Let us do the Market Share job for you

The restaurant industry is one of the most competitive. Having said that, the top reason why a restaurant fails is that they are put out of business by their competitors. Very simple.

The law of supply and demand generally dictates all our strategies. In restaurants, this phenomenon is even more relevant. 

Regardless of the theme, location or even price points of your restaurant, chances are that you will find yourself in competition for your target market.        

In a market where demand is much higher than supply, poor performing restaurants stay afloat because they attract customers that cannot get in their preferred restaurant choice.

On the contrary, if supply and demand are similar, restaurants will try hard to capture customers from the market available and gain more market share.

The beginning of a restaurant

Every new restaurant opening is bound to carry out a competitive analysis to some degree. 

If you read articles about what to do when opening a restaurant, you will find that knowing your market and your competition in detail is within the top 3 actions you cannot miss.  From understanding what menu your competition offer to their market proposition; it is vital to complete a checklist on your competition to gain an understanding of where you can compete with them.

If carrying out such a detailed analysis is so important when opening a restaurant, why would not we continue paying the same attention to our competitors now that the restaurant is open?

During interviews with general managers across the industry asking questions about how they tackle the competitiveness of the market, it’s vital to gain a real understanding of how your competition is doing, as your focus on them decreases further the moment you get more involved in your daily operations. It happens simply because this important task drops to the bottom of the priorities organically. Restaurants will not find the time or need to carry out detailed competitive analysis regularly simply because they must do something else instead which has become a priority today.

The definition of success

Trying to figure more about what metrics restaurateurs consider important to evaluate the health of their business, the following questions arise: How do you define success? What does success look like for your restaurant? How do you quantify it?

Each business has a set of KPIs designed to quantify what success looks like. Investors might worry about what their earnings per share are while general managers might look at sales growth above anything else.

Not finding a solid target that can filter down to all levels of the organisation can cause instabilities in your restaurant and damage your business more than anything else.

An aligned and realistic target or set of targets which are communicated effectively generate great success as every member of the company will strive to reach that point sooner or later. Think of it this way: if a restaurant’s goal is to improve its customer reputation while having to grow covers substantially, we can mostly agree that unless both objectives are rigorously studied and woven together, they will not succeed. 

Hoping to find if ‘beating the competition’ is a significant measure for success in a restaurant, I asked this question: Is capturing more of the market than your competitors what makes your restaurant successful?

As expected, the answer was mostly no. Majority of restaurants will primarily focus on achieving budgets or growing sales year on year.

Unlike other industries restaurants do not look at market share results to drive performance, set strategies or celebrate success. This is primarily because no company has ever provided restaurants with insightful market share information, until now.

If you said to a hotel owner, they have now to operate without knowing their market share, they would go crazy. Hotels have been using market share since STR was founded in 1985.

In conclusion, if the top reason why restaurants go bust is because the competition kicks them out, the logical answer to this would be to look at market share results to prevent this from happening.

 Perhaps no sector suffered during the pandemic more than the restaurant industry resulting in changes in priorities. For this reason, let us look do market share job for you.

*References

https://www.allianceonline.co.uk/blog/2018/06/how-to-open-a-restaurant-the-essential-guide/

https://startups.co.uk/guides/how-to-start-a-restaurant/

https://smallbusiness.co.uk/opening-a-restaurant-the-key-ingredients-to-startup-success-2508906/

People’s deep confidence in their judgments and abilities is often at odds with reality – by Harvard Business review

Written by Carmen Mallo 02.12.2021