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February 1, 2013

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The Names You Know

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To brand or not?

Restaurant, bar and nightclub brands provide consumers with a sense of familiarity and consistency, often becoming an advantageous differentiator for casinos operating in a competitive environment. In Las Vegas, branded restaurants have operated with great success for both their owners and their gaming industry partners. In the smaller regional markets, the branded restaurant and bar has had limited exposure, mainly through breakfast restaurants such as Denny's.

There are many pros and cons of the branded food and beverage experience. The following will provide insight into the associated costs and the ROI evaluation process, and describe a hybrid branded food and beverage experience that has succeeded in smaller regional casinos in both the commercial and Native American markets.

Brand Bias

The branded restaurant experience has been part of casino food and beverage programs for many years; nationally recognized entities and celebrity chefs who have expanded their namesake restaurants have historically exposed casino guests to brands in a positive way. Brands bring with them an inherent reputation and recognition of the food and a standard dining experience, which is in some cases coupled with higher check averages.

Corey Nyman, a Las Vegas-based food and beverage consultant, states that a branded restaurant can drive between 15 percent and 20 percent higher price points when compared to non-branded restaurants in a facility.

"Brands bring with them standards and consistency, which in most cases can appear as higher quality and drive higher prices to the customer," explains Nyman. "The higher check averages and consistent quality standards have proven to be a successful mix for both the brand operator and host casino."

According to Mark Healey, senior vice president of casino operations for Ovations Food Services—a nationally recognized food service management company and member of the Comcast/Spectacor Group of Companies—a brand should deliver three things better than a generic offering.

The three priorities, according to Healey, are "increased length of stay for the customer on property, increased frequency of visits to the casino, and enhanced reward and comp opportunities."

Healy's and Ovations' point of view is that branding enhances the overall appeal of a restaurant, with such food and beverage outlets bringing higher food quality for the guest and greater growth potential for the main show at a casino—the gaming floor.

Nyman also observes that in addition to increasing the guest experience outside of the restaurant, "brands can bring in an expert with proven talents, name recognition and a positive reputation to the host casino."

Furthermore, he contends that signature brands allow for a casino to bring an established food and beverage operator to an aspect of the business where the host property may lack experience. Nyman asserts that brands provide consistency and standards where oftentimes, the host casino's food and beverage operations do not.

Accompanying expertise and higher standards comprise an established and positive execution strategy for the food and beverage program, the development of which can otherwise burden a casino's internal operations.

By capitalizing on the regional or national awareness of a restaurant brand, a casino can utilize its food and beverage program to drive visitation. A great example of this is the soon-to-open Horseshoe Casino in Cincinnati, which will be operating in partnership between Rock Gaming and Caesars Entertainment. Caesars Entertainment has made it a point to partner with well-known restaurant and bar operators to create unique food and beverage experiences at their casinos and resorts.

One such high-profile operator Caesars is bringing into the Cincinnati facility is Jimmy Buffet's Margaritaville, along with one other to-be-named restaurant to couple with an in-house steakhouse and buffet. Caesars officials expect these restaurants to drive added visitation and increase exposure to the casino through product differentiation and enhancement for their potential gaming and non-gaming guests.

Additionally, by partnering with Margaritaville, the casino can tap into the national "Parrot Head" phenomenon and enhance the marketing exposure of the casino.

Plus and Minus

Brands like Margaritaville also bring with them some disadvantages and drawbacks—most notably, the loss of operational control and flexibility. One of the key strengths of a casino's operations is its control over the guest experience for the complete duration of the visit. An externally operated food and beverage restaurant forces the host casino to relinquish that control.

If the guest experience at the restaurant is not on par with the overall property, problems will arise; the guest may leave before spending any time on the gaming floor, may never return to the casino, or may pass along less-than-favorable reviews to other potential customers what will discourage them from frequenting the casino, all because of the actions of the branded restaurant and not the casino itself.

In other words, a casino needs to choose its food and beverage partners wisely.

The introduction of a brand limits the flexibility of the host casino to make changes. Should the brand not work in a certain market or location, it is very costly to either eliminate the restaurant or bar or make changes. In one sense, this handcuffs the host casino. However, most of these issues can be mitigated on the front end with strong due diligence and proper planning.

"It is important to do your homework and learn about the brand and its culture and make sure it fits with your operations," Nyman says. "This will alleviate a lot of headaches further down the road."

In addition to asserting a certain level of operational control, brands bring with them costs to the host casino in the form of royalties and marketing costs, which can reach up to 12 percent of revenues. These costs can limit a restaurant's or club's impact on the overall F&B program, and it is important to evaluate the entire picture of brand's introduction, including the ROI.

"The ROI analysis must include an evaluation of the impact beyond the four walls of venue and how it will increase gaming revenue and player loyalty," says Charles Lawrence, vice president of development for Ovations.

Soft Touch

To reconcile the benefits of branding with its potential costs, casinos are beginning to pioneer the in-house, or soft brand, which has gained traction in certain local and regional casino markets.

This hybrid brand brings together the standards and systems of a national brand while maintaining the overarching theme and integrity of the host casino. In addition to providing the host casino with added control over the customer experience, the in-house branded restaurant is advantageous in its novelty.

In-house brands allow for a property to differentiate itself from its competition.

"Especially in highly competitive jurisdictions, branded F&B can provide the casino with an added lift beyond the gaming floor with limited risk to overall operations," says Lawrence.

The Comanche Red River Casino and Resort provides a useful model of this type of branded restaurant and bar at the regional scale. The Comanche Tribe partnered with Ovations Food Services to establish a branded food and beverage experience. The result—Countryville Bar and Grille—fuses Ovations' established food and beverage operations expertise with a unique, branded dining experience that is reflective of both regional tastes and the Comanche Tribe's values and desired guest experience. Additionally, Ovations was able to utilize resources from its parent company, Comcast, to provide entertainment content for the bar.

Organizations such as Ovations provide casinos with a unique third-party strategy for taking advantage of branding's benefits while minimizing its risks. These models allow casinos to retain control of their operations and reap the benefits of efficient operations and nationally recognized brands such as Shula Steakhouses, or create their own in-house brands.

Ultimately, the question of whether or not the branded food and beverage solution is worth the costs and integration efforts necessary to make it work has no easy answer.

"This really depends on how the brand fits into the casino's overall marketing goals and objectives," says Lawrence. "It also comes down to making solid choices that will help the casino meet these goals.

"This is not an intuitive process, and it should follow a careful evaluation of player behavior in order to choose brands that will activate and motivate players to play more, stay longer and return often."

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