Blue orb 2016 restaurants growth report

REASONS YOUR
RESTAURANT IS NOT
GENERATING ENOUGH SALES
AND WHAT YOU CAN DO ABOUT IT

WHY WE COMMISSIONED THIS RESEARCH
We’ve work with leaders and entrepreneurs in different industries and
have seen the confusion and disappointments they’ve suffered from
inaccurate and misleading information, guesses and decisions.
It is in response to this dilemma that we made a commitment to
relentlessly invest in curiosity-driven research to unearth and address
both obvious and hidden challenges faced by many entrepreneurs and
business leaders.
So, we commissioned this research to investigate the challenges most
restaurants are facing and as well provided some insights that will help
tackle these issues, improve your overall efficiency, yield better return
on your investments and aid the future growth of your company.
We are pleased to share this study with you!
RESEARCHED AND PRODUCED BY BLUE ORB LLC

 Is the current economic crisis negatively impacting
your business in any way?
 Would you like to know the strategies you can
deploy to outshine your competitors and make your
restaurant the choicest place for your customers and
their friends?
 Would you like to learn the smartest and most
effective ways to generate more sales and
geometrically increase your profit margin?
If your answer to any of the questions above is “Yes,” then
this report is something you really need to read.
© Copyright 2016 Blue Orb LLC

IN TERESTIt will
you to know that…

But…

Several years ago, researchers at Cornell
University and Michigan State University
conducted a study of restaurants in three local
markets over a 10-year period.
They concluded the following: After the first year 27% of
restaurant startups failed; after three years, 50% of those
restaurants were no longer in business; and after five years 60%
had gone south. At the end of 10years, 70% of the restaurants
that had opened for business a decade before had failed.
Source: Dayton Business Journal

The failure rate is alarming!
In Africa, 76% of all SMEs fail in their
first two years of existence.

IF THE LEVEL OF PATRONAGE
ON A DAILY BASIS IS THIS HIGH
 How come the industry failure rate is this astronomical?
 How come your revenue and profit margin is shrinking?
 How come customers are not coming to your restaurant?
Answer to these questions are unveiled in the proceeding pages.

THE COST OF AN INEFFICIENT
OR LACK OF REFERRAL SYSTEMS.
Over 85% of businesses that generate majority of their sales through
referrals don’t have any referral system in place. About 10% of
businesses generating sales from referral systems only have one or two
of such systems in place. And over 5% of businesses in this category
don’t know what to do when this system has become obsolete.
-Blue Orb Survey, Q1 2016

Research has shown that
restaurants are one of the most
universal activities enjoyed by
visitors.
Food expenditures often
represent 25 percent of
visitor spending.

HOWEVER
more than eight in 10 restaurants say
their guests are paying more attention to
the nutrition content of their food today
than they were two years ago.
Good restaurants create hygienic environ; Smart ones create
both hygienic environ and nutritious meals; but Wise ones
create both hygienic environ and nutritious meal, and tell
their customers about it.
-Blue Orb-

The
unknown
impact of
Music

MUSIC CAN DIVIDE
GENERATIONS OF EATERS
AND ATTRACT SPECIFIC
DEMOGRAPHICS
Research have shown that older people don’t
want to dine in fast paced and loud noise
restaurants, they generally stay away from
those places, instead vying to go to
restaurants that play cool or soft music.

People chewed food nearly a third faster when listening to
high-volume, fast-tempo music, potentially increasing table
turnover. Also, a French study observed that as decibel
levels increased, men not only consumed more drinks but
also finished each drink in less time.
- CNN
Controlling the crowd,
Increasing the revenue…
Diners increased their expenditures by 23 percent when
slow-tempo music was played. Most of the additional
spending went toward the drink bill, which grew 51 percent.
Because drinks are typically a high-margin item, the increase
in profits was especially significant.
Source: Association for Consumer Research

The Untapped
Potentials of TECHNOLOGY

ACCORDING TO FORRESTER RESEARCH,
MOBILE COMMERCE
TRANSACTIONS ARE
EXPECTED TO TOP
$142 BILLION IN
2016.
NRA/LevelUp whitepaper suggests that consumers who have
placed an order online visit the restaurant 67% more
frequently than those who haven’t.

58% of diners surveyed reported
that they have paid their bill via app
or would do so.
52% of diners say they make
reservations via the Internet, while
44% use the telephone.
The proactive embracement and strategic
deployment of technology can reduce queues
at your restaurant, cut operational cost,
transform your business model, create new
growth opportunities and increase the overall
efficiency and impact of your brand.
THE TREND TOWARDS
MOBILE ORDERING
AND PAYMENTS IS
GROWING

THE
IMPACT
OF LEAVING
CUSTOMERS

80% of companies
surveyed said that
they offer superior
customer service,
but only 8% of their
customers agreed
with them.
-Bain and Co.
There’s little point in dedicating massive resources to generating new customers
when 25%-60% of your dormant customers will be receptive to your attempts to
regenerate their business if you approach them the right way, with the right offer.
The average business
loses around 20% of
its customers annually
simply by failing to
attend to customer
relationships.
In some industries,
this leakage is as high
as 80%.

The job customers want to get
done never changes, it is “WHO
DOES IT” and “HOW IT IS DONE”
that often change.
Obafemi Awobajo
(Head of Enterprise Development & Business Growth, Blue Orb)

WHY DO CUSTOMERS LEAVE A COMPANY?
 68% leave because of the treatment they received
 14% are dissatisfied with products and services
 9% begin doing business with competition
 5% seek alternatives
 3% move away
 1% die
ATTRACTION vs. RETENTION
Further report suggests that:
 71% of customers have ended their relationship due to poor customer service.
 61% of customers take their business to a competitor when they end a business relationship.
 96% of dissatisfied customers don’t complain. They just walk away, and you’ll never know why.

DRIVING INNOVATION
Customers who visit a restaurant have a variety of jobs they want to get done,
and it is the responsibility of restaurant owners and managers to find out what
they are and build their business around them.
Unfortunately, this is not the norm. Most restaurants present diners with
offerings, environments and policies that that are solely focused on their own
benefits rather than seek ways to satisfy the consumers their business exists to
serve.
Hence, deciphering and attending to both verbal and non-verbal customer’s
needs, looking beyond industry practices, exploring substitutes and alternatives
through which customers get these jobs done are all critical perspectives that
can birth new initiatives and offerings.
To achieve this, restaurant owners and managers must seek ways to use
consultants, dedicated teams and front-liners to obtain necessary information
about diner’s needs, dissatisfactions, complaints, behaviors and preferences.
However, these front-liners must be well-trained to carry out such tasks.

The job-to-be-done for diners who visit restaurants varies. Some of the basic reasons people visit
restaurants are food-related, but many visitations have nothing to do with foods.
Based on our research, we are able to uncover different customer needs and have segmented them into
two different categories. The first being the primary reasons people visit restaurants, and the second being
the conditions that affect their selection of a restaurant.
The primary factors consists of these five major areas:
 Eating: this is when visitors are basically seeking where to satisfy their appetite. And under this
circumstance, where and what to eat are the primary concerns of many diners. However, price and
quality play a major role here.
 Hangouts: this is when customers select a restaurant for informal meetings. These includes dates,
reunions and get-togethers. For a date, for instance, price might not really be an issue, as the Romeo
will often want to impress his Juliet. But factors like convenience and quality would count.
 Meeting: this is when the restaurant is selected as a place to meet. And the reason for meetings can
vary from serious to casual business appointments. Here, the most important thing for many visitors is
convenience (i.e. conduciveness and proximity). Restaurant owners should also note that, even though
foods are often ordered, many who meet at a restaurant under this circumstance don’t spend much.
 Relaxing: this usually happen when a consumer impulsively decides to deal with his current state or
feelings. Contrary to other planned visits, this is often largely influenced by factors such as stress,
weather, distress, projects and so on.
 Celebrating: this decision often span out of consumer’s decision to celebrate milestones and advances
at a restaurant. In this case, price is usually not an issue. But speed, convenience and quality would
matter much.
ANTICIPATING AND FIGURING OUT
WHAT CUSTOMERS REALLY NEED

Exploring
‘ SECONDARY NEEDS
Quality
Affordability
Convenience
Speed
distance, easy-of-use of mobile apps,
comfortable environment,
attractiveness, noise level, crowd,
exposure
transaction, delivery,
responsiveness
food taste, hygiene,
healthiness, packaging,
customer service, quality of
response to issues
Price, size of meal,
bonuses
Apart from the primary factors considered earlier, when it comes to selecting a restaurant, people often consciously and subconsciously
draw their conclusions from a ‘swift’ analysis of these secondary factors. Therefore, for many diners, the surrounding circumstances are as
important as the prospective location. Hence, these are the four secondary factors managers need to bear in mind:
 Quality: for many diners, apart from those who are extremely price-sensitive, factors like food taste, hygiene, healthiness, packaging,
customer service and the quality of response to raised concerns are very important. Here, customers lookout for the match between
the brand promise, their expectations and experience. This is one of the reasons some diners have been retained as returning
customers and referrers. And it is also one of the major reasons some diners never returned to a restaurant.
 Speed: for instance, most diners who do take-away often
wish they could just enter into a restaurant and hop out
immediately. Also, customers who use the internet to make
home-delivery purchases desire that their order could just
arrive within the next few minutes. In a nutshell,
transaction speed, delivery speed and the speed of
responsiveness to other customer needs are all critical
factors customers examine.
 Convenience: how far is the restaurant? How cozy is the
place? Is it noisy or rowdy? Does it look like a befitting
place for my status….? These are also questions customers
often ask in split seconds. So, while managers can’t do
much about issues like distance; they can reduce the line,
control noise level, make the environment more
comfortable, ensure that their apps are more user-friendly,
and so on.
 Affordability: even for customers who don’t care much
about the cost of a meal, they’d rather choose discount
offers and bonuses when the options are available to them.
Here, the key is using price and incentives to drive sales. © Copyright 2016 Blue Orb LLC

HANGOUTS
RELAXATIONCELEBRATION
MEETINGEATING
Customer’s Job-To-be-done Framework for Restaurants
Speed Convenience
Quality
Affordability

For each of these primary factors, there are also alternatives for visitors, and
that is why restaurant owners and managers must look for ways to make their
outlets a go-to-place when people are making these choices. Below is a
summarized list of possible alternatives to getting these jobs done outside a
typical QSR:
 Eating: home-made foods, mobile food companies (which delivers to diners at
their desired locations), local restaurants (widely known as ‘Mama Put’), fast-
casuals, grocery stores, bars, etc.
 Hangouts and Celebrations: home, beach, cinemas, fun and games centers,
clubs, boat cruise, resorts, spas, etc.
 Meetings: offices, co-working spaces, home, project sites, bars, clubs, etc.
 Relaxation: home, bars, clubs, cinemas, fun and games centers, spas, etc.
For manager seeking ways to grow their restaurants, these alternatives should
not be seen as obstacles, but rather as opportunities they can leverage on and
arenas they can learn from to generate and capture more values. Therefore,
borrowing ideas and concepts from these substitutes is one of the best ways to
engender new business models, create a niche for your brand and proactively
transform your restaurant.

It is unarguably true that where each organization plays, how they compete, when they make specific strategic moves,
their target demography, and the challenges they face varies…. But we are quite certain that, the content of this report,
if well-digested and applied, can literally help you reconfigure your business to win, satisfy your customers more
effectively, boost your sales and largely increase your profit.
CLOSING REMARKS
However, from previous experience and feedbacks, we have discovered that, while most leaders can relate to,
understand and make sense of reports such as this one, they often struggle with the following:
And that’s where we come in!
 Discerning the key activities their organization is not doing right.
 Developing the right strategies, competencies, processes, policies and relationships
that could spur the kind of result and growth they’ve always imagined.
 Effectively implementing developed strategies and initiatives to positively impact their
entire business.

If you find our services suitable for someone you know or feel
there are other ways in which we can be of help to them, do
not hesitate to tell them or reach us now.
Referrals stand the chance of enjoying up to 25% discount on our offerings.
it’s simple! All you have to do is, reach us with the contact information of the firm or friend you are referring us to.
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Blue orb 2016 restaurants growth report

Blue orb 2016 restaurants growth report

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