The Year of Living Dangerously

How one restaurant persevered through the crucial first 12 months in business

Capital $ 59,102.00   Capital Contributions 247,361.41   Net Income/<Loss> <35,952.43>   Total Capital   $270,510.98 Total Liabilities and Capital   $304,754.84

Helpful Advice
BE asked two experts, Earl E. Allen Jr., a Houston-based CPA, and Mark Hanna of Customer First, a restaurant market research and public relations organization, also in Houston, to review Fusion Café’s performance and recommend strategies for the future.
Their main recommendations:
Change the price structure. “They are at the lower end as it relates to price,” says Allen. “Their margins are very tight and they have not raised prices since they opened, in spite of the fact that their vendors have raised prices.”

Just a few days after this recommendation, the owners took Allen’s advice and raised the prices across the board.

Examine expansion plans carefully. Hanna thinks that there could be problems with rapid expansion. “The big danger in opening a second location is the fear that you might take away business from the original [location],” he says. “The proximity of the two restaurants is limiting. They’re going after a nighttime crowd which they don’t have at the original Fusion, and they need to be careful with that.” Hanna notes that the new restaurant will need to have “more than just good food. People go to restaurants for the entertainment value. The place has to make you feel good. They want ambience, which is what the original Fusion has.”

Allen cautions against stretching their management talent with the opening of the new café. “Can Greg and Chris handle the management tasks of both locations?” he asks. “They need to make sure that they can keep the consistency of the food and the management.”

Expand the customer base. Allen suggests expanding the customer base to ensure steady traffic at the new Fusion Café. “What they don’t want to do is to pull customers from the original location,” he says. “To accomplish this, they need to do a major advertising campaign. The food business in Houston is extremely competitive, so they will need to spend at least $15,000 to $20,000 for that media campaign.”

What is Fusion Café doing right?
Hanna stressed that Fusion’s owners know who their customers are. “They’ve done a lot of comment cards and they are very much service-oriented,” he says. “Overall, they do a great job, and that [providing good service] is a major obstacle for most restaurants.”

He also states, “[The partners at Fusion] have done an incredible job of marketing themselves. There has been a lot of publicity. Their products are totally consistent. They have terrific food one week and it’s just as good the next week. Consistency of food is a big problem for restaurants; it’s good one week and the next week it’s not, and that runs customers away.”

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