staple to their menu, iced coffee, which will also draw in afternoon traffic. The chain has also given new instructions to their restaurants to brew smaller pots of coffee so the taste will be fresher. For the past year Chick-fil-A has been developing their coffee program in Philadelphia, Nashville and Phoenix where coffee sales increased by 35 percent; the expectation of this new coffee program in stores is that it will double current coffee sales.

To read more about the new specialty brew coffee items on the Chick-fil-A menu, click here

OpenTable Brings Mobile Payment Services Nationwide

OpenTable, acquired by Priceline for $2.6 billion this past June,  will begin to expand the mobile payment service nationwide in the next coming months. This new feature, which was launched as a trial earlier this year in San Francisco, will allow users to book their reservations and then pay for their meals all through the OpenTable iPhone app. According to the company the app allows the user to connect it with a credit card without having to scan or use bar codes in the process; making it very streamlined and user friendly. Having started to roll out mobile payments in New York (about 45 restaurants to date), OpenTable expects to extend the service to 20 additional cities in the USA.

Eliminating the often annoying process of waiting for the check by paying via mobile app should lead to a faster turnover which in turn will drive revenue. OpenTable will not be charging an extra fee for using mobile payments. An OpenTable spokesperson also commented that the ability to pay with the app will encourage trends in tip and check-size. There are other companies that have also adopted mobile payment services such as PayPal and Cover. Senior Analyst Joran McKee states that, “OpenTable’s prospects look particularly promising, as it has relationships with 31,000 restaurants from its reservation service that it can tap into.”

Some New York restaurants that are adding OpenTable’s mobile payments services are Agave, Café Luxembourg, Il Buco, Le Cirque, Ruby Foos and The Odeon. To read more about OpenTable’s mobile payment services roll out, click here

Café El Presidente: Mexican Restaurant & Marketplace

30 W 24th Street (Flatiron)        Tel. 212.242.3491

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Their Success…Dario Wolos, owner of Tacombi, opened an enormous and truly authentic Mexican restaurant serving all day parts in Flatiron in earlier this year. The space is comprised of white tiled high top tables in the entrance and a massive dining space in the back with a long taco bar, ‘Tacos Madison,’ where guests can order directly from the line cooks. In the left back corner of the long taco station is a large authentic ‘tortillera’ machine where the team produces the fresh tortillas for their tacos that are also sold for $3.95 by the pound; other Mexican ingredients are also for sale along the back of the restaurant.

At the entrance is a very colorfully decorated juice bar where guests can enjoy freshly pressed juices that are reminiscent of those sold from carts on almost every street corner in cities in Mexico. The tropical fruit choices and simple combinations set this juice selection apart from other fruit and vegetable juice bars around the city. Café El Presidente also serves a great café con leche using La Antigua coffee from a beautiful Elektra coffee machine. As a nice finishing touch, a small pot of simple syrup, which is easier to dissolve, accompanies the iced coffee. The restaurant also makes their own sodas and aguas frescas with flavors such as watermelon and horchata.

The most pleasant and unexpected aspect from Dario Wolos’ new restaurant is the fact that they serve a great Mexican breakfast. The breakfast menu has a wide selection of both sweet and savory options. Savory options include the typical huevos rancheros served on Vista Hermosa tostadas and eggs Tinga with achiote and chipotle braised chicken served on their homemade corn tortillas. Breakfast tacos with scrambled eggs are also served on the corn (or flour) tortillas. The sweeter breakfast options include some American classics, such as pancakes, with a Mexican twist; they are served with cinnamon, agave and delicious cajeta cream. Mexican oatmeal with vanilla and cinnamon is also available on the menu as well as a house-made Mexican granola that is sweetened with honey and agave syrup.

The most exciting items on the breakfast menu would have to be the baked goods. On the sweeter side, Mexican style croissants called Cuernitos (little horns) are served with a spiced apple and cinnamon house-made marmalade. The restaurant also serves sweet empanadas that are filled with seasonal fruits. The breakfast pastries also include muffins and biscuits that stay true to Mexican flavors such as the roasted corn & poblano muffin and the jalapeño and cotija cheese biscuit. The pastries are accompanied by queso fresco, a spicy chili honey and an orange-flavored cream cheese spread. The finishing touches on the menu such as the unique accompaniments to the baked items truly add value to the guest’s experience.

Take Aways…It is refreshing to come across a thoughtful breakfast menu that remains consistent with the theme and concept of the restaurant. The menu offers a good variety without being overwhelming and consists of items that are authentic and made fresh in-house. The smallest details and finishing touches make a great impact on the dining experience. It is also convenient to offer items that can be enjoyed at a leisurely pace surrounded by the authentically Mexican décor and fun atmosphere as well as items that are easy to take-away and enjoy on the go. The high quality of the sustainably sourced products make the marketplace items very appealing to the guest and will certainly create a good buzz and word-of-mouth. Café El Presidente succeeds in offering a visually stimulating space that has an authentically Mexican feel with great service and a properly thought out menu selection for breakfast, lunch and dinner.

 

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