Terzo Restaurant
Upscale restaurant serving Mediterranean-inspired cuisine
San Francisco, CA
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Meeting with Laurie Thomas, the co-owner of Terzo
Terzo is an upscale cafe in San Fransisco’s Cow Hollow neighborhood. Opened in 2006 by Chef Mark Gordon and Co-Owner Laurie Thomas, Terzo serves Mediterranean-inspired dishes nightly and has a private dining room available for rent. Terzo (“the third”) is Thomas’s third restaurant; she also owns and operates Rose’s Cafe, located just across the street. We met with Laurie Thomas, Terzo’s co-owner and operator, to discuss the suite of software used to power the restaurants.
11
years in operation
~98
seating capacity
Software used
Choubox
Cloud-based invoice management
Choubox creates daily cloud reports on expenses and revenue and ties into Quickbooks. Operator and accountants can remotely review invoices and audit reports.
Aloha
Point of sales system
Process payments and print receipts.
CTUIT
Invoicing and operations reporting
Restaurant analytics software on top of the point of sale system. The owner gets a report on what was sold and expensed and the total number of diners.
OpenTable
Reservations & operations research
Customers can book tables online, and restaurant staff can take notes on diners and offer more personalized service. The manager uses OpenTable analytics to optimize seating and staffing. Thomas said that OpenTable is great for filling tables, but it’s expensive; there’s a fixed and per-person cost to be on the platform.
InstaWork
Hiring
Marketplace for restaurants to source staff. Thomas said that labor is Terzo’s biggest expense and that recent San Fransisco regulations have driven many restaurants out of business.
Q&A
What are some of the main problems and challenges that you face?

More diners in seats: With a changing consumer preferences and trends, Terzo’s primary goal is to get more diners to actually show up to the restaurant. Thomas cited millenials enjoying delivery or more casual places as opposed to fine dining as a challenge. Even things like the weather being rainy could have a significant effect on the restaurant's nightly attendance and thus bottom line.

Accounting and finance: Thomas has a clear picture for the financials of the restaurant, and they involve many complex transactions. Food needs to be delivered, staff needs to be paid, and customers need to be served - this all results in a complex combination of various accounting and revenue services. Many restaurants have digitized their accounting systems over the last few years, but there is still work to come on moving invoices and revenue reports to the cloud. Thomas audits for errors and anomalies regularly, and tracks numbers carefully to keep her finger on the pulse of the business.

Rising labor costs: Thomas said that the cost of labor is Terzo’s biggest expense. New laws around healthcare and wages have made it hard for restaurants to keep costs down. Thomas herself just closed a restaurant, Rose Pistola, because there was no way to recover the rising costs.

How do you discover new software to use at your restaurants?
Having opened and operated three restaurants in San Francisco, Thomas got most of her recommendations through referrals from colleagues and friends.

Referrals from consultants: Thomas contracts from an external accounting agency to track cash flow. Since the external agency specializes in services for restaurant owners, Thomas’s accountant benchmarks Terzo’s expenses against other similar restaurants and recommend new vendors or software if they’re overspending.

Restaurant trade group: Thomas is a part of the Golden Gate Restaurant Association, which is a trade group made up of many restaurant owners in San Francisco (it's the same group that organizes Restaurant Week). Restaurant owners get ideas and opinions on new software offerings from each other through connections and meetings with the group.

What factors into your decisions for what software to choose?

Cost: Because margins are so low, restaurant owners can afford to invest in new software only when it is cheap and delivers immediate value.

Offline support: Terzo’s internet is not always reliable, and the staff doesn’t have much downtime. As a result, it’s important for software to degrade gracefully when the internet is down.

Referrals: The power of referral is very powerful for the restaurant industry. All of the software that Thomas chose to use was recommended through friends and other trusted restaurant owners.

Takeaways
Thomas seemed skeptical about new software offerings for restaurant owners because of the constraints of the restaurant business. Delivery, catering, social media, and online reservation platforms are changing the food services industry, but winning the market depends either on offering the lowest-cost service or dominating the network. Thomas felt that the for restaurant market was polarizing toward fast casual and high-end ticketed experiences without much opportunity for the affordable and fine-dining establishments. For payments and reporting, restaurant owners need faster, better, more integrated and reliable software to move off of paper, but switching costs and operational demands make it difficult to prototype new systems.

Selling to restaurant owners seems like a very hard business, because it is not affected by traditional tech growth hacks like SEO or online marketing. Rather, the industry moves almost exclusively through word of mouth and trusted recommendations from other restaurant owners. Building up rapport with in the industry associations would be important for any future tech product targeted towards restaurant owners.

That said, we did have some ideas around how it might be possible to provide additional value for restaurateurs:

Finding new ways to market restaurants to millennials at a low-cost: OpenTable helps restaurants reach young, mobile diners, but joining the network is expensive for restaurant owners. Could there be a better way or platform to reach millennial diners?

Social media management: Engage restaurant employees to manage social channels to reduce labor costs and recover down time. Social media is important to folks like Thomas, but it often falls low on the priority list when it comes to everything that must be done.

Benchmarking against other local restaurants: Restaurant managers are constantly looking for new ways to cut costs and could benefit from more visibility into the strategies and costs of other local operations.

Reduce the cost / friction of hiring: There is a high labor turnover rate in the restaurant industry. Creating a way for owners to hire good, affordable labor quickly and easily would provide immense value.