So You Want To Open A Restaurant — Are you crazy? Part 2

by Spence Cooper on 07/05/09 at 11:11 am

So you still think you want to open a restaurant?

This is the second installment in a 10-part series on “How To Open and Run a Restaurant“. In part one we discussed general business considerations and market research. Let’s briefly continue along those lines.

As I previously mentioned, market research is a key element in laying the foundation for a successful business strategy. The referenced Bloomberg piece indicates the price range consumers are willing to spend when dining out is around ten dollars or less, thus, there is a greater chance of success in the fast-food sector of the industry; rising risks of bankruptcies and buyouts have created a favorable climate for latitude in negotiating a competitive lease price for a restaurant location. Given today’s economy, a business partnership may be an option instead of beginning a new restaurant project. But in my view, unless you’re extremely knowledgeable about the restaurant industry, entering into a partnership would be risky. There’s sucker born every minute, especially in a New York minute.

The Bloomberg article is certainly not a definitive body of market research, but for a budding entrepreneur on a limited budget, the article serves as a weather report — even if only topical — into the economic conditions one can expect to sail after leaving the dock. For the sake of discussion, let‘s use Bloomberg’s assessment and accept the fast food paradigm as the current money making trend in the food business with the greatest potential for success.

There are interesting and creative variations on the fast food restaurant theme. Years ago I met a guy in a shopping mall who mentioned a restaurant idea to me. “Beans,” he said. “Just beans.“ And “Just Beans” was what he proposed naming the small serving stand he envisioned. His plan was to sell bowls of steaming hot beans from a small bean stand with an array of condiments like grated cheese, chopped onions, tomatoes, and dollops of sour cream. The simplicity of his idea struck me as being particularly inventive.

Another alternative fast food concept is catering trucks. From New York to Los Angeles, catering street wagons have become the latest craze serving high-end fast food to taste savvy consumers. One Los Angeles based catering company, Kogi BBQ, has combined the use of Twitter as a real time marketing and promotional tool — talk about guerrilla marketing! The two Kogi BBQ trucks use Twitter as an internet based bulletin to “Tweet” customers with the latest menu items and truck locations. Kogi BBQ now has over 20,000 followers on Twitter.

But let’s broaden our focus for the moment and take a look at target markets. Because no matter what eating venue you may entertain, be it a deli, diner, or buffet, the narrower your focus on a targeted food audience, the better your chances — it‘s all about niche marketing.

Entrepreneur.com has compiled a great breakdown of the main market categories of food-service business customers:

Generation Y:
This generation, also tagged the “millennial generation,” the “echo” or the “boomlet” generation, includes those born between 1980 and 2000. Generation Y is the most ethnically diverse generation yet and is more than three times the size of generation X. They are a prime target for a food-service business. Members of Generation Y go for fast-food and quick-service items. About 25 percent of their restaurant visits are to burger franchises, follow by pizza restaurants at 12 percent.

Generation X:
Generation X is a label applied to those who were born between 1965 and 1977. This group is known for strong family values. While earlier generations strove to do better financially than their parents, Gen Xers are more likely to focus on their relationship with their children. They are concerned with value, and they favor quick-service restaurants and midscale operations that offer all-you-can-eat salad bars and buffets. To appeal to this market group, offer a comfortable atmosphere that focuses on value and ambiance.

Baby Boomers:
Born between 1946 and 1964, baby boomers make up the largest segment of the U.S. population. Prominent in this generation are affluent professionals who can afford to visit upscale restaurants and spend money freely. During the 1980s, they were the main customer group for upscale, trendy restaurants. In the 1990s, many baby boomer were two-income households with children. Today, those on the leading edge of the boomer generation are becoming grandparents, making them a target of restaurants that offer a family-friendly atmosphere and those that provide an upscale, formal dining experience.

Empty Nesters:
This group consists of people in the age range between the high end of the baby boomers and seniors (people in their early 50s to about age 64). Empty nesters typically have grown children who no longer live at home, and their ranks will continue to increase as the baby boomers grow older and their children leave home. With the most discretionary income and the highest per-capita income of all the generations, this group typically visits upscale restaurants. They are less concerned with price and are more focused on excellent service and outstanding food. Appeal to this group with elegant surroundings and a sophisticated ambiance.

Seniors:
The senior market covers the large age group of people age 65 and older. Generally, the majority of seniors are on fixed incomes and may not often be able to afford upscale restaurants often, so they tend to visit family-style restaurants that offer good service and reasonable prices. “Younger” seniors are likely to be more active and have more disposable income than “older” seniors, whose health may be declining. Seniors typically appreciate restaurants that offer early-bird specials and senior menus with lower prices and smaller portions, since their appetites are less hearty than those of younger people.

I’ll close for now with a shameless but invaluable plug: you can’t beat FriendsEat as a tool to enhance the success of any new restaurant business. With our own succinct Tweet-style reviews, we serve as a world-wide hub for Foodies seeking restaurants and vice versa. The FriendsEAT network is international. People from all different corners of the world discuss their favorite restaurants, cuisines, cooking methods, recipes, restaurant reviews, Foodie blogs, videos, and even participate in lively forum discussions and questions related to food and restaurants.

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So You Want to Open A Restaurant – Are You Crazy? Part 1