Successful operators are always on the lookout for new opportunities to establish a unique place in the market. Launching a new menu item or service offering carries a risk, however. If it’s not distinctive enough, if it doesn’t appeal to your target guest, if you’re not able to execute it well, you may damage your brand and your bottom line.
An opportunity analysis helps minimize the risk. It helps validate the viability of your idea and your ability to make it happen—before you spend inordinate time and resources to launch it. While there are many ways to evaluate an opportunity, these three steps are the foundation for any effective analysis.
Look at the competition
Begin with a competitive analysis. Focus on businesses within a one- to 15-mile radius of your operation. The circle you draw should be based on the density of the competition and the population—the higher the density, the smaller the circle. (Businesses that are true destinations or resort locations are exceptions to this rule.)
Once you’ve determined your circle, zero in on those businesses that are direct competitors for your guests. It’s not just restaurants you’re concerned with, it’s anywhere consumers might spend their foodservice dollars—including B&I cafeterias, C-stores, supermarkets and delivery services.
Keep your analysis simple. First, use the Internet to review competitors’ menus, service offerings and prices. Keep an eye out for things that seem similar to the initiative you have in mind. As you narrow down the list, you’ll want to visit sites in person as a guest to help you better identify your direct competitors. This is the critical first step in defining the battleground on which you’ll fight for market share.
Identify your target audience
A market analysis is the next step. The goal here is to better understand your target guest and the likelihood they will embrace your initiative. Focusing on the population within your already defined circle, you’ll want to identify demographic factors as age, sex and income. The U.S. Census Bureau is an excellent resource for this information.
You can use this demographic data to help gauge the likely reception to new products and services. Do they align with the interests and lifestyles of your target audience? Are they priced appropriately? Do they appeal to the predominant generational groups in your target area? While no generation is black-and-white in its preferences, there are specific tendencies that should be considered to help you further scale your opportunity.
Assess Your Capabilities
Once you have a clear understanding of your market and target audience, it’s time to look inward. Operators often start with this step, but the effort is wasted if the competition is already nimbly executing your idea or there is no guest preference for such an initiative.
Let’s take the example of an operator who would like to launch a mobile application allowing guests to pre-order and pre-pay for takeout. Assessing capabilities in this case would entail analyzing whether the front and back of the house are really ready to support such a plan.
Operators may think they’re good to go if they simply lock down packaging and perhaps connectivity to a point-of-sale system. But a truly effective analysis will dig into far more details. Answering these sample questions, for example, will give you a broader, more accurate perspective on your ability to execute this idea well.
Back of the House (BOH)
- What should my menu offering be based on the ability of product to travel well?
- How would the offering impact my print and online takeout menu?
- Where would I store this product at the proper temperature in my kitchen?
Front of House (FOH)
- Who would be responsible for putting the order together?
- Where would takeout orders be placed as the operator awaits customer pickup?
- Who would verify customer phone orders to release the takeout?
- What pre-marketing needs to occur to launch this initiative?
- What staff training is necessary to support the initiative?
- How would this impact employees in terms of time management, bar involvement and tips?
- How would we ensure employee buy-in to maximize the odds of success?
Armed with the findings from your analyses of the competition, the market and your own capabilities, you’ll be able to easily determine these key questions:
- Is this strategy sufficiently unique to drive sales?
- Will my target guest likely choose my offering?
- Am I able to execute this initiative?
In a strong competitive market with razor-thin margins, “knowing before you go” can make all the difference in success.