Tag Archives: Consulting

Looking For The Truffles

This Foodie Friday I’m going to run the risk that I’m going to burst a balloon. If you received some truffle oil as a holiday gift, the odds are overwhelming that there isn’t any truffle in your truffle oil. That’s right: much like true extra virgin olive oil, which is generally often neither “virgin” nor “olive oil,” truffle oil is generally some sort of oil infused with something called 2,4-dithiapentane. Sounds yummy, no? As Tony Bourdain said, truffle oil is “not even food! About as edible as Astroglide and made out of the same material.”

Norcia black truffles.

Norcia black truffles. (Photo credit: Wikipedia)

I should not really be the real bearer of bad news here. As far back as 2003, publications were reporting on this and the NY Times did a piece last September on it that was widely read in foodie circles. You might think I’m going to use this as the jumping off point for another rant about deceptive advertising, and as appealing a thought as that is, I’m heading in another direction. Much like the “Where’s The Beef” question, seeing truffle oil on a grocery shelf (heck, even Walmart sells EVOO with “truffle aroma”) makes me wonder where exactly the truffles are. Real truffles in oil don’t last long, you know, so they’re probably not in things that sit on a shelf.

Come to think of it, vanilla extract has the same issue. Much of what you see in the stores isn’t real vanilla and there’s no vanilla in most vanilla things, but vanillin, a chemical compound. Unlike truffles, you probably can buy the real thing at your local store but it’s not 98 cents a bottle, believe me.

What does this have to do with your business, other than making you feel as you did when you found out there isn’t a Santa Claus or Easter Bunny? More than you’d think, actually. When you put up a sign or create a website that announces you as a service provider of some sort, people have an expectation that you can, in fact, provide said service. When you advertise a product, customers expect that the product will do what you say it will. They don’t want to have to look for the truffles nor do they expect that what they’ll find will be fake or something that mimics the real thing. If you’re selling your expertise, have some, even if it’s narrow. I’m surprised sometimes when I speak with people who claim to know something about a piece of this crazy business world how little they actually do know. They might have read a book and can fake their competence, but there really isn’t a truffle there.

A vanilla-flavored extract isn’t the same as vanilla extract. Truffle flavored oil assuredly has no truffles. Make sure there is validity in whatever you’re claiming to be or much like olive oil brands and truffle oil distributors are being sued (there were “four class-action lawsuits filed in New York and California accusing Trader Joe’s, Urbani Truffles, Sabatino and Monini of fraud of ‘false, misleading, and deceptive misbranding’ of its truffle oil products'” you’re heading for big trouble.

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Filed under Consulting, food, Huh?

Want Fries With That?

Foodie Friday at last and this week the topic is, once again, fries. I see that Taco Bell has joined damn near every other quick-service restaurant and is now offering fries. Not just any fries, though. Nacho fries, which I gather are fries with a bit of Mexican seasoning and some nacho cheese on the side. Sounds good, right? Well, maybe, but not from a business perspective and let me tell you why (and how it might just apply to your business too!).

English: Taco Bell crunchy shell beef tacos

(Photo credit: Wikipedia)

When I think of Taco Bell (or any other taco chain), fries don’t enter into the equation. I realize that a few of Taco Bell’s direct competitors have fries (more on that in a second) as does every burger chain and chicken joint. Do you really think that diluting the brand is worth capturing those people who MUST have some fries with the burrito?

Moreover, Taco Bell has actually done a great job in positioning itself as having healthy alternatives and, in fact, has some of the best options for healthy eating in all of fast food. While they don’t tout themselves as being healthy (they respect that much of what’s on their menu isn’t and know it would be inauthentic to claim to be), the fact is that they can now offer “choice” while competing against Chipotle and other “healthier” alternatives.

The chain has also done a great job in coming up with weird menu items that are true to the brand. While I’m not rushing out to grab a naked egg taco or a firecracker burrito, those items are true to the brand identity. Even the California Loaded Fries burrito rings true while just plain fries don’t. A better idea? How about offering carne asada fries, which are common in Southern California and taking them nationally? Sort of a Mexican version of poutine, Taco Bell could have stayed true to their brand while offering something they believed was lacking in their menu. Del Taco, a SoCal competitor, offers chili fries. Here is a chance to one-up them and take a regional specialty into new areas.

Ask yourself this. Would you head to Burger King for a taco? Maybe for a breakfast burrito but I wouldn’t classify what is basically an egg sandwich wrap as “Mexican.” McDonald’s tried and failed with pizza, and it wasn’t just because of the product. If you’ve done a good job of branding, your customers have a focused expectation of your product. Diluting that image or causing cognitive dissonance with a new offering helps neither you nor them.

My local taco place doesn’t serve fries. It serves papas, and only as a side on the kiddie menu. Frankly, I was upset when they went to a menu in English because it hurt the authenticity of the place in my mind. Fortunately, the food spoke louder than the language change. See your brand from the consumer’s eyes and you won’t get too far out of bounds. You with me?

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Filed under food, Consulting, Huh?

The Food Business Isn’t Just Food

It’s Foodie Friday and the topic today is business. I know: that’s pretty much the topic every day, but let me explain. I read an article on one of the restaurant sites I frequent that spurred a thought that goes beyond the restaurant business.

Photo by Helloquence

The piece was all about the financial statistics a good restaurateur needs to watch. I’m always surprised when a place with good food in a great location goes out of business but it seems to happen a lot. Sometimes it’s that the chef leaves and things slide downhill but more often than not it’s because the business part of the food business overtakes the food part of the food business.

One needs only to watch an episode or two of the show Restaurant Startup to see how a food business is not especially different from any other startup. I assume what I’m seeing on the show reflects the new restaurant world at large and today’s article confirms that belief. Many of the contestants have no clue about the first, and maybe the most important statistics any startup needs to grasp: Cost Of Goods Sold. In a restaurant, that’s food. In a service business, we usually call it cost of sales. In either case, it’s the cost of producing whatever it is you’re selling. You’d be surprised how many businesses don’t know this number.

That number is part of a bigger one called overhead, which includes rent, salaries, services such as accounting and legal, and things like keeping the bathroom clean (your restaurant has one; hopefully, so does your office). These numbers are critical because if you charge too little for what you provide you won’t be in business very long, and you can’t figure that out unless you know your monthly nut.

Once you have the Gross Profit (or Gross Income) number, you can subtract your expenses to get Net Income or Net Profit. Divide that by your sales and suddenly you have a profit margin. That’s something you can use to benchmark your results against other businesses of the same type. In the restaurant business, it’s generally not very big, which is all the more reason why a complete grasp of the numbers is critical. There isn’t a lot of room for error.

I spend a lot of time with my clients on their numbers. It’s not just so that they can present themselves well to potential investors either. Like your web traffic or any other piece of data, they can illuminate a lot and help you make critical decisions. Ignore them at your own peril.

By the way, I’m writing this as a sort of thank you to my late brother who was my CPA and who beat accounting into me many years ago. He passed 5 years ago next week and I miss his guidance and the clicking of his calculator every day.

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What Restaurateurs And Founders Share

It’s Foodie Friday, and this week an article on a restaurant trade site caught my eye. It’s all about the things restaurant owners wished they’d known when they decided to open a place. Having spent a lot of time working with startups, what I find interesting is that many of their statements are not unique to the restaurant business. In fact, I’m willing to bet that you will nod your head in agreement with these if you’ve even started a business or worked with one in its early stages. You can read the entire piece by clicking through here.

Photo by Bank Phrom

First and foremost, the time involved. One owner said she wished she’d known “That I was going to spend the first couple months basically living in the store and two years married to the business. 86 my social life!” I’m often amused at the founders who still have side gigs, especially if those gigs are not consulting positions that are very flexible. One startup with which I’m working has two founders who don’t seem to be able to focus enough time on their company, and as a result, their progress is very slow. What should have taken them several months has taken them a couple of years. In part it’s a financial decision – the gigs help fund the startup – but I sometimes feel as if they don’t really get that you need to be married to the business, as this owner says.

Another owner wishes he’d known “To have enough money reserved to be able to wait to open the doors to the public.” There is something to be said for throwing a lot of tests out there and iterating, but I’m a believer in making sure you’re putting your best foot forward. That doesn’t mean every beta has to be perfect but it does mean, to paraphrase the words of the old Paul Masson commercial, not selling any product before its time. The world is too cluttered and I’m not sure any business gets multiple chances after a bad customer experience (think about how many apps you’ve deleted recently or a restaurant at which your first meal was your last).

Then there is the point never underestimate the value of private dining. As the owner put it, people wanted a place where it was quiet and personal. I think that makes it as much about the experience as it does the product. Personalization is key!

Finally, I love another owner’s point: “To build your squad. We always knew that having good people was important, but I’m not sure we realized how important.” As any business grows, the founders can only do so much and your success is in the hands of the people you’ve brought in and trained. Your job as a manager is to help your team to do their jobs, but it’s also to be sure that every person is carrying their load. Nothing will bring a business down faster than a weak link in the chain that causes resentment among the rest of the team. Hire well, don’t be afraid to admit you’ve made a mistake with a hire if you have, and do everything in your power to retain great talent.

Yes, the food service business is different in many ways (you probably don’t have the health department visiting nor do you deal with many cuts and burns), but as the piece demonstrates, every startup faces many of the same challenges, don’t they?

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Is Crowdfunding A Killer?

One of the ways I’ve been working with startups to raise money is through crowdfunding. You might be most familiar with Kickstarter but there are dozens of other companies that help to fund companies that are too small for VC funding but need capital to grow.

I’ve always thought that this was a good thing. Many entrepreneurs aren’t well-connected to a network of people who can afford to invest. Having entities such as Kickstarter available to raise the startups’ visibility and to grow their investor pool seems valuable. Something I read this morning, however, challenges my thinking.

Crowdsourcing initiatives like Kickstarter are hurting innovation, according to a new study from a business school, INSEAD. Researchers found that the ‘crowd’ appetite for investing in innovative products is startlingly low. Claims of novelty and usefulness are viewed unfavorably and result in lower pledge figures on crowdfunding initiatives. This is significant as the equity crowdfunding industry is set to surpass venture capital as the leading source of startup funding.

Data from Kickstarter from its inception in 2009 to 2017 was interpreted by state-of-the-art machine learning technology that incorporates speech and image recognition, seasonality, perceived risk, etc. to determine the funding success of both ‘novel’ and ‘useful’ products. This is the first time large-scale speech analysis and image recognition has been applied to the study of innovation. You can check out the full research here. What it found was that the Kickstarter community does not view claims of product novelty and product usefulness as congruent. While the total amount pledged is boosted when a product is said to be useful (or alternatively, novel), claiming that it is both reduces the total amount pledged by 26 percent.  In fact, a single claim of novelty increases project funding by about 200 percent, while a single claim of usefulness leads to an increase of about 1200 percent, as compared to projects devoid of any such claim.

I’ll let three academics explain why this might be hurting innovation:

“Prior research has shown that products that are novel and useful typically succeed in the marketplace,” said study co-author Amitava Chattopadhyay, Professor of Marketing and the GlaxoSmithKline Chaired Professor of Corporate Innovation at INSEAD. “But when projects make both claims, backers either assume a product’s benefits are inflated, that it carries a high risk of failure or that it divides the crowd between believers and skeptics, making it hard for backers to pick a side.”

“The higher level of uncertainty in the crowdfunding context drives backers to choose modest innovations and shy away from more extreme innovations,” said Cathy Yang, Assistant Professor of Marketing at HEC Paris.

“This is deeply disappointing as the premise of crowdfunding is to support creativity and innovation”, said Anirban Mukherjee, Assistant Professor of Marketing at Singapore Management University. “Entrepreneurs, therefore, might be advised to frame a project as only novel or only useful, rather than both”, Dr Ping Xiao of the University of Technology Sydney (UTS) added.

Something I’ll be keeping in mind when putting together a crowdfunding campaign. It seems a little sad though, doesn’t it?

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Embracing Change

“The only constant is change” is an old saw, but it got to be so because it’s true. I mean, it was uttered by an ancient Greek philosopher (Heraclitus) and has been repeated for 1,500 years. Change is inevitable yet a lot of us are incredibly resistant to it. We carry that resistance into our business lives as well.

Most businesses are pretty good at living in today. They have a grasp on their current situation and have allocated resources to deal with their daily operations based on that situation. A lot of businesses also have a grasp on what will happen tomorrow. They plan lines of succession within departments and train their staff to move up. They allocate capital to grow strategically based on how they see tomorrow playing out. Generally, the short-term doesn’t portend radical change.

The problem occurs when you ask businesses (and people) to think about the day AFTER tomorrow – the longer term in which change occurs. In some cases, people don’t even recognize that there will be a day after tomorrow. Try to have a chat with a 23-year-old employee about retirement and the need to start saving today for something 50 years down the road if you want proof of that. A lot of managers guide their businesses based on a series of short-term plans and goals without contemplating the sustainability of their plans over long-term. They don’t embrace change because they don’t want to accept that it’s going to happen.

The music business fought change and where are they now? My beloved TV business is going through this now as they continue to deny cord-cutting is a problem and refusing to adjust to this massive change. On the non-business side, I believe that many of the challenges our country faces are due to the refusal to accept how our demographic and economic base has changed. That refusal, both in business and outside of it, sparks fear as the signs of change become more prevalent. It’s really only traumatic, however, if we try to resist rather than accepting change and planning for it.

I believe in controlling your business. That means you need to contemplate change, accept it, and revise your plans before change happens to you and not because of you. Things happening due to circumstances beyond your control should be rare if you look to the day after tomorrow, embrace the inevitable change, and having a clear picture of where you’re going, not clinging to an unreasonable and unsustainable changed past. Make sense?

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Navigating To Success

One of the roles I play along with my regular consulting gig is an advisor. I am what’s call a “Navigator” at one of the oldest incubators in the area. Each month, the Navigators get together and listen to a pitch from a resident company. It’s good practice for them (you can NEVER have enough practice pitching your business) and it’s good for us to become better-versed in what’s going on.

Most of the companies headquartered at the incubator are engaged in scientific research of some sort and there are a lot of Ph.D.’s wandering around the building. They know a phenomenal amount about their fields and about the company they’re germinating. The problem is that they don’t seem to know that they’re building a business and not a science experiment. We had one of these get-togethers yesterday and I was speaking to another Navigator, comparing notes about the companies we’ve seen and the pitches we’ve heard. He had found, as had I, that most of these very smart entrepreneurs had no trouble explaining the nuances of some very complicated science but had massive difficulty in explaining how they were going to make money.

A book from a few years ago wrote up research that found that 87.5% of Millennials disagreed with the statement that “money is the best measure of success.” On a personal level, I couldn’t agree more with their thinking. There ARE many more important things in life that reflect success and failure. On a business level, unfortunately, that’s dead wrong. When you raise capital, your ability to provide a return on that investment – i.e. money – is the measure of success. Otherwise, you’re not a business: you’re a charity. Since these entrepreneurs – almost all of whom are Millennials – claim to be building businesses, part of what I and the other Navigators help them do is to focus on the business of their business and not just on the science and their products.

We ask them the kinds of questions I hope you ask yourself. What problem are you solving? Who else is solving it? Why is your solution better? How much will it cost to build your product at scale? How is it priced? What is the profit margin? What’s the competitive set in how big a market? Pretty basic questions, I know, but these are smart people who have never been asked them before. The ones that can answer them clearly are the ones that will get funded and survive. Do you fall into that group?

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