The Lease Doctor™

The Lease Doctor™ Interview
“We are what we repeatedly do; excellence, then, is not an act but a habit.”
—Aristotle

Most restaurants operate on properties that are rented. Unless you’re fortunate enough to own the land where you want to build your restaurant, you must enter into a lease agreement with a landlord. A lease is the most important  document a restaurant owner will ever sign, one that will have immediate consequences on the success or failure of your venture.

For more than 30 years, Todd Dorn has specialized in reviewing leases for tenants and making sure that they work to his client’s advantage instead of the landlord’s. Too often, landlords’ leases tend to be one-sided. Dorn, now better known as “The Lease Doctor™”, is the head of Dorn & Company, which has successfully reviewed, redlined and modified more than 2,000 leases. He’s worked with such well-known brands such as Pinkberry, Mathnasium, Miracle Method, Auntie Anne’s and Zankou Chicken.

In this interview, Dorn explains all the ins and outs of signing a lease and helps to level the playing field for tenants.

What kind of homework should a restaurant owner do for negotiations to renew a lease? We have more than a million restaurants in the United States, so there are more and more people renegotiating leases than signing new leases.

The very first thing restaurant owners need to do is they have to know when their lease expires. They have to review the contract and look at the “option language” in the lease to see what their rights are. Sometimes you have options, sometimes you don’t.

If you don’t have an option to renew your lease, it gets a little tricky. In a hot market where there’s a lot of leasing going on and there’s a lot of demand, the landlord can tell a restaurant owner that he’s got other people interested in the space. So if you don’t have an option, you have to deal with that.

Landlords typically don’t want to kick out a restaurant owner. They might not renew a lease if they can get way more money from a new restaurant owner. They can go, “Gee, I can get a dollar more per square foot—if you can give me a dollar more per square foot you can keep your place.” The negotiations are hinged upon supply and demand. If you’re in a market where there are many vacancies, the landlords can’t dictate harsh terms.

So, looking back at the contract, you either have an option to renew your lease or your don’t. If you don’t have an option to renew, the best thing to do is to start negotiating about a year in advance because you have to have a backup plan if the landlord’s not going to work with you or not going to be reasonable.

Options in the Lease Contract 
But let’s say you have an option, and it requires that you give the landlord a minimum of nine months notice or a six-month notice. That’s the notification period, and it’s very important to pay attention to it. Some leases only give a 30-day window. There’s no such thing as a standard lease. It’s all custom-made; written by the landlords’ attorneys for their benefit. The key is to know what your rights are.

If you do have an option, it’s better before you give notice to exercise that option, to do research so that you can understand what the market’s doing and what your alternatives are. There are two kinds of options. There are options where the lease is based on market rate, and there are options where the lease is based on a fixed amount of money you pay in a given period. Generally, when there’s a recession and the market’s less active, landlords are more likely to give you a fixed rent because they tend to be concerned about where the market’s going to go. When landlords think the market’s going straight up, they’re hesitant to commit to a price. They’re more likely charge rent according to the market or greater.

But what the market valuation is tends to be subjective. A landlord can think his rent is worth $5 per square foot, even if there’s a landlord right around the street who’s charging only $4 a square foot. Landlords tend to have the perception that their space is better, so that they can get charge money. In the end, it’s all about the money. Unfortunately, landlords don’t look at tenants as people, to them it’s more like a spreadsheet.
Practically every lease that a tenant signs has some terminology that the tenant’s not aware of because nobody’s pointed it out to him. There are no laws that require a broker or landlord to state specific terms in an option relative to language. So one of the key points in an option that can be very deceptive is that the tenant’s thinking that he has the right to extend his lease for another five years at market rate.

Let’s say you’re over market by $1 per square foot, and you’ve got 2,500 square feet. So you’re over market by $2,500 per month. The landlord loves it. The tenant doesn’t. And the tenant thinks he can negotiate the lease based on the market—because, let’s say he’s got a five-year option based on market rent. The problem is that there might be some language in the lease that says that in no event will the option rent be less than what the tenant is currently paying. Big trap.

How come the tenant doesn’t see that?

Because he typically doesn’t know to look for it. Leases are very verbose. They’re written in legalese and there’s a lot of onerous language. Tenants by their very nature tend to be busy running or knowing their business, dealing with employees and a whole bunch of ancillary factors. They don’t sign leases every day—it’s unfamiliar territory for them. So their only choice is to either read the lease themselves or give it to an attorney. And a lot of tenants are hesitant to give the lease to an attorney because it’s an open-ended situation in which the attorney is to an extent working for himself—the longer he takes to read the lease the more money he makes. Few, if any, attorneys solely specialize in commercial leases so you end up paying for their time to research language.

Besides, attorneys typically don’t deal with business points. They deal with problems or points regarding potential litigation. For example, they might introduce language in the lease that protects the tenant from issues arising out of construction that the landlord does—that in no event can the construction interfere with the tenant’s business. Stuff like that.

So, to summarize, landlords typically tend to hold restaurant owners hostage because they know that restaurant owners have a lot of money to put into the business. If you’re an insurance agent or a nail salon owner or running a UPS store, you don’t require all the fixtures that a restaurant does. It’s easier to pick up and move. You have more leverage with the landlord because the landlord knows you can find another space that doesn’t require infrastructure such as the grease trap, the plumbing, the gas. The amount of fixed investments in a restaurant are very expensive. So a landlord knows that when he rents to a restaurant he’s gotcha! He knows that the likelihood of you picking up and moving is slim to none.

So, does real estate drive the economy or does the economy drive real estate?

They kind of have a symbiotic relationship. As the economy thrives and more people have jobs and more money is available, a lot of people may want to go out and open businesses. And the more business that open up the more vacant spaces get leased. And that drives the real estate market. The higher demand in the market, the higher the rents. And as the real estate market gets hot, there’s more money available, and more businesses thrive. So both real estate and the economy work hand in hand.

What are the fundamental differences between a residential lease and a commercial lease?

Basically, residential leases are standard leases because there are laws that regulate what residential landlords can and cannot do to homeowners. A residential lease could be a very basic two-page or three-page form, with disclosure laws. By contrast, the commercial sector, since it’s not regulated, is everything else. Landlords can put anything they want into a lease, and it’s legal. Anything goes.

Location, Location, Location 

What kind of homework should prospective restaurant owners do when looking for a new location to rent?

The first thing is to zero on to which location you want to be. You don’t want to end up in a poor location, even if you get a good deal. You want to be in a shopping center or a freestanding building that has a lot of traffic. On the flip side, depending on what type of restaurant you have, you may want to be near an area that has a lot of high-rise office buildings, where people have to go to lunch. And in that case you won’t get a lot of business during dinnertime. In general, you’ve got to study the demographics. There are demographic reports that are universally available.

The next thing to do is to look at all the vacant space in the prospective center as well as the competition—what sort of businesses are already in the location where you want to be. Generally, you should look at a reasonably broad range of space sizes. If you think you need 2,500 square feet of space, you may also want to look at spaces as low as 1,800 square feet and as high as 2,700 square feet. The space maybe bigger than what you want, but the rate per square foot might be less than some other place. And you can get all this information in one of the commercial real estate subscriber-based online databases such as LoopNet. You can do your own searches for properties or you can hire a broker to do the searches for you.

Once you’ve captured all the available vacant spaces that fit your location requirement, you can start looking at prices. And always look at vacant spaces where there used to be a restaurant—a failed restaurant, say. If you move into one of these spaces, you save a huge amount of money on the infrastructure. On the flip side, the landlord already knows that you’re going to be saving money on infrastructure, so he may want more money on the rent per square foot. So you have to weigh the pros and cons there. Generally, if a landlord has a vacant restaurant, he can only rent the space to another restaurant. Otherwise he has to spend money in tenant improvements by ripping everything out.

With very few exceptions, leases are always on a triple-net basis, as opposed to a gross lease. So it’s important to ask the landlord what the triple-net cost is. For example, is it $.60 per square foot? The landlord’s not going to tell you unless you ask because he wants to get the tenant wheeled into the deal. Unlike in residential leases, where there are disclosure laws and consumer protection laws, there are no legal requirement for landlords or brokers to make specific disclosures about financial terms in a commercial lease.

The presumption is that if you’re in business you should know this already. But the problem is you probably don’t. You don’t learn it in business school and you generally don’t learn it in specific trade schools. If you try to learn it on the Internet, there are no specific books or classes on the subject. And it’s kept that way for a reason. The landlords control the ball—they control the property market, which is huge. The largest amount of wealth on the planet comes from commercial real estate. If you look at big shopping malls and office buildings, they’re all owned by billionaires, pension funds, publicly traded companies. Wall Street controls such properties and Wall Street’s in the government’s pocket. If, God forbid, the commercial real estate industry was changed, and tenants had rights and there were disclosure laws, landlords would be less profitable.

Why do brokers and landlords do business this way?

I’ve been in this business for over 35 years; you can figure it out by connecting the dots. The only material difference in the industry from 1980 to 2015 is computers. You’ve got software to figure things out. But as far as what’s contained in the lease contract, and what’d disclosed, nothing has changed. It’s all the same—it’s the Wild West.
So given a choice, landlords would rather keep tenants ill informed. That way, the negotiations are easier, the tenant makes less demands and the landlord might have more opportunity to collect more dollars.

Why is it so difficult for restaurant owners to negotiate with landlords even though restaurant owners typically raise the value of a given property? Why do landlords always tend to have the upper hand? As valuable as restaurants are, they don’t get respected. How can restaurant owners mitigate this phenomenon?

It all goes back to the money. It’s not about respect and it’s never personal. Taking advantage of the situation has been around forever and a day. It’s always difficult to leverage against a landlord in a tight marketplace. The only way to have leverage in a market where there are not a lot of vacancies is to pay attention to the language in the lease so that you can protect yourself. At the end of the day, everything is controlled by the lease and by the landlord. So the only way for any business owner to protect himself as a tenant is to have the lease contract carefully read, reviewed, redlined and modified so that the tenant doesn’t have an open-ended situation where he sees the rent going up, say, 30 percent over market, while his profits aren’t going up as quickly.

Is it a good idea for a restaurant owner to rent a space in a market that’s down or in recession?

It always makes sense to negotiate a lease for as long as possible in a market that’s down or temporarily down and you can see in the future that there’s going to be growth where the prospects for your business look good. I recommend that restaurants and dental practices, which are also substantial in infrastructure, negotiate a lease that’s at least for 10 years with one or two five-year options. If you can get two five-year options, the better.

But what if the restaurant owner doesn’t do so well in the first few years?

That’s a business risk. It’s a crapshoot, whether you sign a 10-year lease or a seven-year lease or a five-year lease. In any case, you generally can’t sign a lease that’s less than five years. But I recommend longer because if your business is going to go bust it’s going to do so sooner than five years. A landlord can force you to pay the remainder of the lease, but he has to mitigate damages. Most tenants have to personally guarantee the lease. But when a tenant is in default—he can’t pay the rent, goes into bankruptcy or is going out of business—a landlord is legally required to mitigate the tenant’s damages and re-rent the space. To an extent this is like consumer protection. It’s more or less like an implied covenant in the lease, even thought it’s not specifically said in the lease.

So if the landlord re-rents the space, the tenant is responsible for the re-letting leasing fees, tenant improvements and so forth. The thought process at work here is: how long will it take the landlord to rent the space? If the tenant has rented a good space to begin with, and let’s say after two years or two and a half years the business failed, the likelihood that the landlord will be able to re-rent the space in the next 12 months is probably pretty good, especially since it’s got the infrastructure there. And so the tenant is off the hook anyway. The fact that he signed a five-year or seven-year or 10-year lease is not going to matter. The only instance where it would matter is if the tenant has a long-term contingent liability on a long-term lease.

So you’re betting one way or the other. You’re going into business probably betting that there’s a 50-percent chance that you’ll succeed. If you fail, the likelihood of your space being re-rented is probably pretty decent. So if you sign a short-term lease, thinking you could fail, and things are going well, you back yourself up. If the business fails in two or three years and you signed a five-year or 10-year lease, the landlord still has to go through the same process to re-rent the space. And once it’s rented—after sitting for vacant for eight months, let’s say—and you’ve accumulated eight months of accrued rent in liability, once that space is rented you’re done anyway. So you’re better off giving yourself the chance of not getting stuck after a short term lease and having the landlord stick it to you.

That said, you have to be careful about the five-year or 10-year lease you signed. There are rent increases, cumulatively compounded. Typically they’re 3 percent per year. It depends on the market. What we try to do is stagger the increases—spread them out more—or minimize them. Because when you get to year seven, eight or nine in a 10-year lease, for example, on a 3-percent a year increase a lot of tenants will find themselves paying an over market rent.

Give us some tips on negotiation tactics.

There are quite a few, although everything depends on what kind of market you’re in. Generally, you don’t want the landlord to think that he has your business and that you’ve got all your eggs in one basket and you’re stuck. You always want the landlord to think that you have other options. You don’t want to give the impression that you want to rent a space really badly. Because that makes the landlord think that he doesn’t have to come down on his price, doesn’t have to make any tenant improvements.

So whether it’s re-negotiating your lease or finding a new place, and you’re speaking with either the landlord or a management company, you always want them to think that they’re not the only ones. Because at the end of the day, whether they think you have other options or not, whether they know you have other options or not, is one thing. But if the landlord doesn’t rent the space, it’s costing him money. Brokers are highly incentivized to rent spaces because that’s how they make a living—by getting a commission. But if the broker or whoever you’re dealing with has the perception that you want the space so bad—that you want it no matter what—they’re not going to come down on their price and not going to offer other incentives, such as tenant improvements. It’s kind of lying buying a car.

When talking to a broker about a space, it’s important for the tenant not only to give the impression that not only does he has other options, but to stress the benefits that his business is going to bring to the shopping center (or area).

If a tenant has been in proven business for a long time and has high credit, it’s always a good idea to impress upon the value that his business is going to bring to the property. The tenant should indicate to the landlord that renting the property to him is a much better bet than getting a new business out of the gate, which is probably not going to be so successful and where there’s some risk.

That way, the landlord knows that he has less risk that the business will go bust. So you have to sell your strong points. But the key is to not let the other side think that you’re so desperate for the space that you’ll pay anything the landlord wants.

Should a tenant customize his lease by writing what he wants into the lease? And if so, how does a tenant know what to write what not to?

That is critical because a customized lease dictates a tenant’s finances. A lease is typically a business owner’s first or second highest fixed expense. And it’s all controlled by the language in the lease. As I said earlier, there’s no such thing as a standard lease in commercial real estate. They’re all custom. And they’re all written by attorneys, modified over and over again at the behest of landlords who ask attorneys to change leases around so that they can get more money by making the leases more open-ended. Landlords will say, “We want to charge the tenant more for making capital improvements or ADA upgrades. We want to be able to have a merchants association fee, even though we don’t have one now.

So it’s the most important thing to ensure that once you’ve negotiated the lease—the rental, concessions, basic improvements etc.—to have that lease gone through with a fine toothcomb for all business and legal points. To give you an example, we recently did a lease for Utility Board Shop, a retailer that has about six or seven locations. They were opening up a new store and they sent us the lease to review. And they sent us the final Letter of Intent, which contains all the final terms agreed upon between the landlord’s side and the tenant’s side. We make sure that all those terms are contained in the lease, because sometimes there are concessions in there and free rent offered. But when you look at the lease for free rent, the free rent all the time doesn’t include the Tripe Net CAM charges. For example there’s four months free rents during a build out, but the lease says that the tenant pays the CAM charges, even when he’s not doing business.

So a tenant thinks that he’s getting free rent, the Triple Net is considered a rent, so why isn’t that free—why am I paying rent? It’s a contradiction that’s glossed over by everybody. If a tenant brings it out, the landlord’s side usually counters that what they’re doing is standard—that you always have to pay Triple Net during free rent. The tenant doesn’t know if it’s standard or not. And so the tenant goes along with the lease—he’s not going to walk from the deal over such an issue.

But neither is the landlord going to walk away. So we tell the tenant to say that while I’m not paying rent while the space is being built out, I want the free rent on my Triple Net CAMS as well.

What are CAMS?

CAMS are Triple Net expenses. The best way to understand it is to say that you own the building, but you don’t have a title. Let’s say you’re part of a complex. You, the tenant, must pay all the pro-rata (proportionate share) costs of operating the complex, no matter what. That’s why shopping centers are popular—because landlords have no expenses. When the expenses go up, they get passed on to the tenant. Every possible element of ownership that it costs to operate a shopping center—taxes, insurance, maintenance, improvements, repaving of parking lot, landscaping, gardening, redecorating, new signage, ADA compliance, replacing HVACs, anything—all gets passed on to the tenant.

So going back to the Utility Board Shop, the company was about to sign its lease and didn’t know that there was a merchants fee in there. Nobody told them—it wasn’t in any prior documentation. And it was $400 a month for 60 months.

What’s a merchants fee?

It’s an association or membership fee set up by the landlord. We believe it’s just like a profit center—like a homeowners association. Landlords will tell you that it’s to promote the center, but it’s very vague, very grey, containing language such as, “We do this in the best interests of the tenants ..” It doesn’t have any specifics such as whether the landlords is going to run ads, have a billboard, things like that.

Wait, so the bit about the merchants fee written in the lease—how come the tenant didn’t notice that?

It was in the lease contract but not in the final offer. When a tenant signs a final offer, he looks at things such as his rent, increases in the rent, how long the lease is, how much it’s going to cost per square foot to do tenant improvements, and the fact that he got five months free rent. Nobody is required on the landlord’s, broker’s or management company’s side to tell the tenant, “Oh, by the way, there’s a merchants fee in there for $400 a month you’re responsible for.” It’s left up to the tenant to find it—in the lease. If the tenant doesn’t find it and signs it, oh well, too bad, you’re stuck for it.

So in this case of the Utility Board Shop, there was no mention of the merchant fee in the final offer. Nobody ever discussed it. Sometimes there are merchant fees in leases that are not currently being done but the landlord has the right to do them later—and they can charge whatever they want. So, when we talk about customizing a lease, we always recommend that the tenant scratch it out, redline it. Most landlords, if they’re not collecting merchants fees presently will scratch it out because they don’t want to blow the deal over it. In the case of the Utility Board Shop, we told them that the merchants fee was not disclosed to them in the final offer. And they were able to go back to the broker and when all was said and done, the landlord chopped the fee in half. The tenant still wanted the space—didn’t want to lose the deal—and the landlord didn’t want to lose the deal. Keep this in mind—that landlords don’t want to lose deals, even though they want everything they can get. And a lot of that is buried in the lease contract, which the tenant usually has no way of getting at, let alone understanding. And, unless the tenant already has maybe 80 stores and a real estate department that’s been dealing with leases for 20-30 years, the tenant has no way of knowing what’s standard, what’s normal, what’s customary and what’s not.

And that, mind you, is just the tip of the iceberg. There are numerous provisions in a lease contract that have to be changed for the best interests of the tenant to be protected. For example, assignment subleasing, which involves the tenant selling his business. Most contracts will say—in fine language covered under the subject of rent—that the landlord has the right to share the profits from the sale. That’s because rent has a definition—and it literally has dollar signs all over it. Consequently, anything with a dollar sign on it is considered rent. Leases will say, for example, that rent is considered as base rent, CAMS—and any other financial consideration. So if a tenant is receiving money from a prospective purchaser, the landlord, in most leases, will have the right to highjack that consideration. Moreover, the landlord often has the right to recapture the lease in a lease assignment. So, one of the very important things to read carefully, or have an expert go over, is to ensure whether the landlord has the right to take 50 percent of the profits from a business if and when the tenant sells it. Attorneys are not well-versed in this subjet matter because they don’t do it every day and don’t learn it in law school.

How can prospective restaurant owners find someone such as you who understands leases?

Unfortunately, they don’t. And that’s all by design, because the industry is controlled by landlords. It’s their property, their power, their money. And brokers and real estate advisors support this structure. The only way tenants can find help is to search on Google. That’s where the Lease Doctor will show up. Now that we’ve built up a critical mass of clients, we’re marketing ourselves on databases like LoopNet and other mediums, making people aware that these types of services are available. Before a tenant signs a lease, we charge a flat fee of $395 to review the whole contract. It’s a fraction of what attorneys charge, and we cover all the business aspects. Plus we turn the document around in a few days. An attorney can hold up a deal for two or three weeks, which upsets everybody.

Talk a little bit about how tenants can protect themselves against Triple Net charges. We have a landlord who charges Triple Net, which is around $1,700 per month. But they do no gardening—there are no plants except for a few cacti. And they don’t do anything to the parking lot—there are no lights, yet they have maintenance charges. So how do people fight back against such charges?

There are only two ways to fight back. The best way is to have protection in the lease contract. Make sure that there’s a cap on expense increases in the lease. A lot of landlords will do this. So you have to control what currently is being paid and what goes up. What we always look for while reviewing a lease, even if it’s not in the final offers, is that increases on Triple Net are capped at 5 percent per year. Sometimes landlords won’t agree to cap everything, but they’ll cap the controllable items, such as maintenance, landscaping and management fees. These are items landlords have control over, and they can’t just increase them to make more money off the tenant. The other thing to do is to ask for exclusions in the operating expenses. There’s a whole list of exclusions.

Remember, there’s no such thing as a standard lease. The language in a lease is often open-ended, such as: “The landlord may charge including but not limited to …” We recently reviewed a lease for a retail franchise that said each year the landlord will make a determination of what the expenses will be the next year and that the landlord will tell you how much it is. We always say that the landlord needs to give a detailed and itemized statement of Triple Net expenses, such as taxes, insurance, maintenance, replacements, parking lot, landscaping. That way, each year a tenant can track what it is going on each year.

Let’s say you sign a lease in which the landlord says that his Triple Net expenses are 60 cents per square foot. We always say that should be fixed for the first year of the lease because the tenant can come in thinking his Triple Net expenses are 60 cents per square foot but three months later they could be 80 cents per square foot. Triple Net is like a black box. Unless a landlord is required to itemize the expenses, it remains a black box.

Can the tenant ask to see receipts?

Usually a lease will contain language that the tenant has the right to conduct an audit of expenses. But a tenant usually doesn’t know what to do in an audit. He has already run into enough trouble trying to get the deal done; now he’ll spend more time trying to unravel the black box. You could have a landlord who owns a shopping center. Let’s say it’s a shopping center that has been owned by a family for 20 years and the landlord wants to sell it. Over the years, the taxes on the shopping center have gone up astronomically. And who pays that tax increase? Not the landlord—it’s passed on to the tenant.

How important is it for tenants to measure the space they want to rent, given that landlords can overestimate how much the square footage is? Should tenants get a third-party estimation of the space measurement before signing the lease?

We always recommend that a tenant do that. But the key is to know how to measure a space. It takes very little time, and there are a lot of tricks to do it. Many ceilings, for example, have two by four tiles. You can count the tiles each way. Walls are usually six inches thick. Take half that, add it to the width. If you’re being told before you sign a lease that the space is 2,000 square feet, for example, and indeed it is 1,700 square feet and you can make the argument for it by telling the landlord that you field-measured the space and that it’s off by 300 square feet, it’s well worth your time and effort.

There are some reasonable standards. For example, the thickness of the walls is always included in the square footage. Let’s say you’re renting a space and you’ve got a tenant on each side of you. Let’s say the wall on each side is a foot thick. So the tenant would pay half the thickness of the wall on both sides. Now, you also have the rear and the front of the space. The tenant will usually pay up to the exterior glass line of the space and the exterior wall. That’s what it should be.

Sometimes landlords use standards such as BOMA, that is, Building Owners Management Association, which are generally geared toward office buildings. Just the other day we reviewed a lease that stated that the tenant accepts the square footage the way the landlord states it. Which means that if the square footage of the space a tenant is occupying is actually 300 square feet smaller than what the lease specifies, that’s too bad.

So yes, sometimes landlords do exaggerate their square footage and prefer not to have the tenant measure the space. Or a landlord may think he’s got a space that’s 1,500 square feet—he purchased the space based on 1,500 square feet—but in reality it’s 1,200 square feet. They don’t want to collect rent on 1,200 square feet. But if a landlord doesn’t agree with your reasoning, try to get something taken off the rent in exchange.

When a potential tenant approaches a lease specialist such as you, how important is it to ask whether that specialist also represents landlords to determine if there’s any conflict of interest involved?

It’s very important for a tenant to know who they’re dealing with and which side they represent. Our mantra is that we strictly represent tenants. Generally a tenant won’t ask us if we represent landlords too because we make it clear on our website that we strictly represent tenants. But it’s so important for tenants to know who is on their side.

Given the obvious importance of lease specialists for tenants, why hasn’t there been an organization over the years around which lease specialists have coalesced to represent tenants?

You have to go back to the basics of real estate. Most people start out as brokers and then might branch into other areas. And the only way a broker can make a living is by having listings of property. That’s what I was taught when I went to real estate school in the late 1970s, and the same is true today. It’s harder to get business from a prospective tenant because you don’t have anyone calling off a sign posted on a property.

So that becomes the direction and focus of the business when a broker first starts out. That’s what’s drilled into prospective real estate agents before they get licensed. And after they get licensed they’re taught that they need to cold call landlords to get listings, and that when they finally get listings they need to cold call tenants to try to fill the listings. So the broker’s income is derived from the landlord because that’s who has the money. Almost the entire 100 percent of the industry is driven, controlled and run by the landlord side of the equation. So the idea that there can be a body to represent tenants has been drained by default from the industry’s inception. And there’s nowhere to go.

We once had a situation in which the landlord wanted free food for up to $30 a day. And I obliged because I wanted more parking from the landlord.

That’s a good example. A commercial lease can have anything and everything. Once you agree to the terms and sign the lease there’s nobody there to protect you or help you out because you’ve already signed it.

On a side note, we were once called in on a case in which there was a major school district that had rented 65,000 square feet. They had a lawyer and a broker representing them. But the lease was full of holes—it was open-ended and left the tenant with multiple and potentially terrible legal exposures. This was a public institution—a school district—and there were many things it was not aware of in the lease. The school district signed the lease, and some tax payers got wind of it. It became a highly political and controversial lease because it was public information. Long story short, about four months after the lease was signed, I was contacted by a political tax-payer group in the district to see if I could help.

So they brought us in to see if we could renegotiate the lease, get the tenant out of the lease, anything we could do. There was serious misrepresentation on the broker’s side because it was a dual agency and all the broker’s loyalties went to the landlord. The tenant was not aware of all the details they were signing. There were things even in the final offer that never made it into the lease. We felt that at the minimum the brokerage firm that represented the tenant but also represented the landlord had exposure and liability for misrepresentation and negligence and potential DRE ethics violations.

The school district didn’t want to get into litigation over such an issue, but it knew that was an option. What we ended up doing was red-lining the lease and brining it out in a public meeting attended by more than 200 people. The landlord and all his lawyers and brokers were there, and they weren’t happy. But I had to expose what I saw. We went through the whole contract and discovered that there was a huge hole in the lease that actually worked against the landlord. If we navigated the lease going forward according to the terms of the lease, intelligently, without breaching, there would be a potential out for the tenant.

Now, the landlord didn’t know what we knew. It was all kept behind closed doors. Several months after we were hired, we were able to use the out clause in the lease for the tenant because the landlord was not able to commit certain obligations he was committed to. And that would be determined a breach of the contract, leaving the tenant with the right to cancel.

Even the landlord wasn’t really familiar with the language that would have exposed him legally in the lease. We exposed it and we forced the landlord to come to the table to either renegotiate the lease or the tenant was going to kick out—cancel—because the landlord wasn’t going to be able to perform certain obligations. Just as a landlord can go after a tenant who doesn’t pay the rent on time, we were able to go after the landlord.

But all along, we advised the school district not to indicate to the landlord in any way how reliant the district was on the 65,000-square-foot space it had rented. We told them to let the landlord know that the district had a Plan B in case anything went wrong. And the landlord didn’t want to lose the tenant—he already had the space vacant for a significant period of time before the school district moved into it. So again, going back to what I said earlier, it’s always important to let the landlord know that he doesn’t have you, that he’s the only game in town.

What’s the difference between a Triple Net lease and a Gross lease?

In a Gross lease, the landlord pays all the expenses, but each year, as those expenses go up, that component gets passed through to the tenant. In a Triple Net lease, all the expenses are paid by the tenant. So if expenses in a Gross lease go up by $1,000 and the tenant has 10 percent of the building, the tenant pays 10 percent of the $1,000. By their very nature, therefore, Triple Net leases are more expensive than Gross leases.

Let’s say you’re paying $2 per square foot gross. Besides your $2-per-square-foot rent, the landlord pays for all the taxes, insurance, maintenance, repairs, replacement, landscaping etc. After a 12-month period of time—and this has to be negotiated ahead of time—the tenant has to pay any increase in expenses over the base year in which the lease was signed. The rub is that if the tenant signs a gross lease at the end of, say, October 2015, he’s going to get hit with what’s called an operating expense increase in three months. So we advise tenants to make sure that the lease specifies that any operating expense increase doesn’t occur for the first 12 months.

What are some of the elements of accountability or responsibility between a tenant and the landlord regarding repairs undertaken in a leased space? What are some of the key issues to watch out for in grey areas such as not just who pays for the repairs but who actually gets the repairs done?

Again, everything in the lease dictates what is and what isn’t. Verbal understandings don’t mean anything. In a Triple Net lease, the tenant is responsible if anything breaks, such as the roof or HVAC air conditioning. A lot of times the landlord will make the repairs and bill back to the tenant. Most of the time, the tenant is required in the lease to maintain a contract with a certified company that comes out periodically and tests the HVAC system and maintains it. Typically, in a Triple Net lease, the tenant maintains the HVAC system, although the landlord has the right to do this himself. Like everything else, it all goes back to the way the lease is written.

What are your top three Do’s and Don’ts for signing a lease?

The Do’s: First, review your lease and final offer very carefully. Make sure everything you bargained for is included in those two documents. Have a knowledgeable third-party go over your lease so that you can be aware of any potential financial exposure to you. Check all the math because mistakes that work in the landlord’s favor do happen.

Second, do your research carefully as to what the market conditions are relative to rent rates, additional charges and concessions. This will help you negotiate with the landlord intelligently.

Third, arrange for an independent, unbiased third-party negotiate on your behalf instead of letting the landlord’s broker represent both sides. This will help you avoid any inherent “Dual Agency” conflict of interest in the negotiation.

The Don’ts: First, don’t rush or feel pressured into signing a lease quickly, even if you’re told that other people want to rent the same space you’re interested in renting.

Second, don’t make assumptions based on verbal representations from the landlord’s side. Anything verbally communicated to you goes by the wayside once a lease is signed.

Finally, don’t sign a lease unless you understand the full and actual costs, including tenant improvements, associated with leasing a particular place. Far too many tenants underestimate these costs.

END

Book Proposal and Biography

Read Book Proposal Books again and re-write and add to much of this for month of June. For June and July finish the 5th Edit and, as I read EACH chapter from first to last I write the summary of that chapter, 1-2 paragraphs for each summarizing EVERYTHING in there.

Book Proposal

 

  1. Mission Statement

My mission statement as a speaker and instructor is the following Trademarked motto: “Inspired Learning Through Cohesive Education™.

 

The mission statement for the book itself is: To provide the potential restaurateur with all of the tools, knowledge, ideas and experience they need in order to successfully open, manage, market and grow their own restaurant enterprise.

 

 

  1. Overview
  • Biography
  1. Promotion and Competition
  2. Marketing Plan

 

I plan to use targeted ads in niche markets by placing advertising in trade journals and magazines. Entrepreneur magazine has many issues devoted to franchising I would love to place small ads for the book in. Among other magazines I will advertise this book in is Success Magazine; Trade journals such as The Nation’s Restaurant News provide us with a window of opportunity to reach readers that are already interested in opening restaurants. Restaurant-centric magazines such as Los Angeles magazine also require small ads to reach my ideal clientele. I plan to get small ads in the classified section of the New York Times and LA Times.

  1. The Chapter Outline

Introduction

 

Table of Contents

 

  • Seven reasons why I wrote this book (put briefly inside part of the introduction as a nice narrative; this does not necessarily have to be a chapter
  • The Moment Where Everything Changed (likely the first chapter or the prologue). The story starts with a lot of action, and not necessarily having to do with restaurant marketing. This makes it fun to read and an exciting way to start the book.
  • Which Came First, the Chicken or the Garlic? This chapter deals with the humble beginnings of Zankou Chicken in Beirut, Lebanon, and how it grew to become the American business with ethnically diverse variety of fans and customers it is today.
  • Hollywood in 1984. This chapter looks back at the wonderful year of 1984 and what our pop culture looked like that year. This year is important to the history of Zankou Chicken because we opened our first American branch that year on the corner of Sunset and Normandie in the heart of old Hollywood.
  • O Lord Give Us This Day our Daily Pita . This chapter looks at the sanctity of food in general and its importance in our daily lives. It looks at the rich history of Mediterranean food in particular and how it’s evolved over the years. This chapter illustrates in great detail the variations within what is considered the healthy “Mediterranean” diet and what it consists of.
  • Zankou’s Famous Chicken is a Triumph of Technique: Interview with Abel Uribe. This chapter looks at why how you cook the food is as important as what the food is comprised of. It talks about running and managing a restaurant since we interview someone that has managed restaurants for years. This chapter shows what managing and running a restaurant entails.
  • How It’s Made: Your Passport to Fresh Mediterranean Flavor . Here we talk strictly about the food. Nothing is more important than the food, so in this chapter we speak of how we take our time marinating and spicing the food. A lot of what we used for this chapter ended up as descriptions for the food on our web site zankouchicken.com
  • Teams- Not Money- Make the World Go Round: How to Hire and Keep the Best Employees [add and read book for TIPS to motivate employees section of this chapter]. This chapter talks about the real secret that is in the sauce: teamwork. Nothing gets done in the restaurant business without a powerful team working hard behind the scenes.
  • Writing the Business Plan (make sure it’s a bit more detailed before publication). This chapter is important for people to read before they open a restaurant. It will help them write their business plans and (hopefully) get the funding they need from banks or private lenders.
  • Mission Statement and Vision Statement. This chapter helps people come up with their own mission statement and vision statement. This is very important because it sets them up for success in the future.
  • The Importance of Food Safety. Food safety is very important. This chapter points out the detailed facts people need to know such as the safe cooking temperatures for beef and chicken, how to avoid harmful bacteria growth, and other important food safety facts. We researched the governments’ web site and many other places to neatly and carefully put all of this information in once place.
  • To Franchise or Not to Franchise with Anthony Le. This is an interview with someone that owns branches of the Robek’s Juice franchise. It’s an insightful chapter that talks about why you should (or shouldn’t) consider franchising as an opportunity.
  • 10 Ways to Throw a Great Grand Opening (add 2-3 more ways and change the name to 12) . Here we list useful ideas on organizing a grand opening. Everyone dreams of throwing an opening with glitz and glamour, but you have to do your homework if you want it to succeed.
  • The Different Pricing Strategies Explained (Re-Write Chapter as an Easy to read narrative). This chapter talks about the various methods businesses use for pricing strategy. It is not limited to the restaurant industry. Any business can and does use one or more of these methods.
  • The 9 Questions that Help Determine Price Strategy. This chapter is different from the previous in that it lists helpful hints and advice for any pricing strategy. These are things people should consider before pricing their items.
  • Organizing and Creating Menus. This chapter speaks in great detail about creating and showcasing a beautiful menu. There is nothing more important as a marketing tool inside a restaurant than having a beautiful (and useful) menu board.
  • The 12 Methods that help Reduce Ordering Errors. When customers get their orders wrong and they are hungry, they tend to get very angry. This chapter looks at all the ways we can prevent this from happening.
  • How We Do it at Zankou Chicken: The “Zankou Difference”. Any restaurant should point out what makes them different than the rest. We use this chapter to illustrate what makes us different.
  • SWOT Analysis: A Case Study. A SWOT analysis is something a business does before having a huge change in strategy or releasing a new product line. This chapter shows them how to do this.
  • The Pros and Cons of Delivery (add statistics on insurance and injuries). Offering delivery services is not without its pitfalls. This chapter looks at the pluses and minuses of such a decision, and shows how to carefully weigh all the facts before making any decision.
  • Having a Legacy Business. It’s one thing to have a working restaurant; it’s something else to have a legacy This chapter shows us in the middle of a transition from slow growth to becoming a fast-growth enterprise we wish to be. It’s inspired reading for any entrepreneur.
  • Creating an Amazing Web Site: Interview with Maxine Torosian. Creating a web site is usually timely, costly, and extremely difficult. It doesn’t have to be. This chapter shows how anyone with a small budget can be creative and make a truly excellent web site for their business.
  • Ideas on How to Make your Existing Web Site Better (talk a bit more about how it can always get better). For those that already have a web site, this chapter shows how to make it better.
  • How To Create a Great FAQ Section. The FAQ section is important because it helps us avoid redundant and repeated questions.
  • The Yin and Yang of Yelp. This chapter begins to tell the story of Yelp. Yelp is a very important web site for restaurant and this book goes into grater detail than any other about the intricacies of Yelp.
  • Yelp Analytics . It’s not enough to know the story of Yelp. You should also be aware of some analytics and how to effectively use Yelp and this chapter shows you how.
  • Yelp Talk: What Makes us want to Review: The Addictive Psychology Behind leaving Reviews. This is a very interesting chapter that goes deeper into why humans behave in certain ways. For example, why do we love to review restaurants? There are thousands of people that want to know more about Yelp: for example they want to know how to market well on this platform, how to respond to customer complaints…etc. This section answers their questions and allays their concerns.
  • The Elite Squad: Yelp’s Secret Army of Social Butterflies . The Elite Squad is Yelp’s Secret Service. They are the secret to their success. This chapter blows the lid on this secretive society and includes tips on how to get in, how to rise up the ranks, and even how to possibly join Yelp as a full time community supervisor.
  • The Secret to Exponential Growth. It’s one thing to grow as a business; it’s something else entirely if you wish to grow exponentially. This chapter talks about the missing ingredient that helps make that happen: teamwork.
  • Why the Customer is King. The customer is the center of our universe. Here we talk about why that is. This chapter takes the customer-centric approach to marketing and provides insight about the importance of treating our customers well.
  • Customer Relationship Management (CRM). This technology helps us keep in touch with customers, use analytics to figure out who they are, and shows how to keep numbers organized to figure out how much they spend. This chapter talks about how to get and keep the best customers, something every restaurateur should know how to do.

Manuscript Part II

  • The Customer is Not Always Right: What to do when things go wrong.

In this chapter we talk about the benefits of firing the worst customers. Here we examine what’s known as the 80/20 rule, or the Pareto Principle, an often overlooked method of thinning the ranks so we can focus better on our prime customers.

  • The New Product Lifecycle (add an original graphics from Dreamentia)

Everything that goes up must also come down. But is that always so? Here we look at a few things we can do to assure a new product launch, and we study the different stages it must go through in its lifecycle.

  • Ethics in Marketing: How to Effectively Market (add a few guidelines from the American marketing Association)

It is not enough to do effective marketing. We must also follow some basic ethical and moral guidelines if we are to succeed with our spirit intact. This chapter covers some specific examples, such as refusing gifts, supporting all the claims made in your advertising, and being careful with the words we use in our print ads. It’s a timely chapter, especially nowadays when so many food companies and restaurants are marketing unethically. They advertise delicious food but serve microwaved junk. This chapter will certainly not alleviate all these problems, but it will provide timely advice that’s easy to follow for anyone in our field.

  • The Definition of Marketing

This chapter looks at the American Marketing Association’s definition of marketing, as well as my own take on it. We talk about the 4 P’s of marketing and much more.

  • The Power of Reciprocity

Reciprocity is concerned with the idea that whatever we put in people, we can expect back. It’s like the old scripture says, whatever we sow we will surely reap. This chapter examines the mechanics of Reciprocity, specifically relating to the restaurant space.

  • Strategic Marketing with Vartkes Iskenderian

This interesting chapter looks at the lifetime value of customers, perceived value in their experience with your brand, social conformity, and cognitive dissonance. These are all $400 words but the basic premise of the chapter is very simple: how to attract and keep the best customers for life.

  • 22 Ways to Increase Restaurant Sales

Many of these are basic, but they are all essential toward any effective marketing campaign. Examples include using radio ads effectively, Yelp, upselling existing customers, adding a drive-through, and creating amazing-looking menus.

  • 12 Tips on How to Increase Satisfaction in the Restaurant Industry

This chapter looks at different, down to earth ways we can increase the happiness of the customers we have. Most people know that it costs a lot more to get new customers than to keep existing customers, and this chapter intends on helping you do that.

  • Are Coupons Good for Business?

This chapter looks at businesses like Groupon and asks an important question: Do coupons hurt your business in the long term?

  • Radio Advertising 101 with Bill McBee
  • The Importance Brand Positioning
  • Is Great Leadership Just Another Marketing Role?
  • Leadership Lessons from the Indian Tea and Chinese Steamed Buns

(make sure this article doesn’t copy too much from HBR for copyright purposes) Replace this with how to motivate employees.

  • The 12 Characteristics of Great Managers with Ara Iskenderian (make this 21 and add a few characteristics from different articles and re-write them)
  • The 12 Different Styles of Leadership (add some nice graphics, one for each style)
  • The 12.5 S’s of Leadership: How to be a Super Leader
  • The Business of Leadership: Chapter from Brian Tracy’s Success Today [make sure it is the latest edition from May, include name of this book]
  • Maximum Wage for Minimum Skill
  • Dikran Iskenderian Interview (rename this chapter for 4th Edit) Re-organize chapters for the 4th edit after a full read-through and place this chapter in the first 5 chapters of book.
  • The Scorpion and the Frog
  • Locations, Landlords and Lawyers [Lease Doctor Chapter to follow]
  • The Lease Doctor: Fixing Broken Leases
  • The Art of Negotiation with Jack Nasher
  • Risk Management: Interview with Dennis Healy
  • Let Them Eat Cake: Interview with Damon Wallace and Sevada Markosyan
  • Morgan’s in The Desert: What Makes a Leading Waldorf Astoria Restaurant Tick? Interview with John Healy

 

The Appendix

 

On the Los Angeles Times articles and other media/ the best things they say about us. Remove the old / negative workers strike article instead put the very BEST of what people say about us from all the menus and our web site.

I can use their logos (fair use) as I am only quoting them.

This is a great way to show people how they can do it too and how third party praise is special.

Appendix A: Yelp FAQ

Appendix B: The Los Angeles Times Article

Appendix C: Complying with ADA—Americans with Disabilities Act

Appendix D: Sample Work-For-Hire Agreement

Appendix E: Sample Copyright Agreement for Web Site Development

Appendix F: Sample Copyright Release Form (not a real chapter can go in the appendix)

Appendix G: Provide an Example of a simple Employment Form Application

Appendix H: Link to Los Angeles Magazine Article by Mark Arax

Appendix I: The LA Times quotes and other 3rd party praise.

Conclusion: Write a New Conclusion for the 4th Edit

About Dikran (from Brian Tracy Book) update this for book on 4th Edit

Epilogue

 

Conclusion

 

 

 

 

 

 

 

 

Introduction (Query Letter)

Every year, thousand of families and individuals embark on a journey to open a new restaurant. The quest to start and run a successful restaurant enterprise is one, which can be gruesome: the odds are stacked against you. Every year, anywhere from 40-60% (depending on who you ask) of these people fail within 3 years. What is the secret formula to follow to ensure success? Some experts say your chances of succeeding are better if you open a franchise, since that is a proven method. Others say to avoid franchising altogether since you would be bound by contracts that are so strict some would call it enslavement.

Who are we to listen to? I wanted to write a book about this topic to help these people. I began this adventure about 5 years ago, in 2011 after I finished my certification in marketing from UCLA. I am a voracious reader, yet I never stumbled upon a book that can help people not just open and run a successful restaurant, but also teach them how to effectively market themselves and deal with all the problems and issues typically arise.

This book is the first of its kind. It is the only book on the market written directly from an insider: someone that owns, runs, and markets a restaurant. I researched these topics extensively for 4 years and wrote this book as a gift to all the authors that helped me along the way all these years. It is my way of giving back to the universe and to the literary world that has given me so much and has enriched my life. I can say for certain that my life would not have been as rich were it not for all the books that made a positive impact in my life. This book will help you avoid the mistakes I have made in my 25 years in this business. We work in an extensively competitive, shark-eat shark environment in the restaurant industry. Consider the numbers:

The National Restaurant Association estimates that there are 245,885 quick-service restaurants in the USA. There are 224,560 sit-down restaurants (with waiting staff), bringing the total to 470,445 locations. About 42,000 new restaurants open each year. Taking this into account, we have over half a million potential buyers for this book annually. This does not take into account the thousands of times each year restaurants do not open but change ownership; this new management is hungry for knowledge about how to succeed in the restaurant space.

There were 4,442 more restaurants in the U.S. in the fall of 2012 than there were in the fall of 2011, according to a recent census conducted by The NPD Group, a leading global information company. The total number of U.S. restaurants is now estimated at over 1 million. The restaurant industry employs over 14 million restaurant employees. Over 1.7 million people start working in this industry anew each year. A study by the National Restaurant Association showed that 9 out of 10 restaurant managers start at the entry level. 8 out of 10 restaurant owners started their career in entry-level positions. These are all people that would love to buy my book.

Researchers at Cornell University and Michigan State conducted a study. They looked at various restaurants in local markets over a 10-year period. They discovered the following:

  • Within the first year of opening, 27% of new restaurants failed.
  • Within three years, 50% of the new restaurants failed.
  • Within five years, 60% of the new restaurants failed.
  • Within ten years, 70% of the new restaurants failed.

Until now, people simply assumed restaurant failure rates are the way it’s supposed to be. But it doesn’t have to be this way. These failure rates are dismal because most people don’t do their homework and open their restaurants without enough hard work, the research, or the team that is necessary in order to succeed. This book will fulfill the role of being the one book in the marketplace that can help these people. No one has ever written a book exactly like that. The emotional, psychological, and financial turmoil suffered by these people every year can be avoided.

According to the National Restaurant Association, approximately $710 billion is generated every year from restaurant industry sales. Restaurants gross a combined average of about $2 billion per day. Our industry employs over 14 million people, making up 10% of the total workforce in the United States. Many of these 14 million employees and managers hope to open a new restaurant every year, and they are the ones that make up the large number of new establishments that open annually.

In addition to this, the Food Network has made restaurants famous with shows like Restaurant Impossible and is credited with starting the “celebrity chef” phenomenon. In 2013 the Food Network was watched in an estimated 99 million (approximately 75% of) US households.

My book is unique because it will teach you almost everything I know. I have gone through great lengths to summarize the best knowledge available in this field, by interviewing all the professionals. I have asked them questions no one dared ask them; I got close to them because I wanted to know and I wanted to learn and grow, not just for this book but also as an individual.

Not long ago I was featured on a Food Network segment titled “The Best of Garlic“, which has been viewed by millions of Americans on TV and has been viewed over 65,000 times on YouTube. That video can be seen here

https://www.youtube.com/watch?v=ZcR2k5gkkqo.

I still get stopped and asked about my appearance on that show all the time. It was so much fun to do that I look forward to being on that network again, and possibly being in the next Zankou commercial as well. We made one here

https://vimeo.com/120767969.

And while I have had my fun with all the people I’ve met in the process of writing this book, my greatest reward will be to know I have made a positive impact in your life.

For those that do not know me, I am co-owner of a famous rotisserie chicken chain here in Southern California called Zankou Chicken. My name is Dikran Iskenderian, nice to meet you. My name is very Armenian, since that was my great grandfather’s name. It was also the name of our greatest King, King Tigran the Great, who made the Armenian Empire stretch from western Turkey to Cyprus to Syria a century before Christ. My father always used to say our lands started shrinking when we stopped making weapons and started making churches. Armenians were the first nation to accept Christianity as a state religion in the early 4th century.

Back to the book: this adventure took me to many places I had not imagined, helping me learn so much about the topics I had not thought much of before. I started with a clean slate, asking myself a simple question: “If I wanted to open a new restaurant and had no experience, what would I want to know?” The answers kept flowing into my mind.

For one, I would love to know what kind of restaurant I should open. Next I would want to know where I should open it. Naturally after that I would love to know how do I find the right location once I know where to open, for example, where would I look specifically to find the right location. As you know, location is extremely important in this business. It can make or break you. I would love to know what’s the difference between a regular restaurant and a catering business.

I would love to learn how to negotiate terms better with landlords and distributors. I would love if someone taught me about the correct marketing methods, ROI, how to come up with a great mission statement, whom I should hire and whom I should fire, how to form the right team, and whether or not I should franchise. I would want to know all the positives and negatives of different ownership styles. I would want to know the different styles of leadership and how I should behave around my employees.

If you purchased this book I want to say: congratulations, because you are holding the only book available that will answer all of these questions and more. I worked hard to make this book fun to read, educational, and immensely informative for you. My ultimate goal is to follow my dreams and become an instructor, where I can teach this material to everyone all across this great country and the world.

Thank you for the opportunity to meet you. If you bought this book please visit my web site and insert the code to get my other book, Success Today, for free. It is my gift to you for joining my family. There you can join my email list and we will keep in touch, where I will be answering many reader’s questions on social media and email.

I look forward to working with you. God bless you and thank you for buying my book.

The Business of Leadership

THE BUSINESS OF LEADERSHIP

Sample Chapter

THE BUSINESS OF LEADERSHIP

BY DIKRAN ISKENDERIAN

Some leaders are born and some are made. We all have God-given talents and abilities. However, if we really want to become awe- inspiring leaders, we must constantly study leadership by reading books about it and attending seminars. We must become what we study and lead by example, not just by words. As one of the leaders of my family’s chain of restaurants, I am always studying the best books I can find on a variety of topics.

Some of the most memorable leaders throughout history have been transformational leaders, like Mother Teresa and Martin Luther King, Jr. They had a profound impact on history. The principles they taught have endured long after their death. Their lives were so meaningful that they changed peoples’ entire worldview. Not everyone can be a transformational leader. That’s why it’s important for aspiring leaders to evaluate their skills and see what kind of leader they are best suited to be.

There’s a difference between being a leader and being a manager. All good leaders and managers treat their employees well. They pay them better than the competition and give them opportunities for growth. The best team members are those that smile naturally and have a great personality. These are important traits because personality can’t be taught. If someone is not smiling or they’re constantly bitter, you can’t change that. As long as people are intrinsically positive, they’ll make great employees. Every good leader and manager should constantly strive to make people better by always training them. This is why it’s important for leaders to never stop learning.

Management implements what the leadership plans. Managers are like car mechanics who make sure the car is running smoothly—that the oil is right, the temperature’s right. For example, a restaurant manager’s job includes:

  • Maintaining great food quality

2) Providing excellent customer service

3) Making sure employees are treated with professionalism

Good managers can help reduce overtime while simultaneously assuring people are paid fair wages. Leaders are responsible for hiring the right kind of people and writing the company’s Vision and Mission Statements, outlining clear goals and communicating them with the team, and dealing with rapid changes in the environment.

Good business leaders focus relentlessly on the customer. Leaders should always be learning, taking classes and making the most of their God-given talents. Managers, employees and customers can’t do that for us.

The managers, in turn, should watch out for the business as if it’s their own. Success for them should be the company’s growth. If they see the company has the potential to grow and they communicate that to the leadership and help them create that growth, that’s the definition of success for them. Managers want to make more money, too, but how can business owners pay them more if the business is not growing and making more money?

It’s best to shift most of your time and energy on serving your best customers. There’s a saying that 20 percent of your customers often provide 80 percent of the value to your business. It’s called the Pareto Principle. In the restaurant business it’s more like the “99-1 rule.” That is, 99 percent of customers are awesome, but you always have the worst 1 percent who constantly seem to be complaining. You have to fire the worst 1 percent of your customers. They are the ones who destroy employee morale and slow down service for everyone else.

CREATIVITY

I am probably more of a conceptual, artistic kind of leader. The restaurant business often tends to be modeled on the military style of leadership. And, just like the military, there is a very well organized hierarchy of positions. There are rigid rules and procedures, methods and protocol that must be followed. Being creative doesn’t come easily in this kind of environment.

Following mundane rules is a responsibility for management, not leadership. Leadership has more to do with vision and entrepreneurship— starting and shepherding new businesses and creating new industries that did not exist before.

Cirque de Soleil is a good example. This Canadian company came in with the revolutionary idea of wanting to launch a circus without animals. At first, people couldn’t understand how anyone could run a circus without animals. At the time, it didn’t make sense. But Cirque de Soleil quickly became one of the top entertainment companies in the world. Its owners became billionaires by asking a simple question: What are the worst parts of a circus?

Many circuses were abusing animals, so animals were taken out of the equation. Instead of animals, live music with staged acrobatics, grandiose costumes, mystery and magic were brought in. That’s what people wanted to see, and the extraordinary success of Cirque de Soleil shows that the public supports and loves the concept behind any business that operates with integrity.

There’s a book that I highly recommend, written by W. Chan Kim and Renée Mauborgne called Blue Ocean Strategy. Their concept looks at what customers want and gives it to them by creating a new industry instead of competing with existing businesses. By creating a brand new niche it destroys the competition because it doesn’t even have direct competition. This book teaches you to come up with a concept, do your research, put together the best team you can to implement the idea and get out of the way.

Suppose that I have an idea for a new kind of nail salon. In doing the research for it, I ask women what they hate the most about nail salons. It turns out that a lot of them don’t like the fumes. They also don’t like the fact that many of the employees in nail salons can’t speak English. They hate the fact that the seats in nail salons aren’t very comfortable. “I wish there were wide-screen TVs,” some of the women say. “I wish I could get a nice cocktail.” Others want comfortable sofa-like seats that give massages. A few even want private rooms in order to host a special event for their best friends.

I also ask what they would want more of and I get responses like: “extended hours,” “dead skin fish treatment,” “friendly and attentive staff,” “better brands of color and organic nail polish,” “fresh smoothies,” and “live music spun by a DJ on the weekends.” I would never be able to come up with these ideas on my own.

After doing the research, we must start coming up with solutions. One way around the fumes may be in an open-air setting or better ventilation. If nobody has done anything like this before, it would give me confidence in its future success.

If I started such a concept and it was based on sound market research, I know it would be a solid place to start. I know that if I get such a concept up and running, I wouldn’t be the one managing it. That’s because I’m not—and can never be—a manager. I’m the person that usually comes up with the ideas but not the best at implementing them.

But even the best idea, the best product, needs to be marketed well and have the right team. It’s safe to say that in business there can be no success without great marketing. Take Apple for example. They display their products on billboards against a background that is a clean, white opaque. In fact, all you see is the product and a tag line—an iPhone 6, say— hypnotizing you to buy it. It’s almost as if the viewer has no choice.

It’s important for an entrepreneur to find a niche and create a culture around it. Look at what you’re good at and try to come up with something no one else has created. If we really do what we are best at, it doesn’t even feel like work and life actually becomes fun and full of adventure. Then figure out your target market—the kind of customers you’d like to sell your product to. I have found that once we do this, the key players and new team members seem to magically appear and help to attain our goals. Success Today, for example, is the product of the hard work and energy of a few key people. Hopefully being part of this book and the publicity we generate will help me become an instructor.

I am at a point in my life where I am very happy with all I’ve accomplished. My new happiness will come from writing books and teaching people, which has always been a lifelong dream. You would find me almost daily looking through books at Barnes and Noble, so imagine the thrill I would feel when one of the books on the shelf happens to be mine! What a dream come true! Through teaching and training others, not only will I realize my full potential, but will make new contacts and meet interesting new people. I want to challenge myself intellectually; making a little extra money on the side is just a bonus when you’re doing what you love.

Having read hundreds of books and articles over the years, the time has come for me to transition from student to teacher. Instead of just reading and listening to books and CD’s, I will be making them. What a joy it will be to know that I am helping people and the books I write can positively impact people’s lives long after I am gone. It’s a true sense of immortality, which is why so many people dream of getting their work published and leaving a legacy.

Since I’ve been doing this for so long, I feel as though teaching is the next evolutionary step in my growth. The best way to learn is to teach, and so I would be learning and growing myself as I teach others. I plan to eventually teach a class at UCLA Extension, having received my own certificate in marketing from there, with distinction. After that, I plan on teaching at seminars and attending various professional conferences.

I have created a new web site:

www.therestaurantmarketingexpert.com

to help me launch this second career. Among the topics I wish to teach are: branding, leadership, marketing and sales, and social media. When I first began our social media page, we had about 120 followers. We now have over 50,000 fans on Facebook and thousands more on Twitter, as well as tremendous growth we’re seeing on other networks. This took years of dedication and interaction with thousands of customers.

So to recap, the keys to real and permanent growth are:

1) Finding your niche and know your audience.

2) Creating and maintaining the right team.

3) Ensuring great service and marketing.

You have to consciously make time for yourself and explore the artistic side of you; we tend to forget the imaginative side of ourselves. If you ignore that side of yourself, you’re not going to be very happy. I keep myself busy through my artistic projects. When I get too stressed working on our restaurant business, I go to my creative side: painting, artwork, and photography.

You have to make time to socialize, meet people and network. We can accomplish this by meeting three to five new people each day. If you don’t network consciously, it will never happen.

A person’s artistic side is tied to their emotional intelligence. Just like leadership, some people are born with better emotional intelligence than others, but everyone can become better at it. The key to improving emotional intelligence is relating to people—talking to them and interacting with them. Taking some psychology classes is also a great idea. Learning about psychology enables us to study what’s behind the human mind and what motivates us. Everyone has a reason for doing things, even if it doesn’t seem to make sense.

To me, one benefit of having a high emotional IQ is that you would be more in tune with people’s reactions. You can’t force yourself on others. For example, if you’re at the airport and people are in a rush, they’re not going to be very receptive to any marketing efforts. You have to know what mood a person is in and what they really want to hear.

Emotional intelligence is about becoming a better listener and showing more empathy for others by acknowledging their feelings. As entrepreneurs, oftentimes we are poor listeners. It’s about letting people talk about themselves instead of talking about yourself. It’s no wonder that the first rule of marketing is to listen to your customers.

It’s also important to look people in the eye, especially these days when so many people whip out their smart phones and start talking or texting in the middle of a conversation. That’s rude. Give your cell phone a break and focus on people during conversations.

Reciprocity is an important principle to understand and practice. For example, if you immediately ask someone whether they would like to buy a house from you, that person would probably wonder who on earth you are and what you’re talking about, given that you barely know each other. Such behavior turns you into the personification of spam, and people hate that. But if you go up to the person and invite them to a free weekend hiking trip, you’re likely to become friends. Do something nice for someone before you ask him or her to buy something from you. These are the things that lead to symbiotic relationships, which is what we want.

As an entrepreneur, I have learned to practice reciprocity simply by showing empathy towards others. I often ask people about their day, their families and their vacations. I’m alert to their upcoming anniversaries. Even if I know nothing about them—or feel they don’t have the time to talk—I just smile at them as frequently as I can. Never underestimate the power of a genuine smile.

Above all else, a leader should always seek wisdom.

Proverbs 3: 13-18

Blessed are those who find wisdom, those who gain understanding, for she is more profitable than silver and yields better returns than gold. She is more precious than rubies; nothing you desire can compare with her. Long life is in her right hand;
in her left hand are riches and honor. Her ways are pleasant ways,
and all her paths are peace.

She is a tree of life to those who take hold of her; those who hold her fast will be blessed. ~Proverbs 3: 13-18and Biography

Jameca’s List

On Restaurant Marketing:

1)     Interview with Zankou Chicken’s Marketing Director Dikran Iskenderian (combine biography update with the 2 Dikran chapters)

2)     12 Tips on How to Increase Customer Satisfaction in the Restaurant Industry (CRM) DONE

3)      9 Questions That Help Determine Price Strategy **

4)     To Franchise or not to Franchise?

5)    The 12 Characteristics of Great Managers

6)    The Yin and Yang of Yelp (combine the best of Yelp chapters in this lecture)

7)    The Pros and Cons of Delivery

8)   Principles of Strategic Business Marketing with Vartkes Iskenderian

9)   52 Ways to Increase Restaurant Sales

10)   Secrets of Exponential Growth

11) Locations, Landlords, Leases and Lawyers

12) Organizing and Creating Great Menus *****

13) Risk Management: How to Keep costs down for Workers’ Comp Insurance Premiums.

14) The 12 Methods to Reducing POS errors

15) The New product Life-cycle

General Business

1) The 12 Styles of Leadership

2) Why the customer is always King

3) Customer Relationship Management

4) Why Teams (and not money) Make the World go Round

5) The Power of Reciprocity

6)  Is Good leadership a Marketing Role?

7) Why The Customer is Not Always Right

8) Fundamentals of having a “Legacy Business”

9) Are Coupons Good for Business?

10) Maximum Wages for Minimal Skill? How to mitigate the risks associated with mandatory minimum wage increases

11) The Different Pricing Strategies Explained ****

12) The 12.5 S’s of Leadership

13) The Art of Negotiation

14) What is Branding and what does it entail?

15) 10 ways to throw a great Grand Opening

Look at your Customers

We have already seen what listening to your customers does. It improves customer service because listening to your customers is the #1 rule of marketing. By listening, we allow the customer to tell us how to make the food better, faster, and improve their overall experience. This, in turn, brings positive word of mouth advertising and increases the number of customers a business has.

But what about seeing your customer? Often times in the restaurant industry we are busy looking over numbers in the office, the chefs are busy cooking in the kitchens, and the waiting staff hardly have a moment to stop and look at the customer. Well, a recent Harvard Business Review article suggests that by watching our customers, their entire experience seems to improve. It doesn’t end there. This study also showed that the cooks or chefs had a better experience serving the customers when they also were able to watch them.

https://hbr.org/2014/11/cooks-make-tastier-food-when-they-can-see-their-customers

The research: Ryan W. Buell, an assistant professor at Harvard Business School; Tami Kim, a doctoral student at HBS; and Chia-Jung Tsay, an assistant professor at University College London, set up four scenarios in a real cafeteria for two weeks. In the first, diners and cooks couldn’t view one another; in the second, the diners could see the cooks; in the third, the cooks could see the diners; and in the fourth, both the diners and the cooks were visible to one another. The researchers timed the preparation and conducted surveys about the service and food. The results showed that when the cooks could see their patrons, the food quality got higher ratings. Interview by Scott Berinato

The challenge: Does the mere sight of a customer motivate you to do your job better? Defend your research.

Buell: The results were pretty compelling: Customer satisfaction with the food shot up 10% when the cooks could see the customers, even though the customers couldn’t see the cooks. In the opposite situation, there was no improvement in satisfaction from the baseline condition in which neither group could see the other. But even more striking, when customers and cooks both could see one another, satisfaction went up 17.3%, and service was 13.2% faster. Transparency between customers and providers seems to really improve service.

HBR: How did you rig it so that they could see one another?

Kim: We used iPads and set up a videoconference between the dining area and the kitchen. There was no sound and no interaction, but people on both sides could see each other.

Why do you think that improved the perception of quality?

Buell: We’ve learned that seeing the customer can make employees feel more appreciated, more satisfied with their jobs, and more willing to exert effort. It’s important to note that it wasn’t just the perception of quality that improved—the food objectively got better. During the experiment we had an observer in the kitchen taking notes and timing service. Normally, chefs would make eggs on the grill in advance, adding them to plates as needed and often overcooking them. When we turned on the screens and the chefs saw the customers, they started making eggs to order more often.

Tsay: We also tested these effects on a range of populations, from chefs to communities in remote parts of the world. We consistently found that transparency created value.

Maybe seeing the customers just raises the anxiety of the chefs, and they feel they have to do better because they’re being watched?

Kim: We considered whether transparency could have unintended costs. We found that reciprocity plays a much bigger role than stress or accountability. This is more about gratitude—which is a powerful force. Cooks constantly said how much they loved seeing their customers. Many wanted to keep the iPad setup. One said, “When the customers can see the work, they appreciate it, and it makes me want to improve.”

Buell: Being appreciated makes work meaningful. People feel what they do matters. Human connections seem to trigger that.

Tsay: We did follow-up experiments in which chefs and customers watched videos of service interactions. For customers, seeing the chefs’ work increased their perceptions of effort and improved their opinions of the service. But it didn’t matter to the chefs if the customers watched them make the meal. Just seeing the customers is what motivated them to do better.

This makes sense because at Zankou, I often watch people order the kabob plates and wait patiently and curiously for sometimes up to 20 minutes to get their plate. It somehow makes it seem more appropriate that good tasting, healthy food should take a little longer to prepare. The cooks watch the patrons and the customers watch the cooks. Everyone has each other on check. If the food is taking too long customers will often alert us and we try to speed up the process. The entire experience is better because seeing our customers makes us want to please them in every way possible.

How to Write a Comprehensive Employee Manual

The employee handbook is an important communication tool. If written well, it can show potential employees what they can expect while working for your restaurant, and what will be expected of them. It should contain a lot of information that is concise, easy to read because it’s well-organized, and it should serve as both a teaching manual as well as a legal shield to protect you as much as possible from potential lawsuits.

Here are a few of the things it should include:

Open Line of Communication

The most important aspect of a powerful and functional team is open communication. Make sure employees know they can talk to the owners and higher management about anything; and make sure they know that they are expected to report anything they see that may be breaking the rules. This is very important for stopping sexual harassment in its tracts, as well as a host of other issues such as workplace violence, unsanitary kitchens, or safety issues, which leads us to the next topic…Be encouraging and positive, letting them know you have an open door policy.

Creating a Safe Work Environment

Just as we discussed in the chapter on worker’s comp. insurance, creating a safety culture is very important. This area should list the phone numbers where they can receive medical assistance, and how to respond to emergency situations such a hold up, cuts or bruises, or a fire. It can show easy to read guidelines for safety (for example how to lift heavy objects), and how to reduce injury. As an option, you can outline bonus schedules for the teams that go for a certain period of time without injuries.

Non-Disclosure Agreements (NDAs) and Conflict of Interest Statements

These helps to protect your trade secrets and company proprietary information. Make sure specialized chefs and anyone that will have access to your secret ingredients sign this. They should never be allowed to take your trade secrets and go sell them to another company.

Compensation

Clearly show how people will be paid, and at what time. Show potential bonuses and pay schedules, and state the minimum wage for your state and all laws here. Also list anti-dscirimation laws, and show that hiring and compensation will never be affected by age, race, color, creed, religion, sex ..etc

Standards of Conduct

This section should not only show that professional conduct is required at all times by your employees, but it should also contain what is expected of them in your business. Not all businesses are the same, so this section should be a little different in every business. For example we do not allow chewing gum behind the counter because we deem it unsanitary. That may not be so for a teenager working at a clothing shop, etc. A tight top is not allowed while working at a bank, while it is the uniform for a waitress working at Hooters. Every business is different. Make sure your company’s values and culture are reprinted well by the way people dress and act as employees.

Leave Room for Improvement

Just like everything else, there is always room for improvement on your Employee Manual. Let people know it will be updated regularly and is subject to change without notice. Copyright the agreement itself with your lawyer to make sure people don’t copy all your ideas.

Include Mission Statement, Values Statement, and By-Laws

As a document of important communication the Employee Manual should detail what the company stands for. The mission statement, values statement, and company by-laws can evolve over time and thus it would be great to keep records of them here and to make sure everyone is always looking up to the standards they are expected to live by, inside and outside the job. Make sure to include new media here, and some guidelines against defamation of the company’s good name on social media (or anywhere else) on duty or off-duty.

General Employment Information

Your employee handbook should include an a overview of your business and general employment policies covering employment eligibility, job classifications, employee referrals, employee records, job postings, probationary periods, termination and resignation procedures, transfers and relocation, and union information, if applicable.

The POS System and Credit Cards

As a general rule, employees are not supposed to retain credit card numbers or their expiration dates. If your company allows them to do this and there is any repeated pattern of theft, credit card companies have the right to refuse working with you and cut off all lines of credit. Considering there are only 4-5 major credit card companies, you don’t want this to happen. Be very careful with retaining information on the POS systems and who has access to them. Point out correct procedures here and let employees know they are expected to follow them regarding the POS system.

Contact Information

Make sure employees know where to point people for the right information. Often this is your company’s web site. We don’t allow employees to give out our phone numbers, for example, although it still happens occasionally. There should be one source of contact for all things marketing, once source for insurance, etc. List the names and phone numbers here.

Employee Benefits

List all the employee benefits here. Do you have a 401 K program? Is there a health care provider for all employees that can give them a discounted rate? Do you cover time off for pregnancies? All of that information should be listed here.

Leave Policies

Family medical leave, jury duty, military leave, and time off for court cases and voting should all be documented to comply with state and local laws. Also explain your policies for vacation, holiday, and sick leave.

Legal Review 

Make sure a qualified lawyer reviews this employee manual. Often they can point out legal materials your forgot to provide, or your state’s mandatory tax, anti-dscirimation, and ADA laws you forgot to include.

Let them help you include a paragraph disallowing class-action law suits in lieu of a fair, dispute-resolution mediation service every employee should be required to sign.

In short, whatever is in your best legal interest to include, you should include.

Now publish the Manual in English and Spanish to make sure everyone understands their rights, privileges, duties, and responsibilities. Then say a prayer and begin work.

Resources: 1) The Small Business Administration web site

https://www.sba.gov/content/employee-handbooks

2) http://www.wheniwork.com

Start with good people, lay out the rules, communicate with your employees, motivate them and reward them. If you do all those things effectively, you can’t miss.
Lee Iacocca

The Different Types of Ownership

There are three types of ownership which reprints how your restaurant can be classified as. If you do nothing, and simply open a business and start working right away, these will generally be classified as a sole proprietorship, which is estimated to compromise

Sole Proprietorships one person owning and operating a business (Advantages: ease of start/ending business, own boss, less regulation / Disadvantages: unlimited liability, limited financial resources)

Benefits of Being a Sole Proprietor

The benefit is you are individually responsible for everything, so you decide the marketing budget, the menu, who to hire and fire, where the locations should open, etc. A highly profitable business means you reap most of the benefits and do not have to share your earnings with a franchise company, a board of directors, or partners.

The obvious drawback to this is, since it is only you (or in many cases a family business, which is still classified under sole proprietor in most cases), you are also fully responsible for all taxes, legal liabilities, and employment related issues. Make sure to save enough money to pay a huge tax windfall you will owe at the end of each year for social security, state and federal taxes, and premiums on workers’ compensation insurance.
Partnerships are legal business with two or more parties. What I see in my personal experience is that in partnerships it’s usually classified as a partnership for one of three reasons:

1) The business is started by siblings (two brothers, two sisters…etc). These kinds of businesses start positive, but due to the high volume of stress restaurants or any other food or bar business typically bring upon its owners family relationships tend to suffer. think twice before opening a business with your siblings. In some cases it works beautifully, but more often than not, tragically, it ends with huge legal fights and breaks up families.

2) Some partnerships are made of people that come from totally different backgrounds. For example in our catering business chapter (Let Them Eat Cake), we saw how this can work. If you are great at marketing but terrible at cooking, you would need a chef to partner with. In some cases this can work beautifully, but beware partnering with n eddy people that want to use you just to get their feet in the door but don’t want to do an equal amount of work.

3) Partnerships are often formed in businesses where it is really tough to do anything alone, for example law firms and medical practices. Often you have dentists that are married and share an office, or similar family situations. Many of these “form a partnership for the convenience of it” types open up partnerships as a married couple.

Just as the previous examples, be very careful about this. Marriage is difficult enough as it is without mixing the stresses of work into the equation. It can work, but requires tons of care and effort.

(Advantages: shared financial resources, equal and divided risks, no special or added taxes / Disadvantages: unlimited liability, profits are equally shared, disagreements due to emotional stress and potential conflict of interest)

Corporations are legal entities with their own social security number. Often they are treated like citizens by the government; they are taxed, they are considered a separate entity, and they can even be convicted of crimes and fined just like an individual.

The advantages are that they have a limited liability, usually gain more money to invest from huge investors, they recruit talented employees, and corporations usually (though not always) outlive their founders by many decades. Longevity is much easier for established corporations than sole proprietorships.

Disadvantages: double taxation, usually expensive to incorporate with tons of required paperwork both with the government and the IRS, and sometimes they get too big to make quick decisions, falling prey to newer businesses with quick thinking. That is to say, they are slow to change (thinkMc Donald’s and how it’s been losing money for years now without being able to change the quality or the perception of their low quality as a brand).

Resources used for this blog:

1) http://www.foodservicewarehouse.com/education/how-to-start-a-restaurant/restaurants-organized-as-sole-proprietorships/c28278.aspx

What is Branding and what Does it Entail?

The importance of having a great brand supersedes all else in the restaurant business. Money comes and goes, there are busy days and there are slow days, employees come and go as well, but your brand is unequivocally the most important aspect of the business. Think of your brand like a lighthouse.  Out there is the great big ocean of stormy waters. It is cold, raining, and misty in the great big sea. There are many ships with hungry fisherman and sailors that need to dock and have a bite to eat. Your restaurant’s brand is the lighthouse.

Time and time again it will attract people, just like that Greek Siren. Except here we mean to do no harm to the fisherman and sailors, we wish to give them what they need. A hearty and healthy meal. People have known to trust the Zankou Brand for over 54 years, over three generations, two continents, and millions of happy customers. This type of love and dedication customers and fans have is not easy to achieve and takes time, dedication, and hard work. You have to constantly thrill the customer, not just satisfy them. And in today’s extremely competitive marketplace of $5 chickens available at places like Costco that is becoming more and more difficult to do.

According to Wikipedia, a Brand is very different from just a logo. A brand is all-encompassing, whereas a logo is simply the small icon most business affix to all their merchandise or food items. A brand is a name, term, design or other feature that distinguishes one seller’s product from those of others.[1] Brands are used in business, marketing, and advertising. Initially, livestock branding was adopted to differentiate one person’s cattle from another’s by means of a distinctive symbol burned into the animal’s skin with a hot branding iron.

A modern example of a brand is Coca-Cola which belongs to the Coca-Cola Company. In accounting, a brand defined as an intangible asset is often the most valuable asset on a corporation’s balance sheet. Brand owners manage their brands carefully to create shareholder value, and brand valuation is an important management technique that ascribes a money value to a brand, and allows marketing investment to be managed (e.g.: prioritized across a portfolio of brands) to maximize shareholder value. Although only acquired brands appear on a company’s balance sheet, the notion of putting a value on a brand forces marketing leaders to be focused on long term stewardship of the brand and managing for value.

The word “brand” is often used as a metonym referring to the company that is strongly identified with a brand. Marque or make are often used to denote a brand of motor vehicle, which may be distinguished from a car model. A concept brand is a brand that is associated with an abstract concept, like breast cancer awareness or environmentalism, rather than a specific product, service, or business. A commodity brand is a brand associated with a commodity. A logo often represents a specific brand, as do many trade names.

Source 1) Wikipedia http://en.wikipedia.org/wiki/Brand

Radio Advertising 101 For Small Businesses

Hundreds of millions of people listen to the radio every week in America. According to the data analytics company Arbitron, radio reaches about 95 percent of all Americans 12 years or older. Eight out of 10 adults listen to the radio in the car, and about three out of 10 listen to it at work. Radio is streamed on the Internet, enabling its reach even farther, nationally and internationally. By any reckoning, radio is an ideal medium to advertise on for small businesses. But running an effective radio advertising campaign takes a bit of know-how.

Los Angeles communications expert Bill McBee has a background in managing radio and print media marketing. In this interview, he gives a terrific overview of radio advertising for small businesses.

Give us some background about radio advertising.

Radio and print media are pretty much intertwined these days—you can’t do one without the other. Anytime you look at marketing as an ad sales person or as an advertising agency you have to look at the different aspects of what’s best for a client—because every client has different needs. To be a true marketing consultant, who is what you must consider yourself when you’re in advertising and sales, you have to look across the board into radio, print, billboards, online.

Radio is less expensive than TV and it still has a very good reach. The reach has gotten watered down over the years as radio companies have integrated Internet marketing and some print. And print, by the way, doesn’t necessarily mean newspapers and magazines because there are many different ways to cover print. One of the biggest radio stations in the Los Angeles area, which is great for reach, is Jack FM. That’s because Jack FM prints bumper stickers. So someone may not want radio advertising because he thinks it’s too expensive, but for a certain amount of dollars he can get a certain portion of radio advertising such as quick 10-second promotions. Besides, that he can get a coupon for his business on the back of bumper stickers that Jack FM gives out—say, 100,000 bumper stickers a month. So it depends on how many coupons on Jack FM bumper stickers a customer may want to hand out—a thousand, 2,000, or 5,000? So that’s targeted advertising that’s a form of print media. Plus the customer can get a 10-second promo around lunchtime that, for example, says: For so-and-so product go to so-and-so place … 10 locations. And now with smart phones, you can find out exactly where the closest location is to where you happen to be.

So you can’t define a marketing strategy through a single form of media. You can’t define it by radio or print or the internet alone—it’s all connected. Let’s take CBS Radio, where I spent some time working. How many station vehicles do they have? They say that for “x” amount of dollars we’ll give you so many radio blurbs or we’ll wrap the back of our station vehicle with your logo. You know how many thousands of people will see that logo on the road or at events? That’s all quantifiable money—that’s good marketing. It’s mixing radio promos with coupons, with wrapping a vehicle. And if you do it smart and if your consultants at, say, CBS, have your best interest in mind, they know about everything that’s available to you.

Let’s switch hats for a minute and go to print advertising. With print, you have to think what’s best for your business—should I go to Pasadena Weekly or Downtown L.A. Daily News? What’s the most local reach I can get for the money I have in the area I want? You have to ask yourself the “who, what, when where, why and the how” of advertising. That is,

1) Who do I want to reach; (target market)

2) What do I want to promote; (which item on the menu)

3) When do I want to promote (duration of advertising)

4) Where is my demographic; (what does the audience look like)

5) Why is that my demographic; (Align with right radio channel that caters to this audience because they listen to that kind of music)

6) Which methods will I use in order to reach to reach it?

So, remember, a guy who wants to sell you advertising can talk you into anything. But somebody who actually takes the whole picture and scope of a marketing plan will look at all of it. Somebody who wants to sell you $15,000 a week of just radio ads or $10,000 of print ads is wasting your money. What you’re looking for is added value. You want the most educated reach for what you want to do, and that’s why you need a true consultant—someone who doesn’t just sell you spots on a radio but support on the radio’s website, some sort of coordination with the radio’s street team. These are all things that you, the customer, have to ask for and include in your reach.

I’ve always thought of myself as someone who looks at each specific case. I’ll meet with you, shake your hand, ask you 10 or 15 specific questions and then say, “Let’s meet in a week or five days. “

There’s no better spokesperson for your business than you. That’s why whenever I met someone articulate or concise, I’d have him or her voice or write his or her own commercials because no one can talk more passionately about your business than you do. Then together we’d fine-tune it.

What if someone has a really low budget and wants to pursue a single advertising source such as, say, radio?

First of all, you can’t do radio on a low budget. And the reason that low budget and radio can’t exist in the same conversation is this: Let’s say you have a restaurant. And you have a restaurant in Burbank and one in Santa Clarita and one in Glendale. And a radio advertising rep from K-Earth 101 comes into you and says, Hey, I can put you together a package—it’s $8,000 a week. So as a businessman I would ask about K-Earth 101’s reach.

If you do your homework, you’ll know that it reaches L.A., Orange, San Bernardino. My point is that probably $4,000 or $5,000 of that $8,000 would be wasted because you’re over-reaching. People aren’t going to drive from Orange County to your Burbank location or your Valencia (Santa Clarita) location. Besides, K-Earth 101 doesn’t even reach Valencia very well. From knowing the radio market, I could tell you that the best buy for you would be 100.3 The Sound. Because The Sound reaches Burbank, Santa Clarita and Glendale.

And because they don’t reach as big an area as K-Earth 101, their ad rates aren’t quite as expensive, even thought they’re a highly rated station and have a lot of listeners. So your money would be spent better. Moreover, they have two frequencies—100.3, which is based in L.A., and 100.1, which is based in Santa Clarita. And they’re not reaching in Orange County or San Bernardino or any of the beach cities. So you’re getting more of a targeted reach.

It’s well known that commercial radio stations make their money by selling airtime to advertisers. However, their rates are still very expensive, given that more and more people now play video games or downloading movies and apps. A lot of people are very distracted by the new technologies and new media. I recently looked into purchasing a 30-second spot on Kiss FM, which is 102.7. It cost about $1,083 per spot. At a 30-second spot times 10, that’s $10,083. At such an expensive rate, how could a small business benefit?

If you’re trying to build brand recognition, 10 spots of airtime in a week won’t get you anywhere. Anybody who tries to sell you advertising for one week is not doing you any good. The minimum you want to run with anything is six to 10 weeks. Because nobody is going to even recognize your name for the first four weeks.

I do this exercise where I take a piece of paper and ask people to write down a list of television manufacturers. Some people who are really savvy can give me five, six or seven names. But do you know how many television manufacturers there are? There are 44 major ones. Most people can’t get past the top seven. And which one do you think is the highest? You would say Sony. But do you know how many millions of dollars Sony has spent to make them number one in your brain? The number one brand name in the world is who? It’s Coca-Cola. Number Two is who? Disney. And both of these companies spent billions over the years in order to achieve this level of brand recognition.

In February 1922, AT&T announced that it would start selling toll broadcasting. Business would underwrite or finance a broadcast in exchange for being mentioned on the radio. What has changed in radio advertising over the years? Advertising today is of course very different.

Back in 1922, the only radio stations in existence were AM. FM was only used in the military—it didn’t really exist. About 1967-68, a guy named Ray Donahue and his wife Rachel went to what I think was a church-owned FM radio station in San Francisco and said, Hey, let us play some records on your station. And they said, “Are you nuts. “

The Donahues said, “No, no, no, people want to hear this music on you FM station, and we’ll tell you what: So and so will give you “x” amount of dollars per week to let us play these records.” Well, the radio station was about to go broke. They accepted the offer—and as you can tell, it caught on.

Do you know who was the very first paid sponsor for FM music radio? It was the U.S. Army. They did it to recruit people. Right around 1968, automobile manufacturers saw a future in FM radio and they started putting FM radios in cars. The old cars used to have three AM buttons and two FM buttons. So the AM was way stronger and more programmable. But then the FM came in. And look at it now—you can get satellite radio on FM, and that’s a whole different ballgame because satellite radio is national. You can drive from the West coast to the East coast or from Canada to Mexico and never lose your satellite radio station. They have around 200 stations on satellite, from talk to comedy to music to religion to ethnic. And one company owns it—Sirius XM. It’s a subscriber-based system, and there are many channels within their system with commercials on it. You pay $100 or more to get satellite come to your car without commercials. So the growth from AM to FM has been amazing, especially in light of the broad scope of radio going just from talk to music to advertising.

Let’s talk a bit about reaching people through local nonprofit stations. My dad was a good friend of Rick Dees, who, back in the day was a very famous host of Kiss FM. They used to smoke cigars together.

My dad used to donate lots of food—Zankou Chicken—to the homeless through a program Rick Dees helped with. They would go out together and hand out blankets and food to the less fortunate every Christmas. What’s your take about giving back to the community through sponsored events, blood drives, etc.?

That’s fantastic. Again, it’s another way to get a lot of bang for your buck without paying a lot. Of course you have your food costs and people costs. Marketing for a good cause is a whole different issue. You have to partner with a different set of radio stations, most of which have a set cause they feel passionate about. Jack FM is tacos, autism. K-Earth 101 used to be big in the military, the veterans. Each radio station has one or more causes they stand for, and business people can target those causes.

You have limited reach—you get a couple of minutes in the morning. But it’s very tangible. In fact you might have noticed a spike in your business following your dad’s association with Rick Dees. Again, that won’t build your name or brand awareness. But it will build your “warm and fuzzy,” and there are still probably a lot of people who haven’t felt that for a while.

Interesting you said that because the first time the L.A. Times mentioned Zankou Chicken around 25 years ago in an article, our sales exploded that week. My family was in Disneyland when my dad got a great call on his cell phone and we went out and found a copy of LA Times in Disneyland, not that easy to do. I remember he was ecstatic. We had four times the revenue for a few weeks just after that, but then it died out and went back to normal.

Yes, that’s why it’s important to keep brand awareness going. Sony, for example, has maintained that top spot among TV manufacturers. They probably don’t advertise as much now—they don’t have to. They’re able to take that money while keeping their brand at the back of your mind. Another great thing for reach is radio station T-shirts. For example, K-Earth 101 does Earth Day at the L.A. Zoo every year. They have food trucks down there.

Let’s talk about jingles. The In & Out jingle, for example, is: “In & Out, In & Out, that’s what a hamburger’s all about.” A sixth-grader could have come up with that, and I actually think it’s kind of cheesy.

That’s why it works. It sticks in your head. Radio and television programming is geared toward no more than the average eighth-grader’s mentality.

General Mills was the first company that ever created a jingle—for Wheaties, the cereal during the Christmas of 1926. And they found that for a week or two after their jingle was aired, their sales soared. The twin cities ran out of boxes of their cereal for the months following this ad campaign. So how important is it to have a jingle?

It’s the most important thing in the world.

And sometimes it has to be an ad within a made up song—otherwise people tend to change the station.

A song is good. Some major musicians started their careers writing jingles. Barry Manilow—he wrote the Band Aid jingle: “I’m stuck on Band Aid because Band Aid’s stuck on me.” Billy Vera. I think Billy Joel wrote some jingles. These guys were jingle guys before they were celebrities. There was a Jif peanut butter jingle—”Moms like you choose Jif, choose Jif!” An Alka Seltzer jingle—”Plop Plop Fizz Fizz.” But the thing about jingles is, don’t put your money behind jingles if you’re not going to put the motor in the front to drive it. It’s great if you have a great jingle, but if you can’t afford to put it out there it’s a waste overall.

And by the way, on the subject of money, one of the most successful—and absolutely free—forms of advertising today is YouTube. I could think of proposing to you a three-minute video and guaranteeing a minimum of 500 to 1,000 hits on it. And you take that 500 to 1,000, who will tell a further 500 to 1,000 people, and pretty soon you’re up to 20,000 or 30,000 hits—20,000 or 30,000 people who have heard your voice, seen your shtick, and attached something to it. A smart marketer will link their radio ads to their You Tube and Facebook presence.

How about the use of a sound or just a funny line?

If you go back to the Wheaties ad, what became of it was a commercial of people sitting with their heads in their hands, looking exhausted. “Oh, you didn’t have your Wheaties today!” Which then took on a life that your life is going to be miserable without Wheaties.

Starbucks can do that now!

Well, Starbucks never put their money into TV or radio or advertising as such. They put all their money into getting into every single place they could. They got into airports; they opened a store in every corner. And the success of the Starbucks market is that when you go into one of their stores, every single one of them is the same. Every place you buy a Coca-Cola in the world it’s the same drink. And I asked a Coke executive why that was, given that water in every place in the world is different. And the answer was that Coke has a water purification system that makes the drink uniform everywhere. The only inconsistency I’ve noticed in the fizziness of the drink. The flavor’s the same.

How important is it for a restaurant to have a focused, core message in advertising? “We’re the Best Sushi in Town” or “The Freshest Lobster.”

That’s backwards thinking. Everybody has the best chicken. Everybody has the best barbeque. The print advertisers—L.A. Weekly, Pasadena Weekly—all have these “Best of” features: Best Restaurants in Pasadena 2014; Best Cafés in Los Angeles, etc. But nobody cares about “Best of.” Everybody is “best of” something. It means squat. What you have to think about is what is going to drive people to you. You don’t have to tell them you’re the best. They have to think you’re the best. Because you’re going to be the best compared to what? One customer may like your food. I may hate it.

To say you’re the best is a cliché. And clichés are to be avoided at all cost. Slogans are good, but clichés are bad. There’s a movie, Elf, with Will Farrell in it. He plays this innocent kid—an orphan—who’s raised on the North Pole and goes to New York to find his dad. He’s walking down the street and walks into a little coffee shop, and he screams at the top of his lungs, “Congratulations, oh my goodness, you’re the best coffee in the w-o-r-l-d.” And then later he goes to the same coffee shop with a date and he asks her, breathless, “How do you like the coffee?” She goes, “it’s OK.” And he says, “No! It’s the best coffee in the world.” And she goes, “This coffee sucks.” But in the front of the building, the coffee shop spent money painting a sign, “Best Coffee in the World” or” Best Cup of Coffee in New York City.”

So, you can’t tell people you’re the best. That’s a pitfall. Do you know the story about tabouleh? It was a poor man’s salad. In the old days, cooks took all the old vegetables—whatever was left over and wilted—and chopped it up really fine and soaked it with olive oil and lemon juice. That was tabouleh back then. And look at the dish now.

You have to say , “All our ingredients are fresh. All our flavors are unique. Decide for yourself.” Invite people to make their own decisions. Don’t shove your view down their throats. How many times do we tell ourselves “If I get that shoved down my throat one more time…”

But if someone else says you’re the best—a celebrity, say, like Gordon Ramsey—then you can use that quote. It’s off the hook there. Third party recommendations are always credible. Put those on your web site and plaster them everywhere.

How would a restaurant owner know which station caters to their crowd?

What you have to think about is who does that radio station attract—what demographic in terms of age, income and preference for music. Radio stations target their demographic by the music or content they disseminate. The Classic Rock station, KLOS-95.5—what do you think their demographic is? Men, 25 to 54. Their advertising is mostly geared toward men 25 to 54 years old.

I used to tell women around Christmas, You want to know what to buy your man for Christmas? Listen to KLOS for a week—you’ll get 20 ideas. Who do you think KISS-FM targets? Their market is probably leaning toward younger females, 12 to 24, maybe 18 to 24. All this information is part of the radio stations’ one sheet. Then you have to think about which radio stations duplicate each other. If you draw a pie chart you’ll see that KISS-FM, Power-106, KROQ and 97.1 AM overlap. What you want to do is get as much of a station’s unique reach, based on your own audience. Power-106, for example, has more teen listeners in a day than KROQ has in a whole week. But advertisers aren’t comfortable spending their money advertising to teens. So they veer away from that. Power-106 has 1.3 million teen listeners. That’s more than KROQ’s whole audience, which is 750,000. But KROQ’s audience spends more money. All this stuff is part of the formula.

When I look at Zankou’s age range, I would say it’s 25 to 54 years, men and women. So your basic radio campaign should look at the following factors: Who’s your core audience? How much do the stations that attract your core audience duplicate with their competitors? Is the station skewed toward men or women? What’s the income level of your audience?

One other thing: You want to have a marketing consultant who has same amount of passion as you. This whole thing should be drive by passion. Educated but passionate. If a salesperson doesn’t have a passion for what he does, you’ve got the wrong person.

What are the advantages of putting the name of a business on public radio, such as, say, Southern California Public Radio and the Southern California classical music station KUSC?

These stations have very low reach. Ask them how many listeners they have.

The other thing is that there might be stations on which a restaurant doesn’t want to advertise because they attract a certain type of audience the restaurant may not want because, for example, it doesn’t want people coming in who tag the restrooms.

That’s true. But you never want to put anybody down. I’ll give you an example of Morrissey Universal Nissan, near Universal Studios. Morrissey once wanted to launch a campaign in which they said that if you came in and test-drove an Altima you would win two tickets to a certain show. Now, Nissan is an economy car. I told Morrissey that when they do something like this they’re going to have a load of people coming in just to get those tickets and not purchase a vehicle. Maybe one out of 100 people might test-drive a car and buy one. Your sales guys would hate you. I told them it’s a bad idea. And they killed it. If they had people come in for a sweepstakes, that’s different. That way, they would keep their liability low.

Radio advertising can basically be broken down into two things: Brand awareness or direct response. You have to decide what you want. Let me give you an example. KLOS-95.5—their demographic is 25- to 54-year-old men. What do 25- to 54-year-old men in Los Angeles do? They go to jail. So who’s a good late-night customer of KLOS? Bail bondsmen. Who’s a big advertiser on Power-106 or KISS-FM? It’s usually businesses like inexpensive car dealerships—such as Galpin Ford and Nissan.

What should a restaurant’s call to action be on a radio ad? Should it give out a telephone number, a URL, or something else that ties in with the restaurant’s message?

Whatever it is that’s going to identify the restaurant—the easiest, quickest identification. Phone numbers are worthless. If you have a website that’s short and memorable, such as, say, ZankouChicken.com, give it.

What are your top three Do’s and Don’ts for small businesses that want to advertise on radio?

Let’s start with the Don’ts.

  • Don’t put all your eggs in one basket—the world’s too diverse for pigeonholed, scoped-in marketing.
  • Don’t expect immediate results—you’re going to be disappointed.
  • Finally, don’t be afraid to try new things. If people really want your business they will partner with you to try things. If you have an idea that something will work, push for it. For example, if I came to you and said, “Let’s try this first,” you should not hesitate to say, “Let’s give it a shot.” Try different things to help decide what works well for your brand. It may take a while to figure this out.

The top three Do’s:

  • Ask the person that you’re trusting with your money and marketing what they would do while starting out, and ask them to treat the campaign as if the restaurant were their own.
  • Give people choices—a wide spectrum of ideas. I maybe able to take your photos in one or two shots, but I’d take a hundred because I maybe able to see something that you like better in the one or two shots that’s missing from the rest of the 99 or 98 shots. And if we both decide that none of the 100 are good, then we’d go back together what we figure out next.
  • My third do is being action oriented. Get out there and just do it, learn from your mistakes and grow.

It’s not just about getting a song on the radio or appearing on television. It really is about helping people change their lives one day at a time.

Yolanda Adams

I’m obsessed with radio. It’s a good start to Sunday morning.

  1. L. Stine

That was the big thing when I was growing up, singing on the radio. The extent of my dream was to sing on the radio station in Memphis. Even when I got out of the Air Force in 1954, I came right back to Memphis and started knocking on doors at the radio station.

Johnny Cash

 

It’s not true I had nothing on, I had the radio on.

Marilyn Monroe

Nobody counts the number of ads you run; they just remember the impression you make.

William Bernbach