Forming a marketing joint venture helps drive new customers to your restaurant, while keeping costs down. By Rowena Mary
“Dining,” said the great American architect Frank Lloyd Wright, “is and always was a great artistic opportunity.”
He might have added that running a restaurant can be a great commercial opportunity—provided all the pieces are in place and you implement a sound marketing plan. Word-of-mouth will only take you so far.
But effective restaurant marketing isn’t easy. It takes a lot of research, analysis and testing, and the industry is constantly evolving. Plus, most people in the restaurant business are good at exactly that—running restaurants. They’re not born marketers.
Most are familiar with the basics: strong branding, relationship marketing, database and email sales building, knowing your customer and advertising in the mass media. But by constantly looking for ways to improve your marketing competency, you can certainly create a competitive advantage.
One method being used by savvy restaurateurs is the joint venture. This marketing philosophy can be an extremely potent tool in building new business.
Managing director of the Sydney-based company Restaurant Marketing, Grant Lewers, is a keen proponent of the joint venture. He sees it as one of the strongest strategic marketing methods a restaurant can employ: “It’s insanely clever. The people we teach this to, when they ‘get it’, they say ‘Oh my God’!”
So how does it work?
In essence, the joint venture or “host-beneficiary relationship” as it’s also known, is no different to when an airline offers a great rate on a hire car. It involves finding a compatible partner and offering your product to their existing customers. You are utilising the goodwill they have already built up with their clientele to capture new customers for your restaurant. Meanwhile, your partner is happy because their customers are getting something for nothing—which makes them look good.
“Let’s say you have a 100-seater restaurant and have 80 people there,” says Lewers. “You’ve staffed for 70 to 100. If you bring two extra people to your restaurant with a voucher, the only extra cost to you is what they order in food. You’ve already paid for staff, insurance, electricity, etc.”
It follows that if these two new people enjoy their experience at your restaurant, they’ll come back, and as we know the repeat customer is every restaurant’s lifeblood. If they come back for the occasional coffee, for Friday lunches or for dinner once a month, you have effectively gained loyal new customers you would not otherwise have had. The trick is in pinpointing the right people: are they the type to return? Do they live in the area? Are they impressed by what you are offering? If so, they’re high-value customers, and they’re the ones you should be chasing.
Lewers has seen the approach work time and again: “We did some work with a Russian restaurant. They didn’t advertise. We gave a hundred $100 vouchers to business leaders in the community. Some of these would come in and bring six people and spend $200 on top of their voucher. What these people spent over and above what we’d given them meant we ended up breaking even.”
The first thing you need to do if considering giving away vouchers is to work out your restaurant’s average spend. You should deduct the cost of the food from this. Food costs run anywhere from 26 to 33 per cent in most restaurants. So if your average spend is $100, and the food cost is around $30 (at an average of around 30 per cent), if you give away a $70 voucher it’s more than likely the voucher recipient’s spend will cover the food costs anyway. A good rule of thumb is to make the value of your voucher around 75 per cent of your average spend.
The result? The customer is saying, ‘Wow, this place is amazing’, it has cost the restaurant nothing, and in effect you have brought in a new customer who will potentially be back many times.
However, giving vouchers away randomly isn’t the best way to go about things. Think about it: if you had something handed to you on the street, as opposed to it being sent to you as a gift from someone you already had dealings with—like your real estate agent, hairdresser or accountant—would you really be keen to accept it? Human nature dictates that we are more comfortable with what we find familiar. A business that people know, trust and see as a credible source is the sort of company you want your offer to be associated with.
Finding the right partner to be the provider of the “gift” is crucial and will increase the take-up rate of your offer. It’s no use hooking up with a Ferrari dealership, for example, if your restaurant is a steak’n’ribs kind of place. Similarly, if your offering is fine dining, Mitre 10 probably isn’t the place you’re going to find your wealthy stream of new customers. You need to find the right ‘fit’ to guarantee optimum success.
“Work out your demographic,” advises Lewers. “What car do they drive? Where do they get their hair cut? What watch do they wear?” Approach the businesses you think are complementary to your customer base. Send them a letter outlining your proposal and perhaps inviting them to a free lunch, to experience your restaurant for themselves.
Mark Hynes, owner of Tasman’s in East Sydney, did just that. He mooted the idea of a joint venture with a local hairdresser and a European car servicing centre. Both of them were very interested in theory, but ultimately hard to nail down due to the paperwork they thought they’d have to contend with. “Your partner needs to have their administrative and marketing processes in order, to be able to align with your offer,” advises Hynes. “You have to really chip away at it…it took me six months to get my joint venture happening.”
It’s been worth it, though. Hynes approached City Gym, just across the road, with an offer. “We said, ‘Hey, we’ll give $50 vouchers to your customers who fit our profile’.” People signing up at the gym for one year have to spend a certain amount to receive the offer. “Normally two or three people will come in,” says Hynes. “I see this as a marketing cost that is variable. Even if it does end up costing me $20 to have them there, hopefully they’ll have had a good enough time that they’ll come back, and maybe even tell their friends about us. And we’ve found that to be the case…it’s a very neat idea.”
You may even find your costs being covered in their entirety. Seenie Kahukura from Sydney’s up-market Mint Bar and Dining has a ‘preferred dining partner’ arrangement with Sydney City Lexus, which evolved out of sharing an event with the car company. “The general manager and I got talking,” recalls Kahukura, “It was like, ‘you sell cars, we provide meals—why don’t we do something together?’ The fact that they enjoyed our restaurant so much had something to do with it, too.” Now, every Lexus sold comes with a voucher for two people for dinner at Mint, along with a letter from both Lexus and Mint. The value of the meal is not disclosed on the voucher, but the threshold is $250, which no one has gone over yet. At the end of the month, Lexus simply pays all of the charges. “They send around 12–20 people our way a month,” says the restaurateur. “And they do come back.” The Mint also has a similar arrangement with Audi.
Entering into a joint venture arrangement is not yet common practice—but then again, it’s probably more common than you may realise. It’s sometimes referred to as a “ghost strategy” because the negotiations happen behind closed doors, customers aren’t aware of it, and often any existing arrangements are kept relatively quiet because, after all, the competition is tough!
Joint ventures benefit every party involved. As Lewers says, “The person receiving the gift voucher has no idea. They’ve spent $200 on a cut, colour and blow-dry at the same place for the past five years and suddenly they’re rewarded with a free dinner! (Using the 30 per cent of average-spend rule.) The restaurant has covered its costs, the customer has been introduced to the restaurant and the business gets to look like a God to their customer.”
There is a catch, but it’s pretty self-evident: you have to have the right product to start with. “No BMW dealer is going to send his customers down to some crappy restaurant,” warns Lewers. “You should certainly never do this unless your product is A1 to begin with. That means everything—the offering, the food, the service—has to be hot.”
So, if you have a great restaurant but would like more people frequenting it, and a nearby business has plenty of customers but would like to keep them loyal and happy, entering into a mutually beneficial joint venture might just be, as they say, a match made in heaven.