[Vnbiz] Restaurant charges

[Tran Dinh Hoanh]

Dear CACC,

Let me continue my restaurant competition discussion and the
standardization issue (for all industries).

1.   The obvious quality problems of restaurants in Hanoi simply show
that that restaurant industry there is underdeveloped.  That is an
opportunity for investors to develop it.   Obviously, the main problem
as I can see is that most people think that restaurant means food.
Well, food is a very small part of restaurant.  We have to define
restaurants as providing "eating services."  Food is a part of it, the
other part is services.   Food and services make a restaurant "product
package."

Food quality is easy to define.  Good food is food that tastes good.
Not much else.  Maybe food that looks good too (presentation of food).
 But other than that, food is food.

Service is where the competition really is, because service is
hundreds of other things that allow creative minds to come up with
hundreds of ideas to compete, such as:

*  Physical the environment:  Good air conditioning, not too crowded,
beautiful decoration, cleanliness, decoration theme, background music,
privacy (where needed), spotless fancy restroom, powder room for the
ladies, etc.

*  Hosting and waiting services:  Hostess and waitresses a pleasant and
professional, service is quick and friendly.

*  Atmosphere:  Friendly, classy, etc…

*  Parking area and parking services.

These elements can be put together in any kind of package that you
like, to target a specific groups of clientele.  Than price your
package in accordance to the kind of quality you provide.  The
packages can range from every low end to very high end.  A person can
visit a low end restaurant one day, and the next day brings his girl
friend to a very fancy and expensive restaurant.

These sound so fundamental but most of the time the Vietnamese don't
get it.  Even Vietnamese businesses in the US compete solely on price.
 Every one tries to reduce their price as low as possible.  So all
restaurants have very low price, and of course, low quality too.  That
means, restaurant owners can hardly make money and consumers have to
put up with very poor services.  I like Vietnamese food, but hate
Vietnamese restaurants.  But business folks I know get stuck with the
thinking that Vietnamese (and Asians) in general are so thrifty that
they won't pay a high price.  I think that is a lot of bull.  As far
as I can see, the Americans are much thriftier than the Vietnamese.
As long as your price is "reasonable" for the "package" you provide,
your package will sell.  And while a low end restaurant may need a
hundred customers to survive, your high end restaurant may need only
10 customers to survive.

And if you go high end, try to look at non-Vietnamese as a potential
target too.  So you should have bi-lingual menu (Vietnamese and
English)  (even the French can speak English, so you don't need to
have all languages of the world on your menu).  And have bilingual
waitresses and hostesses.

My point here is "Don't think about price only."  Think about the
entire "food services package" and the price compatible to quality.
Each kind of package is good a group of potential customers.  Know who
you plan to attract, know "your intended market."

(My personality is such that I like to sell/provide expensive
packages.  Nothing's wrong with cheap packages.  For me, it is just
more demanding and more artistic to do expensive packages, and
therefore more challenging and more fun.  That's all.  Do whatever
your heart desire.  Go after your heart).

2.  Waiters/Waitresses:  Generally people don't tip waiter/waitresses
in Vietnamese restaurants.  I hope that is going to change.  Without
tipping it is very hard for waiters/waitresses to make a living, and
it is very hard to motivate them to compete.

With tipping, good waiters/waitresses get good tips, bad ones get bad
tips.  That would motivate everyone to be good.  I think people who do
high end restaurant should start to "remind" customers to tip.  In
some restaurants in the US I have seen notices (on the menu or on the
ticket) saying "Your waiters/waitresses make a living from tips.  We
suggest a 15% tip."  Sometimes you go over 15% for a good
waiter/waitress and lower for the bad one.   (In some restaurants, the
restaurant will add 15 percent tip right on your ticket. You have no
choice.  But I hate this policy.  It defeats the entire purpose).

I really think that restaurant industry will not develop well without
tipping.  Waiters/waitresses are the main customer service crew in a
restaurant.  If they are not motivated constantly by tipping, their
quality won't develop well.

3.  Each restaurant has a different way to do business.  That is how
they compete.  Some restaurant has  free tea, some charge for tea.
Most restaurants in the US I know have a price on every thing (except
the ice water). So if you have Pho you automatically have some
vegetable to go with it. But you want some extra vegetable, you order
an extra vegetable dish and pay for it.  Then, no one is stressed when
you want something extra.  (Some cheap restaurants in New York, will
charge you a price when you need to go to the rest room.  You have to
put some coins in a slot of the rest room door to open it).    You,
restaurant owner, just have to decide what can be free, what should be
charged.  Whatever you do, make sure your customers are OK with it.

4.  That leads to chi Dieu Anh's question on standardization:  Should
be make all restaurants do the same things, charge the same way?

When a group of producers in an industry agree to use the same
qualifications for a product, or the same way of providing a service,
they "standardize" their product/service.  Standardization is a
relatively difficult area for anti-trust (competition) law
enforcement.

"Standardization" really is an agreement among producers not to
compete (which is bad for competition.  Say, all bicycle producers
agree to have the same size of wheels for bicycles.  That means, they
agree not to compete on wheel size.  All bikes in the market have the
same wheel size.   That kind of agreement REDUCES competition a
little.

But it may BENEFIT the CONSUMERS tremendously, by making bike repairs
much easier and convenient.  When they have to buy a new tire, they
don't have to worry about size.   So this standardization agreement is
actually good for the consumers.

But sometimes people may use the name "standardization" to really harm
competition.  For example, all the producers in this industry through
its "Association of Producers" have this Standard A for this kind of
product.  One producer invents a new product with Standard B.  The
Association may refuse to "certify" this Standard-B product because it
doesn't meet the "industry standard."   If this Association has great
reputation with consumers, consumers may think that Standard-B product
is bad because it doesn't meet "industry standard."    That is how the
majority of the producers try to put this creative producer of
standard B out of the market.  It could be a serious anti-trust
violation.

So every time there is some standardization somewhere, anti-trust
enforcers need to look analyze the situation carefully to see if the
standards are indeed good for the consumers and the development of the
industry's products/services, or it is just a pretext to kill off
competition.

These issues, in some cases, can be very complicated.  But there is no
general rule.  Each case has to be examined under its own facts and
circumstances.

In the case of restaurants, if the "restaurant association" members
meet and agree on some standards of services, most of them are
probably good for consumers and for the industry.  But we just have to
wait and see.  Say, agreement to demand 15% tip would be an anti-trust
price fixing, which is really bad.  (Note: When everyone simply
follows each other, that is not an agreement.  When they agree with
each other, it is an agreement that violates anti-trust law).

This issue of standardization comes up very often, whenever you have
an "association" involves (such as lawyers' association, doctors'
association, engineerss assocation. ect).  Sorry I won't be able to go
into a lot of details and examples here.  I just want to alert
everyone of the competition issues involving standardization.  That's
all for now.

Great issue, chi Dieu Anh.  Glad you touch it.

Good day, everyone.

Hoanh
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On 8/1/06, Tran Dinh Hoanh <tdhoanh at gmail.com> wrote:
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> Dear chi Dieu Anh, Anh Binh, Anh Toan, V. & CACC,
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> Thanks for the notes on this issue.  Together you have raised some very interesting (and important) issues in competition.   One is the issue of customer satisfaction; the other one is "standardization."  But before going to these issues and other issues on competition (in restaurant industry), let me give you the real-life answer in my case.
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> As I mentioned previously, as I ordered lunch the waitress brought out a glass of ice water and a pot of hot tea.   American restaurants (except "fast food restaurants") always bring you a glass of ice water as soon as you sit down.  The waitress at this restaurant knew that I like hot tea (I'm a regular), so she automatically brought out hot tea too.   As soon as I asked the restaurant owner: "I'd like to have an empty glass so that I can make some ice tea," she said, "You charge for ice tea."  I said, "Fine.  I can pay for that.  I just need an empty glass now."
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> The final answer in my case is that I paid for it, just because she asked for it.  I was surprised that she would make such a mistake—risking losing a customer over such a small thing.   Obviously as brother Binh and our anonymous friend said, it was not a wise move on her part.  But after thinking hard about it, I thought maybe she was mot as dumb as I thought.   Maybe she had known in advance exactly how I would react to such request, i.e., I would just say "yes" and not get upset over it.  So she could be very smart after all J
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> In any event, tomorrow I will continue write a bit about my feeling on restaurant competition and the issue of standardization in an industry.   Got to go now.
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> Have a great day!
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> Hoanh
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-- 
Tran Dinh Hoanh, LLB, JD
Attorney of Law
Washington DC