After 7 years, my investment in a sushi restaurant has ended with a buy out from the primary investor/owner. My best friend, chef/owner wanted to keep running the restaurant, but it no longer fit my long term investment of time and money.
What I learned from this experience
Running a restaurant is very difficult because of the long hours, low margins, a lot of temporary/short term staff and unpredictability of the enviroment around you.
Going into with a friend, much less your best friend is great when things are going well, but fraud(sp?) with challenges when money and different priorities are at odds with each other.
Getting into a LLC without legal respresentation to write up clauses for clear exits makes exiting the LLC messy and non-deterministic and will tear apart any friendship.
Restaurants can be profitable, but not a huge money maker and it’s usually a labor of love.
My friend wants to continue running the restaurant after buying out all 3 investors, I think he will do well for himself.
Yelp is a marketplace connecting small business owners with their customers.
New customers want to find small businesses (restaurants, plumbers, dentists) who are near them, with high trustworthy user reviews and matches their needs. For restaurants, it might be the type of cuisine, a particular food item, atmosphere. For a dentist, it might be a type of dental speciality, whether they are friendly, and the type of insurance they accept.
Yelp solves the new customer use case very well.
If a business is successful in keeping these new customers coming back, why would a loyal customer visit Yelp again? There is no reason for regular customers to go on Yelp for the business that the use very frequently. This is where Yelp has missed a huge opportunity to connect the most loyal customers with the business owner.
Background
As a business owner these are the activities that a user interacts with the business on Yelp.
Mobile Check-ins : A customer is inside the business and wants to tell the owners : “Hey I’m here”
Directions & Map : A customer is looking up directions to the business
Deals Sold : A customer buys a deal, prepaid and will come in very soon.
Messages : A customer sense a messages to the business owner
Calls to Your Business : A phone call is made
Clicks to your website : Click to check out the website
Online Reservations : Made a reservation using Yelp Reservations
Yelp Online Orders : Order food/ items to be delivered or picked up
Users uploaded Photos : The customer was at the business and took a photo
Yelp bookmarks : The potential customer bookmark with intent to go
Call To Action Clicks : The button that the business wants a customer to click on, and it actually happens.
These activities are cool to look at, but only the ‘Mobile check in’ applies to loyal customers
Loyal Customers
If I were a loyal customer of a restaurant, I would like to choose to receive the following. Deals for me as a loyal customer, special occasion deals (birthdays, my anniversary). New menu updates. Maybe a direct line to the owner on my favorite dishes, and also maybe some comments on dishes I don’t like. A way to directly message with the chef.
For a dentist or optometrist, I would like a way to message and make appointments easily. A way for them to remind me of appointments that I need to schedule. Maybe a way for me to refer my friends and I get a small kick back?
For my favorite local bookstore, let me subscribe to their email list easily?
I have partnered with my best friend from middle school Stanley Chan (bio) to open up a modern sushi restaurant, I Privé, in downtown Burlingame in 2014. We have been in business for little over 14 months now.
The restaurant serves innovative Japanese food that combines flavor, texture and sauces to bring “not just another sushi restaurant” to the Bay Area. Stanley has run a very successful restaurant in Castro Valley for over 12 years, I Sushi (Yelp) and his food deserves a much bigger stage.
This week, I’m very happy to tell everyone that after many months of preparation, we are ready to bring ramen to the menu!
Pork Chashu Ramen – Served with slices of Chashu pork, soft-boiled egg, bean sprouts, bamboo shoot, corn, veggies, and all deliciously prepared with our special Tonkatsu broth
Tonkatsu Scallop Ramen Served with seared whole scallop, soft-boiled egg, bean sprouts, bamboo shoot, corn, veggies, and all deliciously prepared with special Tonkatsu broth.
If you are in the Bay Area, come by and check us out, right off of the Burlingame Caltrain station! http://iprivesake.com/
If you are curious about what I’ve learned along the way, I have written about my perspective of the restaurant business from a technologist point of view. Two of my blog post details what it’s like from a small business dealing with the marketing tools that are out there.
I am writing to you as a small business owner as well as a loyal foodie using your app to find great places to eat. I have rated over 100 small businesses, most restaurants. I manage the digital infrastructure of 2 restaurants in the Bay Area and the Yelp for Business Owner pages.
Everyone has a favorite restaurant, but the owner of that restaurant does not have a way to engage with their most loyal customers even if the customers really want to hear from the restaurant owner. (There are ways to do private messaging, but that is one on one). Let’s say my favorite local French restaurant is celebrating their 5th year anniversary and wanted to offer their loyal customers a special dinner, or the restaurant has some new dishes that they want to let their customers know about.
As a restaurant owner, I am able to see an anonymous view of my customers’ activity. I see ‘someone’ has viewed a map, made a reservation or looked at some photos. These are valuable connections for me. I would love to offer these customers a way to connect with my business, if they chose to. I’m not planning to spam them, I want to engage with them. The most valuable part of my business is repeat customers. I want to build up a long term connection with these customers.
Yelp can be so much more. Yelp can be the platform for small businesses to engage with their most loyal customers. These customers are not just someone who ‘liked’ their page, these are real customers who came to the restaurant. This is a large missed opportunity for Yelp as a business and a missed opportunity for small businesses who love the Yelp platform.
I’m currently spending about $200 a month on Facebook to reach people who have liked my page.
We have about 3,000+ people who have liked the page, I don’t even know if they are customers
When I post something on Facebook, they restrict the post to only less than 10% of people who have liked the page
I have pay a fee for ‘Boost’ the post to all of the people who have liked the page
Yelp can have all of this $200 a month if
You make a new way for my customers to opt in to messages from me
You can restrict # of posts per week/month
Make it easy for my customers to tell me if my messages as relevant or not
Charge me more if my post are not relevant in order to incentivize the right behavior
I’ll pay for pageview and click through and engagement, I’ll write a check for $200 / month.
I would rather pay you than Facebook because your users are my customers
Thank you
Tony T. – Owner of I Privé restaurant in Burlingame
(invite me to your hack week, see my resume for my background. I don’t want to work for you, just want your product to succeed)
In helping my friend’s modern Japanese I Privé raise awareness, we decided to try to pay for marketing on Facebook, Yelp, Yahoo, Google. Here is what I’ve learned about the effectiveness of these companies. Keep in mind that is this my owner personal experience and not based on a large marketing budget and only apply to a small restaurant.
When we think about marketing, it’s not just about driving people to visit the restaurant, it’s also about building a relationship over the long term so that we can communicate with current and potential customers. The return on investment focused on long term relationship as well as sustained value.
Yelp
Yelp is the first platform most people think of when they want to find a new restaurant. When we started the restaurant, we agreed that building a good reputation on Yelp is the primary focus. To do that, we have to focus on awesome food and great service and the Yelp ratings should take care of itself. We also agreed that we have to be listening and responding to any negative feedback and act on them.
We did pay Yelp for advertising in one of his previous restaurants and noted that the ROI for paying removing competitor ads, hosting a video, pay for view ads for similar restaurants was about $3 / click to our page. We thought that was not worth paying for. The main reason was that for a new restaurant, we wanted to build a good reputation on Yelp rather than just driving traffic. So we decided to pay $0 on Yelp but focused a lot of time responding to customer.
We do love Yelp’s transactional business model. The integration with Locu for $20/ month. The integration with online reservation with seatme.com for $99/month. These services are well worth the money. I did an analysis of Opentable, the cost would have been about 8 times the rate of seatme.com. We had the luxury of too many people wanting to get in, so we didn’t need the exposure of Opentable for immediate term traffic.
Future: We spend 50% our time focused on paying attention to Yelp and responding to our customers. We would love to integrate with Eat24 as well once the pricing model looks better.
Yahoo
When we looked at our referral data for our website http://iprivesake.com/, Yahoo and Bing combined to have < 1% of referral. We decided to first focused on improving our SEO and make sure when users looked for ‘i prive’ they would find us. We worked on this for 3 months, even thought the current search for ‘i prive’ still has a suggestion for ‘in private’, our website appears to be #2 in the search result.
At the 3rd month of opening, we decided to spend buying native ads on Yahoo Gemini. The Gemini ads appear on mobile, desktop and search on yahoo.com and other *.yahoo.com sites. To my surprise, we saw a 0.07% click through rate. While that doesn’t sound like a lot, the CPC was $0.48 which is almost 6 times better than Yelp. (While the CPC on Yelp is higher, I do agree the quality of the acquisition is way better on Yelp because people are looking to each that day or that week)
I also love the Yelp check in deals, because we get to see how many people checked in for the deal and how many redeemed.
Future: We decided to continue to buy ads on Yahoo in order to build brand awareness and expand our reach. There are some drawbacks in the granularity of the demographics and geolocations we can target to. It’s at the DMA level and not on the city level.
Google
We bought Google Ad words ads which would show our ads on affiliates and on Google search for certain keywords. Very surprisingly, the Google Ad Words was not very cost effective. We had a CPC of almost $1.11. We were getting 40% of our web traffic from google.com, without paying them anything. They did a great job of refreshing their index and our SEO worked really well.
Future: For restaurants, Google Ad Words would drive clicks, but I cannot retain a long term relationship with the customers after that first click. We decided to stop and just pay attention to continue to improve our SEO and also the integration with Google+ into the search results is effective for coupon promotions.
Facebook
I am not a personal user of Facebook, but I was surprised at how well Facebook marketing was. For a CPC of about $0.77, I’m able to get a Facebook like. From that point on, I’m able to market to about 10% of the audience via free news feed. Then I can boost my feed post to about 4,000 people for about $50.00. This is great to keep people engage on a weekly basis as well as do one time promotions of coupons.
Future: The bulk of marketing dollars will go into gaining Facebook likes for the next 6 months as well as posting photos to keep users engaged. Also it seems like people don’t really mind when we post about 1 photo a day. It’s not like email spam, because you can ignore the news feed posts.
I Privé Facebook
Mailchimp
From the beginning, my vision is to build a relationship with customers. Customers who subscribed to our email list will only get 1 email per month, never more than that. We get almost 250% better open rates than the industry norm. It’s a great way to build a long term communication channel with our customers. Email coupon campaigns have proven to be hugely effective.
Future: I think we continue to keep up our part of the bargain, never spam our customers and we built the email list. We are growing about 50% a month here, so it’s worth to keep on investing.
Conclusion
What surprised me is how ineffective Google campaigns are. Facebook demographic targeting, the real time feedback about how effective each ad is really has pushed Facebook forward and convinced me to open up most of our marketing budget. Yelp’s checkin deals are effective as well for restaurants. Ultimately, we want to own the relationship with our customers, so the most valuable marketing is our email database. And the surprising dark horse has been Yahoo Gemini ads.
Tony Tam 