“The first question to ask is what you want from a program,” suggests Martha Rogers, Ph.D., founding partner, Peppers & Rogers Group, a customer-oriented management consulting firm, and co-author of Extreme Trust: Honesty as a Competitive Advantage. “Is a loyalty program something you feel you must do because everyone seems to?” According to Martha, it’s a valid rationale to offer a program in order to be included in what she calls “the consideration set,” the group of restaurants (or airlines, supermarkets, etc.) that consumers are motivated to consider first – usually because of some type of payback. The problem, she explains, is that most loyalty programs stop there and become like any other kind of discounting. “We think of the common ‘buy ten, get one free’ prototypes as ‘faux-loyalty’ programs – just forms of bribes – and they effectively decrease profits by 10%. You need to make it crazy for customers to go anywhere else, so instead of thinking ‘How can I join the legions of those offering similar programs?’ restaurateurs should be asking themselves ‘How can I reward customers to give me access to information and then use it to create and reward true loyalty?’” Brad Rukstales, president/founder, CAC Group, a customer marketing solutions firm, agrees. “Strategic organizations would not start out saying ‘I want a loyalty program,’ but rather ‘I want to identify opportunities to increase engagement with my customers.’ Once you have that mindset, then you can add a program.”

The key, advises Martha, is to determine what your customers really want. “It’s this insight and the use of it – doing things for them that your less knowledgeable competitors wouldn’t know to do – that makes customers truly loyal.” To that end, technologies to help gather and analyze data about customers and their transactions are enormously helpful. In fact, Martha feels that much of the value of a loyalty program is gathering insights about those customers without having to ask. “Don’t make customers work to tell you what they want,” she cautions. “Assume they have other things to do than to make your business succeed.” That said, understanding customers’ preferences is within the reach of any restaurant. “There are so many ways you can learn what customers enjoy. Pay attention and be creative,” advises Martha. “If you see that a regular always wants a booth, set one aside when he or she makes a reservation. If you observe that someone always gets appetizers and not desserts, don’t send him or her an email about desserts – send an invitation to try a new appetizer. We need to see businesses like restaurants only giving rewards that are relevant to individual customers.” Brad adds, “Whether part of a loyalty program or not, what’s required is making the commitment to track loyal customers’ preferences, even if it means writing them down on an index card. Technology makes it easier but you have to be customer-centric in the first place – a loyalty program isn’t going to compensate if you’re not.” Brad reminds restaurateurs that the value of customer-centric insights extends beyond loyalty programs. The goal, he says, is the ability to deploy customized communications to any customer. “It could be in the form of a phone call, direct mail, a text, or an email to customers you haven’t seen in awhile saying you miss them and asking them to come in for a drink or a dish they’d enjoyed in the past.” Gathering information about customers and then using it to serve and reward them as no one else can is the principle behind a growing and important trend. Instead of a one-size-fits-all loyalty strategy, which offers the same rewards for everyone, more companies understand the benefit of delivering what’s meaningful to each customer. Martha’s advice: “Stop thinking about what loyalty programs can do for you, and start thinking about what’s in it for your customers.”

DUE DILIGENCE “Do your research first. You need to know and abide by food safety regulations, which are different for retail food products than for food served in restaurants,” advises Barbara Lang, educator, entrepreneur, and author of From Restaurant to Retail. “Talk to the Department of Health in your area, as well as your state’s Cooperative Extension office and Department of Agriculture and Markets – they will help guide you.” (Regulations differ by municipality and state.) She adds that there are Food Venture Centers at Cornell University, University of California at Davis, and in Hardwick, VT that help individuals and companies get food products safely to market. “The easiest products to start with are ones that don’t contain liquid or proteins – such as dry spice blends and baked goods – which remain more stable so food safety is less of an issue.”

START SMALL “I recommend that clients start small, testing their market with no more than three products,” advises Mary Carter, founder, Food Trade Consultants, a company that offers a turnkey solution for restaurants and individuals who want to produce and package food products on a small scale with a limited budget. Judy Barnes, owner, Citrus Deli, Redlands, CA, worked with Mary to bring three chili verde sauces to market. Judy says she wanted to get into retail on a “pay-as-you-go” basis, without getting a loan to finance the project, and needed lots of advice and direction. “We moved slowly and Mary held our hands through each step – once we could no longer produce and package sufficient volume in a small certified kitchen she connected us with a co-packer – a company that manufactures and packages food products.” Marcus Davis, owner, the breakfast klub, Houston, TX, dipped his toe into retail by bagging and selling his proprietary blend of coffee beans on premise. “People love our coffee and it was an easy item to package,” he explains. Following the success of his coffee, Marcus began retailing two other products requested constantly by customers – the seasoning used on catfish and chicken, as well as the waffle and pancake mix. (These products were initially made and packaged in house; as sales increased Marcus began working with a manufacturer to meet demand.)

“It’s critical that the product you retail has the identical quality and flavor as it does in the restaurant – that’s what customers want. To make sure it’s identical, we use the retail product in our kitchen.” – Marcus Davis, owner, the breakfast klub, Houston, TX

PRODUCING AND PACKAGING ON PREMISE One of the items The Melting Pot restaurants retail is their Signature Chocolate-Dipped Strawberries. Neil Hackley, vp operations, says the boxes of three and six, which are prepared and packed daily in each of its 140 locations, are especially popular to take home. The fondue franchise company also boxes and sells chocolate wafers, $1 of which goes to St. Jude Children’s Research Hospital ($6 million has been donated since 2003). Mr. Stox, Anaheim, CA, makes and packages 1,000 custom-designed tins of “mahogany brittle” during the holidays. Owner Chick Marshall says the $12 tins are something unique for customers to buy as gifts and they sell out every year.

WORKING WITH A MANUFACTURER Mark Maynard-Parisi, managing partner, Blue Smoke, New York, NY, says they interviewed four manufacturers to find the one who could produce the quality and quantity of barbecue sauce they wanted. “Scaling the recipe and tweaking flavors in large volume was very difficult, requiring lots of time and tasting.” Ray Flores, managing partner, El Charro Cafe, Tucson, AZ, says they tried using outside bottlers for their salsas, but felt the flavor couldn’t be reproduced consistently, so they moved production to their commissary. “Producing in house allows us to adjust batch size and inventory levels as needed for our seasonal business.”

THE GROCERY STORE MARKET Steve Sazama, owner, Saz’s State House, Milwaukee, WI, says they started making BBQ sauce 20 years ago and selling it on premise, at Milwaukee’s summer festival, and the state fair. Now they’re working with a grocery broker and have promotional deals with the Green Bay Packers and Miller Lite. He says retail sales account for 10% of overall business and adds, “We’re fortunate to have a great relationship with our manufacturer who helps us with R&D to determine which of our products we should bring to market.” Marcus says that local grocery stores have approached him. “I look at getting my products on grocery shelves as a wonderful way to grow my brand and revenue stream rather than opening additional restaurants.” Sometimes, serendipity can strike. Mark says Blue Smoke’s pastry chef made a chocolate, jalapeño, peanut bar to give away on Valentine’s Day. A purchasing agent from Whole Foods fell in love with it and now the bars are being made by a manufacturer to Blue Smoke’s specifications and sold at two New York City Whole Foods stores, as well as Blue Smoke restaurants. The branded wrapping has a map on the back showing the restaurants’ locations.

NOTE: For a copy of Barbara Lang’s Restaurant Retail Resource List (books, online guides, manufacturers/co-packers, etc.), questions to ask yourself before getting into retail, and how to do a market analysis, email editors@restaurantbriefing.com

Part of the optimism is consumers’ apparent willingness to spend on wine more freely and as a result, for the first time in recent years, restaurants appear to be able to pass along price increases. The recession resulted in a contraction in spending and consumption; in contrast there now seems to be an expansiveness which respondents described as “more generous” in terms of spending, with a “broader zone of comfort,” using terms like “splurge” and “luxury” (which Josh says haven’t come up in years). Josh compares the wine market of recent years to the housing bubble. “When the recession hit, there was a lot of wine in the pipeline. New producers and new vintages coming into the market had to be so competitive that we saw a huge price drop in 2008. We’re not back to the pre-recession price increases on lists, but we see momentum in the number of people who say they are increasing them.”

Other evidence of consumers’ renewed expansiveness is greater experimentation – often via glass wines – and more pairings with food. “‘By the glass’ used to have a much different connotation; now it’s where you’ll often find experimental wines,” says Josh. Interesting wines are also in evidence in pairings, which the Poll indicates are becoming more mainstream. Richard Hanauer, sommelier, L20, Chicago, IL, told Wine & Spirits that “five years ago guests ordered pairings with a degustation menu perhaps 20% of the time; now it’s 50%-70%. On the floor, sommeliers used to recommend a good Burgundy with dinner, now it’s down to the course.” Josh says he hears more and more from wine professionals that many of the interesting wines on their lists have come from their tasting menus. “Guests will try a pairing selection and will order it again. From the consumer perspective, it seems to be less about a perfect match and more ‘give me something I’ll enjoy.’ And they trust that restaurants can provide it.”

In 2011, 5,560 participating restaurants across the U.S. raised nearly $2.4 million dollars, an increase of 60% over 2010. These funds were invested in 18 No Kid Hungry state and city partnerships and community organizations in all 50 states. Debbie Shore, Share Our Strength’s co-founder, credits customers’ enthusiastic support of the cause as well as restaurants’ smart fundraising techniques for the program’s success. For example, a number of multi-unit restaurants offered bounce-back coupons good on future purchases to customers who made a specified donation in their stores; one such restaurant even reported a 40% redemption rate.

To learn more, sign up, and take advantage of specially created marketing tools, visit DineOutForNoKidHungry.org.

Not Your Average Joe’s, BOSTON, MA, makes it easy for customers to order takeout via an online ordering system, which founder Steve Silverstein says works well because it puts the customer in charge – eliminating mistakes and errors – plus it’s easy to reorder as previous orders can be viewed. “We also have a separate entrance for takeout, so those coming to pick up don’t get mixed into the line of customers waiting to be seated.” When it comes to packaging, Steve adds that the bar has been raised. “The quality of packaging connotes the quality of the food and it’s now a prerequisite that it be brand-consistent, eco-friendly, and microwaveable.” Takeout accounts for 11% of their business which, he reports, is increasing a little faster than total sales . . . At West Town Tavern, CHICAGO, IL, owner Susan Goss says, “Takeout is an important part of our business and is growing, especially on weekends, with 75 to 80 orders a month and an average check of $30 or more.” She says her takeout customers are part of a generation that grew up dining out on gourmet food and now they want the option to eat it at home. “Everything on the menu, even ice cream, is available for takeout because we want our customers to be able to enjoy the same choices that they have when they dine in with us,” says Susan. “And we feel that when people open the container our food needs to look as good as it does in the restaurant, therefore we don’t skimp on packaging.” Susan says she tested containers (which cost the restaurant $2.15 each) by taking all menu items home to ensure they held the proper temperature and didn’t leak.

“Our free iPhone and Android apps allow customers to order and pay for takeout on their smartphones. They like it because it’s easy to use and when they come in they can skip the line, going directly to the pickup counter.”

– Molly Catalano, director of communications, Five Guys, headquarters, LORTON, VA

To meet requests from fans of the restaurant working in the nearby financial district who don’t have time to have lunch there, La Mar Cebicheria Peruana, SAN FRANCISCO, CA, turns the bar into a “cafe” Monday through Friday, offering takeout box lunches with a choice of sandwich or salad, house-made chips, and a cookie for $8 to $15. Susan Hwang, office manager, says the restaurant sells as many as 50 box lunches a week. . . At Hermann’s, CADILLAC, MI, in order to encourage takeout during the slow winter months, customers are offered a 20% discount after 5pm Mondays through Thursdays. “It’s important to have the fewest limitations, so we offer the full menu. Chef/owner Hermann Suhs says the 40+ takeout orders each month are an important addition to the bottom line and the discount helps make takeout possible for busy families on a budget.

According to NRA data, consumers don’t appear to be resistant to technology playing a greater role in the restaurant experience, especially younger ones, for whom it’s becoming “an expectation.” Of adults surveyed, 39% said they’d be likely to use an electronic ordering system at a fullservice restaurant; 52% said they’d use an electronic payment system. Operators acknowledge that the use of “high-tech” items such as electronic menus and ordering/payment systems isn’t commonplace in the industry yet, but a majority of fullservice operators said electronic payment systems would become more popular; about 40% had the same opinion regarding electronic ordering systems and menus/wine lists on iPads/electronic tablets.

While the climate is favorable and Hudson feels there is still substantial room for technology integration, he underscores the importance of a well-thought-out plan and a clear vision before implementation of new technologies. “Operators need to consider the initial investment and the payback period along with how it will impact employees and the customer experience. In particular smaller operators should ensure that service contracts are robust and that they have good working relationships with suppliers – technology is almost a black box to many operators and not something they can fix on their own. Ultimately the challenge will be to remain high touch in a high tech environment. This was true 10 years ago when many technologies came online and will be true 10 years from now. Service is a hallmark of the restaurant experience and a greater reliance on technology doesn’t have to impact that negatively. In fact, if well thought out and executed, it can be good service delivered in another way,” says Hudson.

OPPORTUNITY The traditional way in which orders are taken aloud at the table is a quintessential scenario under which consumers might choose uniqueness over personal preference. Mitigating strategies might be making the ordering process less of a public event – more of a private interaction between server and guest and/or between guest and kiosk or a handheld device – or deflecting the emphasis by numbering menu items or wines. The research found that when given a recommendation from elsewhere, such as chef/server favorites or items labeled as house specials, many consumers felt less pressure to make different choices. Present options and welcome customization when possible – the more choices consumers have, even if the variations are slight, the more they can follow their preferences without copycatting.

CAUTION This effect isn’t in play at every table all the time. Just the same, providing options and the ability to craft a little variation can enable customers to stay true to themselves and increase their satisfaction.

Data Source: The Futures Company

Members of Lettuce Entertain You Enterprises’ Frequent Diner Club, launched 30 years ago, earn points for dollars spent at the company’s more than 70 locations. Participants can opt to automatically receive a $25 Dining Reward at 350-point increments or “bank” points to redeem annually from a catalog of premium rewards – ranging from steaks and cooking classes to a wine library, spa experiences, and London and Paris vacations. As an added incentive, Silver (spending $1,000 annually) and Gold ($2,500) tiers earn more: 1.25 points per dollar spent for Silver and 1.5 for Gold, who also receive priority reservation privileges at Lettuce restaurants. The company says the program was built to show appreciation to its best customers, and that it helps create a conversation with them – an important dialog, as Lettuce’s ultimate metric is guest satisfaction.

Cameron Mitchell, founder, Cameron Mitchell Restaurants, says, “I believe today’s employees still want the same things they always did – a great work environment, where they’re well compensated, and well treated.” He says wages for their hourly associates are very competitive and managers’ salaries are in the top quarter, with many in the top 10% compared to national industry standards. “Taking care of our people – giving them days off and helping them cover shifts, for example – enhances longevity, loyalty, and the sense that ‘I can make a career with this company.’” Cameron reports that 85% of management ranks are filled by the promotion of hourly associates.

Niki Leondakis, president/coo, Kimpton Hotels & Restaurants Group, (the highest-rated hospitality company on Fortune’s 2012 list of “100 Best Companies to Work For”), says employees have higher expectations for the companies they work for today. “Employees want to learn and grow, and add to their skill sets to increase their overall marketability.” She says they hire people for who they are, not just for what they’ve done. “We’re looking for people who have self-awareness and a commitment to their own growth, those who want to better themselves as human beings. In interviews we ask, ‘What are you working on developing in yourself?’” Sylvia Doggett-Jones, vp of culture and inclusion, Darden (also on the 2012 Fortune “100 Best Companies to Work For” list), says employees want meaningful work today. “They want to know about our sustainability efforts and what our goals are, how we contribute to their communities, and how we’re focusing on health and wellness for our guests – and they want to be involved.” Paul Bolles-Beaven, chief people officer, Union Square Hospitality Group, says “The integrity with which a company does business today – being ethical, a ‘good citizen’ – really appeals to the current workforce. Since people want to contribute and be creative, their engagement with their work – and with our company – is huge.”