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.
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.
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.
On Sunday I decided to treat myself and check out a place my foodie brother-in-law has been raving about: Matsuhisa in Beverley Hills voted 100 best restauants in America by Zagat. The place is supposely frequented by Hollywood types and seen as catering to them. But I do believe the rich and famous also could know good sushi. They are just like us, no different.
If you know me recently I am wearing shorts and my running top, I walked into this fancy place and asked for a table. I was a bit intimidated by how underdressed I was, but what they heck, no one knows me here. I was extremely lucky since there was only one sushi bar spot open in the huge dinning area, the place was packed.
First thing I noticed was that the sushi bar was only about 12 foot long but had 6 sushi chefs behind it, it’s a very traditional Japanese way of setup. You will get 1-on-1 personal attention at this bar. I sat down and saw that they had omakase, which is checf’s choice of $80, $100, $120. I imediately asked the chef whether they had mirugai and monkfish liver. It’s my way of gauging whether a sushi place is a special place. They had it! Now I knew I arrived at the right place! I ordered the $80 chef’s choice, order up a cold sake and the journey began! If you can’t wait start with the Flickr slideshow!
A little background: I was told once that picking chef’s choice was your way of honoring a sushi chef by placing your faith on your chef’s to use his artistic talents to pick the best fish of the day and serve you the best meal possible.
If you decide to go, keep in mind that it will be expensive, open up your wallet and enjoy the interaction with the chef. Go around 9:30 and buy the chef some sake to share after 10:00pm (that’s the policy, no drinking for the chef until after 10). After I was done with my meal I felt my entire Santa Monica business trip was worthwhile, even though this meal will not be reimbursed. This was the best sushi meal I’ve had outside of the Tokyo fish market 7:00am sushi breakfast.
First dish was my recently favorite: monkfish liver It’s like foie gras but better, lighter, taste fresher.
Scallops thinly sliced over cucumber, string of squid, touch of hot sauce
Beautiful arrangement of fresh greens, tuna, spanish makerel over a grated daikon sauce
fried oyster in nest of fried taro over shiso leave and lettuce, fresh paper thin daikon
Chilean Sea Bass baked in sweet soy sauce with plumb on the side wraped in some kind of leaf
Torro one seared one raw
Simple yet delightfully crunchy mirugai nigiri, anago
Meal ended with a molten chocolate cake, 2 bottles of cold sake and a happy Tony and a promise to chef Ken that I will be back again one day.
Tony Tam 