Benchmarking is the process of measuring the competition in comparison to your own service and product in order to gain a competitive edge. It is an important aspect of any business’s marketing strategy. You cannot survive in a competitive market if you do not know your competition. Fortunately, in food service, learning about your competition is probably the most entertaining and enjoyable market research you could imagine.
Generally, all restaurants within your trading area, or a 5-15 mile radius, are in competition with you. However, some restaurants will be competing with you more directly than others. For example, if you own a pizza place, other pizza and Italian restaurants will be competing with you more directly than a pub or a sandwich shop.
Watch direct competitors closely.
Although you should consider any restaurant in your trading area to be a competitor, direct competitors should be more closely watched than secondary competitors. Direct competitors include any restaurants nearby with a similar menu, pricing, atmosphere or target market. The National Restaurant Association suggests that all similar establishments within a 15-minute drive from yours should be considered direct competition.1
Keep secondary competitors in mind.
Any business within your trade area that sells food should be kept in mind. Even the nearby grocery store can steal your business in certain situations. For example, if you own a sushi restaurant, and the nearby grocery store offers and displays sushi at their deli or take-out counter, they are probably taking away some of your business, and you need to consider this as you develop a marketing strategy.
You should read any reviews you can find, both reviews of your own business and of the competition. Read both customer reviews and reviews by experts like food critics. Record what you learn in a comparison chart.
One of the best places to research the competition is on the Internet. Check out your competitors’ websites to learn about their online marketing strategies. Also look for restaurant reviews. Most restaurants have been reviewed by customers on at least one website. The value of online restaurant reviews is that they are usually written by the customers themselves. Furthermore, the reviews are often more truthful than the information you would get from a customer satisfaction survey or from asking customers directly. Begin your online research at some of the following sites:
Read your own reviews as well as others’. This is one of the best ways to improve your own product. Do not allow yourself to be biased or become angry. If you really want to improve your product and develop an effective marketing strategy, you need to actually listen to what people are saying in their reviews. It is important that you address issues found in online reviews, since a recent poll suggest that 89% of Americans have researched a restaurant online before visiting.2
Read the papers.
Most local newspapers will contain a food section, which you should examine thoroughly every day for any mention of your competition. You should subscribe to the city journal and always pick up any free local papers. The free papers often contain reviews of restaurants, bars and events. Also keep an eye out for any local food and drink magazines that may be reviewing restaurants in the area and giving press to you or your competition.
Keep your ears open.
Many restaurant “reviews” only get passed on through word of mouth. Listen to what people are saying, both on the street and at your business. Often times, customers in your restaurant will be talking about the competition in comparison with where they are currently eating. Ask your servers and other staff to keep their ears open for any comments like this.
Read restaurant guides.
Placement in restaurant directories and guides is especially important if you are hoping to attract tourists. These include the AAA Travel Destination Guide, James Beard Foundation Restaurant Directory, Michelin Guide, Fodor’s Restaurant Guide, Gault Millau and Zagat restaurant guides. The best way to guarantee a spot in these books is through good reviews and press. You can also contact the creators or publishers and ask to be listed.
Get industry reports.
The Restaurant Industry Operations Report, published by the National Restaurant Association and accounting firm Deloitte & Touche, can provide you with statistics on the industry and can be found online or at a library. When benchmarking, an industry report will contain financial and operational statistics so you can compare your restaurant’s performance with the industry standard. By performing a comparison of the numbers, you can identify problem areas in your restaurant that may otherwise have gone unnoticed. For example, if you are spending a larger percentage of sales on labor costs than the majority of restaurants, it could mean that you have too many employees.
Talk to suppliers.
It may seem like a last resort, but it is never a bad idea to ask your suppliers for gossip. You should always make a point to develop a friendly relationship with them. Chances are, they are also supplying some of your competitors, and they could have some inside information.
It may seem counterintuitive, but you should consistently patronize the competition. Go out to eat all the time, especially at your direct competitors’ restaurants. Afterward, you can write off the expenses on your taxes. As you eat out, try not to be biased, since this will skew your research. Instead, try to enjoy yourself like any other customer who goes out to eat. Here are some things you should do every time you eat out:
Anything you notice, whether small or large, is worth noting down. For example, are the croutons soggy? Is the booth’s upholstery sticky? Do the servers smile a lot, or do they have a serious, no-nonsense attitude? Write down what you see, smell, hear, feel and taste, but try not to let the employees or managers know that you are spying on them.
Watch other diners.
See how other patrons are reacting to the food, service and atmosphere. You could even wait outside and ask them questions as they leave, like, “Did you enjoy your time here? What was your favorite part?”
Perform a comparison.
You should evaluate the competitors’ concepts and operations with the same detail you use to develop your own. Compare their restaurants with yours. Here are some questions you may want to ask yourself about the competition:
- Are we in direct competition? Do we attract similar customers or offer similar menus and atmosphere? How do our concepts differ? How does our pricing differ?
- What is their location like? Do they have good parking, visibility and accessibility?
- What is their unique selling proposition (USP)? How does their USP compare to mine?
- What is the atmosphere like? Is there music? Can you hear or see what is going on in the kitchen? How full is the restaurant?
For a full comparison, use a chart to organize the key points. Fill out a chart each time you visit your competitors, or simply update their past chart. Also, every few weeks you should ask a friend or third party to fill out a chart for your restaurant, to make sure the data you have on your own operation is unbiased. Once you have filled out a chart that includes the pros and cons for each competitor, you can determine the best way to gain an edge over your competition by developing your USP and downplaying your own “cons” or turning them into “pros.”
You should usually avoid imitating the direct competition. Instead, try to do better than them. However, sometimes it is a good idea to try and imitate secondary competitors. For example, when Roger Fields found that his New York City Mexican restaurant was not attracting enough business, he analyzed and imitated Bobby Flay’s Mesa Grill, changing the theme of his Mexican restaurant to “Southwestern” and developing menu items based on Flay’s recipes.3 The change of concept worked, and his restaurant became successful.
Follow these steps to gain an edge over your competitors:
1. Compare yourself to the competition.
Try using the aforementioned charts and benchmarking techniques. Ask yourself which competing restaurants are successful, which are not, and why.
2. Fix any obvious problems.
You should do your best to fix any problems that the comparison reveals. For example, you may find that one of the main “cons” of your restaurant, when compared with other similar establishments, is a lack of menu options. You can turn this “con” into a “pro” simply by adding more items to your menu. Another example of a disadvantage would be if you rate lower in the “atmosphere” category than other similar restaurants. To fix this, you could try redecorating your dining area, playing music over the speakers or inviting a band to play. Each problem area is unique and should be addressed separately.
3. Develop a strategic edge.
If you think you can one-up the competition and beat them at what they do best, then by all means, do so. However, for most restaurant operators this is not feasible. It is much more logical to focus on developing your own strengths and exploiting your competitions’ weaknesses. If you notice that a certain problem area is prevalent in your competition, then you should make a point to turn it into one of your strengths. For example, if you run a Tex-Mex restaurant and other Southwestern-style restaurants in your area do not have a bar, you should start offering alcoholic beverages to gain an advantage over them.