Friday, March 6, 2009

How Restaurants Can Ride Out the Economic Storm

(Originally posted 2/26/09)

A couple of weeks ago, I took my family out to one of our favorite Indian restaurants for dinner. The waitress, who recognized us immediately, commented on our long absence from her establishment. We explained (somewhat sheepishly, I might add) that we had not been going out for dinner anywhere these past few months. “I understand,” she said. “Very few people do. It’s been hard for us.”

The economic downturn has been especially hard on the restaurant industry. CNBC reported on declining restaurant attendance last December. According to The NPD Group, a leading market research company, the opening of new restaurants was balanced out by the closings, resulting in no growth in total restaurant units in 2008. In 2009, restaurant traffic is predicted to fall by at least 1%, and the casual dining segment could have its worst year in decades.

Dick Williams, culinary advisor and owner of Denver’s high end Buckhorn Exchange Steakhouse, reported that menu prices increased 4.3% in 2008. With food costs expected to increase by 7-9%, either menu prices will rise in 2009, or portion sizes will shrink.

So, what is a restaurateur to do? The answer is obvious. Start offering cooking classes.

Interestingly, cooking classes are doing quite well in this economy precisely because so many people are no longer going to restaurants. Sherry Zylka, associate dean of continuing education and workforce development at Schoolcraft College in Livonia, MI, reported a 20% increase in the number of men taking classes, suggesting that interest in cooking cuts across gender lines.

By offering cooking demonstrations and classes, restaurants can maintain their customer loyalty while continuing to make some money. By offering classes at $15-$25 per class, the restaurant can greatly undercut Williams-Sonoma’s costs for cooking demonstrations. Furthermore, the restaurant does not need to create a new brand identity or reputation for its cooking demonstrations. The quality of its product is known to all of its customers.

Ethnic restaurants in particular could succeed with cooking demonstrations simply because fewer Americans know how to make exotic dishes. A cooking class on making paneer pakora (fried, battered cheese) is much more exciting than a cooking class on, oh, I don't know...breaded cheese sticks.

Unfortunately, I predict that few restaurants will try out this idea simply because of the fear that the classes will cannibalize or neutralize their existing business. While this is certainly a possibility, I personally think that the benefits gained in building customer loyalty outweigh any lost revenue. When times are tough, customers will flock to the restaurants to learn how to make their favorite dishes at home. And when times get better, customers will come back. Yes, even if customers know the "secrets" of cooking, they will still go out to eat at restaurants for two important reasons: 1) most people don’t want to cook if they don't have to, and 2) they know that the restaurant can do it better.

So, there it is: my secret for riding out the economic storm. It is free advice for any restaurateurs who wants to take it. I won’t charge you a penny for the idea.

However, if you want to give me a discounted rate on your palak paneer demonstration, I won’t say no.

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