Mkt2235 Final Exam

^{MKT2235 Final Exam39}

^{The Riverside}

^Restaurant

It had been a cold and blustery day, and the weatherman was forecasting a blizzard. Reservation cancellations had begun flooding in to the Riverside Restaurant by late afternoon, and by 7:00 o’clock it was obvious that the evening’s business would be negligible.

Manager Joseph Cantone took advantage of this rare opportunity to leave the floor and retire to his office. He began reviewing financial records and was pleased to see that the Riverside had continued to increase its sales volume in each of the past three years. On a less encouraging note, he re- alized that the restaurant had not produced the substantial profits neces- sary to achieve its financial objectives.

Background

The Riverside Restaurant was located in North Caldwell, Idaho, approxi- mately 20 yards off the heavily trafficked Route 44. Caldwell had once been a familiar way station for east–west travelers on the Old Oregon Trail as early as the mid-17th century. It was approximately 15 miles from Boise, Idaho, the state capital, and just off I84, which crossed the state. The transporta- tion access to Caldwell was excellent and was probably the area’s greatest asset for retaining present industry and attracting new businesses.

The town’s population of approximately 25,000 citizens had in- creased by about 12 percent in the last five years, growing at a rate one and one half times that of the state. Statisticians predicted that the population would jump by another 11.5 percent over the next four years. The events of recent years had tended to decentralize the community and progressively change its character from a self-sufficient manufacturing town to a bedroom community.

The Riverside Restaurant had been solely owned by Orly Cantone. Cantone started his restaurant career as a busboy at the competing Lafayette House and was eventually promoted to head waiter. He decided to create a roadside restaurant that specialized in prime rib. The Riverside was known for its superior prime rib to the present day. Orly also had owned the Riverside Pub in South Caldwell. His sons, Joseph and Robert, purchased the two restaurants from him when he retired. Currently, Joseph managed the Riverside Restaurant, while Robert managed the Riverside Pub.

Word-of-mouth advertising had always been responsible for the growth of the Riverside. Orly Cantone had never advertised the restaurant or promoted his specials in any way, and Joseph felt the same way. “When peo- ple walk into our restaurant,” he said, “we try to take care of them. Customers do not want their guests to be dissatisfied. Food has to be good. Service has to be polite. At lunchtime, it has to be fast. We do our best to provide a relaxed and comfortable dining experience with quality food and genial service while providing an acceptable price/value relationship.

People who have dined with us have had a favorable experience and tell their friends and relatives; it’s as simple as that.”

The Restaurant Today

The Riverside Restaurant was a stately old mansion that had been the show- place of North Caldwell in the mid-1800s. It was a three-story, white Victorian structure with four dining areas and a cocktail lounge. The main dining room, called the Lounge, was decorated in a pink and maroon motif and seated 70 people. It was adjacent to the cocktail lounge, which seated

30 and was for cocktails only, except when customer requests or dining room overflow necessitated serving dinner in this room.

The nonsmoking dining room, also decorated in pink and maroon, had a capacity of 40 and was located next to the stairway leading to the second floor. This area was separated from the other dining rooms and hall- ways and was most popular. The River Room was a 125-seat function room located behind the nonsmoking area and was used for à la carte service on Saturdays and holidays only. The room was done in blue and gold and was an ideal spot for rehearsal parties and wedding receptions. Finally, there was the 15-seat private dining room, which was located on the second floor. It was increasingly popular with business groups, particularly in the spring.

The Riverside had existed for almost 40 years and had witnessed the rise and fall of many area restaurants. Five years ago, there were at least a dozen pizza parlors in North Caldwell, each of which had a long waiting line. Now only a handful remained. There were also many Chinese restaurants in the area, but most also eventually failed.

The Riverside menu featured prime rib, steak, and various seafood items. Dinner prices ranged from $18.50 to $28.50 and included a selection of relishes, crackers, and homemade cheese as well as a house salad. The best-selling entrée had long been the prime rib, which was available for as little as $27.50 with beverage and dessert. Upon request, the house policy was to offer an additional serving of prime rib, but few customers requested seconds because the entree portion was generous.

The restaurant’s luncheon menu was in the $12 to $18 range and of- fered smaller portions of some of the dinner items as well as soups, sand- wiches, and salads. A banquet menu was available for parties of 25 or more.

Joseph Cantone was hesitant to embrace “trendy” cuisines because he feared that they would lead to his restaurant’s downfall. Although he agreed to revise the Riverside menu a few years ago in response to the strong demand for seafood, beef remained a popular selection. Nonetheless, seafood soon overtook beef as the top seller.

The Riverside tried to position itself as a moderately priced meat- and-potatoes restaurant that did not attempt “gourmet” preparations.

CHAPTER # Chapter Title ■ 1

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_{2 ■ CASE 39 The Riverside Restaurant}


Joseph remarked, “I don’t want to be perceived as an elegant restaurant that only the well-to-do can afford. I also have no intention of expanding to a chain operation that would require more managerial and financial capabili- ties than we currently have. I want to improve what we are doing. Wouldn’t it be great to see the whole restaurant reserved by 12:00 on Saturday?”
Customers

According to Joseph Cantone, the Riverside attempted to appeal to everyone. “When you do that,” he said, “what you have is wholesome food that is served nicely at a reasonable price.” For some reason, however, the restaurant was not popular among residents of North Caldwell. Cantone suggested that perhaps they were afraid to try the restaurant because of its “ritzy-looking” building.

Demographically, the Riverside customers were predominantly male, with over 75 percent of all female diners accompanied by a male compan- ion. More than half were in the 40- to 60-year-old age bracket. One third of all sales volume was generated by corporate bookings. Cantone cultivated this patronage with membership in various social and civic organizations. Credit card sales represented 60 percent of total sales.

At lunchtime, approximately 80 percent of the clientele were busi- nesspeople, but that percentage dropped to 20 percent at dinner. For the most part, dinner regulars were residents of the surrounding communities who had patronized the Riverside for many years. These guests were set in their ways, and the waitresses frequently complained about their demanding natures.

Financial Performance

The restaurant’s peak periods were predictable with Tuesdays and Wednesdays generally proving to be the slowest nights. The restaurant served an average of 150 to 250 covers on Sundays through Thursdays, 450 on Fridays, and approximately 600 on Saturdays.

Joseph Cantone considered his product to be underpriced relative to the market. He chose not to raise his prices because he felt they should reflect the financial attitude of what he considered to be an economically depressed community. Joseph alluded to his current situation with the fol- lowing comment: “Our dollar volume has increased every quarter for the last three years. However, the increase in volume did not keep pace with the in- flationary trend. Additionally, we did not achieve the desired return on gross sales.”
Management

When he first purchased the restaurant from his father, Joseph immersed himself in the minute details of operating the establishment and interacted personally with everyone from the dishwashers to the vendors. Recently, however, he had begun to delegate more of the operational details to his unofficial assistant manager, Veronica Terinese. Veronica was a veteran wait- ress who had gradually taken over the hiring and scheduling of the wait staff. She began at the Riverside 10 years ago and had become a go-between for Joseph and the service personnel. She kept track of the daily perform- ance of the restaurant by recording the number of covers and the average checks on her personal computer. She also compiled sales abstracts for use in future menu planning.

A strong emphasis was placed on quality control of service. Joseph established the service standards, monitored their execution, and actively solicited feedback from his customers. He also held frequent staff meetings to discuss service-related problems. Veronica Terinese was proud of the Riverside staff. “You just have to make sure you don’t lose any of your good people,” she said. Many of the waitresses had been at the Riverside for

10 to 15 years, although an increasing percentage of the staff were college students and young mothers.

The Riverside had no sales or marketing staff per se, because Joseph did not feel that employing a salesperson would prove cost-effective. As a result, a considerable part of the sales effort was made by Joseph himself.

Our base is too limited to support a major marketing program,” he said. “In order to attract the Boise market, we would have to go out and hire

professionals who are knowledgeable of that specific market. Our business simply does not warrant that type of activity.” On a local level, Joseph acknowledged that it would be relatively inexpensive to advertise in the area media. However, he contended that it might change the restaurant’s image.
Competition

Joseph Cantone considered everyone in food service from a McDonald’s to a Chinese restaurant to be his competitor. However, he was not concerned about those who offered two-for-one specials as a means of attracting new business. “They will steal your customers for a while,” he said, “but they are not building loyalty. The customers will return when the special ends.”

Of the 22 restaurants in North Caldwell and the several others within

10 to 20 miles, only a few could be identified as direct competitors. There was no other restaurant in North Caldwell that was comparable in level of service and atmosphere, although a similar new establishment was slated for construction across the street within the next year. The primary competitors were identified as the Riverside Pub, the Lafayette House, and Benjamin’s.

The Riverside Pub

The Riverside Pub was a sister restaurant to the Riverside and was located

five miles away in South Caldwell. When it was opened in 1979, the estab- lishment attracted many of the Riverside customers because the Pub was closer to Boise and was therefore more convenient for many.

Except for minor variations in decor, the two facilities were extremely similar. The menu, prices, and level of service were virtually identical. The customer base of the Pub was primarily businesspeople, with some local res- idents and college students as well.

The Lafayette House

The Lafayette House first opened in 1784 when it was a popular tavern on

the Old Oregon Trail. It was located in North Caldwell, five miles north of the Riverside on Route 44, and was easily accessible from all directions. The facility had six dining rooms and a cocktail lounge.

The Lafayette House attracted businesspeople and locals on the strength of its word-of-mouth advertising. The atmosphere was somewhat rustic, and the establishment was known for its excellent facilities for small or large banquets accommodating a maximum of 200 people. Entrée prices ranged from $24 for shrimp scampi to $29.50 for filet mignon, with prime rib prominently featured at $28.50. Like at the Riverside, entrées included fresh relishes, tossed salads, and assorted rolls.

Benjamin’s

Benjamin’s was 12 miles from the Riverside. Since the restaurant opened in

1979 the seating capacity had been increased to 650 people. Presently, there were three dining areas, a lounge, and a ballroom that accommodated

250 guests. After dinner many of the guests enjoyed dancing in the Library

Lounge, which featured live entertainment five nights a week.

The best-selling entree at Benjamin’s was the prime rib at $27.95. Other items included poultry, seafood, and beef with filet mignon at $30.95 as the most expensive. Side dishes were offered à la carte with prices for sal- ads or vegetables ranging from $4.25 to $7.50.

The major markets for Benjamin’s were businesspeople and special occasion diners. The establishment’s reputation had been built on its abil- ity to provide both intimate dining for families and friends and large-scale business functions. Many repeat customers had generally become acquainted with Benjamin’s through word of mouth, although some were first attracted by infrequent newspaper ads.
Conclusion

Despite the fact that sales volume had increased over each of the last three years, Joseph Cantone was not altogether satisfied. His restaurant had not kept pace with inflation, and his real profit was declining. He wondered whether this was the case with his primary competitors and pondered this dilemma as the snow outside continued to fall.