How to Turn One Restaurant into a National Brand | Ep 886
In this episode of The Game, Alex Hormozi examines how a successful Thai restaurant plans to expand from a single location into a national brand. The owners of Basil & Co., who currently generate $3.5 million in annual revenue from their Diamond Bar location, share their strategy for growing to 20 locations while maintaining their high standards of food and service quality.
Hormozi provides specific recommendations for increasing profitability, including strategic price adjustments, menu optimization, and enhanced customer experience initiatives. The discussion covers practical aspects of expansion, from launching influencer events at new locations to implementing effective staff training programs. The conversation also addresses the careful balance between maintaining excellence at an existing location while preparing for growth into new markets.
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1-Page Summary
Current Business Performance and Growth Opportunities
Basil & Co., a Thai restaurant in Diamond Bar, has achieved remarkable success with $3.5 million in annual revenue and a 19% profit margin, serving over 100,000 customers yearly. Owners Calvin and Air have ambitious plans to expand to 20 locations within 5-10 years, targeting $80 million in revenue. Their expansion begins with a new location opening in Azusa, California.
Operational and Marketing Strategies to Increase Profitability
Alex Hormozi suggests several key strategies to boost profitability. He recommends adding 99 cents to entree prices, potentially increasing profits by 30%, and implementing weekend/weekday pricing tiers to capitalize on peak demand. For menu optimization, Hormozi advises reorganizing items to highlight profitable dishes and including pairing recommendations to drive beverage sales.
To enhance customer experience, Hormozi recommends training staff to identify new customers through visual cues and offering incentives for repeat visits. He also suggests implementing a review-based program with rewards for customer feedback. For the bar program, Hormozi emphasizes featuring weekly cocktails and adjusting beverage pricing to maximize profit margins.
Preparing For the Expansion to a Second Location
Calvin and Air emphasize the importance of perfecting operations at their flagship Diamond Bar location before expanding to Azusa. They're focusing on creating a comfortable dining environment and offering competitive staff pay. For the Azusa location launch, Hormozi recommends hosting an influencer night before the public opening to generate buzz and content for future advertising. The owners plan a soft opening period of three to six months before the grand opening, demonstrating their commitment by having one owner leave their full-time job to focus entirely on the new location.
1-Page Summary
Additional Materials
Counterarguments
- Raising entree prices by 99 cents could potentially deter price-sensitive customers, leading to a decrease in customer base.
- Weekend/weekday pricing tiers might confuse customers or lead to dissatisfaction if not communicated clearly.
- Menu optimization focusing on profitable dishes may neglect customer favorites that are less profitable, potentially impacting customer satisfaction.
- Training staff to identify new customers visually could lead to assumptions and biases, which may not always be accurate or fair.
- A review-based program with rewards might incentivize quantity over quality in customer feedback, leading to less genuine reviews.
- Featuring weekly cocktails could increase complexity and training requirements for bar staff, potentially leading to inconsistencies in service.
- Adjusting beverage pricing for profit margins might make drinks uncompetitive compared to nearby establishments.
- Perfecting operations at one location before expanding could delay growth opportunities and the ability to capitalize on market trends.
- Competitive staff pay is important, but it must be balanced with profitability, especially when planning for significant expansion.
- Hosting an influencer night relies on the assumption that influencers will generate positive buzz; if the event is not well-received, it could have the opposite effect.
- A soft opening period of three to six months may be too long and could tie up resources that could be used for further expansion or improvements.
- Having one owner leave their full-time job to focus on the new location puts additional financial pressure on the business during the expansion phase.
Actionables
- You can analyze your daily purchases and add a small percentage to your savings with each transaction, mirroring the strategy of raising prices to boost profits. For example, if you spend $50 on groceries, set aside an additional 2% ($1) into a savings account. Over time, this can significantly increase your savings without feeling like a substantial financial burden.
- Consider creating a personal rewards system for consistent habits or tasks you want to encourage, akin to the review-based program for customer feedback. For instance, after completing a workout 10 times, reward yourself with a movie night or a small purchase you've been eyeing. This can help reinforce positive behaviors and make them more enjoyable.
- When planning social gatherings or events, try hosting a "soft launch" with close friends or family before the actual event to gather feedback and make improvements. For example, if you're planning a large birthday party, have a smaller get-together a few weeks prior to test out the food, music, and activities you're considering for the main event. This can help ensure the success and enjoyment of your larger gathering.
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Current Business Performance and Growth Opportunities
Basil & Co., a thriving Thai restaurant based in Diamond Bar, has reported impressive financial success and lays out ambitious expansion plans.
Basil & Co.: Thriving Thai Restaurant With Strong Finances
Basil & Co. has achieved significant financial milestones in the recent fiscal year.
Restaurant Earns $3.5m Yearly With 19% Profit, Serving 100,000+ Customers Annually
The restaurant tallied $3.5 million in revenue for 2024, with a gross profit of $670,000. The efficient management and excellent culinary offerings have led to a strong net margin of 19%. Reflective of its popularity and customer satisfaction, Basil & Co. has served over 100,000 guests in the last year alone, demonstrating its solid footfall and steady stream of business.
Calvin and Air Plan 20 Locations, Aim For $80M In 5-10 Years
The owners of Basil & Co., Calvin and Air, are setting their sights on expansion that matches their financial ambition.
First Location Full; New Location Opening in Azusa, Ca ...
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Current Business Performance and Growth Opportunities
Additional Materials
Clarifications
- Calvin and Air are the owners of Basil & Co., the thriving Thai restaurant in Diamond Bar. They are the key decision-makers driving the restaurant's financial success and expansion plans. Their vision and leadership are instrumental in setting ambitious growth targets for the business.
- Basil & Co., a successful Thai restaurant, aims to open 20 new locations in the next five to ten years to achieve a revenue target of over $80 million. The owners, Calvin and Air, are expanding due to high customer demand and the success of their first location. Their fina ...
Counterarguments
- Expansion Risks: While ambitious, expanding to 20 locations could introduce significant risks such as overextension, quality control issues, and increased competition.
- Market Saturation: The plan to open many new locations could lead to market saturation, potentially cannibalizing sales from existing restaurants.
- Profit Margin Sustainability: Maintaining a 19% profit margin may be challenging as the business scales, especially with increased overheads and potential economic changes.
- Customer Base Diversification: Relying on a single location's customer base as an indicator of success might not translate to new markets with different demographics and preferences.
- Economic Uncertainties: Economic conditions can change, affecting consumer spending habits and the feasibility of achieving the $80 million revenue target.
- Operational Challenges: Managing m ...
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Operational and Marketing Strategies to Increase Profitability
Alex Hormozi and other professionals discuss various strategies to bolster profitability through pricing optimizations, menu design enhancements, customer experience improvements, and alcohol program adjustments.
Optimize Pricing to Boost Profit Margins
Add 99 Cents To Entrees to Boost Profit By 30%
Alex Hormozi points to the significant impact of adding 99 cents to entrees, explaining that even small pricing adjustments can substantially boost profit margins in the high-volume, narrow-margin restaurant industry. Hormozi emphasizes that adding 99 cents represents a 6% absolute increase in revenue, equating to a 30% increase in profit margins. A shift from 19% to 25% margins could result in an additional $200,000 per year, assuming $670,000 in current profit. He insists that this small change will not affect the sales velocity.
Implement Weekend/Weekday Pricing Tiers to Capitalize On Demand
Hormozi suggests adopting different pricing for busier weekend times, akin to Uber's surge pricing. He likens this to the accepted practice of having different lunch and dinner menus. By implementing weekend/weekday pricing tiers, and potentially processing fees for credit card payments, restaurants can strategically capitalize on peak demand times.
Enhance Menu Design to Boost High-Margin Sales
Reorganize Menu to Highlight Profitable Dishes
Ranking menu items by profitability and placing the most profitable dishes first can guide customers' choices. Hormozi advises highlighting a must-try item that combines high profit margin with customer appeal, helping to push sales of high-margin items. Hormozi also recommends reorganizing the menu to feature special items and those that the restaurant intends to sell more of, like the highlighted LSA5 rice dish.
Pairing Recommendations to Increase Beverage Sales
Implementing pairing recommendations can facilitate beverage sales, as it simplifies the decision-making process for customers. Visual cues on the menu can aid servers in offering recommendations. Hormozi stresses the importance of training staff to suggest pairings and feature a weekly cocktail to generate excitement and encourage recommendations.
Enhance the Customer Experience and Encourage Repeat Business
Train Staff to Identify New Customers, Offer Incentive
Hormozi talks about the significance of identifying first-time customers by using visual cues like colored drink coasters or napkins. A surprise free item can leverage the peak-end bias to enhance customer experience and encourage repeat visits. Personalizing incentives, like manager's business card offers for a free dessert on the next visit, can create a return loop.
Review-Base ...
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Operational and Marketing Strategies to Increase Profitability
Additional Materials
Counterarguments
- Adding 99 cents to entrees might not always result in a 30% increase in profit margins due to price sensitivity in some customer segments or markets.
- Weekend/weekday pricing tiers could potentially alienate customers who feel penalized for dining during peak times, leading to a loss in customer goodwill.
- Highlighting profitable dishes on the menu may not necessarily lead to increased sales if those items do not align with customer preferences or expectations.
- Pairing recommendations require staff training and knowledge, and if not done correctly, could lead to a negative customer experience.
- Identifying new customers with visual cues might be seen as intrusive or gimmicky by some patrons, and the surprise free item could be perceived as a ploy rather than genuine hospitality.
- A review-based program might lead to biased reviews if customers feel compelled to leave positive feedback in exchange for incentives, potentially undermining the auth ...
Actionables
- You can create a themed dinner night at home to explore the concept of demand-based pricing. Invite friends or family over for a special meal on a weekend, charging a small fee that's slightly higher than what you'd ask for a weekday gathering. This simulates the weekend/weekday pricing tiers and helps you understand how pricing can affect demand in a social, non-commercial setting.
- Experiment with a home-based "menu" for meal planning that prioritizes dishes with lower-cost ingredients. When you plan your weekly meals, put these cost-effective dishes at the top of your menu list. This mirrors the strategy of highlighting profitable dishes and can help you manage your grocery budget more effectively.
- Start a personal beverage pairing practice ...
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Preparing For the Expansion to a Second Location
Hormozi and experts Calvin and Air discuss the critical strategies needed to perfect operations and customer experience at their flagship location before moving on to expanding with a new location in Azusa.
Perfect Operations, Customer Experience at Flagship First
Calvin and Air emphasize that creating a comfortable space for friends and family and offering competitive pay for staff is essential. With a business that's been developing over 15 years, they now focus on refining operations and marketing at their current Diamond Bar location before launching in Azusa. Hormozi advises that the business model should be super dialed before scaling to ensure success, with the plan being to go from the current location to aiming for $80 million in 5-10 years.
The focus is on making sure the Diamond Bar operations are flawless to serve as a solid blueprint for the new venture. Caller #1 and #2 don't want to just "roll with it" as they did with their first restaurant—they want to get it right from the start with the new location.
Soft Opening & Influencer Marketing For Azusa Location
While information on a soft opening or influencer marketing for the Azusa location was not provided in detail, Hormozi’s insights provide a strategic approach. He recommends hosting an influencer night with a VIP event before the public opening to create buzz and content around the new establishment.
The grand opening is planned for approximately three to six months after the soft opening, with careful attention to ensuring smooth operations during that period. The plan for leveraging influencer content is pivotal—Hormozi sug ...
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Preparing For the Expansion to a Second Location
Additional Materials
Counterarguments
- While creating a comfortable space is essential, it's also important to consider how the business will differentiate itself from competitors in the area.
- Competitive pay is crucial, but staff retention and satisfaction also depend on other factors such as work environment, career development opportunities, and management practices.
- Perfecting operations at the current location is important, but there may also be unique challenges and opportunities at the new location that require a flexible and adaptable approach.
- Aiming for $80 million in revenue is ambitious, but setting such high expectations could lead to undue pressure and might not account for unpredictable market changes or consumer trends.
- Using the Diamond Bar operations as a blueprint is a good strategy, but the new location might need to adapt to its own demographic and location-specific demands.
- Hosting an influencer night can create buzz, but it's important to ensure that the influencers align with the brand's values and appeal to the target demographic.
- Relying on influencer content for advertising has its benefits, but it should be part of a diverse marketing strategy that includes ...
Actionables
- You can create a feedback corner in your living room where friends and family can leave suggestions for improvement every time they visit, mirroring the idea of refining operations in a comfortable space. Set up a small box or digital station with a tablet where guests can quickly rate their experience or offer ideas, making your home gatherings more enjoyable and tailored to your guests' preferences.
- Start a neighborhood skill-swap initiative to foster a sense of community and competitive personal growth. Much like offering competitive pay for staff, this initiative encourages neighbors to exchange services or skills they excel in, such as gardening, baking, or tech support, without monetary transactions, thereby enriching each other's lives and building a supportive network.
- Organize a local showcase event to highlight hidden talents withi ...
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