Restaurant Industry Insider 2/27/2011

This week, I was fortunate to have a great conversation with the General Manager of one of the premier restaurants in my city.  During our conversation, the topic of online reviews came up.  She mentioned how much the negative reviews bother her.  This confused me because I had spent hours reading these same reviews and found them to be overwhelmingly positive.  She also mentioned that the negative reviews on sites like Yelp began before they even served their first meal.

As social networking has become a part of our lives, these sites continue to grow in influence.  Gone are the days where a trusted local critic was the main source of information on a new eatery.  Today, anyone with an internet connection can write a review of a restaurant without ever dining there.  While some owners have taken it upon themselves to reply to such comments, others feel it is not their role to do so.  Fortunately, the same ingenuity that brought us these sites is working on ways to improve them.  This is the focus of this week’s Restaurant Industry Insider.

Yelp has been accused of extorting small businesses in the past to help cover up bad reviews.  A new site named TopDish hopes to provide more accurate reviews by allowing for you to input more specific criteria.  The site will also add more weight to the reviews of people with similar tastes to yours.  It is currently in beta testing, but hopes to launch soon.

Zagat’s is also hoping to distinguish itself by allowing the identities of its reviewers to be known.  Long considered the definitive source for reviews, Zagat’s is aggressively trying to stay ahead of the curve.  They have also announced deals with foursquare and foodspotting while greatly expanding their online content.

Another site has taken a different approach in their attempt to build on the foursquare platform. allows diners to receive a text message when they check into a restaurant on foursquare.  This message will return the current health inspection score within one minute.  It is currently only in use in New York City, but expansion would seem imminent.

OpenTable has become a go to source for reservations, but also reviews.  I have worked at a restaurant that uses the system for years, but only recently joined myself.  I was amazed at the number of restaurants that are included.  Apparently this is not just anecdotal.  Not only has OpenTable been adding restaurants and users, they recently acquired their top European competitor.

While most of their revenue still comes from the fees charged to restaurants to facilitate reservations, they are making aggressive moves into the coupon business currently dominated by Groupon.  OpenTable has a huge advantage in this arena because they don’t possess the stigma that restaurant owners often attach to Groupon as lowering the value of their menu.  They also carry an impressive built in database of information on consumer dining habits allowing the potential for highly focused marketing campaigns.  OpenTable has aggressively positioned themselves to take on sites like Yelp and Groupon in a way that no other site can match.

With the tech news out of the way, here are your weekly financial news headlines from around the industry:

The overall number of restaurants in the US has dropped in the last year.

Morton’s is up

Papa John’s is up

Sysco is declaring a dividend

Cracker Barrel is predicting lower than expected earnings in 2011.

Texas Roadhouse increases profits, but does not meet analyst’s expectations.

This week there were also a large number of legislative highlights from around the nation;

Virginia recently passed a bill allowing for “corkage” that was endorsed by the local restaurant association.

Washington is debating narrowing the definition of “service animals.”

Restaurants are again warned of bogus health inspectors.

Fort Smith, AR is gearing up to fight the “restaurant tax.”

Minnesota is debating legislation to end frivolous lawsuits against restaurants.

That wraps up this week’s headlines.  Keep an eye on this site for a series focusing on how to better read company’s quarterly reports soon.  This should make understanding the financial headlines far easier.  I am also working on a series addressing Groupon and the restaurant industry.  My focus will on the economic impacts and how to know if it is right for your business.  This week you will also find a review of the blog that all restaurant operators should be reading.  Well the blog other than this one that all restaurant operators should be reading.  The easiest way to stay up to date on all of the posts on this blog and throughout The Hospitality Formula Network is to become a fan on Facebook.

Tips²: Tips For Improving Your Tips, the new book from the author of The Manager’s Office, teaches the skills of exceptional servers that will increase customer satisfaction and dramatically improve restaurant sales.  This book is more than a server training manual.  It is the secret to teaching your staff to enjoy selling and give your guests the experience that will create raving fans.  To learn more about the book, visit  Use the coupon code “MANAGER” to save 20% at the checkout.

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About David Hayden

David Hayden is a restaurant marketing and training consultant based in Kansas City, MO. He writes a series of 9 blogs collectively known as The Hospitality Formula Network and is the author of "Tips2: Tips For Improving Your Tips" and "Building Your Brand With Facebook"

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