1 of 5
Industry: Service
Our first application of organic business development.
Situation:
Having met success with their North Austin venue, the owners decided to open a sister South Austin restaurant.
Problem:
South Austin demographics are vastly different from North Austin. No research was conducted to understand the South Austin market.
The owners spent most of their initial budget on decor. The remainder alloted to advertising was spent without any underlying strategy or plan for getting customers.
Our Rationale:
Always up for a challenge and having some familiarity with the north location and its owners, Adbongo, Inc. saw this venue as an opportunity to fine tune our new organic business development model while helping our community and the economy thrive.
Also, the restaurant was connected to a large hotel which was almost always under-booked. While the restaurant alone did not have much monetary potential for Adbongo, combined with the hotel, it offered real possibilities for events, shows and a sustainable business relationship.
By the time the restaurant replied to our offer to help, the situation was bleak, and they were quite desperate.
We decided to move forward. We crafted a holistic contract with a back-end payoff based on performance. This contract was based on a net increase in profits and was broken into phases to make it really comfortable for the owners to sign. The contract allowed that we would only move to Phase 2 of the plan if the owners were satsified with the results of Phase 1, and it only required that they pay if we brought in business above their previous margins.
Our intent was to first sign the restaurant and then to get the hotel on board.
Assumptions:
1. The hotel would sign on.
2. The owners would not quit.
Initial SWOT (Strengths, Weaknesses, Opportunities, Threats) Analysis:
Strengths of the Restaurant:
- Great Food
- Live music
- Highway access
- Cool bar
- Adjoining hotel
Weaknesses:
- Operations/staff
- Lack of communication strategy
- Poor understanding of *South Austin demographics
- Poor visibility of the location (inadequate signage)
*Note: The “Keep Austin Weird” mantra describes this demographic
Opportunities:
Gateway to the adjoining hotel’s business
Performance/Event potential
Potential to be a highway-visible South Austin landmark (with proper signage and publicity)
Threats:
No marketing plan
No strong point of differentiation
Most of extra cash spent on poor ROI (return on investment)
Application of “organic business development”:
Upon signing on with the restaurant, we immediately began housecleaning perceived weaknesses of the restaurant. We provided multiple consultants to talk to the owners about their varied perceptions of what could be improved.
Best practices such as suggestion boxes and better employee hygiene were simple steps that needed to be taken. Some staff needed to be fired, and we even provided some of our own as replacements.
We researched customers’ feedback regarding food, suggested some modifications, and designed a new menu.
We began a discussion with staff and owners about an underlying brand communication strategy that would resonate with the South Austin location demographics. We came up with a space cowboy theme (before, it was simply “cowboy”).
We booked some exciting musical acts to improve morale, profit, and demographic perception of the venue.
During rush hour on Friday afternoons, we placed signs by a live longhorn cow which was saddled and often carrying children riders right by the major freeway (I-35) as a guerrilla tactic to address the poor highway visbility.
Thank you, Travis County Cowboy Church and Reverend Barry Chin for making this stunt possible week after week!
We threw a Texas Independence Day event in the first week of our contract. We packed the house and showcased multiple acts.
We implemented a “Bloody Mary Bar” concept to increase bar sales which have less associated costs and higher profits compared to food sales.
We began communicating with the hotel in regards to a more symbiotic relationship with the restaurant and provided the hotel owner with a proposal that would turn the corner of Oltorf & I-35 into a South Austin landmark.
These points represent a short synopsis; we’re only skimming the surface of the story and our efforts to help. All of the above-mentioned tasks were completed with a marketing budget of zero.
What we should have done:
Focused more on the threats.
Why we did not:
Money. The owners did not have the cash to pay us for ammount of work that a marketing plan would require, so we tried to generate it for them by concentrating on weaknesses and getting the hotel’s business.
Trust. We felt we had to generate trust by providing tangible results right off the bat. This was the rationale for the immediate Texas Independence Day party.
So, what happened?
The owners were a husband/wife team. The stress of the situation resulted in the wife (manager) being “let go” a few weeks into our contract. The person who asked us to help left the situation.
Upon meeting with the hotel owner, he indicated that he would like to build art installations in front to bring more attention to the building from the highway, as we had recommended in our proposal.
Great. In retrospect, we probably had a sale at this stage in the game. However, the hotel owner wanted to build costly metal sculptures, with a low budget. We wanted to build found object (scrap) art that would cater to the locations demographic and allow us to make some money with his budget. Impasse.
The hotel aspect of our plan looked bleak. The hotel owner wanted to play ball on terms that would not benefit us and would not allow us to help them, ourselves, or the restaurant. Furthermore, the hotel staff were vegetarians and were somewhat offended by the steakhouse connected to them.
When we reviewed the sales for the month with the owner (husband), sales had increased.
Awesome, payday the first month!
However, he made the point that he would not be able to pay for food or operating costs if he allocated any of the increase to us as he was deep in the hole.
Knowing that these things take time, we decided to proceed to month two unpaid so that he could “catch up.”
You can probably see where this story is going. This happened for two more months. From this experience, we learned we need to base arrangements on gross rather than net profits.
At our last meeting with the owner, he indicated he really wanted to give up. Obviously, if a business is failing and the owner has quit mentality instead of the can-do attitude we prefer, then it’s time to move on.
Lessons:
- We now craft our contracts based on gross instead of net sales.
- Our philanthropic approach is more suited for products, ideas, or services that will benefit humanity.
- We learned that we are very good at and love producing shows.
- There has to be a front cost for the work. Otherwise, the clients may not value it.
- We have a very high pain threshold and are not constrained by the monetary limitations of our clients.
Read case study 2 next week…….
