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Time for Southland restaurant owner to cut losses, consultant says

Delightful Crepes Cafe in Long Beach makes a small profit. But the larger Cerritos location is having a tough time and should be closed. The owner should also reconsider his coupon offers.

March 28, 2011|By Cyndia Zwahlen
  • Tom Mulvihill at the Delightful Crepes Cafe in Long Beach. The location makes a slight profit, but his other restaurant hasnt done so well. A consultants suggestions include rethinking his use of coupons.
Tom Mulvihill at the Delightful Crepes Cafe in Long Beach. The location… (Anne Cusack, Los Angeles…)

Making a family-owned restaurant a success is notoriously difficult.

Tom Mulvihill has two of them.

His Delightful Crepes Cafe in Long Beach makes a small profit. His larger Cerritos location, which sells Thai food along with sweet and savory crepes, is having a tough time.

Like many cash-strapped small-business owners, he's working punishing hours just to survive and has little time to come up with new strategies. Currently, his marketing is mostly limited to generous coupon offers.

"There's market share out there," Mulvihill said. "If we can get a piece of the market, we can stay afloat and everybody keeps their jobs. But is it going to happen fast enough?"

Restaurant consultant John T. Self, a professor at the Collins College of Hospitality Management at Cal Poly Pomona and a former restaurant owner, said there was no easy path for troubled restaurants, especially in the current economy.

Mulvihill has "a great personality," Self said, which is key for a restaurant manager. But he needs to find more time to focus on the business side of the operation.

He recommended the following for the business, which Mulvihill owns with his wife, Samone.

•Negotiate out of the lease on the slower restaurant.

Self suggested that Mulvihill try to make a deal in which he trades the furniture, fixtures and equipment in the Cerritos location for the remaining lease payments.

It's a tough step for a restaurant owner "to walk away from their baby, especially when you know you put in X-amount of dollars," the consultant said. But closing voluntarily would be a far better outcome than a bankruptcy filing down the road.

"In today's unsettled times, nothing is off the table," Self said.

•Wean off coupons.

"They are fine for a one-shot deal, as long as you really think about how is this helping your business long term," Self said. "That's what it's about … not to spike your sales one day."

Frequent use of coupons can do more harm than good.

"Coupons can be an illusion," Self said. "Sales do go up, but the reality may be that the bottom line has actually gotten worse."

They also might be sending the wrong message to customers. "If people get used to seeing coupons every week, why in the world would you go when there is not a coupon?" he asked.

Finally, a correctly targeted coupon could encourage customers to buy something outside the scope of the deal. Maybe something with a high profit margin. "Are they also getting a glass of wine?" Self asked.

•Begin tracking sales and costs immediately.

"It is crucial to know how your business is doing so that you can make informed decisions, otherwise you are just guessing," Self said

If an accountant is a luxury, he said, use a small-business accounting software package. "This must be viewed as a necessity that is part of the everyday routine, not done only when you have the time," the consultant said.

•Drop breakfast service.

The 3-year-old Long Beach location opens at 8 a.m., but morning sales are typically slow. "Since 8 a.m. to 11 a.m. isn't productive, refocus your hours," Self suggested.

Becoming more of a traditional lunch-and-dinner operation could save money.

•Find time to do strategic planning.

Delegate some tasks so there is time to slow down, sit back and think about the next week rather than, for example, running out to get more napkins.

"That is crisis management to the nth degree, and it doesn't get you ahead," the consultant said.

If your small business could benefit from a free Business Makeover in the Los Angeles Times, please email smallbiz@latimes.com.

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