How to Compete with Chain Restaurants

Updated September 15th 2013

Chain restaurants bring immense competition when they open a branch close to your restaurant. Initially this may seem disheartening but if you employ the right strategies you will learn to compete and co-exist.

Independent restaurants find it difficult to compete with chains because of brand recognition and their seemingly unlimited marketing resources. Chains can easily afford the best and spacious locations in a town. Their prices are also competitive as they can negotiate for better prices of suppliers given their high demand. However this does not mean that independent restaurants cannot compete effectively with chain restaurants. They also have their own advantages and strengths that they can use to keep themselves relevant in the market.

One of the advantages that independent restaurants can use to compete with chains is their ability to relate with their customers more intimately. It is relatively harder for chains to maintain personal relationships with their customers given the large number of customers they receive. Owners of independent restaurants have loyal customers who they even know by name. The trick here is to use all the information you know about your customers to retain them. Give your loyal customers special discounts and deals that will ensure they come back even after a popular chain restaurant sets shop close by. Recently a number of major chain restaurants have recognized the impact of personalization and have begun testing it on smaller locations. But their popularity in terms of number of customers, their high level of standardization and high employee turnover will always hinder a very personalized approach.

Independent restaurants can also offer a wider variety of menu items compared to chain restaurants. This gives you a competitive advantage as you can offer special offers on those menu items unique to your restaurant. Even though chains can offer limited time offers, they cannot freely change their menus as they have to follow a given menu and marketing rules in all locations. The independent restaurants on the other hand can incorporate new items to their menus and offer promotions tailored for their local customers. Besides changing the menu items, you need to market your menu online and on social media in order to attract new business and give alternatives to crowded, fixed-menu chain restaurants.

Reacting to local specials or public holidays will take a lot of adaptation and chain restaurants are not as flexible based on their basic concepts. Reach out for seasonal specials, special public holidays or local highlights which will offer you a local advantage to the rather conservative or right concepts.

To counter competition from chain restaurants, independent restaurants in a given locality can team together. This gives them enough power to compete as another co-operation and also enjoy some benefits that chains enjoy. For instance it gives them bargaining power when they are shopping for suppliers which puts them in a better position to compete with chains on menu prices. You can also advertise and recommend each other’s restaurants to customers to ensure that customers remain within the group.

All said and done competition boils down to quality of food and services. Here independent restaurants have a major advantage as they deal with small volume of customers. This makes it easier to offer quality services.  For instance chains find it difficult to ensure that all the ingredients in individual stores are fresh. Independent restaurants have to advertise their menu and the quality of their food if they intend to compete effectively with Chains restaurants.

Even though chains restaurants bring about a lot of competition they are also beneficial in some cases. For instance if they are crowded and your restaurant is located close by, customers will opt for your smaller less crowded establishment. To compete effectively you need to focus more on personalized service, be creative, and market your restaurants. You will always find customers looking for quality services and be able to co-exist with chain restaurants.

Written by Daniel Grossmann