Every restaurateur wants to drive more customers to his or her restaurant. Ask most any restaurateur what the one thing they need is and they will tell you “more customers.” Many of those restaurants may not be ready for more business. One often overlooked aspect of driving more business is making sure your restaurant is ready for the new customers your zippy new marketing program will no doubt deliver. In this two part blog entry, we talk about making sure your restaurant is ready for new customers before you spend the money trying to attract them.

Preparing to Drive Business (Part 1)

Before you spend time and money on marketing programs designed to convince your target customers to visit your restaurant, make sure you are ready to deliver on your value proposition. The worst thing you can do is spend money to get people to your restaurant and then deliver a sub par experience. You not only wasted your marketing dollars by not creating a repeat customer but you also may have created some negative word of mouth that may prevent some of your customers’ friends from trying you out. So before you spend marketing dollars, pay attention to your value proposition.

Product - It goes without saying that your food must be good, but have you considered your menu mix. You may want to perform a periodic menu analysis, say every 6 to 12 months, and consider what is selling, how profitable it is, and what the competition is offering. Your goal should be to keep your menu responsive, up to date, and profitable. I have heard it explained that you should think of each menu item as a tenant in your menu “office building” and the tenant has to justify the space in your office building during each review.

As a restaurant, you are delivering a dining experience. Even if you are a take out or drive through restaurant, your product is the whole dining experience, not just the food. Take care to ensure that you are delivering a quality dining experience.

How is your service staff? Are they pleasant, presentable, and well trained? Do they up sell? Are guests met and seated as promptly as possible? Is your kitchen efficient? Marketing, training, and operations are intertwined. You have probably heard it said that good marketing will just hasten the demise of a bad operation. Make sure all parts of your restaurant are running well, and training is a key part of that. Don’t forget to train your wait staff on the finer parts of restaurant selling and marketing, as well.

Price - Price is not only how you harvest value from the marketplace. It is also what your customer gives you in return for you delivering them a dining experience. In addition, to the money your customer pays you, they are giving you their time and forgoing the opportunity to dine somewhere else. Keep this all in mind and make sure your price reinforces your chosen position in the marketplace.

Place - Traditionally, “place” with regard to a marketing mix, means distribution channel, such as a sales force or shelf space. With regard to a restaurant, it typically means the location where you provide your dining experience. Again, before you spend money driving customers to your restaurant, view it with a critical eye. Is it ready to reinforce your market position and value proposition? Could your restaurant use some improvements? A deck or patio? An expanded bar area? If so, you are probably better off spending that money you had earmarked for marketing on improving the appearance or expanding your restaurant.

Promotion - Promotion covers all of the communication tools that can deliver a message to the target segment. Generally, promotion encompasses 5 broad classes of communication: advertising; direct marketing, sales promotion; sales force; and public relations.

Before discussing specific promotional tactics, let’s briefly touch on messaging, since all of these tactics involve messaging. When constructing a marketing message, it is always good to take a step back and ask yourself the following questions:

• With whom am I trying to communicate
• What am I trying to communicate
• What am I trying to accomplish, and
• Is this the best communication medium with which to accomplish my goal?

Once you have established the answer to those 4 questions firmly in your mind, your job is 3 fold:

1. Get the prospect to notice your marketing communication
2. Get the prospect to actually read (view or listen to) your marketing communication, and
3. Get the prospect to act on your marketing communication

(End of Part 1 - Preparing to Drive Business)

If you need extra financing to increase marketing or to prepare your restaurant to receive more customers, consider a restaurant loan from ARF. ARF had been making restaurant loans for almost a decade. Whether you need short term restaurant financing or a line of credit, complete ARF’s short, online application and explore our restaurant financing options.

© 2008 Advance Restaurant Finance, all rights reserved

Preparing to Drive Business (Part 2)

Remember in Part 1 of Preparing to Drive Business we ended with the 3 Goals of a Marketing Message:

1. Get the prospect to notice your marketing communication
2. Get the prospect to actually read (view or listen to) your marketing communication, and
3. Get the prospect to act on your marketing communication

Let’s look at this in an example. Imagine you have a restaurant in an area of town that is undergoing a transition - that is, many of the homes or other structures are being torn down to make way for new residences, town homes, and high rises. People new to the area are moving in and you decide you want to introduce them to you restaurant and get them to come try it.

You know who you are trying to communicate with (new residents), what you want to communicate (you have a restaurant worth visiting), and what you are tying to accomplish (get them to visit). You decide that a direct mail piece to all new home owners is the best medium to use.

You could use a post card and hope they read your postcard among all of the other postcards they received that day from all the other businesses vying for their attention. Instead, you decide on something a little different.

You mail a small envelope with a buffalo nickel in each one. The envelope is an irregular size, so it gets noticed and the weight and movement of the buffalo nickel inside gets additional attention, so the prospect decides to open it (goal number 1 accomplished).

Inside you have compelling copy to the effect that this nickel is a welcome to the neighborhood gift from your neighbor - the restaurant - and although it might not seem like much, if you come by [on specified days between specified times] you can redeem this nickel for [offer]. Just our way of saying welcome to the neighborhood! (goal number 2 accomplished).

Over the next several weeks or months, people visit your restaurant and redeem their nickels (goal number 3 accomplished). With the outstanding dining experience you deliver, you convert a large number of these prospects to loyal, long term customers and enjoy the fruits of a well designed, well executed marketing program.

Of course you could have just mailed out some post cards and see what happened. This is a somewhat silly example, but its message is important. Please remember it.

(End of Part 2 - Preparing to Drive Business)

If you need extra financing to increase marketing or to prepare your restaurant to receive more customers, consider a restaurant loan from ARF. ARF had been making restaurant loans for almost a decade. Whether you need short term restaurant financing or a line of credit, complete ARF’s short, online application and explore our restaurant financing options.

© 2008 Advance Restaurant Finance, all rights reserved

Small Business Owners need to “Think Outside the Bank”

Banks are making fewer and fewer SBA Loans every day. SBA loan volume for August and September fell more than 50% from a year earlier and is on pace to decline in October, as well. American Banker, Pullback in Secondary Market Hits SBA Lenders (October 30, 2008). But this time, banks are not the culprits, but rather the victims of the deteriorating secondary market for government small business loans.

Banks can’t “resell” SBA loans for a profit
Some banks hold and service the SBA loans they make, but the majority of banks package the loans and sell them to investors in the secondary market. The problem is the difference or spread between the cost of the investors’ funds and the interest rate paid on SBA loans. Since SBA loans are backed by the federal government, the interest rates are tied to the Prime Rate and lower than rates on non government backed small business loans. The money investors borrow to buy SBA loans is typically tied to the London Interbank Rate or LIBOR. After the Fed Reserve’s latest rate cut, LIBOR was around 3.5% and the Prime Rate fell to 4%.

When these two key rates are this close, there is just not enough margin or profit to entice a sufficient number of buyers into the market. Likewise, the profit margin for banks seeking to sell these government backed small business loans in the secondary market - if they can find buyers - is insufficient to entice them to make SBA Loans. For small businesses this means far fewer SBA loans are available.

According to James Hughes, President and CEO of Unity Bancorp, “There’s virtually no market left for SBA loans.” Unity, which aggressively expanded its SBA loan program a year ago, recently shut down 8 SBA loan offices in 7 states and laid off 10 of its 12 SBA lenders. Pullback in Secondary Market Hits SBA Lenders (October 30, 2008).

Small Business Owners need to “Think Outside the Bank”
With a vital source of small business financing becoming increasingly unavailable to small business owners, where can a typical small business go for expansion, inventory, or even working capital loans? One potential solution - “Think Outside the Bank.” More and more small business owners are turning to alternative lending institutions for their business financing needs.

Alternative lending institutions are typically private, licensed lenders that don’t take deposits, but do make business loans. These alternative lending institutions may focus on a few industries that they know very well. This allows them to tailor an underwriting model specifically for an industry or set of industries that can be more flexible than a typical banks’ underwriting model.

One such alternative lending institution is Advance Restaurant Finance, LLC (ARF). ARF has been loaning money to small businesses for almost a decade. It has developed expertise in the hospitality industry and routinely makes business loans from $5,000 to $1,000,000 to restaurants, bars, hotels, and night clubs. ARF’s extensive experience in the hospitality industry allows it to make loans to businesses that banks won’t.

With traditional sources of small business financing drying up, a smart business operator should “think outside the bank” and consider establishing a relationship with an alternative lending institution. It never hurts to have options.

© 2008 Advance Restaurant Finance, all rights reserved

We all know a Credit Crunch is upon us. Unfortunately, the shortage of available credit has spread from marginal businesses to encompass established, profitable businesses as well. In September, business owner Drew Greenblatt asked for a $175,000 increase to his line of credit for his thriving wire products business. The bank declined to do it unless he put an equal sum into a certificate of deposit. (Credit Crunch Puts Squeeze on Businesses, Business Week, Oct. 5, 2008.)

In Ohio, banks are refusing to renew lines of credit and calling in loans made to decades old family businesses that are current on payments. According to one local workout attorney, “It’s not just sick businesses. These are healthy businesses.” (The Credit Crunch and Small Business, Business Week, Sept. 26, 2008.)

Not surprisingly, according to the Federal Reserve’s July survey of senior loan officers, 65% of banks have tightened credit for small businesses.

David Glass, President of Business Credit Services, an 8 year old Las Vegas firm that helps business owners obtain credit, complained that they “used to have little trouble getting $50,000 credit lines for new business owners with 640 FICO scores. Now banks want to see scores of 720 and companies at least 2 or 3 years old.” In addition, he “had 50 or 60 banks [they] could send people to with the basic $50,000 or $100,000 credit line. Now there are maybe 5 or 6.” (The Credit Crunch and Small Business, Business Week, Sept. 26, 2008.)

No doubt working capital loans and unsecured small business loans are becoming harder and harder to get. At some point, most businesses will need a working capital loan or an unsecured small business loan. What should a successful small business owner do to protect his or her business? Here are 2 ideas steps you can take.

First, establish a relationship with a nontraditional lender. Banks and credit unions are not the only lending institutions out there. Research other lending sources and establish a relationship with one or more. Next, once you find an alternative lender, put a working capital loan or line of credit in place. Once you have an unsecured small business loan commitment or line of credit in place, you can turn your attention back to running your business, knowing you have a ready source of funds available.

Advance Restaurant Finance, LLC (ARF) is a licensed lender that specializes in restaurant funding solutions, restaurant loans, and other working capital loan solutions. Among other products, ARF has an unsecured small business loan line of credit with no application, maintenance, or access fees. Call ARF at 866 702 4430 or apply online today and get the working capital to help your business grow.

© 2008 Advance Restaurant Finance, all rights reserved

How Small Business Owners Can Protect Themselves

Small business owners know that business loans are hard to get these days. You are not alone. Now comes news that banks won’t lend to each other (Lending Between Banks Seizes Up, Wall Street Journal, Sept 17, 2008). Certainly, when behemoths such as Lehmann Brothers can’t get loans, and the government has to step in to loan money to AIG, credit is tight. But when a bank won’t make a loan to another bank, who is going to make business loans to small business?

A bank? They are not even loaning money to each other. The Government? Well, you’re not AIG, so I’m not sure you can count on government small business loans. How do small business owners protect themselves during these uncertain economic times? You most likely have taken some positive steps, such as cutting expenses and protecting your core business, but what about money?

Maybe you don’t need money today, but even the best run businesses can face unexpected disruptions or unforeseen difficulties. Even if you don’t need a business loan right now, wouldn’t it be smart to make sure you had money available if you did need it. You may want to consider a Line of Credit.

A good Line of Credit has many attributes, including:

• Quick Access to Funds
• Easy Application Process
• No Access Fees
• No Maintenance Fees, and
• No Application Fees

If you can find a lender to extend a Line of Credit to you, it can be better than a business loan. With business loans you begin paying interest immediately on the entire amount. With a Line of Credit, you only pay interest on the money you use, and then only if you draw on the line. Once you have a Line of Credit in place, it’s one less thing on your mind. Now you can handle business contingencies without concerning yourself if your local bank is going to give you a business loan quickly when you need it.

With banks hesitant to loan to other banks, you may want to research alternative lending institutions, such as Advance Restaurant Finance, LLC (ARF). ARF has been loaning money to restaurants and other small businesses for almost a decade. In addition to mezzanine business loans, ARF provides other innovative financing solutions, such as Lines of Credit and Interest Only Business Loans. Best of all, 95% of ARF’s loans are unsecured small business loans.

ARF has a simple application process, requires very little documentation, provides answers within a few business days, and can fund within 5-7 business days. ARF also loans up to $1,000,000 and in some instances, more. Don’t gamble with your business and don’t gamble on what a bank may do, call ARF and put a Line of Credit in place today.

© 2008 Advance Restaurant Finance, all rights reserved

With all the lending products out there, it can be difficult to determine which one best fits your needs. How do you know if the product your loan officer or broker is pushing is the best for your business or the highest commission for them? One way is to let your business financing needs be your guide. For instance, if you have an ROI generating project in mind or are looking for bridge financing, would a regular amortizing loan with equal payments be best? Probably not. In this case, you may want to consider interest only business loans with lower payments during the initial payback and an option to roll any unpaid principal into a regularly amortizing loan.

Project Financing
Many borrowers look for money to finish a build out, expand, or increase marketing. In this situation, you may not expect to generate increased revenues initially. But once the expansion is complete or the marketing gains traction, you do expect revenues to increase. Instead of carrying the financing costs equally over the term of a business loan, you may be better off using interest only financing.

You will likely appreciate the lower, interest only payments while you finish out your new location or launch your marketing programs. By the time the principal is due, the locations are open or the marketing is generating new business, providing additional cash flow to repay the business loans.

Bridge Financing
Other borrowers may use interest only loans as bridge financing. These operators may have permanent financing in the works, but with approval times increasing, the interest only money is used to keep projects on track while the borrower navigates the permanent financing maze. Once the permanent financing comes through, the business owner pays off the principal on the interest only business loans.

Alternative Lenders Filling the Gap
While the newspapers and talking heads continually obsess about the credit crunch, tightening lending standards, and lack of creative financing options, many companies are quietly expanding their funding offerings. Advance Restaurant Finance, LLC (ARF), is one such lender that has added interest only business loans to its portfolio of financial solutions.

ARF’s interest only loans typically range from $100,000 to $1,000,000. Each loan has an interest only period of 6 months. At 6 months, the borrower can pay off all, some, or none of the principal. Any unpaid principal can be rolled into a regular amortizing business loan at rates previously locked in.

Another unique feature of ARF’s interest only loan is the collateral. ARF doesn’t require any. These are unsecured small business loans, guaranteed only by the borrower. In addition, these loans are low documentation and quick to fund. Approvals can be had in as little as 2 business days with funding occurring as quickly as 48 hours later.

© 2008 Advance Restaurant Finance, all rights reserved

The Small Business Administration’s flagship government-backed 7(a) or Express Loan program isn’t the credit source to entrepreneurs and other business owners that it once was. Volume and bank participation are down, while credit requirements and processing time are both up. Not a good trend.

Banks are bailing on the SBA’s 7(a) loan program
Banks are bailing on the Small Business Administration’s government backed 7(a) loan program. For Q1 2008, volume for 7(a) loans was down about 20%. For rural entrepreneurs it was worse - down almost 30%. Business Week, The Squeeze is On, June/July (2008).

Why? One reason is bank participation. Bank of America - the leading 7(a) lender in 2007 - made 44% less loans in Q1 2008. Capital One Financial - the number three lender in 2007 - made less than half the number of loans it normally would over the same period. Adding to the problem, almost 400 banks have left the program in the last 2 years.

Processing times and credit requirements increase
With banks loaning less, one would think that processing times for these government backed loans would decrease, as well. Unfortunately, the opposite is true. Take the experience of Wendy Kobler of Huntsville, Alabama. Although “advertised” loan review time was 72 hours, actual review time was two weeks. Then, the loan officer scrutinized three years’ worth of her personal and business finances and asked a lot of questions about her net worth, including the value of her home. “The loan officer was looking at anything he felt could pay back the loan,” she said. (Business Week, The Squeeze is On). Her experience is not unusual. According to the Federal Reserve, in April of this year, 55% of domestic banks reported tightening credit standards for commercial loans, up from 30% in January.

With a key government-backed loan program designed to kick in during an economic downturn on the ropes, business owners need options when seeking $50,000, $250,000 or more to grow their businesses. Luckily, the private sector provides alternatives.

Alternatives to the SBA 7(a) loan program
Private lenders, such as Advance Restaurant Finance, LLC stand ready to fill the void left when banks stop lending through the SBA’s government backed loan programs. In addition, unlike the time consuming, document intensive government backed loan process, ARF’s loan process is streamlined and quick.

After ARF’s underwriters review a few key documents, such as bank statements, a typical applicant will have an answer in 72 hours or less. Once approved, ARF’s borrowers usually have the money in 5-7 days. From $5,000 to $1,000,000, restaurateurs and other retailers are increasingly turning to ARF for their business loan needs. Loaning money since 2001, ARF has helped tens of thousands of borrowers who either have been turned down by their banks or who are simply weary of the government backed loan process. In addition, more than 95% of the loans ARF makes are unsecured, requiring no collateral.

© 2008 Advance Restaurant Finance, all rights reserved

We hear about it every day. It’s on television; it’s in the newspapers; it’s in the magazines we read. A Credit Crunch is enveloping our economy. Credit Crunch Moves Beyond Mortgages, Individuals See Higher Rates, Harsher Terms (Wall Street Journal, Aug 22, 2007); Credit Crunch Strangling Small Business? Entrepreneurs …may no longer be able to get funding (CNNMoney, Aug 30, 2007).

No matter how well you run your business, regardless of the previous relationship you have established with your bank, the time may come when you need cash fast and your traditional sources of funding are no longer available. That is why every business needs a back up plan. Smart business people across the nation are establishing lines of credit well before the need arises…just in case. Many are also looking at alternative sources of funding because their traditional sources are tightening their credit standards, raising their rates and in many cases, denying previously extended credit.

Take the case of Doug Eddings, a 35 year old small business owner in Portland, Oregon. Three of his previously reliable financing sources “all took steps in recent weeks to tighten his credit, either by raising his interest rate, halving his available credit or freezing his accounts.” Credit Crunch Moves Beyond Mortgages (WSJ, Aug 22, 2007). According to Mr. Eddings, when he called to inquire, “they didn’t have an answer for [him], but said it was something in [his] credit file.”

Don’t let the Credit Crunch catch you flat footed. Consider putting a line of credit in place today before the need arises. Business loan providers such as Advance Restaurant Finance, LLC who specialize in the restaurant industry, provide lines of credit to restaurateurs every day, with no application, maintenance, or access fees. Why wait? Establish a line of credit today.

© 2008 Advance Restaurant Finance, all rights reserved

During the good times, everybody makes money: well run businesses make a lot of money and poorly run businesses make some money. During more challenging economic times, well run businesses still make money, but poorly run businesses go under. Whether you call it a shakeout, Economic Darwinism or something else, we all know it happens. Something else happens, as well. When the economy rebounds, the consumers serviced by those marginal competitors will be looking for a new supplier – market share will be up for grabs – and the operator that has invested in his business during the downturn will be better positioned to capture it.

Remember the 1981-1982 recession? According to a McGraw-Hill study of 600 companies covering 16 different SIC industries from 1980 through 1985, firms that maintained or increased advertising expenditures during the 1981-1982 recession averaged significantly higher sales growth, both during and after the recession. By 1985, sales of companies that were aggressive recession advertisers had risen 256% over those that didn’t keep up their advertising.

A series of six studies conducted by the research firm of Meldrum & Fewsmith showed conclusively that advertising aggressively during recessions not only increases sales but increases profits. This fact has held true for all post-World War II recessions studied by American Business Press starting in 1949.

Investing in your business during slow times is not limited to marketing. Labor is cheaper, materials are less expensive, and build outs can be completed more quickly. That prime location that was out of reach when times were good…maybe within your grasp when times are leaner.

Finally, think about personnel. Since weaker competitors can make the mistake of firing during a recession, the labor pool of good talent increases. In addition, it is easier to invest training time in new hires during slower growth periods that can translate into long term success.

There is no question that your stronger competitors are investing in their businesses during the current economic slowdown. The only question is whether you are positioning yourself to capture your piece of the market share newly up for grabs. If capital is tight, consider a business loan. The time to invest is NOW. According to the National Bureau of Economic Research, over the last 50 years, recessions in the United States have averaged only 11 months. You can’t afford to wait.

© 2008 Advance Restaurant Finance, all rights reserved