Recipe for Success

Before wraps, Frappuccino and frozen yogurt, consumers craved cookies. Entrepreneurs responded with endless batches in hopes of tasting the sweet profits enjoyed by the likes of Mrs. Fields and Wally “Famous” Amos.

Movie-lot carpenter Royce Johnson, his wife, Sandi, and buddy Hugh McCurley were among those who joined the batter battles. In the early ‘80s, they founded Auntie Em’s Kitchen in the Land of Ahhhs, today called just Auntie Em’s Kitchen. Working from home part time, they made fudge drops and other cookie concoctions for local movie theaters, including Laemmle’s, and liquor stores.

When a cookie shop in their Eagle Rock neighborhood came up for sale in 1984, McCurley pushed to buy it. With a loan from Sandi’s mother, they did.

The previous owners had added sandwiches to boost sales. As consumers’ cookie cravings waned, lunch became the mainstay of the new restaurant. Royce traded his carpenter’s belt for an apron and took over the cooking full time. Sandi waited tables and worked the register, and McCurley handled deliveries.

Cookies are still on the menu, but these days customers ask for Royce Johnson’s home-style potato soup made from his mother-in-law’s recipe. The other soups, salads, sandwiches and baked goods on the small menu also are popular at the lunch-only eatery, which in 1997 had annual sales of $95,000.

But a look at the balance sheet shows that after 14 years, the business “is only about breaking even,” said industry consultant Arthur M. Manask, a 30-year food-service veteran. Worse, none of its main business categories are growing. The restaurant’s dine-in, takeout, delivery and gift-basket sales are all static, Manask said. “And, generally, businesses that don’t grow go the other way,” he said.

The fact that 90% to 95% of Auntie Em’s Kitchen customers are regulars also concerns him. “That means they are not getting the word out successfully to new customers,” said Manask, who owns a Burbank-based consulting firm specializing in food service for corporations, schools and entertainment venues.

Manask--who raved about the restaurant’s home-style cooking and service--suggested that the owners choose one of two ways to spread the word to new customers and potentially double their sales: Increase lunch sales or add breakfast service.

The restaurant’s average daily sales are $350 to $400, Manask said. On rainy days, when deliveries increase, Johnson said business can soar to $700. “That says to me that he can grow his business almost 100% without adding breakfast,” Manask said.

Adding breakfast service might be a more comfortable way to expand the business. Although it would require the owners to come to work earlier, the total cost would be modest and the risk low, Manask said. Breakfast can be more profitable than lunch because the cost of breakfast goods such as coffee, bacon, eggs and cereal can be 15% to 30% lower than the cost of goods sold for lunch, which are typically 38% of the menu price, he said.

“In the restaurant business your overhead is paid for, so theoretically you are open for breakfast, lunch and dinner,” Manask said. “Very, very few restaurants are only open [for] one meal. . . . If so, there is an asset being underutilized.”

The owners’ success, whichever route they take, will hinge on effective advertising, marketing and promotion, Manask said. The restaurant offers delicious food and good service, but like many small-business owners, the partners’ marketing acumen needs work, he said.

Manask offered a plan to overhaul the restaurant’s amateur marketing efforts, which consist mostly of distributing homemade fliers. The consultant’s suggestions would apply to many small businesses on tight budgets.

First, he encouraged Johnson to do long-range strategic planning, something the business owner has admittedly neglected. Johnson and his partners should develop a marketing budget tied to a “very specific campaign and direction for a year and pretty much commit to it,” Manask said. They should decide in advance to promote, say, their home-style soups in a chilly month like January, their gift baskets for Valentine’s Day, their pies during the holiday season.

The point is to have an organized plan of attack that covers each month of the year and targets seasonal sales opportunities. The plan also should specify promotional methods. Manask recommended tabletop cards that change weekly, cooperative postcard mailings shared with other local merchants and professionally designed fliers distributed three to six times a year.

He suggested that Johnson set aside about 3% of the restaurant’s revenues, the industry standard, for the campaign. The restaurant should track results, so that next year it can drop what didn’t work and put more resources into promotions that were successful.

Johnson will need to hire a professional designer with experience in the restaurant industry to create an image and a standard format for the promotional materials, the consultant said. He suggested that Johnson get the names of designers from print or copy shops such as Kinko’s or PIP, newspaper classified ads and the telephone book, among other places.

He should not be afraid to ask for samples of past work and for the names of clients, as it’s important to check on results. Manask suggested Johnson ask for three different prices: the designer’s hourly rate, a project rate and the cost for a yearlong promotion plan. The charge to make changes should also be specified.

For $200 to $300, Johnson probably can get a flier format in which he can “fill in” individual promotions, Manask said. A new advertising and marketing program can go a long way toward bringing in the new business Johnson wants.

“It’s not really rocket science, it just has to be executed well,” Manask said.

Johnson could get additional help by joining the California Restaurant Assn. and becoming active in the local chapter, said the consultant, who is a former president of the association and current board member.

The monthly meetings would give Johnson a chance to talk to other restaurant owners, “who have exactly the same issues to deal with,” Manask said. The cost is low, and the information and ideas Johnson could pick up would be invaluable.

“They were like a sponge in talking to me,” the consultant said. “It was probably the first time in his life he had talked to somebody in the restaurant business besides his wife.”

Membership also would give Johnson access to the restaurant association’s Los Angeles library, which has information on permit requirements, rules and regulations and legislation affecting restaurant operators.

“He really needs to get some friends in the restaurant business that he can talk to,” Manask said. “They don’t have any restaurant background. Zero. That’s a major weakness.” He suggested Johnson call Buzz Rosenbloom in the association’s membership department at (800) 765-4842 for more information.

The industry group also would give the Johnsons a list of trade publications, Manask said. Magazines such as Restaurant Hospitality and Restaurant Business are free to restaurant operators and “will be a tremendous resource of ideas,” he said.

It takes extra effort for a small-business owner to avoid becoming isolated, Manask acknowledged. The time invested can pay off, however, in higher sales and fewer wasted resources.

Another high priority should be negotiating a longer-term lease or finding a new location nearby, said Manask. The restaurant’s month-to-month lease doesn’t offer the future security needed to build the business, he said.

Finding time to set long-term goals and carry out the necessary plans can be a challenge, but the extra effort has to be made if the restaurant wants to grow, he said.

Luckily, Manask has no complaints with the food. In fact, he plans to add Auntie Em’s Kitchen to the next restaurant survey he gets from Zagat, the restaurant-goer’s bible. “They just really have a great product and great service and great attitude, and you like to see people like that do well.”

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This Week’s Business Make-Over

* Name: Auntie Em’s Kitchen

* Headquarters: Eagle Rock

* Type of Business: Restaurant

* Status: Partnership

* Owners: Sandi and Royce Johnson, Hugh McCurley

* Founded: July 1984

* Start-up financing: $22,000 loan from Sandi Johnson’s mother

* 1997 sales: $95,000

* Employees: 1 full-time, 2 part-time

Main Business Problem

Can’t seem to build customer base

Goal

Increase business to the point owners don’t have to cook, wait tables and make deliveries six days a week.

Key Recommendations

* Consider adding breakfast service or dramatically increasing lunch business.

* Develop annual advertising and marketing budget, then create an organized campaign with focused promotional themes.

* Hire a professional to design a flier format that can be modified for each promotion.

* Track results.

* Increase industry knowledge and contacts by joining the California Restaurant Assn. and subscribing to free industry trade publications.

* Negotiate a longer-term lease or look for new location.

Meet the Consultant

Arthur M. Manask, a 30-year food service veteran, owns a Burbank-based consulting firm specializing in services for corporations, schools and entertainment venues. he is a past president and current board member of the California Restaurant Assn.