Operators seize opportunities to build more traffic when rivals find themselves in a jam

Operators seize opportunities to build more traffic when rivals find themselves in a jam

When the Morton’s Steakhouse [3] location in Minneapolis closed July 3, rival restaurateur Phil Roberts, founder of Parasole Restaurant Holdings [4], didn’t do a victory dance. He did, however, take action.

Saddened that the city’s dining scene had taken a hit but recognizing that one of his company’s nine restaurant concepts in and around the Twin Cities, Manny’s Steakhouse [5], stood to benefit from that misfortune, Parasole began offering a $100 Parasole Dining Club gift card to any Morton’s customer still possessing a loyalty card or gift certificate to the shuttered location.

“We didn’t want to look predatory, opportunistic, cheap or low,” Roberts said. “That’s why we said in the ads we ran that we lost a worthy rival, and we have.”

Parasole is not alone in its efforts to capitalize on a competitor’s hard knocks. Given cutthroat competition for customers and an economy in which misfortune is rampant, many of the industry’s fitter operations are seizing the opportunity to market their survival.

Immediately following Metro-media Restaurant Group’s bankruptcy filing last summer, casual-dining peers like Texas Roadhouse [6] and Logan’s Roadhouse [7] began exchanging gift cards to MRG’s dwindling Steak & Ale and Bennigan’s chains for deals of their own. Other chains have gone on the offense against larger competitors, pouncing on every public-relations miscue, as chicken chain El Pollo Loco continues to do with segment leader KFC.

In order to entice Morton’s former customers, Parasole had to make a significant offer to those guests, regardless of how much money their Morton’s cards held, Roberts said.

“Putting $25 on a card isn’t going to be compelling for anybody,” he said. “We figured, let’s just suck it up, do $100 and not care if they had $10 on their Morton’s card or whatever. Like any top steakhouse around the country, at Gibson’s or Morton’s, all of us essentially are around $90 per person, including drinks.”

Parasole also managed the perception of the offer very carefully, acknowledging on its flyers that Manny’s had lost a “worthy rival” in Morton’s and inviting its new guests to raise a toast to Morton’s when they come in to redeem their offers.

“I would think, as a Morton’s customer, that if I was habitually going in there, entertaining and getting my porterhouse, then I’m going to enjoy Manny’s,” Roberts said. It’d be my kind of place. Thank goodness they reached out to me.

“Minneapolis is a small town,” Roberts added. “We’re going to be here. There’s no short-term gaming of this thing; it’s all long-term.”

Although restaurants benefit from healthy competition next door, operators should be ready to move quickly to pick off customers that suddenly come up for grabs, said Linda Duke, chief executive of Duke Marketing.

“One of the big misnomers in this industry is that you don’t know who your competitors are and that you should be scared of your competition,” Duke said. “I always tell owners, you should be happy when other restaurants open in your three-mile radius. Never bad-mouth the competition, go make friends and look at their pricing.

“Unfortunately, [Parasole] lost their competition here, but they’re doing a good thing in the eyes of the consumers. So sure, swoop in and get those customers.”

Some chains don’t wait for neighboring restaurants to go out of business to play off competing deals or promotions. For example, 41-unit Tumbleweed Southwest Grill [8] is exchanging any restaurant’s coupon for any deal for a free appetizer of chile con carne queso and chips.

“The economic downturn has everyone looking for ways to stretch the dining-out dollar a little further, and almost every restaurant is using a coupon of some sort,” said Matt Higgins, Tumbleweed’s president and chief executive. “We believe our guests would like to use them all at Tumbleweed.”

And then there’s El Pollo Loco [9], the Costa Mesa, Calif.-based chain that also redeems competitors’ coupons for $1 off combo meals or $3 off family meals. But EPL also has gone after its biggest competitor, KFC, in what it calls “the chicken wars,” and has employed a new marketing campaign, “Taste the Fire,” to highlight the differences between its signature grilled chicken and its rival’s new Kentucky Grilled Chicken. KFC’s grilled chicken had been tested in several markets, one of which was San Diego, near EPL’s headquarters.

So far, EPL has pointed out that KFC’s grilled product contains small amounts of beef powder and rendered beef fat with a microsite, www.beefychicken.com , and commercials starring chief executive Steve Carley in a pasture with dairy cows. The chain also staged a competing grilled-chicken giveaway a day after KFC had its own free-chicken promotion and challenged KFC to a taste test.

Carley said his chain escalated the chicken wars because KFC was going after EPL’s core product, not just its home turf.

“We’d have gone and found them wherever they were,” he said. “They were coming after us, no doubt about it.”

EPL pounced on KFC during Mother’s Day weekend, honoring KFC coupons for free grilled chicken that were not redeemable on Mother’s Day. Carley could not say definitively how many KFC coupons EPL redeemed on Mother’s Day, because the coupons weren’t coded in a way that synchronized with his chain’s POS system. However, feedback was voluminous and positive on EPL’s social-media profiles and customer service phone line. EPL made a YouTube video about the promotion, and it was viewed 116,000 times.

As long as the chicken wars carry on all in good fun, Carley said, EPL shouldn’t have to worry about negative perceptions.

“The key is how you deliver the message,” Carley said. “We used tongue-in-cheek humor and incredulity, and because we did it that way and pulled it off, nobody got their nose out of joint. As a 400-unit chain against a 5,000-unit chain, it’s hard for us to look predatory.”— [email protected] [10]