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.

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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.

Every weekday…100,000 pharmaceutical reps take out or deliver $4 million in food from restaurants just like yours.

The average catering budget for a pharmaceutical rep is between $800 and $2500 per month! That means within your take-out or delivery area alone, pharmaceutical reps are spending between 1 and 3 million dollars a month.
How much of this are you getting?

Having a well planned marketing strategy to target pharmaceutical reps can bring BIG sales during lunch and dinner. That money has to be spent somewhere. It might as well be YOUR restaurant.

To help you get your piece of the pie, here are some things to consider when catering to pharmaceutical reps.We’ve categorized these considerations between Lunch and Dinner. What your about to read is feedback received from actual pharmaceutical reps. This is what THEY look for in a restaurant and what drives their buying decisions.

Lunch:

1. Offer all major credit cards including American Express. Different Pharmaceutical companies provide their reps with different credit card brands. The most common is Visa but some do use American Express.
2. Offer delivery and set up. The key to marketing to pharmaceutical reps is to make their life easier.
3. Provide quality packaging to offer great presentation. When a rep provides a lunch it is a reflection of them and their company. Presentation appeals to both the office staff and physician.
4. Offer drinks and dessert for off-site catering
5. Be On Time!
6. Always provide an itemized receipt or invoice of what was ordered. Pharma reps use this for their expense reports and having this available with every order will make their life easier and motivate them to use your restaurant more frequently.
7. Provide flatware, plates and serving utensils FREE OF CHARGE. It is a major irritant when restaurants choose to charge for this service.
8. Have one person in your restaurant dedicated to handling pharmaceutical rep lunches. They prefer one point of contact and the ability to establish a relationship.
9. Offer them a Rewards Program. Pharma reps are spending their company’s money and a rewards program provides them a way to personally benefit from the money they spend on lunches and dinners.

Dinner:

1. Provide privacy with a private room. Dinners usually involve a speaker which requires the proper environment.
2. Have a screen and projection equipment.
3. If you are going to require a minimum, make it reasonable. An acceptable amount.
4. A pre-set menu is acceptable as long as you offer 2-3 choices for the main entree.
5. Have one person in your restaurant dedicated to handling pharmaceutical rep dinners. They prefer one point of contact and the ability to establish a relationship.
6. Offer them a Rewards Program. Pharma reps are spending their company’s money and a rewards program provides them a way to personally benefit from the money they spend on dinners.

How Do I Get Started?

After you have considered the above needs, you will need to start targeting reps AND their offices. Usually a rep will order from the restaurants their offices request. So the fastest way to get into this market is to target the doctor’s offices.

Restaurantpartner.com offers a variety of pre-designed postcards that target Doctors Offices. You can also purchase a mailing list for all the doctor’s offices in your area. This will get the word out. You should also follow up the mailings with a personal visit to the offices.

Once you receive an order from a pharma rep, pull out all the stops and OVER SERVICE THEM. Again, it is all about making their life easy and giving them a personal reason to come back and tell their offices about your restaurant.

Once they come in, DON’T LET THEM LEAVE WITHOUT CAPTURING THEIR CONTACT INFORMATION. Ideally, you will get them enrolled in your customer rewards program right away and give them an incentive to spread the word among their associates.

Usually, marketing to pharmaceutical reps is a grass roots effort and grows through positive word of mouth and attention to detail. Listen to them, reward them and don’t let a bad experience go unrepaired. The reputation of your restaurant among the pharmaceutical rep community can spread awfully fast, both positive and negatively.

Here’s a very good way to look at it: “Arrive at a party early, and you’ll feast on whatever you want. Arrive late – and you settle for leftovers and scraps. The table’s already been picked clean.”

FACT: Rewards-based marketing is spreading like wildfire right now driven by the floundering economy. And just like all airlines, hotels, and rental car companies – all restaurants and pizzerias will have a rewards program in place within 5 years (To ignore this exploding trend would be like a caveman – ignoring fire).

FACT: Those restaurant owners who start now – will lock in customers now. And as those customers become more vested in the program earning more and more points, perks and rewards – they’ll be unlikely to “switch.”

The only question is: “Would you like to have hundreds or thousands of customers locked in to your program today, earning points, perks and rewards today – spending their dining dollars with you today – and staying loyal with you starting today? Or will you be starting from scratch, scrounging for stragglers once it’s too late?

Southwest Airlines waited… but only after losing their best customers to the competition did they jump in. Instead of owning and keeping their high-spending customers – they had to fight like hell to get them back… not where you want to be.

This “party” has already started… and it is filling up fast. Being “fashionably” late to this party will insure an empty plate for you.

This is NOT a party you want to be “fashionably late to.”

Click here for a very eye opening video…

Hey, quickie this time… but soooo simple. You know how people will call in and olace a reservation for dinner? Then they show up – and you waltz them over to a table? Picture this instead… customer shows up – and you take them to a table that has a big sign that says: “Reserved for Robert Jenson”

How does that make Robert feel? pretty special. Watch the video.