Restaurantology Blog

Why many companies have a difficult time selling to “mom-and-pops”

February 14, 2022 | Trends and Advice | by Grant Gadoci

Selling a product, software, or service to the restaurant industry? Figuring out where independent operators fit into your go-to-market strategy can be tricky.

In an earlier blog post, one in which we posited that the US restaurant industry is both bigger (and smaller) than you think, single-unit operators were noted as one of several sub-groups of the foodservice space that typically warrant special attention. Just as with other ICP variables like franchised units and international locations, you’ll want to spell out a specific and intentional approach documenting how you intend to handle the independent long-tail of the industry.

There are currently 3 strategies for selling to “onesie-twosies”:

  1. Actively selling to single units both inbound and outbound.
  2. Passively responding to inbound interest when it arises, but not actively targeting single units.
  3. Avoiding independents entirely for reasons like cost, difficulty, risk, etc.

In a perfect world, all companies would be actively selling to single units. The reality, however, is that there are 2 key factors that make selling at scale to mom-and-pops problematic: they are difficult to find, and it might not make good business sense.

Let’s break this down.

[1] Independent operators are hard to find, and even harder to reach

For starters, roughly half of the the US restaurant industry is estimated to be independent operators. There are literally hundreds of thousands of restaurants who may be interested in what you have to offer and all you have to do is pitch them. Easy enough, right?

Wrong. Putting pen to paper in terms of a marketing and sales strategy makes this uphill battle a steep one. Even if you had an Excel list of every single independent restaurant in the United States, nobody will have credible contact information for the long-tail. Not ZoomInfo, and certainly not a snapshot list provider. This portion of the industry is simply unmappable. It cannot currently be reached at scale.

So how do you get in front of these operators? There are a lot of options, they’re all being tried, and they are all pretty expensive.

Marketers may try things like running ads, ramping up SEO, and booking a booth at a local tradeshow. I’ve even seen companies attempt direct mail campaigns. Sales reps take to cold calling, dialing down the literal phone book, or try feet-on-the-street tactics if they’re lucky enough to be in-market. Partnership teams are whipped up to try and unlock areas of the market deemed unreachable.

One thing is clear: it gets messy, and quickly. It’s hard to measure, and requires a persistent amount of effort, energy, and cost. Selling across the entire country at a single-unit level, and doing it well, isn’t for everyone.

[2] Comparatively, single-units are costly to sell, implement, support, and retain

After confronting the the size and complexity of this difficult-to-reach segment of the industry, the next step is to determine whether or not it makes good sense — or should we say good cents?! — for your business. A logical place to start would be to assess your:

  1. Cost of acquisition (CAC)
  2. Customer lifetime value (LTV)

Getting a return on your investment is crucial whether your new customer is large or small. To see if the “juice is worth the squeeze,” you’ll need to evaluate the cost of your product, the expenses associated with selling it, and estimate just how long you can reasonably expect to retain a single-unit customer.

Product cost can be a difficult place to start. Restaurants have razor-thin margins and often struggle to be profitable in the long run. There’s no lack of shows highlighting kitchen nightmares or mission impossible disasters stressing long-term profitability while simultaneously screaming at a chef. Because cash is tight, any product or service is going to be aggressively haggled down to its bare minimum in an attempt to control the restaurant’s overhead. This is a stark reality for people who find themselves selling into restaurants for the first time. “We absolutely need your product, but also legitimately cannot afford it” is something you get used to hearing.

Next, the costs of acquiring new business can add up quickly. Many companies selling to restaurants, particularly those selling software, pay a premium when it comes to acquiring a new logo. Sales rep salaries, commissions, travel costs, licenses (for things like Salesforce, Zoom, Slack, etc.), and a laundry list of other expenses accumulate fast. And the post-sale process? It isn’t any better. Intricate white-gloved implementations that map out required integrations means ongoing support can skyrocket in an instant. Aside from the actual cost, in many instances, it’s just as much work to go after a small opportunity as it is a big one, which is why when given the choice many companies tend to pick a big(ger) fight. If it’s the same amount of energy, why not swing up, right?

Lastly, calculating the average length of a single-unit customer can be discouraging. Whether or not you believe that 60% of restaurants shutter in their first year (it may actually be closer to 17%), one thing is for certain: smaller restaurants suffer a higher risk of closure when compared to larger multi-unit chains. With the past 2 years as a bit of fresh perspective, restaurants of all shapes and sizes that barely survived the pandemic are now forced to navigate the labor, inflation, and supply chain crisis. What’s that mean for your business? Well, for starters it could mean that reaching the breakeven or profitable stages in your customer lifecycle is increasingly strained. For companies who require months and months of SaaS subscriptions to recoup or offset the upfront costs required to acquire a new customer, the fact that the industry is in distress is diametrically at odds with sustained profitability.

Conclusions

So why do companies struggle to sell to mom-and-pops? It’s a hard realization to come to, and even harder to write down or say out loud, but many companies are now intentionally excluding half of the restaurant industry from their Ideal Customer Profile (ICP) because they’re difficult to find and reach, and it simply isn’t profitable for their business.

Sure, some companies that have variable pricing — covers for OpenTable, payment processing fees for Toast, delivery fees for DoorDash — also have the luxury of building out bulked-up sales teams who can use brute force and elbow grease to sell through the single units. The rest of the companies out there though, the ones who cannot simplify or automate their sales and implementation processes to reduce the cost of doing business, will continue to have the most difficulty selling through the restaurant long-tail because they all have the same problem: a high CAC, and a low LTV.