Tag Archives: Strategic management

November 15, 2019 · 4:05 pm

Concessions

Let’s go to the movies this Foodie Friday. I did the other day. If you’ve been spending time at home streaming your entertainment and none at the theaters, you might not be aware that things have changed dramatically at the old cineplex with respect to food. I happened to go to my local Alamo Drafthouse, which features recliners as well as a large menu of food and beverage.

You are probably aware that theater owners make more money from concessions than they do from admissions. You might have noticed that most movie concessions are high-margin items such as popcorn and soda. Still, I generally didn’t spend much more than $10 on food and beverage. Boy did THAT change at the Alamo. Even factoring in the additional labor costs for the servers bringing the food to my seat, I’m pretty sure that the theater owner netted a heck of a lot more from me than they might have in the past.

The Alamo overall is an interesting model. There are fewer seats in the theater but that really only reduces the take from admissions. My guess is that the concession net more than makes up for the fact that there are fewer bodies in the seats. Of course, my Alamo also has 10 theaters under one roof, ranging from 50 to 100 seats. What I like about this from a business perspective is how they’ve rethought the business model and focused on the part of the business that makes an owner money. The concessions are a significant upgrade. There are craft beers, top-shelf cocktails, and even a vegan menu. Sure there is popcorn but it’s served with real clarified butter. It’s also a bottomless bowl. There is also an herb popcorn that is tossed with that same butter and fresh herbs. Do I give a second thought to paying $8.50 for it? Nope – it’s delicious. So are the sandwiches, pizzas, and salads. $45 on drinks and food? Even at a 20% margin, my concession purchases yield the business owner as much as my previous bill might have been in total.

Any business can learn from what the Alamo and other theaters are doing as they transform their business models in the face of unlimited streaming options. It’s the Wille Sutton Rule – go where the money is.

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November 1, 2019 · 4:13 pm

Local Flavor

This Foodie Friday I’m writing to you from a condo in Myrtle Beach. It’s a place I used to come to only once a year with my golf outing but now that I only live a couple of hours away I’m down here more often. I’d be lying if I said that Myrtle Beach is one of my favorite places to go. Honestly, except for the golf (and there is LOTS of that here), there really isn’t much about it to love. The beaches further north on the coast are way better – less crowded, prettier, and less touristy.

Photo by Gabriel Garcia Marengo

One thing my golf group learned about Myrtle Beach long ago was that there really isn’t a lot of great food here. Oh sure, damn near every chain restaurant has one (or more) iterations and there are local executions of generic food types that one can find anywhere: Italian, sushi, burgers, etc. There are, however, a handful (OK, a couple of handfuls) of places that do their damndest to capture the local flavor and that’s our topic today.

I wrote about Mr. Fish 10 years ago and I still visit when I’m here. His success at capturing the local seafood flavors of the Carolina Coast has enabled him to build a much larger place. There is a huge local supermarket here – Boulineau’s – that has a great kitchen serving local specialties and taking out the fried chicken to the beach is a local tradition.

I’m not going to run down all of the local places that do similar things but it’s instructive to any of us in business. Sure, the national chains are mobbed by tourists that love the notion of eating the same meal here as they can get at home. Those aren’t the loyal customer base though. Any business should be trying to be a local business even if the local outpost is one of many. I represent a national coffee franchise that insists that each local cafe be decorated in a local style, using photos of the town in which it’s located. That’s smart in my book.

People look for the local flavor. You can see it in the push to patronize local small businesses. How can your business be “small” and capture the local flavor even as you grow? Something to think about!

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October 30, 2019 · 12:42 pm

Something For Nothing

I went to one of the warehouse club stores yesterday to make some bulk purchases. If you’ve ever been in one of them – Costco, BJ’s, Sam’s Club, etc. – you know that one feature of walking around the place is that there are usually free samples. You can taste the latest and greatest in meats, cheeses, and frozen things to cook while you’re too busy to make something yourself. That got me thinking about the fact that you really don’t see a lot of sampling elsewhere.

I’m a fan of the free trial. It gets customers walking through your door and using your product. What I don’t particularly like are those “free” trials that require you to fork over your credit card. Free means without strings, right? In particular, if you’re a business that is built around what I think is the gold standard – recurring revenues – you ought to be spending a good chunk of your marketing dollars on free trials.

It’s relatively simple math, right? What’s the lifetime value of a customer? What does it cost you to offer up a free trial – a visit, a free month, whatever? What is the conversion rate of those freebies – how many of the trials become regular customers? Recurring revenues are predictable and generally pretty stable. I bet you’ve signed up for subscriptions of some sort and forgotten you’ve done so or don’t use them as often as you thought you would. For a business, that’s a customer without costs, and that’s a nice margin!

When I talk to people who are looking at franchise opportunities and who don’t have a particular brand or industry in mind, I usually talk to them about the businesses with recurring revenue models. Things like cleaning services. Not a sexy business, but very profitable and that, in part, is because of the recurring revenues. Same thing with spa businesses or some hair salons that feature memberships. Are those businesses that can offer a free trial? Maybe if you’re an out-of-the-box thinker. Giving a converted customer the ability to give away a free trial to a friend is another great way to expand your base at very little cost.

Here is the thing about free trials leading to recurring revenues. As with any business, you have to maintain a high level of customer service. After all, when someone’s credit card is getting dinged each month and your business appears on their statement, it’s an opportunity for them to reconsider.  If they walk away, no amount of free sampling will get them back most of the time. Everyone loves something for nothing. The opposite – nothing for something – is very much NOT true!

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