Aladin’s Restaurant

The Factors That Influence The Success of a Small Restaurant

Contributers: Tarek Snobar (Group Leader), Abigail Vilcheck, Agon Musilu, Jasmine Alanis, Megan Henderson.

Executive Summary:

The restaurant business is an extremely competitive industry; margins are at bare minimums and food costs are on a rise, which makes profit hard to come by. Small businesses that aren’t able to continuously grow will struggle to make any profit. The purpose of our research is to help Aladin Mediterranean Bar & Grill increase revenue, profit, and stay competitive in their market as a family owned business. We set out to determine which factors lead to success in this business. Our group began our research by creating identical physical and online surveys to distribute to customers at the restaurant. The purpose of the survey was to determine how customers became aware of the restaurant, their satisfaction levels on food and service, and their likelihood of returning. We also wanted to determine current customer retention rate. After 3 weeks of collecting surveys, we had enough information to draw conclusions based on the amount of data we generated. We came to the conclusion that most customers were happy with the service and meal they had received, but that there are other aspects the business can improve. We gathered our results and conclusions to make recommendations for the owners of the business, and believe that Aladin has the potential to be more successful by implementing our recommendations.

Problem Background: 

The restaurant we will be analyzing is Aladin Mediterranean Bar & Grill. Aladin is a family-owned business located in Stafford, Virginia that opened in 2013. They have a large menu, but specialize in Mediterranean food. They are one of few restaurants like this in the area.

We want to determine the factors that influence the success of a small restaurant business. As previously stated, in the restaurant business, revenue growth is essential to keeping the doors open. A combination of many things makes it extremely difficult to maintain profitability, such as: competition, increased food costs, rent, labor costs, etc. The only way to increase profitability is to generate more revenue. In order to do generate more revenue, a restaurant needs to determine factors contributing to success and take advantage of available resources to thrive in its market. That is why our research is so important. 

Literature Review: 

We collected various studies and articles in order to help us efficiently and effectively organize our own study, analyze results, and present useful recommendations. The first piece of literature we looked at was that of Herring and Bosworth (2016); it touches on the short and long term effects of restaurant advertising. Their hypothesis pertained toadvertising leadingto short-term increases in average unit sales for restaurant chains. The analysis to test this hypothesis was conducted using the ECM model. The results of the experiment and analysis show no evidence of short-term advertising effects on sales, and the long-term effects were almost negative. This is relevant in our research because we want to consider whether or not advertising affects the success of Aladin’s, and how we should analyze our results to make thorough recommendations. 

Pedraja and Yagüe (2001) examine the “external information search process carried out by potential customers” who are seeking out a new service/restaurant. Researchers attempted to determine motivating factors on search activity, and they used surveys to “analyse the services offered by restaurants in the city of Zaragoza in the north-east of Spain.” Their research and results are relevant to our problem, because determining what motivated potential customers to seek out new services, how to tailor internet sources regarding our business to match what customers are searching, and determining how to become the top spot on a search engine such as google, are all important in helping the success of a small restaurant. Currently, if you search “Mediterranean food in Fredericksburg,” Aladin’s shows up at the top, but a few things may be deterring customers from picking Aladin’s, such as nearby competition. This could explain why only six respondents out of 73 listed internet searches as responsible for learning about Aladin’s. 

Lepkowska-White (2017) discuss the effects of using social media as a advertising tool. “The purpose of this study is to explore the adoption, challenges, and current uses of social media in small restaurants.” This study interviewed 20 small restaurants in Northeastern United States to further understand how small restaurants use social media to contributes to their marketing strategy as a low-cost advertising tool to gain exposure, generate interest, inform, and spread word of mouth. Looking into how other small restaurants use social media marketing to influence their overall success is relevant to our research in growing a small business. If we find that not many of respondents first learned about Aladin through social media, but the majority describe social media as a major influencer for trying new restaurants, then we would make recommendations involving increase social media presence. 

Chih-Hsing Liu (2015) discussed customer recommendation being reliant on customer satisfaction and “there [being] a positive relationship between the quality of a restaurant and customer satisfaction/recommendation.” One question we wanted to include in our survey was “How did you hear about Aladin Mediterranean Bar and Grill?” We asked this question, because we wanted to be able to compare customer satisfaction of those who had family/friend recommendations to customers at an assumed customer satisfaction level it would take to recommend the restaurant. Because we can safely assume that those who made recommendations were satisfied customers, we will create a range we think is sufficient enough to assume “recommendation status.”

Jinsoo and Jinlin (2010) explore restaurant management, food quality, and perceived quality as factors in customer satisfaction and dissatisfaction. Their study took customer sales as the most direct measure of customer satisfaction, so they identified the top perceived quality factors affecting customer satisfaction or dissatisfaction and paired that with AnswerTree methodology. AnswerTree method allowed the researchers to effectively and efficiently target specific groups of people and to find differences between satisfied and dissatisfied customer groups. Their results are relevant to our problem, because customer satisfaction plays a huge role in the success of a small restaurant, and their results should ultimately provide some meaningful information and direction to improving/creating a marketing strategy.

According to Bowden-Everson, Dagger, and Elliott (2013), “the establishment and maintenance of enduring customer–provider relationships remains a primary objective” by service providers and the service industry. Customer loyalty is earned through “relational determinants such as trust, customer delight, commitment, and involvement within the service relationship.” Their findings are important to our problem because it provides us with strategies for improving customer loyalty which is a factor thatseems to influence the success of a small restaurant business.

Longart, Wickens, and Bakir (2016) discuss the consumer decision process in selecting a restaurant. In order to do so, researchers decided to use six different focus groups. These groups consisted of consumers from different ages and occupations. Using the stylized EKB model for the structure of their research, Longart, Wickens, and Bakir found that the most important aspect of choosing a restaurant is the occasion. The reason a consumer is going out to eat plays a large role in what they will choose. They also found that positive word of mouth played a big role in restaurant decision making. This information is important for ourresearch because it gives usa ideas as to how consumers choose where they eat. A look intothe thought process behind consumer decisions allowsus to suggest changes in restaurants to better target the consumer. Our survey question, “How did you hear about Aladin’s?” is going to help us understand consumer decision making.

Problem Statement, Research Objectives, and Research Questions

Problem Statement: What factors influence customer acquisition and retention for a local restaurant, and how can the consideration of these factors help to increase revenue?

Research Objectives

  1. Determine why people choose or do not choose to eat at Aladin.
  2. Determine what marketing factors affect profit for the restaurant.
  3. Determine the best ways to increase customer acquisition.

 Research Questions

  1. How does customer satisfaction affect customer retention and acquisition?
    1. Is this your first time at Aladin Mediterranean Bar & Grill?
      1. yes/no
    2. How satisfied were you with the service you received?
      1. 1-5 (1 = Not Satisfied; 3 = Neutral, 5 = Very Satisfied)
    3. How satisfied were you with your meal?
      1. 1-5 (1 = Not Satisfied; 3 = Neutral, 5 = Very Satisfied)
    4. How likely are you to return based on your experience?
      1. 1-5 (1 = Not Likely; 3 = Neutral, 5 = Very likely)
  2. How does advertising influence customer acquisition?
    1. How likely are you to try new restaurants because of social media or tradition flyers?
      1. 1-5 (1 = Not Likely; 3 = Neutral, 5 = Very likely)
    2. How often do you hear or see advertisements for Aladin?
      1. 1-5 (1 = Never; 3 = Occasionally; 5 = Very Often)
    3. How did you hear about Aladin Mediterranean Bar & Grill?
      1. Social media
      2. Flyer
      3. Friend/family recommendation
      4. Internet
      5. Other
  3. How do coupons/special offers affect customer acquisition?
    1. How likely are you to choose a restaurant because you have a coupon?
      1. 1-5 (1 = Not Likely; 3 = Neutral, 5 = Very likely)
    2. Did you use a coupon during your visit to Aladin Mediterranean Bar & Grill?
      1. yes/no
    3. How many times have you used a coupon at Aladin Mediterranean Bar & Grill?
      1. 0-5+
    4. How likely are you to return without a coupon?
      1. 1-5 (1 = Not Likely; 3 = Neutral, 5 = Very likely)

 Hypotheses:

  1. Higher customer satisfaction will result in greater customer retention and acquisition.
  2. Advertising through inbound marketing brings in the most customers.
  3. Coupons and special offers increase customer acquisition. 

Data Generation and Collection Methods              

We chose to use a survey to collect our data, because it is an efficient, straightforward, and nonintrusive way to generate information directly from the customers at Aladin. To support each research question, we have come up with 3 or 4 survey questions. The survey that we will generate will be distributed in two ways: in person (inside the restaurant) and online. The staff in the restaurant will be instructed to introduce the anonymous survey to patrons at the end of their meal with their bill. They will then encourage the guest to fill out the survey, and inform them that it can be submitted online or left in the basket before they leave. At the front of the restaurant there will be a basket in which customers would place their paper survey, and at the end of the three week period we will collect them. Google forms will be the platform we use to conduct the online survey. The link to the online survey will be placed on the bottom of our paper survey. 

The objective of this survey is to determine the different variables affecting customer retention/acquisition at Aladin. Because customer acquisition and retention relate to marketing, we want to find out how customers learned about the restaurant and whether or not the advertising techniques used by the restaurant are at all effective. Customer satisfaction will be divided into two sections, service and food, to better analyze how strong the influence is on customers returning. Lastly, we want to determine how incentives such as coupons and special offers affect whether a person decides to eat at Aladin. The independent variables in our study are customer satisfaction, advertising, and coupon use and the dependent is customer acquisition.

Before making the surveys available to customers, we asked the team at Aladin’s to limit the amount of changes they made to the restaurant while the study was being conducted. We did not want new changes implemented by the restaurant to affect our results and become confounding variables. We wanted to gather information about the effectiveness of their current standard business model and efforts. One problem we did not forsee was not getting our set goal of respondents for our original expected runtime. The first week the surveys were available, we did not hit our goal of 70 respondents (or ten respondents per day), so we extended the survey run for an additional two weeks. By the end of three weeks, we had 73 respondents.

Analytical Methods 

We used a Linear Regression Model and to determine which factors influence customer retention and to analyze what effect each one has. The x- axis will consist of research objectives. On the y- axis is the dependent variable, which is customer retention. We will measure what correlation our independent variables have on the dependent variable by using excel to generate the plot and linear regression. The following models show the linear regressions for some of our comparisons.

The above bar graph is seperate from the other linear regression models, because it specifically shows the satisfaction level of each respondent that learned about Aladin’s through family/friend recommendations. We felt this was important to include because we wanted to be able to compare customer satisfaction of those who had family/friend recommendations to at an assumed customer satisfaction level it would take to originally recommend the restaurant. Because we can safely assume that those who made recommendations were satisfied customers, we think a total score that ranged from 12-15 would be considered high enough to want to recommend the restaurant to family/friends. What we learned from this chart was that thirty-three respondents would fall into the same satisfaction score range that indicates they would also recommend Aladin’s to their friends/family, which is 76.74%. This is significant, because Aladin can count of word of mouth to bring in a significant portion of new customers without advertising.

Results:

         Over the next few pages are charts depicting the results to each question of our survey. With these survey answers, we were able to answer our research questions, meet our research objectives, and analyze our hypotheses.

Forms response chart. Question title: Is this your first time at Aladin Mediterranean Bar and Grill?. Number of responses: 73 responses.
Forms response chart. Question title: How satisfied were you with the service you received?. Number of responses: 73 responses.
Forms response chart. Question title: How satisfied were you with your meal?. Number of responses: 73 responses.
Forms response chart. Question title: How likely are you to return based on your experience?. Number of responses: 73 responses.
Forms response chart. Question title: How likely are you to try new restaurants because of social media or traditional flyers?. Number of responses: 73 responses.
Forms response chart. Question title: How often do you hear or see advertisements for Aladin?. Number of responses: 73 responses.
Forms response chart. Question title: How did you hear about Aladin Mediterranean Bar and Grill?. Number of responses: 73 responses.
Forms response chart. Question title: How likely are you to choose a restaurant because you have a coupon?. Number of responses: 73 responses.
Forms response chart. Question title: Did you use a coupon during your visit?. Number of responses: 73 responses.
Forms response chart. Question title: How many times have you used a coupon here?. Number of responses: 73 responses.
Forms response chart. Question title: How likely are you to return without a coupon?. Number of responses: 73 responses.

Conclusion

We predicted that higher customer satisfaction would have a positive effect on customer retention and acquisition. Based on our results, this is true. Although 61.6% of respondents were first time customers, 65 out of 73 people were very satisfied with their meal and service. Only two people were completely unsatisfied, and only four people were unlikely to return. With that being said, 61 out of 73 people said that they were either likely or very likely to return. Our results show that most people who responded to the survey were very satisfied with both the service and food. Therefore, we don’t believe that changing the food or service will increase the number of customers or increase revenue.

Inbound marketing did bring in the most customers: 58.9% of respondents heard about Aladin from friends or family, 8.2% of respondents heard about Aladin from an internet search, and 13.7% of respondents heard about Aladin from social media (assumed it wasn’t advertising from Aladin). Only 17 of 73 respondents had ever seen advertisements for Aladin once, while 43 of 73 respondents heard about Aladin through word of mouth. This shows that inbound marketing is largely part of the success of customer acquisition. 17 respondents had only ever seen or heard one advertisement for Aladin, while nine people had heard or seen at least five of Aladin’s advertisements. While inbound marketing has clearly had a large impact on creating more business, we believe that taking advantage of other sources of advertising, such as flyers and other printable ads, as well as the use of social media, could also assist in generating more business for Aladin. 

We were also correct that coupons and special offers increase customer acquisition and retention. Between the 73 respondents, the average response was 3.67 out of 5 from respondents which shows they are more likely to choose a restaurant if they have a coupon incentive. But, 63 respondents said they did not use a coupon during their visit, and only 22 respondents had ever used a coupon at Aladin. Of the 73 respondents, there was an average score of 3.75 out of 5, which indicated that the majority of those would be likely to return without a coupon. Of the 30% of respondents who have used a coupon, only one indicated they would not return to Aladin at all. This means that coupons are great for generating interest and meet customer needs, but customers will not feel deterred from returning if they are without a coupon.

Recommendations:

After reviewing the responses from the survey participants and drawing conclusions based on our results, we decided to further investigate the business’s online presence. We ran some trial internet searches in order to see what potential customers would find. If a potential customer searches for Mediterranean food in the greater Fredericksburg area, their search results will look similar to this:

Aladin shows up as the top result, which is great news for the business as it is one of the only Mediterranean restaurants in the area. We also were impressed with the attractiveness of the website. The photos are updated and professional, and the information is correct and helpful. On the other hand, there were a few things that jumped out at us as opportunities for improvement. Firstly, the internet can play a big part in where people decide to eat. We suggest that the owners take advantage of it as much as possible by expanding their reach on social media and claiming the restaurant. Aladin currently has a Facebook page, but it is not always updated and engaging.

When searching the restaurant on sites like Tripadvisor and Yelp, the business is not claimed on either website. This means that the owners of the business have essentially no control over what their profile on these sites look like. If the business was “claimed,” the owners would have a say in how the restaurant is portrayed and be able to upload pictures, edit information, and review feedback. We believe that these are a few steps the restaurant can take to increase their internet presence. 

In addition, many survey participants said that they are more likely to visit a restaurant if they have a coupon. While almost all of them said they would return to Aladin without one, most people said that they had never used a coupon at the restaurant before. Aladin has an opportunity to provide more accessible coupons and special offers to the customers and potential customers by making them available online, or handing them out occasionally in store. Many restaurants have weekly deals and specials certain nights of the week to attract customers, and we believe Aladin could benefit from this as well. 

Lastly, we believe that guests should be encouraged to review the restaurant online for feedback, and that the business should remain involved in the community. With the data generated from our survey, we can tell that Aladin has a great opportunity to increase their internet presence, bring in more customers, generate more positive online reviews, and eventually increase revenue.

Survey

Our survey was generated online through Google Forms, so below we have included what the survey questions looked like to the participants.

References

Bowden-Everson, J. L., Dagger, T. S., & Elliott, G. (2013). Engaging Customers for Loyalty in the Restaurant Industry: The Role of Satisfaction, Trust, and Delight. Journal Of Foodservice Business Research,16(1), 52-75. doi:10.1080/15378020.2013.761025 http://ezproxy.umw.edu:2048/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=85751069&site=ehost-live

Herrington, J. D., & Bosworth, C. (2016). The short- and long-run implications of restaurant advertising. Journal Of Foodservice Business Research19(4), 325-337. doi:10.1080/15378020.2016.1178052 http://ezproxy.umw.edu:2048/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=117877701&site=ehost-live

Jinsoo, H., & Jinlin, Z. (2010). Factors Influencing Customer Satisfaction or Dissatisfaction in the Restaurant Business Using AnswerTree Methodology. Journal Of Quality Assurance In Hospitality & Tourism11(2), 93-110. doi:10.1080/15280081003800355

http://ezproxy.umw.edu:2048/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=51174581&site=ehost-live

Lepkowska-White, E. (2017). Exploring the Challenges of Incorporating Social Media Marketing Strategies in the Restaurant Business. Journal Of Internet Commerce16(3), 323-342. doi:10.1080/15332861.2017.1317148

http://ezproxy.umw.edu:2048/login?url=http://search.ebscohost.com/login.aspx?direct=true&db=a9h&AN=124613743&site=ehost-live

Longart, P., Wickens, E., & Bakir, A. (2016). CONSUMER DECISION PROCESS IN RESTAURANT SELECTION: AN APPLICATION OF THE STYLIZED EKB MODEL. Trziste / Market28(2), 173-190.

http://web.b.ebscohost.com.ezproxy.umw.edu/ehost/pdfviewer/pdfviewer?vid=14&sid=30a1c061-0ca7-4680-b256-ab405487986d%40sessionmgr120

Liu, C., Chou, S., Gan, B., & Tu, J. (2015). How “quality” determines customer satisfaction.TQM Journal, 27(5), 576-590. Retrieved from http://ezproxy.umw.edu/login?url=https://search-proquest-com.ezproxy.umw.edu/docview/1701275099?accountid=12299

Pedraja, M., & Yagüe, J. (2001). What information do customers use when choosing a restaurant? International Journal of Contemporary Hospitality Management,13(6), 316-318.

http://umw-primo.hosted.exlibrisgroup.com/UMW:TN_emerald_s10.1108/EUM0000000005966

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.