The First Principles of Restaurants

This fable offers insight on the type of knowledge used by once humble restaurants to become independent & chain category leaders. Learn about the author below.

Once upon a time, our fable’s hero Ali, owned a food stall in the middle of a bustling market where he served tasty kebabs that customers enjoyed.

Despite Ali’s modicum of success, other stalls with similar quality food had much longer lines than his did. He was missing fundamental knowledge about which approaches created good versus great levels of demand. Ali asked friendly food stall owners for advice, but none of their tips made a lasting difference. He copied or tweaked recipes of renowned stalls from larger markets, but short-term upticks in traffic did not sustain as upshifts in the longer-term trajectory of his business.

One day, Ali asked the advice of his wise grandmother who had quietly observed the ebbs and flows of food stalls in his marketplace for over 50 years. She listened patiently to Ali’s concerns and then told him a story.

“When you were a child, you watched how your brother dribbled a ball, and then you made those same tactical moves to win more games. You observed your sister’s strategies for doing well in school, and you did the same and excelled. You are now applying the power of your tactical and strategic mind to the competitive world of grown-ups, but it’s not getting you great results like it did when you were a child. Such a smart boy, but now you need to become a wise man.”

She continued: “Ali, I will share with you a first lesson of success, but it is to help you to understand a second deeper one and then to understand a third most fundamental of all lessons. I have been buying kebabs at old man Faiz’s stall in your market since before I married your grandfather. Faiz was busiest even back then because he served kebab sizzling hot off the grill and bread fresh from his earth-oven to every customer the very second they reached the front of his line. Nobody on even the busiest of market days ever had to wait for Faiz’s freshest, hottest food.”

“Grandson, your first easy lesson is that value for everyone’s time is just as important as value for money in your business. Understand how much time people have and as you adjust to their time availability and not yours, you will earn more customers.”

Grandma sipped her tea and peered into Ali’s eyes to make sure he was listening: “Pay attention now as we will dig deeper. Faiz serves just 5 items. Note that as customers walk toward his line from the market, they raise 1 to 5 fingers to signal their order so that Amir, his son, can walk out to collect their money beforehand. In this way, a hungry, hurried customer loses no time ordering and paying and can even more quickly return to the market for their weekly shopping before produce and other items run low.”

“Your second deeper lesson Ali is that when you have a true advantage, such as Faiz’s ever-improving time-value edge, you must forever develop it ahead of the curve as others will copy you and try to catch up. Stay ahead, don’t let competitors catch up, and you will always win more customers than they do.”

“Now, stand up Ali,” Grandma said. “Shake off what you have just heard, because if you could remember just one thing for life, what I am about to tell you would be it.”

“When you were a child, as happens with all children, you were taught tactics and strategies. A tactic is how to do one thing, such as to kneed bread. A strategy is a series of tactics strung together, such as how to make bread come out fresh just when people are reaching the front of the line.”

“Neither tactic nor strategy sustains your advantage for long, because they are both easily copied by others when they focus on it.”

“But, when I told you that you must forever develop your true advantage ahead of competitors to always win more customers than they do, well, that is neither tactical nor strategic knowledge. This type of knowledge is like a rule or law for how the world works, and can be thought of as a First Principle for your food business.”

“Ali, to become wise and not just smart, you must accept that First Principles show you what matters most so that you apply your resources to what works best. Those leaders I have seen both in your market and elsewhere, all understand this and you do not. If you want to stop guessing and start knowing, First Principles is what I would focus on next.”

With that, Grandma’s job was done and Ali was left with a choice as to how to best approach the future of his business. What would your choice be?

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As a researcher and author focused on the First Principles of restaurants, I support businesses that solve restaurant challenges through First Principles. I wrote this piece for Bloom Intelligence because it solves for this critical First Principle:

When you earn and then sustain the lowest cost of acquiring loyal customers, you outpace the revenue growth rate of competitors. It’s automatic.

When you understand the math, loyal customers are worth at least 10X of new ones that do not convert. Lowering acquisition costs drives those multiples higher and is how you optimize income growth. To calculate loyal customer acquisition costs, you must be able to accurately count both new and loyal customer arrivals. POS systems and loyalty programs are not designed to do this, which means you don’t know your true acquisition costs and therefore can’t test for business adjustments that might hone those costs toward zero. Bloom Intelligence is a rising star in our industry because it solves for this beautifully and best-in-class.

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