I had lunch last Friday at the local sushi buffet. The quality of the food is quite acceptable, the price is quite reasonable. In the past they drew a good crowd for lunch but lately the customers were sparse and I have concerns for the future viability of the establishment. I have watched the restaurant business for many years, first because I dine out almost every meal and second because I have found that one of the best indicators of both consumer sentiment and the economy can be found in the number of customers that are dining in restaurants and which restaurants they are choosing. Although the current economy has weighed heavily on the restaurant industry, there are obvious winners even today offsetting many of the losers and the underlying reasons for their success or failure are, I believe, equally applicable to the housing industry.

empty restaurant
In the last year alone several “affordable” restaurants in my neighborhood have gone out of business after having enjoyed some initial success. I have picked just a few to illustrate this point and chose burger joints as I grew up in Chicago and enjoy a great burger, although few can compare to the original Hackney’s in Wheeling. Fuddruckers, Cheeburger-Cheeburger and the Original Steakhouse have all closed their doors. Was it just the current economy or did something happen (or not happen) that caused them to lose their appeal to the market? All of these operations provided decent food, a comfortable atmosphere and competitive pricing. Each had a unique theme and, when they first opened, all enjoyed crowds of customers waiting in line.

Fuddruckers had a creative interior design theme with the entrance path highlighting the freshness of their ingredients with a window to the on-site butchering operation and a meandering walk through the produce provided in their complimentary condiment/salad bar station.

Cheeburger-Cheeburger, playing off the popular Saturday Night Live sketch which parodied the popular Chicago hangout Billy Goat Tavern, was true to its character serving “Pepsi-Pepsi, no Coke”. Offering one of the better burgers of any chain, in addition to great handmade milkshakes available in 60+ flavors, the 50’s coffee shop theme and oldies music provided a pleasant stop for lunch, a light dinner or a late night snack after the movies.

The Original Steakhouse utilized Howard Schnellenberger’s fame as the head coach of the University of Miami and his team’s win of a national championship to create initial visibility for another sports bar venue.

What all of these operations that closed lacked, however, were what I believe are three key ingredients.

First, they did very little advertising and promotion. While other restaurants aggressively promoted their operations on-line, on television and radio, in newspapers and mailings, usually offering discount coupons and specials, these operations apparently forgot the need to keep their name in the forefront of their customers’ minds. As the decision on where to eat, other than for a special occasion, is usually a spur of the moment decision, it is essential to provide continuous reinforcement to the market of a restaurant’s availability, convenience and value and, most important, provide a special reason to visit as soon as possible.

Second, all of these restaurants failed to accept reservations or provide for call ahead preferential seating. While that may seem unusual for an affordable dining establishment, consider a typical family going out to dinner and finding a forty-five minute wait for a table. When our children were young, the prospect of standing in line with hungry and fidgety kids was simply unacceptable.

And third, these restaurants suffered from inertia and failed to change with the times. They did not introduce new menu items; they did not have a “special of the week”. They did not provide new and healthier items to appeal to the diet conscious; they did not offer organic foods or a “green” environment to appeal to the environmentally conscious customers.

As I mentioned, in the past few months several new restaurants have opened (yes, even in this economy) to take the place of the recently departed. They offer similar menus and similar costs to the closed operations but the “newbies” are enjoying success.

Five Guys Burgers and Fries, a chain out of Virginia, opened down the street from the previous location of Cheeburger-Cheeburger. They are inexpensive, the food is prepared fresh but served quickly, and they offer reasonably healthy dining (for a hamburger chain) with zero trans fat and zero gluten except for the buns. They actively advertise and promote themselves including a rating by Zagat and dozens of awards from around the country. And they do a very good job evidenced by the lines of customers at lunch and dinner time although they move quickly.

Primanti Brothers out of Pittsburgh opened a block away from the defunct Fuddruckers. Although I was not familiar with their operation, my wife had seen them featured on both the Travel Channel and the Food Network and my younger son had made a point of stopping by their home operation when he was last in Pittsburgh. We ate there last week shortly after they opened and found a menu offering burgers, pizza and numerous other fast food items. The food was good, several of the selections were unique and creative, the prices were reasonable and the service was surprisingly attentive and competent. They have an extensive children’s menu and nightly specials which are attractive to families, their primary market, and they advertise aggressively.

But my hands-down favorite of all of the new restaurants is Duffy’s Sports Grill as they are truly a professional operation. Their staff is almost all young and attractive which appeals to the younger sports bar crowd. They have luncheon, mid-day and nightly specials. Their frequent dining club is the best I have seen. They have call-ahead preferential seating. And the food is good, the portions are large, and they have thereby managed to capture both the “price” and “value” positions in the market.

As I travel around the country looking at new housing developments I find many similar flaws to those that doomed the defunct restaurants:

– Builders that have established neither the “price” nor “value” position in their market and instead must compete head-to-head with every other builder;
– Communities that are not marketed aggressively and cost-effectively, do not use the web and social media correctly and professionally;
– Product lines that are unchanged in five or more years even though the market has changed substantially;
– Sales offices that are closed part-time and, when open, sales staffs that are untrained and inattentive to the customers’ needs, failing to provide individualized care and regular and consistent follow-up;
– Homes that do not incorporate cost-effective design and even the semblance of environmentally sensitive design and construction;
– Communities that do not offer meaningful incentives to act now, instead lately relying solely on the housing tax credit which every other builder also offers;
– Sales people that are relying solely on their companies to create the prospects and thereby waiting for the traffic to come in the door instead of aggressively networking, creating a referral base and developing their own leads;

closed-sign-poster-smMy advice to builders and developers is to take the time now to address these flaws and be ready to take advantage and prosper when the market returns. Otherwise you may well suffer the same fate as the defunct restaurants.

To be continued………

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