Competitive Analysis

By David Lipton
July 2002, Foodservice and Hospitality

Whether you’re just starting out in the restaurant business or you’re an industry dinosaur, dealing with the competition is an inevitable part of the job. And no matter how hard you try, simply ignoring competitors will not make them go away. Even the most loyal customers may become curious about the “new joint” down the street, and in the process, they may find out there’s something it has that your operation doesn’t. That something may seem small and insignificant to you, but it could mean the difference between an anniversary celebration and a going-out-of-business sale.

While some call competitive analysis immoral and unethical, others call it necessary for survival. Restaurants that ignore customer needs and desires are the ones that don’t last. Survival is guaranteed by staying one step ahead of the competition, but in reality, that doesn’t always happen. It’s vitally important to be sure your menu is not lacking the one dish everyone is seeking out, or to ensure that you décor is not passé compared to competitors. Restaurant owners must have a sharp, keen ear for the latest industry trends; staying attuned to what competitors are offering, how they offer it and why.

Competitive analysis involves using a number of techniques and tactics. The following list represents a few techniques.

1. Broadly define the competitive landscape. Don’t overlook businesses that could easily become your competition by making minor changes to their operation.
2. Attend industry conferences and trade shows. This will allow you to monitor trends and keep track of important issues that may affect your business.
3. See your competition through the eyes of a customer. Being a customer enables you to get a first-hand look at how an operation is run, and their quality standards in terms of service and products. Posing as a customer to experience the competition first-hand is one option. A third-party mystery shopping program can also provide an in-depth assessment of the competitor’s strengths and weaknesses, as well as how it compares to your establishment (from an impartial third party’s point of view)
4. Talk to your competitors’ customers. Find out what they like and dislike about it, why they dine there, and what keeps them coming back. Conducting exit interviews and/or focus groups are some of the ways to obtain this type of information. Comparing that information to the same information from you own business can show you exactly what you are doing wrong—or right.
5. Find out as much as you can about the people who run competing businesses. They may have had training or education that your staff is lacking. Also, since buying out the competition to grow your business is a common strategy in all industries today, knowing how that business runs and who runs it could probe to be invaluable in the long run.
6. If you’re looking at a publicly traded company, obtain information through the investor relations department. Shareholders have access to certain information, such as financial records and strategies that may not be otherwise acceptable.
7. Check public filings. This information will allow you to obtain insight on how the company is actually doing and what its future plans are.
8. Use the Internet. A lot of competitive information is readily available to the public with a little bit of time and Internet searching know-how.
9. Assess the competition’s goals in relation to your own. You may wish to alter certain aspects of your business to better accommodate your customers, or target the competition’s customers.
10. Be aware of the potential for new competition. With today’s technology reducing communication time, business concepts are easily duplicated or developed in a very short amount of time.

Keeping up with the times and knowing what your competitors have up their sleeves is just as important to a restaurant’s longevity as serving the freshest meat and vegetables. Knowing your competitor’s business is as important as knowing your won. Everything from becoming a customer, to talking to customers, to conducting surveys, or accessing public records is a small but key component of thorough competitive analysis. The key to beating the competition is to always be alert, and never let them have the upper hand.