You're ready for the grand opening of your all-American burger joint when you learn McDonald's is moving in next door. What do you do? Don't panic. There are a number of steps you can take to give your independent restaurant the edge it needs to take on a chain.
"The number one way small businesses can compete with chains is by nurturing the relationships they have with the customer," says Joe Erickson, editor of RestaurantOwner.com, an online resource and networking tool for independent restaurateurs. "Collect their names, birthdays, anniversaries, and their specific likes, and use that [information] to start a direct mail campaign."
Debbie Knobelsdorf already knew the names and interests of most of the customers in her decades-old family restaurant, West Side Fish 'n' Chips, in Huntsville, Ontario, but in the past few years she has introduced several creative promotional campaigns to increase spending and repeat visits.
POWER IN NUMBERS. In addition to collecting feedback cards with her customers' names, birthdays, and anniversaries, Knobelsdorf runs a customer-of-the-week program using gift certificates and tacking snapshots to a wall of fame. She also gives out sealed "no peek envelopes" at the end of every meal with reward offers, redeemable only if opened on the next visit.
Franchises can always turn to their corporate parents for guidance, but the independent restaurant owner may feel the pressure of having to go it alone. For this reason, online resources such as RestaurantOwner.com have sprung up and united the voices of mom-and-pop operators. RestaurantOwner offers tools such as training manual templates, startup checklists, financial calculators, and discussion forums—where chain competition is normally a hot topic.
When chef and restaurateur Mark Smith opened The Tortilla Press in the small town of Collingswood, N.J., in 2002, he found that businesses in the area had a history of losing customers to Philadelphia, located just across the river. So he and nine other local restaurant owners founded the South Jersey Independent Restaurant Association (SJIRA), which today has grown to include 30 restaurants and acts as a support network and a platform for voicing the importance of independent restaurants in the community.
QUALITY, NOT QUANTITY. "We're not only combating chains, we're combating people spending all their special occasion dollars in the city," Smith said. "We try to make people understand they're welcome and appreciated in our restaurants." Marketing and networking strategies aside, it is often the food itself that will separate independents from chains.
Tony Palombino, who owns Tony Boombozz, a gourmet pizza shop in Louisville, Ky., advises all restaurateurs to use the freshest and highest quality ingredients they can afford, because customers will notice the difference. Although the cost of extra virgin olive oil has nearly doubled in the eight years that Palombino has been in business, he insists that it is an irreplaceable component of his signature pizza crusts.
John Foley, a former restaurateur and current writer of The Restaurant Blog on AllBusiness.com, believes that changing the menu frequently is one of the easiest and most effective ways to differentiate your small restaurant from competitors. "One of the things people don't want to see is the same thing on the menu day in and day out. Menu changes not only keep you coming back, there's an adventure there."
Click here to see the slide show: what 10 independents across the country are doing to compete with chains and their advice for would-be restaurateurs.
MacMillan is a reporter at BusinessWeek.com in New York
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