I’m a restaurant systems expert. I help literally hundreds of independent restaurant operators every year make more money in their operations then they ever have before. For some restaurant owners it’s the first time they have ever made ANY money in this competitive business.

It’s not uncommon for me to work with a large number of restaurant owners who say, “I don’t understand why I’m not making any money. I’m doing record sales!”

Let me start off with explaining a lesson I learned early on in my career and is still true today, “It’s doesn’t matter how much money you bring in at the register. It’s what you do with those sales.”

With this lesson as our theme, let’s proceed to bust the most deadly marketing myth that I believe is the number two restaurant killer, right behind extremely high debt service. This myth is often referred to as the cocaine of restaurant marketing … couponing!

It’s called the cocaine of advertising because it feels good when you increase your sales at the register and often dramatically. But when you stop couponing and sales drop, you look for a quick fix and run another coupon promotion. And as time goes by, you start running more and more aggressive discount promotions just to feel the rush at the register.

The similarity to cocaine is that this practice is addictive, and while it makes you feel euphoric, it literally can and will kill your restaurant.

Before I dispel this popular practice, let me make sure I let you know that all couponing is not bad. It has its place and needs to be done wisely and strategically.

OK, the theory behind couponing is that if you send out an aggressive coupon promotion it will bring in customers (translation = sales) that you would not have had otherwise. Many marketing experts will quote the National Restaurant Association and say that this increase in sales will not require you to schedule more labor to handle the extra volume. So the assumption is that you will make a lot more money because you ran the coupon promotion. While this is not totally incorrect, it more often than not does just the opposite and robs your bank account.

The rub lies in the execution and overuse  h2

The rub lies in the execution and overuse  h3

The rub lies in the execution and overuse  h4

Let’s break the numbers down. First understand there are two types of expenses: variable and fixed. Variable expenses are expenses that go up and down with sales, such as labor and food cost. Fixed expenses are expenses that stay the same, whether you bring in $1 or $1 million in sales. The key is to keep these expenses in the correct balance, which means your restaurant is operating at or above a breakeven point before you run your discount promotion.
The key numbers

To have any chance of making any money in this business, your prime cost (total cost of goods sold plus total labor cost) should not exceed 65 percent of sales for a full-service restaurant and 60 percent of sales for a quick service restaurant (and I advise full-service restaurants to strive for a 60 percent prime cost goal to ensure success). Couple your prime cost with the assumption that every other line expense on your profit and loss statement is in line, the average restaurant only makes a nickel (5 percent) of every dollar it brings in.
For a moment let’s assume your restaurant is at the breakeven point today. In fact, you bring in $100,000 in sales a month and when all of your bills are paid you owe nothing more and nothing is left over for you to take home. Basically for every dollar you bring in, it goes out dollar for dollar.
If this was your restaurant and you chose to run a coupon promotion with a 25 percent discount to bring in more business, this is what your increased sales and profits might look like:

1. Increased sales by 20 percent for an additional $20,000 in sales.
2. For each new dollar that came in we deduct a minimum $0.65 to cover our cost of goods sold and labor (prime cost of 65 percent).
3. Take an additional $0.25 away for each new dollar because of the 25 percent off coupon (Assuming that no more and no less than the increased sales came were from this promotion).
4. Assuming you’re at breakeven and all of your fixed expenses have been covered and that there are no additional variable expenses in your operation, you pocket $2,000 you wouldn’t have made otherwise or about a 2 percent profit margin on $120,000 in sales.

Plus you had to run your butt off to keep up with the new rush of business. So if you were already making a profit, you could assume a 2 percent increase is what you get to keep. But if you ran a BOGO (buy one, get one free promotion) and were only at breakeven, you would actually lose money bringing in an extra $20,000 in sales.
For many of you the 25 percent discount example has you thinking, “Hey, I was making nothing before. At least now I have something.”
The problem with this thought process
If your restaurant is losing money on $100,000 a month in sales, and that loss was only $5,000 because your prime cost was running at 70 percent, only 5 percent above the recommended level, this increase in discounted business actually doesn’t help much at all! Take a look:

1. Increased sales by 20 percent for an additional $20,000 in sales.
2. For each new dollar that came in we deduct a minimum $0.70 to cover our prime cost.
3. Take an additional $0.25 away for each new dollar because of the 25 percent off coupon.
4. Your $5,000 loss is now only a $4,000 loss.
5. So for every $20,000 in increased sales, you keep (or in this case decrease your losses by) $1,000.
6. To turn your $5,000 loss into a breakeven scenario using a 25 percent off coupon promotion you would have to increase your sales from $100,000 to $200,000 to just breakeven using this approach!

Change this to a BOGO offer and you’re creating a recipe for disaster.
And it gets worse
Now that you understand the pure economics of couponing, you need to understand the whole story. Have you ever noticed that you wait to go to the dry cleaners until you get their coupon in the mail inside your Money Mailer or Super Coups mailer? The dry cleaning industry has trained their customers to wait for the coupon, to never pay full price.
The last thing you want to do is train your customers to wait for a coupon to actually make the decision to come into your restaurant and spend money. If you over coupon, this is exactly what you do. And when this happens you don’t get increases in sales because of the coupon. Instead, your existing (not new) customers wait for the discount, too! And your sales and profits actually start to plummet!
When discounting is a good thing
There are certain times when I think you should absolutely run a discount promotion and even give away a FREE meal. It’s when you’re marketing to bring in a new customer, i.e., targeting new movers vs. your own customer database. This is because if your restaurant is running well and providing your guests with a fantastic dining experience, the money they will bring to your register over their lifetime far outweighs the small initial loss.
The solution
Instead of discounting, follow the wise advice of a good friend of mine and marketing guru, Kamron Karington, start to bundle your promotions. Keep your register ring high. Give up your discount in food cost and WOW your guests.
But most of all, follow the advice of former First Lady of the United States of America Nancy Regan: “Just say no to drugs!” Stay far away from making couponing your preferred and only choice for marketing your restaurant.

The Internet has become an integral part of the daily lives of Americans. The “Big Three” pizza chains, Dominos, Pizza Hut and Papa Johns, have taken advantage of that and dominated the landscape of online food ordering. But finally, independent restaurants and pizzerias are jumping on board at a slow but steady rate.

The reason that online ordering didn’t catch mass appeal sooner is mainly due to a few misconceptions. Online ordering can be much more affordable and easier than you think, so let’s explore some of the myths.

Myth #1 “I don’t know enough about computers and the Internet.”

That’s why you should focus on making great pizza and leave this to the experts. Online ordering companies can have you online and running in a few very painless days. Most online food ordering companies only require information, such as your menu and thirty minutes or so of your time to answer some questions.

And while some companies charge fees to update your menu prices and specials, most online ordering companies will do these types of changes for free as long as your menu doesn’t change daily. One thing to ask about is if you are required to make menu changes and additions yourself. This often leads to the owner having to deal with the stressful and time consuming process of dealing with technology. It is easier to deal with a company that will commit to doing these updates on a timely basis.

Myth #2 “I have to first get a POS, computer, or high-speed Internet connection in my pizzeria.”

Congratulations if you’re one of the few high tech pizzerias with a POS, computer and high-speed Internet access! But, you don’t need any of those to give your customers the ability to order your food online. All you need is a fax machine and an existing phone line. Most pizzerias already have fax machines, the most you may need to do is move the fax machine to the front of the house or somewhere where it will be heard. If you don’t have a fax machine, there are laser fax machines available for about $160.

Myth #3 “It costs too much”

Online ordering has a vast range of prices. For example, to get your own website address with full online ordering capabilities, charges can range from $20 to $30 per month with no set up fee to upwards of $300 for setup fees and $100 per month. Some companies also offer valuable email marketing services to their customers at no additional costs.

Now let’s talk customizations. Customizations are any services that you want for your pizzeria’s website that most pizzerias don’t use. For example, you may want a section where kids come to your website and play games, or a section where employees can fill out job applications. These features would have to be designed specifically for your website. The cost would depend on how many hours a web design company will have to put in. Customizations generally run from a minimum of $600 to over $5,000. That can be pretty expensive.

• How often can I change my menu prices and items without incurring a charge?
• Is there a charge per order?
• Is there a penalty if we decide terminate our contract, and what is the length of the contract?
• Is there an extra fee for updating our coupons and specials?
• Always get the first few months free in order to let you begin to market the website.

Myth #4 “The Internet is just a fad.”

If the Internet was just a fad, then it would be running out of steam. In fact, just the opposite is happening. According to Nielsen NetRatings, the number of Americans with Internet access from their home increased 9 percent from 2003 to 2004.

The most impressive statistics were those published January 2005 by Stanford – the average Internet user spends three hours per day online, almost double the 1.7 hours the average respondent spends watching television. In relation to pizzerias, Internet users are already using the Internet as a resource to find phone numbers, directions, menus, special offers and coupons.

Myth #5 “My customers don’t want to send their credit card information over the Internet.”

In 2004, 55 billion dollars were spent online buying everything from books to shoes to cars to pizza! A majority of these purchases were made using credit cards. Although there are concerns about using credit cards online, here are some reassurances.

Myth #6 “My menu and coupons are too complex for the Internet.”

Most online ordering companies have employees that have owned and worked in the restaurant business and therefore understand the complexities of the restaurant business. Online, your customer will be able to order from your entire menu, all your specials, and even be able to use coupons.

Myth #7 “Only College Students use the Internet”

First – Of the roughly 220 million Internet users in the United States, only about 14 million, or 6 percent, are college students. Second, who eats pizza? Teens, mothers, families, single people. Not just college students. And finally, if only college students used the Internet then Pizza Hut, Domino’s, and Papa John’s would only put their locations that are close to college campuses online. With the Big Three racing to put all of their locations online here’s an opportunity:

1. Go online to www.pizzahut.com, www.dominos.com, or www.papajohns.com.
2. Enter in your pizzeria’s address. If there are already Big Three locations online near your pizzeria, then it’s time for you to go online and compete! If there are no locations near your pizzeria, then it’s time to get a head start!

Myth #8 “Giving my current telephone customers the ability to order my pizza online will not increase my bottom line.”

Sending current telephone customers to the Internet is not a waste of time and has one major benefit; higher check averages. The average online check order is six to nine dollars higher than the average telephone check order. The reason for this is that customers can see the whole menu and all the specials without being rushed to make a decision.

Myth #9 “I already have a website, so I don’t need to offer online ordering”

Online ordering companies can accommodate pizzerias, regardless if they have a website or not. A good pizzeria website will allow customers to view information about your pizzeria, menu, and coupons. What’s the next step? Online ordering.

Myth #10 “I’ll have a huge amount of online orders right after my site goes live!”

Many pizzeria operators will get their website ready and sit behind their fax machines and wait for the orders to fly in magically off the Internet. Remember one thing – you only get what you give. Just because you have a website doesn’t mean it’s time to plan for retirement in Tahiti.

Put the website address right next to your phone number wherever it appears – menus, coupons, flyers, radio ads, television commercials etc.

Put coupon codes in your coupons – these can be four to five digit numbers that appear on each coupon that the customer can enter in when placing an online order.

Call your online ordering company and tell them about the specials that you running – carry-out specials, delivery specials, Super Bowl specials etc.

If the online ordering company offers email marketing, start collecting customer emails immediately – let customers know that they will receive coupons and specials in their email.

The most successful online food ordering rollouts include great added incentives for customers to order food online, such as a two dollar discount for each online order over $15 dollars.

After setting up your online ordering you have to tell your customers about it:

• Advantages to offering online ordering compared to a simply owning website are monumental. What good is having a car with no engine? It looks great but doesn’t get you where you need to go. Online ordering will actually allow your customers to create and transmit an order completely without error. The goal of any website should be not just to show customers what’s available, but to complete the transaction.
• For example, Big Guys Pizza and Pasta in Southern California received 66 orders in the first months of offering online ordering. The average check of the online orders was $23.21 compared with $14.75 for telephone orders. There is a huge opportunity for pizzerias to increase revenues by offering online ordering to their current telephone customer base.

As more people buy online, security is also advancing. Today online ordering companies should be using advanced Internet security measures to protect customers’ sensitive information. The most common is called Secure Sockets Layer or SSL technology. But an advantage that online ordering has is that the customer associates their pizza order with the actual local restaurant. It is very assuring for a customer to know that the website they are ordering from is connected to a living breathing pizzeria around the corner. Another difference between online-only businesses, such as Amazon.com and eBay, is that customers can use cash!

Whatever payment methods you currently accepted over the phone should also be accepted online. A majority of online ordering companies not only allow for credit card transactions, but also allow for cash or check payments. The same customers that are uneasy about using their credit cards online are also uneasy about using their credit card over the phone. Therefore, your current cash customers have the ability to remain cash customers and don’t have to worry about the looming mysterious dangers of using their credit cards on the Internet.

The next logical step is to give these customers the ability to complete their transaction through online ordering. The Big Three and a host of smaller pizza chains and independents are racing to give their customer this ability to order online. It is obvious that online food ordering has a place in the future of the pizza industry.

The main thing to look at is return on investment. For the majority of pizzerias, giving customers the ability to order pizza online is the most important and profit-maximizing feature. Questions to ask online ordering companies to avoid hidden charges are:

The second thing you need is a phone line to connect with your fax machine. For pizzerias with rollover lines or pizzerias accepting credit cards, you may not need a dedicated fax line because you may be able to use your credit card processing line or one of the rollover lines for the fax.

Most business owners don’t use postcards as a marketing tool, and those who do, use them infrequently and haphazardly with no strategy involved.

However, postcards are so cost-effective they can be a high-frequency sales building weapon. Because they are 6 times more likely to be read than a direct mail letter, they are also a high-impact weapon.

Best of all, postcards have a high recall by recipients for three reasons:

• The use of color or a picture provides a visual that is easily remembered
• Postcards are intimate by nature and are much more personal
• They are quickly noticed in the mass of daily mail

The power of postcard marketing starts with message repeatability.

One side of the card is your “billboard”. Ideally you want to print a headline that screams value – the single most important benefit you want to communicate to your customer. Adding a photo and some color with the headline is also important.

The other side can contain a message specific to an individual mailing. And you can also add a handwritten message, signature, and address to personalize your mailing. And every time you mail a postcard, your prospect sees your value statement.

A scheduled campaign is the next step. Mail one every two weeks for two months. Or mail one a month for six months. Establish a frequency that fits your product and your offer and stick with it. You’ll be top-of-mind in your prospects eyes for very little money. Postcards work well in tandem with other marketing weapons like e-mail or text messaging. In fact, it’s shown that combining direct mail with email can improve marketing results by 27% or more.

What makes postcards most powerful is when you add personalization.

With the advent of variable print technology, you can create postcards using your customers name in creative ways that are sure to capture your customer’s attention. You can have their name written on a beach, on a billboard, in a newspaper headline, on a pizza box or on football jerseys promoting a big game day promotion. Studies show that adding personalization to your postcard mailers will increase response rates by up to 40% vs. generic mass mailings.

And personalization doesn’t have to end with your customer’s name. If you have a customer loyalty program or POS system that captures customer data such as their last purchase date, most active purchase day or most popular menu item, you can incorporate that information into your postcard mailings too.

The more personalized you can make the postcard, the more effective it will be. Not only will the response rates be higher but the people who respond will spend more money. According to research by the Direct Marketing Association, consumers who respond to personalized direct mail will have a 24% higher average ticket.

So remember, to deliver an effective postcard marketing campaign be sure to:

• Personalize
• State your value
• Repeat it
• Repeat it again
• Keep doing it