Identifying and drawing up a business plan can be tricky. In this article I will explain how to find your competitive advantage and how to draw up your business plan.

If you are wondering “What is a competitive advantage”, it simply means you are analyzing the restaurant industry because you are looking at starting a restaurant business or you are trying to revise or improve your business plan.
In both of these cases, you would definitely be on the right path. Analyzing your competitive advantages is crucial in any business. Whatever your reason, the good news is that you are looking at your actual or potential business to ensure you have a successful strategy.
Overlooking the competitive advantage may lead your restaurant direct to bankruptcy. Bear in mind that the key of a restaurants success is not in the kitchen but in your mind.
Let’s look in detail what restaurant competitive advantage is.
What is a competitive advantage in the restaurant business?
Basically, a company has a competitive advantage when it has any distinguishing feature over its competitors, which gives it the ability to achieve a higher yield over time.
Translation: No competitive advantage = Not enough income.
This is the main reason that customers choose to eat in one restaurant rather than another.
Think about it. What makes your restaurant so special? Even though it is similar to thousands of others, you need to be able to figure out what makes you different from all the others. What gives you that competitive edge?
Similarly, if yours is a niche business – maybe you sell gluten-free pizza or specialize in vegan food – you still need to identify how, within this niche, you can differentiate from all the others. You need to figure out what skills or circumstances allow you to be better able to provide a service that others can’t.
Competition in the restaurant industry is high, and you need a competitive positioning to stand out from the crowd.
If your business is based on an idea that nobody has had before, you must first ask yourself why has nobody tried to exploit this already and if you are successful, then how can you prevent others from copying you.
The essence that makes your business special is called competitive advantage or strategic advantage. This advantage is the most important element by far in ensuring that you have a successful restaurant.
How to Gain Competitive Advantage
How do you manage to beat the competition and what advantages does your restaurant provide compared to the other restaurants around? Here are some ways by which your restaurant may be able to establish a strategic advantage over other competitors.
- Added Value: Added value is something that can give you the edge by adding some of value which your competitors don’t have. For example, a star chef, a fast home delivery service, a great menu, organic products or products where the quality is much higher than the ones offered by competitors.
- Innovative Idea: Do you have an idea that nobody before you has churned out? Or maybe a new way of doing something to make the product or service better, faster or cheaper?
- Intellectual Property: Do you have a unique intellectual property that customers want and it is difficult to copy? By intellectual property, I mean copyrights, patents or trademarks. If your business is just starting out, intellectual property can simply be an interesting name, logo or an impact domain.
- Location: Where is your restaurant located? Is your restaurant located in a central shopping area? The area where your business is, is it busy? Is there much foot traffic?
- Obsession or Cut Above: Do you have a great vision or something even better? For example, think about Steve Jobs and his obsession with design.
When Steve Jobs and Steve Wozniak founded Apple, one of the most important strategic advantages was that they were a close knit team and had a real passion for design. The synergy between their skills was very difficult to imitate, sophisticated design was particularly pleasing to customers, and Apple was therefore in a position to continue to improve and sustain this advantage.
- Team Working Fluidity: If you are in partnership with someone, do you have a unique combination of skills and are you able to work effectively as a team? The synergy created by two or more people who have complementary skills is a great advantage.
- Special Skills: Are you a specialist in doing something in particular that the others could hardly do? For example, you have an excellent knowledge of social media marketing and you would be able to attract customers to your restaurant using Facebook easily. Or you may have experience in public relations and you know how to bring people to your business.
How to Identify Your Competitive Strengths for Your Business Plan
A great way to find out where your strategic advantage lies is to observe your customers and their purchasing patterns. Or if you still have not started your business, imagine what the answers to these questions would be.
Then as yourself these questions:
- Why does a customer choose to eat at my restaurant?
- Why do potential customers go to the competition?
- When a potential customer researches where to dine do they end up at another restaurant Why?
- Are the benefits I offer – or intend to offer – to my customers unique?
Try to honestly answer these questions and write down the results. Reflection up the reasons why customers come to your restaurant will give you precious information to spot your competitive advantage.
Generic Competitive Strategies
Michael Porter – an American academic at Harvard business School, famous for his theories on economics and business strategies – identifies three possible alternative strategies and two different types of competitive advantage.
Cost Leadership Strategy
Cost leadership is the ability to produce a product or service at lower cost than competitors. If your restaurant is able to provide the same quality food and service but at a lower price, this gives you a competitive edge over other competitors.
Differential Strategy
A differential advantage is when a company has products or services that are different to similar businesses. If this is the case with your restaurant, according to Porter, you should make your good food or services more inviting and stand out from other restaurants. If customers see that your food and service are different from your competitors, they are will to pay more.
Learn How to raise prices at your restaurant by 70% without losing customers.
Focus Strategy
Focus strategy is when a business aims at a few target niche markets instead of trying to target everyone. This strategy is often used by small restaurant businesses as they can’t afford to do otherwise. Restaurants that use this strategy usually focus on the needs of small niches such as vegans, vegetarians or Muslims.
Michael Porter is the king of market and business analysis. If you are writing a restaurant business plan or you’re trying to improve your restaurant business, I do recommend reading his book “The Competitive Strategy: Techniques for Analyzing Industries and Competitors.”
An Example of Restaurant Competitive Advantage
I’ll give you an example of a restaurant’s competitive advantage by mention McDonald’s as a case study. The fast food king has built his competitive advantage on the following key points:
- Low Operating Costs. The fast food company exploits economies of scale to achieve the cost advantage.
- An excellent fast food business model. McDonald’s is known for the speed of it’s customer service while not compromising its quality.
- Universal Taste. The Big Mac tastes the same all over the world due to the use of the same ingredients. Such consistency means customer loyalty.
Here We Go. Now you should have a clear idea of how important it is to look into the competitive advantages for both writing your business plan and implementing a successful strategy to enable you to make money with your restaurant.
Finally, I recommend that you learn what are the characteristics of a good restaurant manager, as this is a competitive advantage as well.
Cheers!