Maximize the Value of Your Restaurants and Bars with the Right Product , Positioning , Pricing , Processes and People
BY BOB BOUGHNER & STEVE GALLAWAY
I n today ’ s business environment , casino operators must find ways to enhance and maximize the appeal and gross operating income of their food and beverage venues . An effective food and beverage strategy should not only attract and retain gamers , but generate profit through proper pricing and planning .
Las Vegas Strip operators have clearly demonstrated how profit can be gleaned from F & B operations . Bars and restaurants today are a significant generator of EBITDA ( earnings before interest , taxes , depreciation and amortization ) for many Vegas resorts . Outside Vegas , many operators have discovered how well-run restaurants and bars with quality food offerings can benefit the bottom line .
While regional casinos differ substantially from those on the Strip , they can apply the same practices to turn a profit from dining .
THE PRODUCT
To optimize guest count and the restaurant ’ s financial contribution , you must first determine the appropriate product . Too often , casinos add certain venues just because their competitors have them . In the past , the perfect formula for any casino included a coffee shop ( not Starbucks , but your 24-hour café ), a buffet , a steakhouse , and one or more quick-serve outlets .
But this formula may not be right for your casino . Even if it is , you must determine the ideal positioning for each of those venues . Should the steakhouse be operated in-house or leased ? What grade beef should be provided ? Such choices can have a significant impact on costs , and some casinos cater to enough premium customers that offering prime steaks at the premium steakhouse is appropriate . For most , however , it ’ s likely that spending extra money on prime beef doesn ’ t yield incremental benefit to the operation .
Depending on the casino ’ s proximity to the surrounding population , the best choice may be to convert the steakhouse into a branded mid-market operation such as Texas Longhorn or Outback . These products can attract people as stand-alone businesses . And the cost of goods is generally lower . Lower-cost steaks can yield incremental profit to the overall operation .
Buffets have long been a means of attracting people to a casino through price-driven meals . But buffets are usually inefficient and result in large amounts of food waste . Often casino management believes a buffet is necessary ; they think the patrons love it . But are those patrons gamers or families coming in to enjoy the low price ? Also , while customers may say they love the buffet , perhaps there ’ s an alternative solution they would enjoy even more , one that would turn a profit .
Only by evaluating the customer base , speaking with guests and evaluating the competition can the right product be determined . Buffets require a compelling environment and quality food in order to differentiate themselves from the competition . In regional markets , differentiation of the buffet may not be necessary , as the consumer may view it as more of a commoditized experience : quantity and low price .
O THE POSITIONING
nce you ’ ve decided the suite of food offerings , the next question is : How should they be positioned ? All businesses compete using one of two basic strategies : a pricing strategy or a differentiation strategy .
Businesses that compete on price strive to reduce the costs of production to deliver a product or service at a lower price than the competition . This strategy works well for commodities in which the products are undifferentiated . Wheat and oil are commodities , and producers compete solely on price . Products that are clearly differentiated , through features or other unique elements , can command a higher price .
Some products and services can compete using either strategy . An example in manufacturing would be automobile products . A Kia automobile delivers basic transportation at a low price . A Mercedes Benz delivers the same basic function , but the product is differentiated so the manufacturer can command a much higher price . Kia
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