Restaurant Trade Area Research

When I do my `MarketView’ within markets, at multiple units simultaneously, one of the more interesting `facts’ that emerges from the research is the `party size of the transaction’. Frequently at one restaurant you might find a `low’ figure such as 1.61 customers per transaction and for others you might find that the figure might be 1.9 or even 2.1 customers per transaction.

Obviously, this shows the potential for `focused marketing’ at the unit with fewer customers. THOSE are the restaurants that the special `two sandwich coupons’ (two sandwiches/two fries for a bargain price) should be distributed to the customer base — preferably ONLY to folks that are coming by themselves. This is the idea of targeted marketing dollars.

Those are the customers we want to have bringing in their co-worker next time — or buying for them at the drive-thru. And, it is this type of information that becomes available when one does total full market research at every unit. It is also one of the easiest ways to increase store sales - and NOT to waste marketing efforts at stores with less potential to increase party size.

Want to know more about my MarketView? — then please go to my Trade Area Website at www.squidoo.com/tradeareasurveys.

Today’s Restaurant Links

“McDonald’s Could Sniff Out New Ground With Yappy Meals”

http://adage.com/columns/article?article_id=130402  Yes, the article is referring to having `pet meals’ and the possible market niche. And, as a person who has literally seen folks ONLY reason for stopping was to get rover a bite (at a drive-thru) the idea is not stupid at all and could influence some purchases.  Are you creating goodwill? Three minute fun article.

`VALUES Meal’

http://www.newsreview.com/chico/Content?oid=746582 More and more articles are talking of gaining customers by GOING LOCAL with suppliers of products and understanding that some folks KNOW the value of `going green’. Interesting article about how these chains gain advantage by doing so.

“It’s Still NOT ok To Idle”

http://telegraphjournal.canadaeast.com/magazine/article/395758 Evidently, Canada has pulled the idea of turning off engines on idles over 10 seconds and the fast food industry may be the culprit. Interesting read.

“In Car Microwave”

http://www.geek.com/in-car-microwave-lets-you-create-hot-meals-on-the-road-20080813/    The next competitor? Naw.

“Burger King Worker Cleans Up In Kitchen Sink”

http://blogs.usatoday.com/ondeadline/2008/08/burger-king-fir.html And the video made the internet. Yes, he was fired. You have to see this picture.

“Togo’s Cut’s Building Costs”

http://www.nrn.com/breakingNews.aspx?id=357868 By 30% — Find out how.

Last year, I personally interviewed several thousand fast food customers (in-store and drive-thru) in a variety of fast food brands for Trade Area Research purposes. (Do you need trade research before expanding your market?) This was normal for me as I have  personally interviewed thousands of fast food customers for dozens of years. And, as you might know, certain questions are nearly standard on questionnaires trying to understand customer behaviour - such as the fast food restaurant that the customer uses `most often’.

In the 1980’s and even into the late 1990’s - when adults answered that question for me — when the answer was McDonald’s - they would immediately offer a `reason’, in an apologetic tone, which invariably was `the kids’. That is not to say that I didn’t hear `they are everywhere’ and `they are cheap’ on occasion. Nevertheless, the interesting thing was that `other brands’ such as Wendy’s or Arby’s or Chick-Fil-A  or others (such as sandwich chains Subway) - most often users ALMOST NEVER offered up `embarrassing’ reasons for their usage of a particular brand most. Only McDonald’s. It was almost a case of doing `marketing’ too well.

Then, McDonald’s focused less on kids and more on product and product quality. I began to hear folks say that they liked a `particular new product’ at McDonald’s that they went for `most often’. Kids, as a reason, was definitely fading quickly (I informed my clients who at first seemed surprised in the early 2000’s — it was the kind of information that only came from literally being on the ground for multiple brands for decades) - the return of McDonald’s was approaching.

The moral - If the biggest can change a negative perception — other brands, most of which have neutral images, can also build a positive one - like McDonald’s has done.

Today’s Restaurant Links

“People are requesting kids premiums that are more socially responsible,”

http://www.ajc.com/business/content/business/stories/2008/08/16/restaurant_toys_educational.html Wendy’s and Chick-Fil-A jump on `Educational’ kids toys. Strong feedback. Three minute read.

Individual Responsibility And Its Enemies

http://www.mtexpress.com/index2.php?ID=2005122089  Bringing ethics into the fast food discussion with force. Shows how `choices’ and having a restaurant business are related. Three minute read.

Parking Mad At McDonald’s

http://icwestlothian.icnetwork.co.uk/courier/news/tm_headline=parking-mad-at-fast-food-chain&method=full&objectid=21526230&siteid=92284-name_page.html After the positive McDonald’s opinion above - here is an example of not respecting the customer. Probably.

Arby’s Expands Savings Potential With Cellfire Mobile Coupons

http://money.cnn.com/news/newsfeeds/articles/prnewswire/200808130900PR_NEWS_USPR_____AQW047.htm Here’s a new coupon niche.

Are Restaurant Stocks A BUY?

http://www.chicagotribune.com/business/yourmoney/chi-ym-restaurants-0817-cpaug17,0,4787885.story Article says yes if you have a longer time horizon of 2-3 years; while detailing how over stocked the trade areas are with restaurants. Predicts store closings. Four minute read.

Many Many more - current links below. Bookmark and return please. Leave a comment if you wish.

Hello, welcome back. This blog is one of the few on the internet about restaurants by a real market researcher of fast food restaurants. I’ve been sharing some insights and I hope you bookmark my blog and return on a regular basis.

Today’s post is dependent on the previous two posts - so, you may need to dig down for a fuller understanding. Essentially, I’ve been outlining some specific REAL information from about a decade ago for a 3 store FF brand that had sales of @2,670,000.00 combined. And, in the last post I revealed the actual size of the combined customer base - based on my Customer Base Formula. Today, I’d like to show what that MEANS in terms of spending by any individual customer within a specific frequency of usage scale. For example:

49 - 4x’s a week users - spend 80,000.00 per yr - @1.6k yr-130mo-31 week

400-2-3x’s week users - 348,000.00 per yr - @870.00 yr - 72mo-16 week

1,800 - Once a wk users- 642,000 yr - @357.00 yr - 30mo - 7 week

3,600 - Once every 2-3 wks - 642,000 yr - @177.00 yr - 15mo - 3.40 week

3,700 - Once a month users - 321,000yr - @86.00 yr - 7mo - 1.66 week

5,400-Once every 2-3 mtn - 241,000yr - @ 44.00 yr - 3.68mo - 85cents/wk

2,100-Once every 4-6 months- 26,000yr - @12.00yr - 1.00mo -24cents/wk

21,700-Less than every 6 mo - 187,000yr - @8.61yr - 72cents a month and 18 cents a week

These stores had 7% first time users spending about 187,000 a year — 2,100 new customers a month or about 25,000 new customers in a year.

Now, just to ask you as a  restaurant owner — if you knew that @21,000 of your 38,000 customer base spent less than 9 dollars a year at your store - would you be willing to try a method to change it? IF SO, give me a call on my cell ——– you can find that information by going to my site about Trade Area Surveys — www.squidoo.com/tradeareasurveys

Now - today’s restaurant links.

“…nutritious fast food. Maybe it’s not so bad after all.”

http://blog.nj.com/parentalguidance/2008/07/i_was_wrong_about_fresh_apple.html Maybe, just maybe, the Tide is turning.

“…research from Just Kids Inc’s Global Kid Study, which showed that children daydream about helping others and are becoming more altruistic.”

http://www.brandrepublic.com/News/838897/McDonalds-launches-conservation-themed-Happy-Meal/   Perhaps someone will beat McD’s at this in the states?

Economic Slowdown Forces Choices in Food

http://www.ausfoodnews.com.au/2008/08/12/economic-slowdown-forces-trade-down-in-food-spend.html   Holds true worldwide.

Panda Express Thrives On Orange Chicken

http://www.latimes.com/business/la-fi-panda13-2008aug13,1,3381302.story Success story - focused on customers.

That’s all for today — remember to bookmark this page. Thanks.

Despite what you as a restaurant owner may have been told - the number of transactions your restaurant does, compared to another time frame (say a year ago) - does NOT mean your customer base size has a direct correlation. THE ONLY WAY TO KNOW YOUR CUSTOMER BASE SIZE IS WITH REAL MARKETING RESEARCH.

Why? Because your customer base size isn’t dependent on the number of transactions - it is dependent on WHICH CATEGORY of user makes the transaction. For example, if 24% of your customer transactions are with once a week users and 24% of your customer transactions are with customers who come every two or three weeks (see last post below as an example) — THEN OBVIOUSLY, THE NUMBER OF CUSTOMERS WITHIN THE EVERY 2-3 WEEKS CUSTOMER BASE IS OVER TWICE THE NUMBER OF CUSTOMERS (who come about half as often).

So, it is THE MIX of customers - that determines the number of actual customers in your customer base. Your year to year transactions could be UP and yet your customer base may be DOWN in size - AND VICE VERSA. I will literally tell you more about `the formula’ soon - in future posts. Or, find out more by visiting my Trade Area site at www.squidoo.com/tradeareasurveys

But as promised, more from the figures of last post:

3 stores - $2,670,000 Sales (rounded)

customers that come

4+ times wk - 3% of trans - 80,000 in sales - 49 customers - 1,630.00 yr

2 or 3 times a week - 13% of trans - 348,000 sales - 398 customers - 874yr

Once a week - 24% of trans - 642,000 in sales - 1,796 cust - 357.00 yr

Once every 2-3 weeks - 24% of trans - 642,000 in sales - 3,628cust - 177yr

Once a month - 12% of trans - 321,000 in sales - 3,704 - 86.00 yr

Once every 2or3 months - 9% of trans - 241,000 in sales - 5,454 - 44yr

Once every 4to6 months - 1% of trans - 26,000 in sales - 2,145 - 12yr

Less than every 6 months - 7% of trans - 187,000 in sales - 21,758 - 8yr

First time users - 7% of trans - 187,000 in sales - 25,376yr

As you can see from the figures above, for this 3 store contiguous FF market - 9 years ago - 14% of transactions (bottom two frequency levels) contained 46,000 people while the top 16% of the transactions contained less than 500 people. YEAH, how you market MATTERS.

But, understanding your REAL customer base is essential to not wasting dollars. —————— Hey, feel free to leave a comment - and please, bookmark and return for slices of restaurant research and restaurant links. Also, forward my/this link to others who own a restaurant. Thanks.

Today’s Restaurant Links

McDonald’s Success Continues

http://www.allheadlinenews.com/articles/7011881489 Same store sales figures -, less than one minute read.

Chick-Fil-A; Much More Than Just Chicken

http://www.thecitizen.com/~citizen0/node/30742 Remember my previous post about Friendliness being the attribute with the most `customer’ power? Getting  the details right about customer serviceis an attribute of Chick-Fil-A. Re-juvenate that drink sir?

Cleveland’s Soul Food Festival

http://www.cleveland.com/entertainment/index.ssf/2008/08/tickets_going_fast_for_clevela.html

Quick read - being apart of the community is priceless.

Survey Yields Worrisome Restaurant Cutback By Customers

http://www.bizjournals.com/tampabay/stories/2008/08/04/daily44.html 3 minute read based on REAL research — is it true that only 15% of all customers are unaffected in this downturn in their usage of restaurants? Worrisome and applies to all markets.

Fast Food Is Bad

http://www.lavistasun.com/site/tab6.cfm?newsid=19896507&BRD=2712&PAG=461&dept_id=557008&rfi=6  The ragging continues in this two minute tirade about parents not setting good examples.

Finally, my blogroll on the right will tell you more about my marketing research services. Come back Tuesday for more - thanks for reading, again, please send this link to another restaurant owner like yourself.

Hello restaurant owners, and welcome back to Restaurant Trade Area Research - where I share over 30 years of insights from doing restaurant research - and, link to the latest of interest in the restaurant universe. Today I want to share with you the actual findings in a 3 store market about a decade ago.

While I won’t go into the extreme measures that need to be employed to have a VALID sample to begin with at a fast food restaurant (but you can find out more at my other information site www.squidoo.com/tradeareasurveys) - here are the results I want you to consider.

3 stores - $2,670,000 Sales (rounded)

customers that come 4+ times wk - 3% of trans - 80,000 in sales

2 or 3 times a week - 13% of trans - 348,000 sales

Once a week - 24% of trans - 642,000 in sales

Once every 2-3 weeks - 24% of trans - 642,000 in sales

Once a month - 12% of trans - 321,000 in sales

Once every 2or3 months - 9% of trans - 241,000 in sales

Once every 4to6 months - 1% of trans - 26,000 in sales

Less than every 6 months - 7% of trans - 187,000 in sales

First time users - 7% of trans - 187,000 in sales

You would be surprised how many owners DON’T think of their real customer base in this manner - what levels ACTUALLY provide the real dollars to a store. This weekend in this blog - I will expand on the data above. But, now, to today’s restaurant links - feel free to comment too.

Today’s Links

Fast Food Prices On The Rise

http://c13.zedo.com//ads2/f/341180/1/172/0/305001132/305001132/0/305/331/zz-V1-pop1217960041201.html?a=;l=;p= Video report too with story.

Healthy Fast Food For Kids A Tall Order

http://www.webmd.com/parenting/news/20080804/healthy-fast-food-for-kids-a-tall-order  This is a report issued by Center for Science in the Public Interest which rips a new opening for many restaurant brands. Detailed read with lots of interesting facts.

New Jobs In Fast Food

http://www.istockanalyst.com/article/viewiStockNews+articleid_2450358.html This article is about a company that provides your drive thru order taking with folks working out of their home.

Is a Fast Food BAN - Racist?

http://www.momlogic.com/2008/08/fast_food_banned_in_poor_areas.php#over1 After all, how can those fatties in Beverly Hills be helped?

Arby’s Signs Development Agreement For 41 New Stores In New York Metro Area Over 10 Years

http://www.businesswire.com/portal/site/google/?ndmViewId=news_view&newsId=20080805006617&newsLang=en

Again, would love to read your comments. Thanks for stopping by - bookmark for more this weekend.

Nearly all of the clients I have are owners of franchised restaurants - and = one thing they nearly always have in common is that they have limited `marketing dollars’ above and beyond the % they already pay to corporate to market the brand-name. That said, they do have SOME dollars and the decisions as to whether to sponsor a youth team, local charity golf tournament, do limited in-store marketing via bouncebacks, or buy billboards - are important image and marketing decisions.

When choosing to spend those limited dollars, it’s probably best to `do both’ - local image building and REAL marketing such as billboards. One of the `advantages’ that comes from using my services - doing what I call the MarketView — is that the owner knows the CUSTOMER BASE SIZE and type of user - of every individual unit in a market. And, based on that information - the owner knows which units are best and worst in converting their total customer base into `heavy’ users (some chains define this as the once a week customer, others, the once a month customer). Accordingly, the owner then has some direction from the research on how to spend those precious and limited local marketing dollars.

Much more on Customer Base Estimates in future posts - or - find out more at my squidoo website www.squidoo.com/tradeareasurveys.

TODAY’S RESTAURANT LINKS

Are Fast Food Building Restrictions Constitutional?

http://worldnetdaily.com/index.php?fa=PAGE.view&pageId=71377  Michael Ackley does a satire piece about how `gray’ the law becomes when thinking of `fast food restaurants’. A quick two minute read you don’t want to miss.

The Rise of the Breakfast Segment

http://ap.google.com/article/ALeqM5jGpPSjXCwpcs-JKUmPG3Gy5sht8QD92BG2380  Excellent article on how chains are increasingly looking at breakfast items as the way to more sales. Denny’s new containers and IHOP’s increase in take out over the past year is examined; as well as the reasons the FF chains have been successful in stealing the business from the sit-down breakfast eateries. Notes that some chains are thinking of offering breakfast items all day long. Finally gets into new offerings from FF restaurants including Carl’s Jr new product: “that features two eggs, bacon, sausage and cheese between grilled sourdough bread.”

Forget The Free Food and Drink Refills

http://www.startribune.com/business/26188614.html?location_refer=Most%20Emailed:Homepage:12 This story covers the many ways that restaurant owners are mitigating the increase in prices for foods and the increasing reluctance of patrons to eat out often. Here’s a quote from the 3 minute article:

The real problem, they argue, is that many large chains overbuilt at a time when Americans were starting to pull back on restaurant spending….Now, unable to raise prices to match rising wholesale food costs, so-called “menu makeovers” have become increasingly common

America’s WORST Restaurants For Kids Revealed

http://www.emediaworld.com/press_release/release_detail.php?id=120323  WOW - amazing article that GRADES each chain for offerings and other attributes related to healthy eating.  Getting A’s were Chick-Fil-A, Subway and Wendy’s - Getting F’s were Applebees, IHOP, Olive Garden, Outback, Red Lobster and T.G. I. Friday’s. A 3 minute, must read article.

At the corner of Sandy Plains Road and Hwy 92 in North Atlanta you will find a Back Yard Burgers that has gone out of business. Most likely the owners did their due diligence and checked out the basics like traffic counts and the demographic profile of the area. Not only that, I bet what they found sounded perfect for the Back Yard Burgers positioning as an upscale hamburger restaurant. Indeed, the intersection has huge amounts of traffic and the demographics of the area would indicate `families’, plenty of roof tops, and plenty of income.  That said, the fact that a Checkers went out of business at the corner on the opposite side of the street - could have indicated that the location be viewed with caution. (The Checkers challenged an existing McDonald’s. The corner is now home to an Italian sit down restaurant.)

So, what happened? Personally, since I was a VERY light user (3 times in perhaps 3 years) I can’t speak to operations of the unit - but the experiences of my 3 in-store visits went very well. No negatives. So, assuming it wasn’t an operation problem - what gives?

What gives is that you need MORE than perfect demos and traffic counts; you need to understand the real market potential of an intersection. And, the real traffic flows for `your side of the street’.

First off, before you think the intersection was `too busy’ and had huge back-up’s of traffic that no one would want to get `re-involved’ with after visiting the restaurant - forget that. This is a well flowing traffic pattern. That said, most restaurant owners are aware that some intersections are `too busy’ and don’t make a `good spot’ sometimes.

No, it wasn’t that at all. The problem with the traffic counts in this instance was that most of it was `long - flow traffic’ — most of it going miles beyond that intersection as a final destination. Additionally, the location had difficult access due to raised cement in the median - bad access especially can limit great lunch numbers; and females.

Additionally, the trade area likely did not have good daytime worker demographics - as one would assume the `hamburgers’ skews male in positioning - and, likely, not even a strong daytime worker number compared to other intersections with less traffic.

Finally, another word about demographics — a given stores demo’s will almost NEVER fit the demo’s for a 1-3-5 mile area. Most restaurants need to know what subgroups are likely to be important (those with higher indexes) to a normal store like theirs. IF you have a restaurant that features 1/3 lb. burgers — you might want to know the indexing of males within the real trade area. (The real trade area of this store was probably ONLY Sandy Plains Rd. and probably mostly on their side of the traffic flow within 2 miles before Wigley Rd. — NOT a big real trade area.)

But, finally, the real story in this instance - was probably the competitive environment. A Five Guys opened in the direct competitive area, probably cutting off and being `first’ to a large part of Back Yard Burgers lunch traffic and even dinner traffic - and in a more accessible (in and out) location. Splitting the hamburger business with McDonald’s was one thing - 3 way splits - can close a marginal restaurant with poor access to traffic flow.

Looking over potential sites - is a service I’ve provided - find out more about my Trade Area services at www.squidoo.com/tradearearesearch

Today’s Links

Woman Wants To Limit Fast Food Restaurants

http://www.todaystmj4.com/news/local/26152264.html Now that laws have started by activists to limit fast food locations - expect to see your local do gooder getting more and more exposure for such thinking. This is a story about a neighborhood group that says 6 fast foods on a road are enough - too bad for the Church’s Chicken.

Jake Says `Don’t Use The Drive-Thru’

http://poststar.com/wordpress/?p=5836&cat=47    Seeing the miles at zero while sitting at the drive-thru; will bring out the Greens.

The EAT IN Lunch User

http://www.chainleader.com/article/CA6581159.html?industryid=47557 Quarterly survey by Quick - Track; real research and real numbers.