speaker-0: Even if the restaurant is full for dinner on Monday night, we might lose money. So let's not open on Monday night. People forget that it's a business. So I'm opening a restaurant that just happens to also be a business rather than I'm opening a business and it just happens to be a restaurant. The number one restaurant in the world, multiple times over, went out of business.
speaker-1: Today's guest is Jim Taylor. Jim is the founder and CEO of a company called Benchmark60, where he helps restaurant operators use their numbers to improve their margins and build healthier businesses. In our conversation, we talk about how a restaurant can be full and still lose money, why the best operators pay attention to the business model behind the dining room instead of chasing revenue alone. And Jim also explains why sometimes the more profitable decision is simply to be open less. And I think everything that we talk about, we use restaurant as an example, but it can absolutely be applied to any business. Like the level of detail that he looks at the operations of a business and like the di different like formulas and equations and the way that he looks at a restaurant should be the way that every business is looked at for any serious operator. So if you get value from this conversation, be sure to subscribe and share it with a friend. And now please enjoy my conversation with Jim Taylor. Jim, thank you so much for being here.
speaker-0: My pleasure. Thanks for having me.
speaker-1: Yeah, so Jim, before we started recording, I had to clarify with you to make sure that I was had the right understanding and I wasn't just pulling stuff out of my you know what, but the fact that fifty to eighty percent of restaurants fail within the first three years. Why do you think that is?
speaker-0: Think there's there's lots of ways, depending who you ask and what the stat is that you read, you could I mean you could come to lots of different conclusions. However, you know, in my personal experience and and friends and people that we've spent time with who own restaurants, it's largely because it's a passion industry. Right? It's an art. It's I make the best lasagna in the in of anyone I know, so I'm gonna open an Italian restaurant. That type of feeling. I've my grandmother's recipe and it needs to be in front of more people, so I'm gonna open a restaurant. And, you know, unfortunately it's just not that easy and you know, it can be a little bit more complicated than that.
speaker-1: For sure. Yeah. So a lot of the people who start a restaurant, open a restaurant, aren't necessarily doing it to make money. So maybe they kind of overlook the money side of things and they just focus strictly on the 'cause I mean, you feel like I feel like I've seen restaurants that have opened up like I spent a lot of time in Scottsdale and Tempe and then also up here in Milwaukee, Wisconsin. And like there have been restaurants that have come and gone, but like they're busy and then I come back three months later and they're just shut down. Like so is it just like the the money, the finances piece that a lot of restaurateurs overlook?
speaker-0: The way I tell I tell people this, we have this conversation all the time, pretty much every day, it's almost not that it's the money side of it. Almost people forget that it's a business. Right? It's I want to get more of something I love in front of as many people as possible. So I'm opening a restaurant that just happens to also be a business, rather than I'm opening a business and it just happens to be a restaurant. Right. You know, if you look at it through one of those those two lenses, you're gonna approach things a lot differently one way or another.
speaker-1: Yeah. So what is the person who has that mindset of opening up I'm opening a business that just happens to be a restaurant? What do they see or do differently than the person who opens a restaurant that just happens to be a business?
speaker-0: Yeah, I think somebody who opens a business that happens to be serving food and beverage to people, they're gonna look at everything from their their cash flow management to their pricing strategy to their how they manage the cost of goods and product, how they manage their labor model, they're gonna look at their marketing. I mean, all of these things that a you know, air quotes regular business would do, right? And on the flip side of that, people a lot of the time people who open restaurants, they just focus on the the actual product that they're serving, not what it costs them to serve it, not what it costs them to to purchase it or prepare it or how long it takes. And unfortunately a lot of restaurants are they're cash flow businesses, right? The owners are their measure of success is is their money in my bank account or not.
speaker-1: Yeah. You think there's still space for passion though, right? Like there's still space for the restaurateur to really care about the product that they are serving, right?
speaker-0: If you don't care about the product that you're serving and the way in which it's served and this you know, the experience and the hospitality side of it, it's very difficult to make a restaurant work. But if you don't actually understand how to make it run like a again, quote unquote, actual business, normal business, it's even harder. The two of them have to go hand in hand a hundred percent.
speaker-1: Yeah. And I could imagine the situation where again, applying this idea to restaurants and any other type of business, I've experienced this myself when you, the founder, open up the business, you're super passionate about the product. It can be really hard to let things go, right? It can be really hard to delegate and trust other people to be involved in the quote unquote manufacturing process of your product, whether that's cooking the food, delivering the food. Is that something that you've experienced where if somebody's too passionate, too caught up in the product and like really caring and being super attached to the food or the product that they're creating, it can be harder for them to to let it go.
speaker-0: Course, and and it's getting harder, right? I mean, if you think back to twenty, thirty, forty, fifty years ago in the food and beverage or hospitality industry, although everything's relative a little bit, things weren't as expensive. You could go and get product at a cheaper rate, rent was cheaper, labor was cheaper. You know, a lot of these things it was a little bit easier to if if you ran your business based on intuition or gut feel, it maybe wasn't gonna penalize you quite as hard if you made the wrong guess. Right. Now with the amount of automation that's happening, the cost of labor, the cost of rent, the cost of product, the cost of software that you need to run a restaurant, all of these different things, the margin for error is is so much smaller. Yeah. And so we see this all the time where restaurants are serving really high quality product at a really, you know, in a really sophisticated way. And They just can't make the model work, no matter how good the product is, because of how slim the margins can be if you're not careful.
speaker-1: Yeah. What are like standard like what are productive good margins for a restaurant business?
speaker-0: I if you asked a a thousand people, you'd probably get a thousand answers. However, you probably would get a lot of people that tell you that ten percent net margin is a really good business, a really good profit margin for a restaurant. If you get into the fifteens or and you find a restaurant that's up to twenty percent, they're they are doing incredibly well. But the most famous restaurant in the world, the number one restaurant in the world multiple times over in Scandinavia called NOMA, went out of business. They closed their doors because and the owner actually said the business model doesn't work anymore. We can't sustain this. The number one ranked restaurant in the world.
speaker-1: Wow. And how do you think that impacts, you know, just your everyday restaurant that's been around for forty years, right? If the number one restaurant in the world says the model doesn't work anymore, like what has to be done differently to make it work?
speaker-0: Well, the interesting thing that that we find and and I I grew up in the restaurant business. I started I tell people all the time that I was the kid who was twelve years old and my dad showed me how to open a bottle of wine and a bottle of beer so I could bartend their Christmas party. That was my introduction to hospitality. And, you know, some people may frown upon that, but it's fine, whatever. But, you know, I've been in hospitality ever since. And The interesting thing that's happening in the industry now is and and in most industries in general is there's so much data and information available. Restaurants really have an advantage if they choose to pursue it that they've never had before. The amount of information, the rate at which it's comes to them, again, the amount that's available that will literally tell them exactly what they need to do and exactly when they need to do it and what, you know, decisions to make if they know how to interpret it and have the time and energy to go through it all. And that's really, I think, the both the biggest opportunity in the industry and also one of the biggest things that's holding the industry back is there's so much information and so much data. And restaurants are notorious for not having a lot of time. They're busy. You know, there is a huge unlock there if if an operator can, you know, dedicate the time and energy and and really, you know, dive into what that information's telling them about their own business.
speaker-1: Mm-hmm. And I imagine, you know, I did some stalking of benchmark sixty before we had this conversation here today. I would imagine that when a restaurateur signs up, works with you, you kind of create that structure or kind of just show them the way and exactly how to leverage that information in the right way to know what they need to do when they need to do it. Is that right?
speaker-0: Course. Yeah. And you know, the interesting thing is that again, depending where you look, you'll find stats anywhere from 70, 75, 80, even up to 85% of the industry is made up of independent owner operators. Mom and pop, we own run one restaurant, it's our livelihood. We spend every day that that type of thing. It's a massive chunk of the industry, right? And you look at the big companies that are successful, that are doing, you know, hundreds of millions of dollars a year of hundreds of locations. They have people that work for them at their head office and now they likely have some sort of AI that's helping them interpret that data every day to make better decisions and continue to leverage. But the independent doesn't. So yeah, I mean, if you were to ask what benchmark sixty does, a big part of what we do is help we unlock what that information's telling them because they don't have the time and sometimes the level of sophistication or interest in learning what it says other than help my business. Yeah. And so it it makes a massive difference.
speaker-1: Yeah. And I would imagine that, you know, those larger conglomerates that have locations all over the country, maybe under different names, the a huge advantage that they have is that they can they just have so much more data, so much more information. So that I would imagine that when you work with a individual owner operator, not only are you going to help them get a better pulse on their numbers, the information for their location, but they're also going to be able to tap into this larger corpus of information and knowledge that you're seeing from restaurants all over the country that like you know would be a similar size to them. Is that is that something that you guys do?
speaker-0: of course. Yeah. And you know what's interesting too is that there's this term that we hear all the time. I'm and anyone who's worked in restaurants would know, and other industries too. This concept of the industry standard. Right? What's the industry standard? Well, in some industries, there is a standard. Right? There is a this is what we charge for, this is what the industry charges for this product, and this is what this product costs. You know, those types of things. In restaurants Industry that concept of industry standard leads operators astray all the time. Because if you make spaghetti meatballs and I make spaghetti meatballs, my recipe is different than your recipe. I bought the product from a different supplier than you did. I'm in a different market, I charge a different price for it, my rent is a different price, my utilities might cost it all of every single moving piece of that model is different. So industry standard in some cases might be lower than what your restaurant is capable of achieving. And so you might try to run thin in other areas, which may might actually be detrimental to the business. And in other areas, industry standard might actually you might actually be able to far outperform what you think industry standard is. So if you pursue average, you're leaving money on the table.
speaker-1: Yeah.
speaker-0: Okay. So it's it's a really interesting, there's lots of nuance in in the restaurant business that maybe don't exist in some other industries.
speaker-1: absolutely. I mean, the at least from my perspective, right, in other types of businesses that I've been engaged with. And maybe this is a trend that I'm starting to see in restaurants. Like for my business, right? My whole focus is I just want to niche down and just have like one thing that I do really well. And at a restaurant, right, you're kind of almost expected to have so many different options. And you have to have like a standardized process for delivering not just one service or one product, but a menu of fifteen to twenty different dishes. And like I cannot imagine the complexity that goes into something like that, let alone having to do it where it's it's food. People are consuming this, putting this into their body, like the amount of, you know, regulation that has to go into that and how careful you have to be. It's unbelievable. So we're obviously entering kind of like a new age. And I would imagine that COVID, right? Restaurants got crushed during COVID. Since then is when I would imagine that a lot of things have started to really change in this industry. What are you seeing like the best restaurants doing well today? Like obviously the leveraging of the information, but are there any standards that you would expect? Like is a smaller menu becoming more of like the go to kind of thing? Is that is there anything else other than that?
speaker-0: Well, the only the only restaurant in the world that's really done a good job of having a very large complex menu is Cheesecake Factory. Yeah. You know, and they just set a record for the company in terms of what their revenue numbers are. I mean, they're they're the biggest restaurant company in the world. And they're the only ones that have done that well. But what you're starting to see in a lot of restaurants is things like I mean, you said niching down, right? Getting really specific on exactly what type of product we serve and exactly when we serve it. And what I mean by when we serve it is there are a lot of restaurants that are starting to realize that things like even if the restaurant is full for dinner on Monday night, we might lose money. So let's not open on Monday night. They're also realizing things like what the work-life balance and burnout and workload factor, what that does to the business model in restaurants. I mean, it's one of the only industries that a hundred percent turnover annually is almost acceptable. So if I'm asking my people to work. 15 hours a day, twelve hours a day, six days a week. And the solution to them not having to do that is not open on Monday night, then a lot of restaurants are starting to do that. They're shrinking their menu, they're shrinking their time their hours of operation, they're shrinking their their service model because they're realizing that it's actually making them more profitable instead of the old version of just stay open as long as you can to try to capture as much revenue as possible. The whole model is changing.
speaker-1: Yeah. How could that be that a restaurant is filled up on a Monday night and they lose money? How does that happen?
speaker-0: Again, you know, use the term nuance. There's lots of different moving parts there, right? So if a restaurant was to s to open on a Monday night, they might have a full room for based on how customers behave. Maybe on Monday night they're full from six to eight PM. Okay. But maybe they have to bring in their team for six hours for every person in order to set up the restaurant and get it ready to go, clean the restaurant after and so on. But they only have two hours to capture revenue. Plus, to compound that, Customers maybe on Monday night don't have maybe they don't dine the same way they do on Thursday, Friday, or Saturday. Maybe they don't have a an appetizer or dessert. Maybe they don't have a second beverage or drink or something like that. So the compounding effect of spending more on labor while you're generating less in revenue actually could cause them to lose money while they're open. Maybe on Friday night they get revenue, maybe they're full from five or five thirty all the way till ten or ten thirty of at night. Plus people are ordering more, they're spending more, the average guest check goes up. So their profit margins can compound at a faster rate on a Friday than they can on a Monday. And once the operator recognizes that, sometimes it actually makes the most sense to to either limit service hours or not open at all on certain days.
speaker-1: Man, there's so much going on behind the scenes behind that plate of food that just shows up at your table that never even consider would think about when you're at a restaurant. But one idea that I'd love to explore with you is how much of a competitive advantage, how beneficial can it be for a restaurant to its success? Right. Obviously there's the numbers piece, right? And just knowing your numbers, being really precise with your numbers and careful and paying attention to that. But then there's also like the hospitality, right? Almost creating that user experience or the customer experience when they show up. How important is hospitality and like can that be a competitive advantage? Obviously I would imagine that unreasonable hospitality maybe isn't gonna make you the most money. I don't know. What are your thoughts on on hospitality?
speaker-0: I mean, have you read the book? It's fantastic, right? Unreasonable hospitality is incredible. And he, I mean, they set the standard for hospitality almost in the world. What we tell people is, and what my recommendation to anyone who listens to this that is in the restaurant business in general, is there has to be a balance between service model and profit model. Right? So for example, if if we're a a casual restaurant, if I said to you that you're gonna go into that restaurant and you're gonna spend You're going to have a beverage and an entree and that type of thing, nothing too crazy on a Tuesday night, and you're going to spend $30. You might think, nah, that's pretty normal. That's okay. No big deal. And the service will be fine. You know, you'll get somebody who comes by the table every once in a while. They take your order, your plates are cleared when when they're dirty, so on and so forth. You might think that that's pretty good value and that works. I'll go back, right? If you went and had that same experience at $60, the service is not. any different, the food quality is not any different, and the, you know, the the experience in general is not any different. You might think that the value for that is not great, right? That's the customer side of it. If you flip it around to the business side of it, if I said we're gonna have every server only has two tables that they're looking after. You have someone who's your assistant that's gonna clear all the dishes for you. You're gonna have an assistant that runs all the food for you. We're gonna do table side salad for example or cocktails or something like that that's really high touch Service. If we only charge $30 for that, we're going out of business. We have to charge $60 for that to make the model work. Right. So what I tell people all the time, and the encouragement is to they have to consider both the service model and the actual business model at the same time. Otherwise, we're just guessing at one or the other and it's likely not going to end well.
speaker-1: Okay. So yeah, you have to match the service model with the profit model or the business model that and you have to like pair those two together. Right. Do you see like there's a lot of like micro restaurants or like micro coffee shops, like these micro, super small menu, really focused types of things popping up that I've started to see. Is there a kind of split happening where those middle of the pack kind of restaurants that you're talking about are almost kind of getting washed away? Because I think with the convenience of Things like Uber Eats, DoorDash, like just bringing things straight to my house. Like we don't have to go out. We can just kind of host things here. I would imagine that that kind of force is maybe creating a split where it's either like, hey, ultra convenient, ultra easy, just go get your thing really quick, and then high end luxury. Is there a split like that happening in the restaurant space that you're seeing?
speaker-0: For sure. If you look at the sort of three main categories of the industry, quick serve, you know, your fast food restaurant, your drive-thru, your that type of thing. The what I would call casual, so just that middle middle ground, nothing too crazy when it comes to service, fair price point, that type of thing. And then the third version being high end, fine dining, high touch service, you know, really high quality food, high price point. The two on the ends are a little bit sheltered. It's kind of this K-shaped economy scenario, right? The two on the ends, the fine dining thing, those people that go to those restaurants and spend $150 every time they go out or more, they're going to continue to go to those places because they can afford it. It doesn't hurt their pocketbook and they're going to do that. And the quick serve, super high value, even though the prices are going up in that segment, that super high value, really convenient, fast experience is also going to continue likely to perform well. The part of the industry that's having a real challenge and will continue to be have more pressure and more friction. I think in the next few years for sure is that middle casual ground because you have to find that balance of hospitality and service while also not charging too much. And that's really hard to do.
speaker-1: Yeah. Yeah. And is there any I I can't remember exactly where I heard this or where I picked up this idea, but it's similar to like franchises where in order to make a lot of really good money, like good money with a franchise model, you have to have multiple locations. Is it the same thing in the in the restaurant industry? Like can you really make good money with only one location or do you have is there pressure where you have to expand into multiple locations, or is that just a myth that I picked up somewhere?
speaker-0: I think it's a little bit objective, right? It depends what you what you mean by or what an individual would mean by good money. I mean, I know lots of independent operators that are a husband and wife and they own one restaurant and they don't have another job, they make a few hundred thousand dollars a year and live a really good life. But from a corporate perspective, if you know, you want to get into the millions or you know, that type of thing of of dollars to the bottom line and cash flow every year, then yeah, you likely need to have multiple locations. I saw some some stats the other day about a lot of the quick serve restaurant franchise opportunities that are available and what you need to put up front and what the annual return was. And you'd be surprised how low a lot of them are, right? I mean, a lot of those quick serve restaurants you might have to put up six, seven, eight hundred, even a million dollars in some cases, and maybe they're gonna return you a hundred thousand dollars a year.
speaker-1: Mm-hmm.
speaker-0: It all depends on location, it depends on revenue, it depends on, you know, lots of different things that go into
speaker-1: Yeah. As always, right. There's a there's a lot of nuance to this business and to this industry, just with you know, pretty much everything else. right. So again, just from a layman's perspective of the restaurant business, like me thinking about the restaurants that I like to go to, it's almost like I I have I have my go to's, right? Like I have the ones that I wanna I want to. like it's a Friday night, I know the place that I want to go. I have like a small set. So as a restaurant tour. I would imagine that driving and creating loyalty and building those relationships with those customers is super important, right? Like you probably don't make much money on the first visit, but it's like when somebody comes back second, third, fifth, tenth, twentieth time. Like that's really where the money is made. So how does a restaurant tour or a restaurant drive loyalty in their customer base?
speaker-0: Well, you know, the restaurant industry, I mean, you've asked a few questions about this, right? The hospitality factor, the service factor, the there's a there's a person to person interaction for an extended period of time happening in restaurants that's unique versus a lot of other industries, right? A lot of other industries, especially in the casual or fine dining sectors of the restaurant business, you get to spend an hour or more sometimes with those people. And there's a massive opportunity there to actually build relationship with people. So, you know, believe it or not. Most restaurants, if they're doing things right, they do make money off the first visit. But where that, like you said, that compounds is if they don't have to spend money to get the person back the second, third, fourth, fifth, sixth, seventh, eight time. So, you know, things that we recommend are there's a lot of, you know, digital marketing and all this different stuff that people are trying to experiment with and try to do to try to drive more traffic. There's still that personal side of the restaurant business that makes a big difference. Actually personally inviting people back, sending them things. when it's a special occasion, doing things for them, surprise and delight type stuff. You know, actually taking the time to build a relationship with someone in a restaurant and personally invite them back makes a massive difference. You know, even just things like some very old school, but here's my business card. Call me next time you want a table. I'll make sure you never have to wait. Those types of things go a really long way, right? If you think of those five or six restaurants that you have on your shortlist for Friday night, If your friends say, Head hey, where should we go? And you said, I've got a place that I can get a table right away, I don't have to wait, you're gonna go there more often than not. Right. And it and it doesn't take much. It doesn't take time, it doesn't cost money. It's just a a gesture that, you know, I believe is it is actually, I think, dying in most of the restaurant industry. But it's still there.
speaker-1: Yeah. For sure. Because again, you're like walking this tight rope of like you really want to focus on optimizing the operation. And there's a lot to look at. Like I worked with a a woman, she owns a brewery in in Tempe, Arizona, Hundred Mile Brewing Co. Shout out Sue. And she like I had some conversations with her and I like we were sitting next to each other with her laptop open and she was just kind of telling me the things that she was thinking about and just like the wild amount of numbers that she's tracking on a day to day, week to week basis is unreal. So it can be really easy to get caught up in that and kind of forget about that hospitality piece and and just making people feel special, right? To kind of which is what can drive that loyalty. And obviously, you know, meeting expectations, right? All frustrations stem from unmet expectations. So people when they show up, they're gonna have a certain expectation about their experience. So if you don't meet that or surpass that, you're gonna create frustration, which Then we'll leave people upset. But then there are little small things like you talked about, just you know, giving the business card. Like I think that ties me back to an idea that I've shared on the podcast before. But I went to this marketing workshop at the end of last year. And he asked a few questions to kind of build up the audience. And he's like, okay, what is the goal of marketing? And we're like, you know, drive leads, da-da-da. And he's like, No, marketing, the goal of marketing is to grow the business, right? That is the number one objective of marketing. And then what is the best way to grow the business is the second thing that he asked us. And he talked about this idea of improving the quality of your product. Right. And as the restaurant tour, the product is not only the food, but it's the experience, the hospitality that the experience that people have. And then he talked about how do you get people to talk about you and what you do? It's like little things that they wouldn't expect, right? It's like people talk about the things that they didn't expect, like the the letter on the bedside table with their name and like a writ handwritten message when you show up to a hotel. Or like just little small things that people don't expect. Like what are some of those ideas that a restaurant tour, like a sit down, kind of nice, nice ish place could do, or like those small things that people wouldn't expect that will get people talking about their experience. And what are some of the more creative ideas that you've seen?
speaker-0: Every restaurant for the most part has a some sort of promo budget, right? They have a way that they can give away dessert or a drink or something like that for free. And most of them, I would say almost all of them, use those budgets wrong. They use them in a way that actually is almost hurting the business rather than creating opportunity in the business and moments in the business and things that are memorable. So a couple examples. One would be, let's say you and I walk up to a restaurant on a Friday night, we talk to the person at the front desk and they say it's gonna be an hour wait. And maybe we don't want to wait an hour. Right? What we encourage operators to do is say, why don't you come in? We've got a little space here over in the corner. We'll buy you some prosecco or a beer or something. The first one's on us. Come and hang out. The wait won't seem like it's that long. Those two glasses of prosecco or beer or a glass of wine or something like that. Might cost the restaurant at most $5. Now we're engaged. Now we're here. We're spending time in the restaurant. We're probably gonna spend $30, $40, $50 each. Now, if you think about it from a marketing perspective, if I told you that if you spent $2.50 on one person, you'd get $30 back, would you do it? All day long. That's incredible ROI. Right? However. In most cases, they go, it's gonna be an hour. And the person goes, okay, well, that's too And they just go, Okay, well, come try us again some other day, right? So that's one scenario. The other one, and we see this one happen even more. Let's say there's a great customer that's been there a couple times, we recognize them, we say sort of say hi when they come into the restaurant. Maybe we don't know them that well. Every once in a while, the promo budget gets used to let's say that person is sitting there and has two glasses of wine with their meal. Well, they just go and they take one of them off the bill. They buy one glass of wine for that person. Right. I mean, that's a nice gesture. The person might remember it. There's nothing wrong with that. However, it's actually taking away from revenue. Right. So what we recommend is either one of two things either tell them next time you come in, your first one is on us to get them back again, or bring them a third one. Because now we're generating more revenue. The person's staying longer. Maybe now they're gonna order dessert, they're gonna get a friend to come and meet them. There's all these different scenarios that can happen through that, right? But what we're doing is actually trying to expand the business with product that we already have paid for rather than trying to spend money to generate new customers that come in. And we're doing it through hospitality.
speaker-1: Yeah. Wow. Yeah, that is a a demonstration of your understanding of this business. Like that is such a nuanced little thing where okay, you should use your promo budget to get more business, right? Like I've never had that experience in my life where I walk in and it's like, Hey, it's gonna be an hour and they were like, Hey, first one's on us, just kinda like hang out, kinda we got this little space over here. But if they did do that, you're a hundred percent right. Like we would hang out, get that drink, and then you know Being from Wisconsin, like once you have one drink, it's like I gotta have another drink.
speaker-0: There's there's there's a very, very, very successful Canadian-based restaurant group. They do operate in the US too, but we'll leave them we'll let them remain nameless for now. They did a study, this goes back about ten years, how many people came to the restaurant, heard what the quote time was for a table, and left. They literally had someone there with a tick sheet counting how many people left across multiple restaurants across the country. Right? So they had this big piece of information. Telling them X number of people walk away from the front door based on quote times every day. They decided company wide, they implemented a policy company wide. Every single person who walks in the door gets a glass of proseco when they walk in the restaurant. If they have to wait even one minute, they get a glass of prosecco. The number of people that walked away from the restaurant dropped by over 40%. Wow. So imagine the amount of revenue that they generated because people were waiting and they were. Giving them I mean what, a twelve dollar bottle of per seco or giving them three or four ounces of per secola it probably costs them fifty cents a person.
speaker-1: Killer. And there's probably so many of those little ideas out there. But I mean if even if every restaurant that has wait times that has like seating, if they just implemented that.
speaker-0: And think about it from a hospitality and service perspective, right? All of a sudden their reputation in the markets they exist in is it's such a great experience. It's so cool. You get a this glass per second when you walk in. Every single time I go there, they give me one. Like it's just a competitive advantage. It's differentiating them against their their competition. Plus it's driving revenue. I mean, it it's just a it's a no-brainer when you start to think about it.
speaker-1: Yeah, absolutely. And just to go and underline that idea of nobody expects when they walk in, if they have to wait, that they're gonna get a free glass of proseco. So that is gonna be one of those things that they talk to other people about. It's like, yeah, we had to wait fifteen minutes, but they gave us a free glass of proseco while we were waiting. Right. That will get them talking about the experience because again, it's just how our brains work. Like we will really remember the things that we don't expect to happen because we're just running on autopilot ninety five percent of the time. But exactly, this is brilliant. Jim, thank you so much for the time. I have one final question for you. It's a recurring question that I ask every guest. But before we get to that, how can people find you?
speaker-0: Easiest ways are either our website www. dot benchmarksixty dot com. I'm very active on LinkedIn talking about ways that people can improve profitability and and margins and revenue in restaurants. So Jim Taylor, those are the probably the two best ways to find us.
speaker-1: Cool. Yeah, we'll have both those links in the description. So if you're a restaurateur or if you are just someone like me that likes just learning about other different types of businesses and you want to learn from the best in other industries, check out Jim on LinkedIn. You're very active on there and you got a lot of great content. Thank you. So Jim, my final question for you, as I mentioned, is a recurring question I ask every guest. But if you had a giant billboard that everyone in the world could see for ten seconds with like one message to the world, what would it say and why?
speaker-0: I think it would say think differently. We need to protect the people that work in our industry. And in our case, we need to change the way that restaurants think. So it would probably be something along those lines. Think differently, protect our people and change restaurants.
speaker-1: Amazing. Yeah. Restaurants are special places, right? I think we all again, not to keep bringing up COVID, you know, being six weeks, but I mean not having that space to be able to leave, you know, look nice, have a good time, right? Bring people together. Restaurants are really special places. And yeah, I think the work you're doing is obviously helping that industry a ton. So we thank you for that as consumers. But Jim, thank you so much for the time.
speaker-0: Pleasure. Thank you.
speaker-1: Thank you for listening to my conversation with Jim Taylor. My main takeaway from the conversation is that passion is not enough, right? You can't run a business forever on passion, right? You can care deeply about the product, the customer, and the experience, but you still have to understand the business and the numbers underneath it all. Loving what you do can help you to get started, but staying in business requires knowing your numbers, understanding your model, and making decisions based on what is actually happening, right? The quote unquote boring side of business, which Is what makes business possible and what keeps your business alive. If you want to get connected with Jim, you can find his links in the description of this episode. I highly recommend if you're a restaurant checking out Benchmark 60 and the work that they're doing over there. It's incredible. And if you are an author, a coach, or a course creator, and you want more of your clients to actually follow through, get results, and engage with your ideas, I put a free resource in the description that will help you build more execution support into your program without adding more. stuff to your calendar. So if that sounds useful, check out the link in the description and you can download that free resource. Thank you for listening and I'll see you in the next one.
speaker-1: Today's guest is Jim Taylor. Jim is the founder and CEO of a company called Benchmark60, where he helps restaurant operators use their numbers to improve their margins and build healthier businesses. In our conversation, we talk about how a restaurant can be full and still lose money, why the best operators pay attention to the business model behind the dining room instead of chasing revenue alone. And Jim also explains why sometimes the more profitable decision is simply to be open less. And I think everything that we talk about, we use restaurant as an example, but it can absolutely be applied to any business. Like the level of detail that he looks at the operations of a business and like the di different like formulas and equations and the way that he looks at a restaurant should be the way that every business is looked at for any serious operator. So if you get value from this conversation, be sure to subscribe and share it with a friend. And now please enjoy my conversation with Jim Taylor. Jim, thank you so much for being here.
speaker-0: My pleasure. Thanks for having me.
speaker-1: Yeah, so Jim, before we started recording, I had to clarify with you to make sure that I was had the right understanding and I wasn't just pulling stuff out of my you know what, but the fact that fifty to eighty percent of restaurants fail within the first three years. Why do you think that is?
speaker-0: Think there's there's lots of ways, depending who you ask and what the stat is that you read, you could I mean you could come to lots of different conclusions. However, you know, in my personal experience and and friends and people that we've spent time with who own restaurants, it's largely because it's a passion industry. Right? It's an art. It's I make the best lasagna in the in of anyone I know, so I'm gonna open an Italian restaurant. That type of feeling. I've my grandmother's recipe and it needs to be in front of more people, so I'm gonna open a restaurant. And, you know, unfortunately it's just not that easy and you know, it can be a little bit more complicated than that.
speaker-1: For sure. Yeah. So a lot of the people who start a restaurant, open a restaurant, aren't necessarily doing it to make money. So maybe they kind of overlook the money side of things and they just focus strictly on the 'cause I mean, you feel like I feel like I've seen restaurants that have opened up like I spent a lot of time in Scottsdale and Tempe and then also up here in Milwaukee, Wisconsin. And like there have been restaurants that have come and gone, but like they're busy and then I come back three months later and they're just shut down. Like so is it just like the the money, the finances piece that a lot of restaurateurs overlook?
speaker-0: The way I tell I tell people this, we have this conversation all the time, pretty much every day, it's almost not that it's the money side of it. Almost people forget that it's a business. Right? It's I want to get more of something I love in front of as many people as possible. So I'm opening a restaurant that just happens to also be a business, rather than I'm opening a business and it just happens to be a restaurant. Right. You know, if you look at it through one of those those two lenses, you're gonna approach things a lot differently one way or another.
speaker-1: Yeah. So what is the person who has that mindset of opening up I'm opening a business that just happens to be a restaurant? What do they see or do differently than the person who opens a restaurant that just happens to be a business?
speaker-0: Yeah, I think somebody who opens a business that happens to be serving food and beverage to people, they're gonna look at everything from their their cash flow management to their pricing strategy to their how they manage the cost of goods and product, how they manage their labor model, they're gonna look at their marketing. I mean, all of these things that a you know, air quotes regular business would do, right? And on the flip side of that, people a lot of the time people who open restaurants, they just focus on the the actual product that they're serving, not what it costs them to serve it, not what it costs them to to purchase it or prepare it or how long it takes. And unfortunately a lot of restaurants are they're cash flow businesses, right? The owners are their measure of success is is their money in my bank account or not.
speaker-1: Yeah. You think there's still space for passion though, right? Like there's still space for the restaurateur to really care about the product that they are serving, right?
speaker-0: If you don't care about the product that you're serving and the way in which it's served and this you know, the experience and the hospitality side of it, it's very difficult to make a restaurant work. But if you don't actually understand how to make it run like a again, quote unquote, actual business, normal business, it's even harder. The two of them have to go hand in hand a hundred percent.
speaker-1: Yeah. And I could imagine the situation where again, applying this idea to restaurants and any other type of business, I've experienced this myself when you, the founder, open up the business, you're super passionate about the product. It can be really hard to let things go, right? It can be really hard to delegate and trust other people to be involved in the quote unquote manufacturing process of your product, whether that's cooking the food, delivering the food. Is that something that you've experienced where if somebody's too passionate, too caught up in the product and like really caring and being super attached to the food or the product that they're creating, it can be harder for them to to let it go.
speaker-0: Course, and and it's getting harder, right? I mean, if you think back to twenty, thirty, forty, fifty years ago in the food and beverage or hospitality industry, although everything's relative a little bit, things weren't as expensive. You could go and get product at a cheaper rate, rent was cheaper, labor was cheaper. You know, a lot of these things it was a little bit easier to if if you ran your business based on intuition or gut feel, it maybe wasn't gonna penalize you quite as hard if you made the wrong guess. Right. Now with the amount of automation that's happening, the cost of labor, the cost of rent, the cost of product, the cost of software that you need to run a restaurant, all of these different things, the margin for error is is so much smaller. Yeah. And so we see this all the time where restaurants are serving really high quality product at a really, you know, in a really sophisticated way. And They just can't make the model work, no matter how good the product is, because of how slim the margins can be if you're not careful.
speaker-1: Yeah. What are like standard like what are productive good margins for a restaurant business?
speaker-0: I if you asked a a thousand people, you'd probably get a thousand answers. However, you probably would get a lot of people that tell you that ten percent net margin is a really good business, a really good profit margin for a restaurant. If you get into the fifteens or and you find a restaurant that's up to twenty percent, they're they are doing incredibly well. But the most famous restaurant in the world, the number one restaurant in the world multiple times over in Scandinavia called NOMA, went out of business. They closed their doors because and the owner actually said the business model doesn't work anymore. We can't sustain this. The number one ranked restaurant in the world.
speaker-1: Wow. And how do you think that impacts, you know, just your everyday restaurant that's been around for forty years, right? If the number one restaurant in the world says the model doesn't work anymore, like what has to be done differently to make it work?
speaker-0: Well, the interesting thing that that we find and and I I grew up in the restaurant business. I started I tell people all the time that I was the kid who was twelve years old and my dad showed me how to open a bottle of wine and a bottle of beer so I could bartend their Christmas party. That was my introduction to hospitality. And, you know, some people may frown upon that, but it's fine, whatever. But, you know, I've been in hospitality ever since. And The interesting thing that's happening in the industry now is and and in most industries in general is there's so much data and information available. Restaurants really have an advantage if they choose to pursue it that they've never had before. The amount of information, the rate at which it's comes to them, again, the amount that's available that will literally tell them exactly what they need to do and exactly when they need to do it and what, you know, decisions to make if they know how to interpret it and have the time and energy to go through it all. And that's really, I think, the both the biggest opportunity in the industry and also one of the biggest things that's holding the industry back is there's so much information and so much data. And restaurants are notorious for not having a lot of time. They're busy. You know, there is a huge unlock there if if an operator can, you know, dedicate the time and energy and and really, you know, dive into what that information's telling them about their own business.
speaker-1: Mm-hmm. And I imagine, you know, I did some stalking of benchmark sixty before we had this conversation here today. I would imagine that when a restaurateur signs up, works with you, you kind of create that structure or kind of just show them the way and exactly how to leverage that information in the right way to know what they need to do when they need to do it. Is that right?
speaker-0: Course. Yeah. And you know, the interesting thing is that again, depending where you look, you'll find stats anywhere from 70, 75, 80, even up to 85% of the industry is made up of independent owner operators. Mom and pop, we own run one restaurant, it's our livelihood. We spend every day that that type of thing. It's a massive chunk of the industry, right? And you look at the big companies that are successful, that are doing, you know, hundreds of millions of dollars a year of hundreds of locations. They have people that work for them at their head office and now they likely have some sort of AI that's helping them interpret that data every day to make better decisions and continue to leverage. But the independent doesn't. So yeah, I mean, if you were to ask what benchmark sixty does, a big part of what we do is help we unlock what that information's telling them because they don't have the time and sometimes the level of sophistication or interest in learning what it says other than help my business. Yeah. And so it it makes a massive difference.
speaker-1: Yeah. And I would imagine that, you know, those larger conglomerates that have locations all over the country, maybe under different names, the a huge advantage that they have is that they can they just have so much more data, so much more information. So that I would imagine that when you work with a individual owner operator, not only are you going to help them get a better pulse on their numbers, the information for their location, but they're also going to be able to tap into this larger corpus of information and knowledge that you're seeing from restaurants all over the country that like you know would be a similar size to them. Is that is that something that you guys do?
speaker-0: of course. Yeah. And you know what's interesting too is that there's this term that we hear all the time. I'm and anyone who's worked in restaurants would know, and other industries too. This concept of the industry standard. Right? What's the industry standard? Well, in some industries, there is a standard. Right? There is a this is what we charge for, this is what the industry charges for this product, and this is what this product costs. You know, those types of things. In restaurants Industry that concept of industry standard leads operators astray all the time. Because if you make spaghetti meatballs and I make spaghetti meatballs, my recipe is different than your recipe. I bought the product from a different supplier than you did. I'm in a different market, I charge a different price for it, my rent is a different price, my utilities might cost it all of every single moving piece of that model is different. So industry standard in some cases might be lower than what your restaurant is capable of achieving. And so you might try to run thin in other areas, which may might actually be detrimental to the business. And in other areas, industry standard might actually you might actually be able to far outperform what you think industry standard is. So if you pursue average, you're leaving money on the table.
speaker-1: Yeah.
speaker-0: Okay. So it's it's a really interesting, there's lots of nuance in in the restaurant business that maybe don't exist in some other industries.
speaker-1: absolutely. I mean, the at least from my perspective, right, in other types of businesses that I've been engaged with. And maybe this is a trend that I'm starting to see in restaurants. Like for my business, right? My whole focus is I just want to niche down and just have like one thing that I do really well. And at a restaurant, right, you're kind of almost expected to have so many different options. And you have to have like a standardized process for delivering not just one service or one product, but a menu of fifteen to twenty different dishes. And like I cannot imagine the complexity that goes into something like that, let alone having to do it where it's it's food. People are consuming this, putting this into their body, like the amount of, you know, regulation that has to go into that and how careful you have to be. It's unbelievable. So we're obviously entering kind of like a new age. And I would imagine that COVID, right? Restaurants got crushed during COVID. Since then is when I would imagine that a lot of things have started to really change in this industry. What are you seeing like the best restaurants doing well today? Like obviously the leveraging of the information, but are there any standards that you would expect? Like is a smaller menu becoming more of like the go to kind of thing? Is that is there anything else other than that?
speaker-0: Well, the only the only restaurant in the world that's really done a good job of having a very large complex menu is Cheesecake Factory. Yeah. You know, and they just set a record for the company in terms of what their revenue numbers are. I mean, they're they're the biggest restaurant company in the world. And they're the only ones that have done that well. But what you're starting to see in a lot of restaurants is things like I mean, you said niching down, right? Getting really specific on exactly what type of product we serve and exactly when we serve it. And what I mean by when we serve it is there are a lot of restaurants that are starting to realize that things like even if the restaurant is full for dinner on Monday night, we might lose money. So let's not open on Monday night. They're also realizing things like what the work-life balance and burnout and workload factor, what that does to the business model in restaurants. I mean, it's one of the only industries that a hundred percent turnover annually is almost acceptable. So if I'm asking my people to work. 15 hours a day, twelve hours a day, six days a week. And the solution to them not having to do that is not open on Monday night, then a lot of restaurants are starting to do that. They're shrinking their menu, they're shrinking their time their hours of operation, they're shrinking their their service model because they're realizing that it's actually making them more profitable instead of the old version of just stay open as long as you can to try to capture as much revenue as possible. The whole model is changing.
speaker-1: Yeah. How could that be that a restaurant is filled up on a Monday night and they lose money? How does that happen?
speaker-0: Again, you know, use the term nuance. There's lots of different moving parts there, right? So if a restaurant was to s to open on a Monday night, they might have a full room for based on how customers behave. Maybe on Monday night they're full from six to eight PM. Okay. But maybe they have to bring in their team for six hours for every person in order to set up the restaurant and get it ready to go, clean the restaurant after and so on. But they only have two hours to capture revenue. Plus, to compound that, Customers maybe on Monday night don't have maybe they don't dine the same way they do on Thursday, Friday, or Saturday. Maybe they don't have a an appetizer or dessert. Maybe they don't have a second beverage or drink or something like that. So the compounding effect of spending more on labor while you're generating less in revenue actually could cause them to lose money while they're open. Maybe on Friday night they get revenue, maybe they're full from five or five thirty all the way till ten or ten thirty of at night. Plus people are ordering more, they're spending more, the average guest check goes up. So their profit margins can compound at a faster rate on a Friday than they can on a Monday. And once the operator recognizes that, sometimes it actually makes the most sense to to either limit service hours or not open at all on certain days.
speaker-1: Man, there's so much going on behind the scenes behind that plate of food that just shows up at your table that never even consider would think about when you're at a restaurant. But one idea that I'd love to explore with you is how much of a competitive advantage, how beneficial can it be for a restaurant to its success? Right. Obviously there's the numbers piece, right? And just knowing your numbers, being really precise with your numbers and careful and paying attention to that. But then there's also like the hospitality, right? Almost creating that user experience or the customer experience when they show up. How important is hospitality and like can that be a competitive advantage? Obviously I would imagine that unreasonable hospitality maybe isn't gonna make you the most money. I don't know. What are your thoughts on on hospitality?
speaker-0: I mean, have you read the book? It's fantastic, right? Unreasonable hospitality is incredible. And he, I mean, they set the standard for hospitality almost in the world. What we tell people is, and what my recommendation to anyone who listens to this that is in the restaurant business in general, is there has to be a balance between service model and profit model. Right? So for example, if if we're a a casual restaurant, if I said to you that you're gonna go into that restaurant and you're gonna spend You're going to have a beverage and an entree and that type of thing, nothing too crazy on a Tuesday night, and you're going to spend $30. You might think, nah, that's pretty normal. That's okay. No big deal. And the service will be fine. You know, you'll get somebody who comes by the table every once in a while. They take your order, your plates are cleared when when they're dirty, so on and so forth. You might think that that's pretty good value and that works. I'll go back, right? If you went and had that same experience at $60, the service is not. any different, the food quality is not any different, and the, you know, the the experience in general is not any different. You might think that the value for that is not great, right? That's the customer side of it. If you flip it around to the business side of it, if I said we're gonna have every server only has two tables that they're looking after. You have someone who's your assistant that's gonna clear all the dishes for you. You're gonna have an assistant that runs all the food for you. We're gonna do table side salad for example or cocktails or something like that that's really high touch Service. If we only charge $30 for that, we're going out of business. We have to charge $60 for that to make the model work. Right. So what I tell people all the time, and the encouragement is to they have to consider both the service model and the actual business model at the same time. Otherwise, we're just guessing at one or the other and it's likely not going to end well.
speaker-1: Okay. So yeah, you have to match the service model with the profit model or the business model that and you have to like pair those two together. Right. Do you see like there's a lot of like micro restaurants or like micro coffee shops, like these micro, super small menu, really focused types of things popping up that I've started to see. Is there a kind of split happening where those middle of the pack kind of restaurants that you're talking about are almost kind of getting washed away? Because I think with the convenience of Things like Uber Eats, DoorDash, like just bringing things straight to my house. Like we don't have to go out. We can just kind of host things here. I would imagine that that kind of force is maybe creating a split where it's either like, hey, ultra convenient, ultra easy, just go get your thing really quick, and then high end luxury. Is there a split like that happening in the restaurant space that you're seeing?
speaker-0: For sure. If you look at the sort of three main categories of the industry, quick serve, you know, your fast food restaurant, your drive-thru, your that type of thing. The what I would call casual, so just that middle middle ground, nothing too crazy when it comes to service, fair price point, that type of thing. And then the third version being high end, fine dining, high touch service, you know, really high quality food, high price point. The two on the ends are a little bit sheltered. It's kind of this K-shaped economy scenario, right? The two on the ends, the fine dining thing, those people that go to those restaurants and spend $150 every time they go out or more, they're going to continue to go to those places because they can afford it. It doesn't hurt their pocketbook and they're going to do that. And the quick serve, super high value, even though the prices are going up in that segment, that super high value, really convenient, fast experience is also going to continue likely to perform well. The part of the industry that's having a real challenge and will continue to be have more pressure and more friction. I think in the next few years for sure is that middle casual ground because you have to find that balance of hospitality and service while also not charging too much. And that's really hard to do.
speaker-1: Yeah. Yeah. And is there any I I can't remember exactly where I heard this or where I picked up this idea, but it's similar to like franchises where in order to make a lot of really good money, like good money with a franchise model, you have to have multiple locations. Is it the same thing in the in the restaurant industry? Like can you really make good money with only one location or do you have is there pressure where you have to expand into multiple locations, or is that just a myth that I picked up somewhere?
speaker-0: I think it's a little bit objective, right? It depends what you what you mean by or what an individual would mean by good money. I mean, I know lots of independent operators that are a husband and wife and they own one restaurant and they don't have another job, they make a few hundred thousand dollars a year and live a really good life. But from a corporate perspective, if you know, you want to get into the millions or you know, that type of thing of of dollars to the bottom line and cash flow every year, then yeah, you likely need to have multiple locations. I saw some some stats the other day about a lot of the quick serve restaurant franchise opportunities that are available and what you need to put up front and what the annual return was. And you'd be surprised how low a lot of them are, right? I mean, a lot of those quick serve restaurants you might have to put up six, seven, eight hundred, even a million dollars in some cases, and maybe they're gonna return you a hundred thousand dollars a year.
speaker-1: Mm-hmm.
speaker-0: It all depends on location, it depends on revenue, it depends on, you know, lots of different things that go into
speaker-1: Yeah. As always, right. There's a there's a lot of nuance to this business and to this industry, just with you know, pretty much everything else. right. So again, just from a layman's perspective of the restaurant business, like me thinking about the restaurants that I like to go to, it's almost like I I have I have my go to's, right? Like I have the ones that I wanna I want to. like it's a Friday night, I know the place that I want to go. I have like a small set. So as a restaurant tour. I would imagine that driving and creating loyalty and building those relationships with those customers is super important, right? Like you probably don't make much money on the first visit, but it's like when somebody comes back second, third, fifth, tenth, twentieth time. Like that's really where the money is made. So how does a restaurant tour or a restaurant drive loyalty in their customer base?
speaker-0: Well, you know, the restaurant industry, I mean, you've asked a few questions about this, right? The hospitality factor, the service factor, the there's a there's a person to person interaction for an extended period of time happening in restaurants that's unique versus a lot of other industries, right? A lot of other industries, especially in the casual or fine dining sectors of the restaurant business, you get to spend an hour or more sometimes with those people. And there's a massive opportunity there to actually build relationship with people. So, you know, believe it or not. Most restaurants, if they're doing things right, they do make money off the first visit. But where that, like you said, that compounds is if they don't have to spend money to get the person back the second, third, fourth, fifth, sixth, seventh, eight time. So, you know, things that we recommend are there's a lot of, you know, digital marketing and all this different stuff that people are trying to experiment with and try to do to try to drive more traffic. There's still that personal side of the restaurant business that makes a big difference. Actually personally inviting people back, sending them things. when it's a special occasion, doing things for them, surprise and delight type stuff. You know, actually taking the time to build a relationship with someone in a restaurant and personally invite them back makes a massive difference. You know, even just things like some very old school, but here's my business card. Call me next time you want a table. I'll make sure you never have to wait. Those types of things go a really long way, right? If you think of those five or six restaurants that you have on your shortlist for Friday night, If your friends say, Head hey, where should we go? And you said, I've got a place that I can get a table right away, I don't have to wait, you're gonna go there more often than not. Right. And it and it doesn't take much. It doesn't take time, it doesn't cost money. It's just a a gesture that, you know, I believe is it is actually, I think, dying in most of the restaurant industry. But it's still there.
speaker-1: Yeah. For sure. Because again, you're like walking this tight rope of like you really want to focus on optimizing the operation. And there's a lot to look at. Like I worked with a a woman, she owns a brewery in in Tempe, Arizona, Hundred Mile Brewing Co. Shout out Sue. And she like I had some conversations with her and I like we were sitting next to each other with her laptop open and she was just kind of telling me the things that she was thinking about and just like the wild amount of numbers that she's tracking on a day to day, week to week basis is unreal. So it can be really easy to get caught up in that and kind of forget about that hospitality piece and and just making people feel special, right? To kind of which is what can drive that loyalty. And obviously, you know, meeting expectations, right? All frustrations stem from unmet expectations. So people when they show up, they're gonna have a certain expectation about their experience. So if you don't meet that or surpass that, you're gonna create frustration, which Then we'll leave people upset. But then there are little small things like you talked about, just you know, giving the business card. Like I think that ties me back to an idea that I've shared on the podcast before. But I went to this marketing workshop at the end of last year. And he asked a few questions to kind of build up the audience. And he's like, okay, what is the goal of marketing? And we're like, you know, drive leads, da-da-da. And he's like, No, marketing, the goal of marketing is to grow the business, right? That is the number one objective of marketing. And then what is the best way to grow the business is the second thing that he asked us. And he talked about this idea of improving the quality of your product. Right. And as the restaurant tour, the product is not only the food, but it's the experience, the hospitality that the experience that people have. And then he talked about how do you get people to talk about you and what you do? It's like little things that they wouldn't expect, right? It's like people talk about the things that they didn't expect, like the the letter on the bedside table with their name and like a writ handwritten message when you show up to a hotel. Or like just little small things that people don't expect. Like what are some of those ideas that a restaurant tour, like a sit down, kind of nice, nice ish place could do, or like those small things that people wouldn't expect that will get people talking about their experience. And what are some of the more creative ideas that you've seen?
speaker-0: Every restaurant for the most part has a some sort of promo budget, right? They have a way that they can give away dessert or a drink or something like that for free. And most of them, I would say almost all of them, use those budgets wrong. They use them in a way that actually is almost hurting the business rather than creating opportunity in the business and moments in the business and things that are memorable. So a couple examples. One would be, let's say you and I walk up to a restaurant on a Friday night, we talk to the person at the front desk and they say it's gonna be an hour wait. And maybe we don't want to wait an hour. Right? What we encourage operators to do is say, why don't you come in? We've got a little space here over in the corner. We'll buy you some prosecco or a beer or something. The first one's on us. Come and hang out. The wait won't seem like it's that long. Those two glasses of prosecco or beer or a glass of wine or something like that. Might cost the restaurant at most $5. Now we're engaged. Now we're here. We're spending time in the restaurant. We're probably gonna spend $30, $40, $50 each. Now, if you think about it from a marketing perspective, if I told you that if you spent $2.50 on one person, you'd get $30 back, would you do it? All day long. That's incredible ROI. Right? However. In most cases, they go, it's gonna be an hour. And the person goes, okay, well, that's too And they just go, Okay, well, come try us again some other day, right? So that's one scenario. The other one, and we see this one happen even more. Let's say there's a great customer that's been there a couple times, we recognize them, we say sort of say hi when they come into the restaurant. Maybe we don't know them that well. Every once in a while, the promo budget gets used to let's say that person is sitting there and has two glasses of wine with their meal. Well, they just go and they take one of them off the bill. They buy one glass of wine for that person. Right. I mean, that's a nice gesture. The person might remember it. There's nothing wrong with that. However, it's actually taking away from revenue. Right. So what we recommend is either one of two things either tell them next time you come in, your first one is on us to get them back again, or bring them a third one. Because now we're generating more revenue. The person's staying longer. Maybe now they're gonna order dessert, they're gonna get a friend to come and meet them. There's all these different scenarios that can happen through that, right? But what we're doing is actually trying to expand the business with product that we already have paid for rather than trying to spend money to generate new customers that come in. And we're doing it through hospitality.
speaker-1: Yeah. Wow. Yeah, that is a a demonstration of your understanding of this business. Like that is such a nuanced little thing where okay, you should use your promo budget to get more business, right? Like I've never had that experience in my life where I walk in and it's like, Hey, it's gonna be an hour and they were like, Hey, first one's on us, just kinda like hang out, kinda we got this little space over here. But if they did do that, you're a hundred percent right. Like we would hang out, get that drink, and then you know Being from Wisconsin, like once you have one drink, it's like I gotta have another drink.
speaker-0: There's there's there's a very, very, very successful Canadian-based restaurant group. They do operate in the US too, but we'll leave them we'll let them remain nameless for now. They did a study, this goes back about ten years, how many people came to the restaurant, heard what the quote time was for a table, and left. They literally had someone there with a tick sheet counting how many people left across multiple restaurants across the country. Right? So they had this big piece of information. Telling them X number of people walk away from the front door based on quote times every day. They decided company wide, they implemented a policy company wide. Every single person who walks in the door gets a glass of proseco when they walk in the restaurant. If they have to wait even one minute, they get a glass of prosecco. The number of people that walked away from the restaurant dropped by over 40%. Wow. So imagine the amount of revenue that they generated because people were waiting and they were. Giving them I mean what, a twelve dollar bottle of per seco or giving them three or four ounces of per secola it probably costs them fifty cents a person.
speaker-1: Killer. And there's probably so many of those little ideas out there. But I mean if even if every restaurant that has wait times that has like seating, if they just implemented that.
speaker-0: And think about it from a hospitality and service perspective, right? All of a sudden their reputation in the markets they exist in is it's such a great experience. It's so cool. You get a this glass per second when you walk in. Every single time I go there, they give me one. Like it's just a competitive advantage. It's differentiating them against their their competition. Plus it's driving revenue. I mean, it it's just a it's a no-brainer when you start to think about it.
speaker-1: Yeah, absolutely. And just to go and underline that idea of nobody expects when they walk in, if they have to wait, that they're gonna get a free glass of proseco. So that is gonna be one of those things that they talk to other people about. It's like, yeah, we had to wait fifteen minutes, but they gave us a free glass of proseco while we were waiting. Right. That will get them talking about the experience because again, it's just how our brains work. Like we will really remember the things that we don't expect to happen because we're just running on autopilot ninety five percent of the time. But exactly, this is brilliant. Jim, thank you so much for the time. I have one final question for you. It's a recurring question that I ask every guest. But before we get to that, how can people find you?
speaker-0: Easiest ways are either our website www. dot benchmarksixty dot com. I'm very active on LinkedIn talking about ways that people can improve profitability and and margins and revenue in restaurants. So Jim Taylor, those are the probably the two best ways to find us.
speaker-1: Cool. Yeah, we'll have both those links in the description. So if you're a restaurateur or if you are just someone like me that likes just learning about other different types of businesses and you want to learn from the best in other industries, check out Jim on LinkedIn. You're very active on there and you got a lot of great content. Thank you. So Jim, my final question for you, as I mentioned, is a recurring question I ask every guest. But if you had a giant billboard that everyone in the world could see for ten seconds with like one message to the world, what would it say and why?
speaker-0: I think it would say think differently. We need to protect the people that work in our industry. And in our case, we need to change the way that restaurants think. So it would probably be something along those lines. Think differently, protect our people and change restaurants.
speaker-1: Amazing. Yeah. Restaurants are special places, right? I think we all again, not to keep bringing up COVID, you know, being six weeks, but I mean not having that space to be able to leave, you know, look nice, have a good time, right? Bring people together. Restaurants are really special places. And yeah, I think the work you're doing is obviously helping that industry a ton. So we thank you for that as consumers. But Jim, thank you so much for the time.
speaker-0: Pleasure. Thank you.
speaker-1: Thank you for listening to my conversation with Jim Taylor. My main takeaway from the conversation is that passion is not enough, right? You can't run a business forever on passion, right? You can care deeply about the product, the customer, and the experience, but you still have to understand the business and the numbers underneath it all. Loving what you do can help you to get started, but staying in business requires knowing your numbers, understanding your model, and making decisions based on what is actually happening, right? The quote unquote boring side of business, which Is what makes business possible and what keeps your business alive. If you want to get connected with Jim, you can find his links in the description of this episode. I highly recommend if you're a restaurant checking out Benchmark 60 and the work that they're doing over there. It's incredible. And if you are an author, a coach, or a course creator, and you want more of your clients to actually follow through, get results, and engage with your ideas, I put a free resource in the description that will help you build more execution support into your program without adding more. stuff to your calendar. So if that sounds useful, check out the link in the description and you can download that free resource. Thank you for listening and I'll see you in the next one.
