starting a quick serve restaurant brand (part 1)

Some people say that starting a business is daunting, perhaps even downright scary — so much to the point that the fear of failure may actually be more of a deterrent than the failure itself. But that’s only because you’ve either gotten used to coasting on cruise control sailing through life with someone else behind the wheel of the luxury yacht. The one that you so want your name emblazoned on. Berthed in Cannes for the summer.

You’re merely leasing the experience while someone else owns you.

But you’re definitely not someone else’s b$&$*.

So you’ve resigned yourself to the reality of capping your potential so much that you’ll never be able to do something meaningful. Then that existential moment arrives and you’re rather poignantly faced with the a crisis of conscience. I’d be hard pressed to say that everyone doesn’t feel it. It’s that moment where you so badly want to add a ton of value to this world before you eventually leave it. In fact, I wouldn’t even consider for a moment that anyone is too old to head down this (rewarding) road.

Source: http://arkenea.com/blog/entrepreneurs-above-50/

There are many reasons why businesses fail but an observation of the downfall of entrepreneurs I’ve surrounded myself with will lead me to one conclusion — they failed themselves. They lacked heart. They lacked courage. Perhaps even conviction as to why they so aggressively pursued their first step to releasing themselves of the 9 to 5 shackles.

Then came the blinders — starting a business shouldn’t ever be considered by the sane and financially troubled.

Insanity is necessary along with seeking out a financial savvy partner (conservative money manager CFO-type but not a SPECULATOR) who can complement your operational and marketing expertise. Or maybe a crash course in cash management and conservation.

As an insurance policy maybe commit the principles to heart, mind, body, spirit, and soul outlined in Daymond John’s hustler heavy perspective book, The Power of Broke.

Otherwise, you might not ever be able to plug the gaping hole in the hull of that sinking ship with borrowed $100 bills, hopes, wishes, and dreams.

I grew up watching my dad persist at formulating a model which hinges upon identifying then transforming under-performing and distressed real estate assets and businesses. Once he had perfected that model alongside building the trust and ability to gain greater access to leverage with various financial institutions, he could then replicate that very model. All while continuously seeking to perfect it in order to grow his various existing businesses. Nothing was ever too broken to be fixed and there was always some sort of upside to be realized even with the most seemingly perfect business model. With that kind of optimism and testament to the infectious nature of entrepreneurial spirit, I began to realize it was only a matter of time before there may be no other more fulfilling path for me to follow.

But first, a very methodical approach needed to be taken before we committed our first dollar. Since we (myself, my sister, and her husband) are in the process of starting an Indian quick serve restaurant (The Bombay Frankie Company, Instagram: bombayfrankiecompany) in West Los Angeles, the analysis had to run deep and mitigate any fear of failure.

Because failure is and should never be an option.

We needed to reverse engineer every detail, every subtle nuance, and every angle for which any gain (even pseudo arbitrage) could be realized. And that wouldn’t be limited to the financial realm. Many current quick serve restaurant problems came to mind:

  1. Check-out process optimization
  2. Ideal waiting time from order to first bite
  3. Food preparation time management to ensure freshness
  4. Complementary higher margin prepackaged snack foods mix sold on the counter
  5. Minimizing waste
  6. Ensuring the highest quality standard. Everyday.

Altogether, it’s nothing short of a huge task coupling management consulting alongside operations and efficiency engineering — literally everything was up for grabs.

Only after that point would price considerations come into play which wouldn’t just blindly set gross margins to be dictated by the 200–250% conventional formula, it would be permissive of a more dynamic pricing scheme which would be reactive in nature to change in trends and other varied margin revenue streams (catering, timed promotions, seasonal offerings, limited plate model).

Our business model isn’t far off from Chipotle’s (minus the massive scale!) and is predicated upon providing the highest level of value for the lowest possible price point. It’s a mid-cost sustainable model for which we could theoretically replicate day-in and day-out.

The Building Blocks

Even after the most meticulous analysis and business model hacking involved with operating three other quick serve restaurants, there are really just four pillars of running a moderately successful operation:

  1. Food
  2. Service
  3. Ambiance
  4. Marketing
I have deliberately omitted location, location, location from this list because I’ve seen massive followings flock to some of the most off-the-beaten-path eateries just for something unique and inventive (or just a well executed take on a tried and trusted). And that’s largely due to the power of digital marketing and the influence of food bloggers. And by no means should the highly influential role of food bloggers be downplayed!

Point of Sale System

We’ve experimented with running many iPad based Point of Sale software solutions and found that the Square app has, by far, the easiest learning curve.

Pros

  1. Adding products from the front or back end (web portal CSV import) is a simplified streamlined process that can have you up and running in less than a minute!
  2. It’s fast with minimal latency (key stroke delay, item scanning, and credit card processing). In fact, the EMV chip processing is so much faster than any other POS I’ve seen of any retailer! Also, the 2.75% credit card fee (3.75% if entered manually) seems reasonable.
  3. We usually have a two printer setup (front of the house receipt Star Micronics Portable Bluetooth SM-T300i printer and back of the house Star Micronics SP700 kitchen order printer) that‘s quick to setup and has yet to let us down. Just be careful when buying recommended printer paper from Amazon. For some reason the paper that’s bundled with each printer respectively (based upon customer suggestions) didn’t seem to fit.
  4. The loyalty program has a high ROI ($25 / mo) and has been conducive to a significant amount of sign-ups in a very short period of time. Our customers seem to love the idea of a free reward. You get 1 point for each dollar spent and once you get to 100 points we award a $10 one time discount to your order.

Cons

  1. You’ll need to ‘hack’ the system with custom ‘Modifiers’ in order to add ancillary fees like CRV (California Redemption Value) to items such as beverages.
  2. Multiple quantity discounts cannot be added at all. Their developers are aware of the problem but doesn’t seem to be much of a priority.
  3. When redeeming a loyalty reward, the cashier can easily forget how to attach the customer to the order and then apply the actual reward. I think a message prompting (some sort of pop-up or overlay) the cashier to apply the reward (if the customer so desires), would work best.
  4. The API is built around only handling mobile payments and not extracting sales/cash drawer reports into your own accounting system or anything which would require a little bit of scripting. The best way to extract your reports is from their portal via CSV (or native QuickBooks) file export.

Digital Presence

Since we already operate three existing quick serve restaurants, we’ve learned a few hard lessons about the pitfalls associated with completely disregarding our digital presence.

  1. You no longer have a choice to carefully manage your Yelp reviews (no bribery allowed, but still exists) and Instagram presence. Even though bad Yelp reviews can herald the demise of a business, the more time that is spent on handling them, the less likely those type of reviews (and any further ones) will hold any significance. On one end of the spectrum, 1 star reviews tend to be more emotionally driven and poorly written while 5 star reviews can be a mixed bag of supporters and Yelp status chasers (word count and average word length ultimately separate legitimate reviews from generic ones).
  2. Online ordering through GrubHub, UberEATS, and Postmates can be fraught with operational headaches at the onset of the sign-up. And just as a general disclaimer, it seems like the technology investment is spent more on the consumer side than the business owner one. If you think that the fee structure is way too lopsided, we’ve found that the average online order tends to be 3–4 times the in-store amount. Also, getting notifications to appear on an iPad running the Square Point of Sale is almost impossible without having to constantly switch screens or run two devices. After experimenting with a series of hacks, the one that seems to work the best is setting one of the notification e-mail accounts to be an employee’s mobile phone e-mail equivalent (i.e. {000–000–0000} @ att.net} so that a text message notification is sent with the order details.
  3. Social media presence is helpful but understand your target profile before engaging in a ‘full-on’ marketing campaign. Facebook is targeted towards the 30–35+ crowd looking for a deal. Instagram following is heavily weighted towards the eye candy seeking consumer looking for pretty food pics (upgrade your photography/video skills). Creative content and dazzle is key. Twitter can work particularly well if you operate a business with unconventional hours, a pop-up setup, celebrity appeal, or other unique/exclusive element. As for Snapchat, we haven’t tried it out and our businesses don’t seem to cater to this particular younger demographic.
  4. On the whole, social media and online presence endeavors seem to be quite meritocratic — the more you put into it the more you can potentially get out of it. And that lends itself to marketing arbitrage since the cost of the platforms are zero there’s only your time to factored into the labor economics equation.
  5. Lastly, align it to your own values, beliefs, and tastes. I recently read about and then visited Andres Izquieta’s (one of the co-founders of FiveFour Club) West Los Angeles quick serve restaurant FalaBar. I linked to the Instagram account instead of the business website because it’s textbook great execution being eye candy heavy. As you can tell from the name, the establishment specializes in different versions of the falafel among other Middle Eastern whole foods. True to his dietary preferences since he’s a vegan, so is the restaurant. And it’s definitely worth a visit!

Stay tuned for part 2 with pre-opening momentum, opening day, and most of all the food!!!

Concurrently published on my blog c-store ‘nomics