Year Of The Opposite - Travis Stoliker's Substack Podcast

Back when I co-owned the restaurant chain Slice by Saddleback, I was looking for ways to increase the net income of the business. One of the things I became fascinated by was how sports stadiums would sell the naming rights to their stadiums as an advertisement to large businesses. Consider how many stadiums are named after companies, like the Staples Center or the DTE Energy Music Theatre. I thought, What if we could do that for a pizza?

Opening restaurants requires a lot of cash. So when we were buying Detroit Frankies to open Slice by Saddleback, I thought this would be a perfect opportunity to sell the naming rights to fund the acquisition.

How did Slice By Saddleback get MSUFCU to buy the naming rights to a pizza?

We had a very good working relationship with Michigan State University Federal Credit Union (MSUFCU). However, I had never worked with anyone in their marketing department, so I went on LinkedIn and found their marketing director, Deidre. I was able to get her email address, and I sent her a simple email that said, I have a great advertising opportunity for you. I want to sell you the naming rights to one of my pizzas.

In the email, I included some general statistics about how many people would see the advertisement, and I included the price of $10,000. She responded almost immediately, and we went back and forth a couple of times. We were able to make a deal, and I received a check for $10,000.

If you go to Slice by Saddleback even today, you will notice that the dill pickle pizza is now called the Green and White Pizza Powered by MSUFCU. Not only was this incredibly profitable for the pizza places, but it was also, by my calculations, one of the most effective marketing and advertising placements that MSUFCU had done when you look at the reach it gave them and how many people saw it.

The offer I made included renaming the pizza, displaying their logo in the menu, and listing the new name on all receipts and online ordering platforms. In addition, I guaranteed that we would use our social media platforms, which I believe had about 40,000 followers at the time, to post content that specifically mentioned The Green and White Pizza Powered by MSUFCU.

This was a great source of profit for the pizza places especially because I had the foresight to do this as an annual advertising agreement. So, the next year, the price went up to $20,000. In total, so far, the pizza places have made more than $30,000 in pure net income with no cost at all.

And not only did the restaurants get direct cash from the advertising sale which was all net income (profit), because of the partnership, MSUFCU promoted the pizza to their employees and to their 300,000 members! So they actually ended up doing advertising for us for free! They even paid to include us on a TV commercial that ran on the local broadcast of the Superbowl! In part because of this relationship. It was massively successful on all accounts.

How much profit can a restaurant make by selling the naming rights to a menu item?

Let’s break down why this is so profitable. Everyone knows that restaurants are notoriously difficult businesses and don’t have a very high profit margin in general.

How a restaurant works is that 30% of the price of the food that you sell goes directly to the food cost or ingredient cost. Another 30% or more goes into the labor for the employees to make and serve the product. And then, on average, about 30% goes into overhead. A very profitable restaurant runs at about a 10% net profit margin. And of course, that doesn’t always happen. Most restaurants I have looked at run at a net profit margin below 10%. As we all know, many restaurants don’t make any money at all, and that’s why you see so many restaurants fail.

So, if you consider that it’s only a 10% profit margin, that means that $10,000 from MSUFCU—or the $30,000 now—went directly to the bottom line, meaning it was pure profit, because there was no cost that went into it. So for the restaurant to make that $30,000 in profit, they would have had to sell a minimum of $300,000 in sales.

To give you an idea of how much money that is, as I recall, one of the Slice locations’ total sales for the entire year was about $500,000. That means that the $30,000 in advertising money from MSUFCU equated to more than half of the entire year’s sales in net profit.

Try to wrap your head around that. It means that all of the activities we did for more than half of the year—all of the staffing, all of the ordering food, all of the dealing with customer complaints, all of that time and effort—made less profit than the advertisement from MSUFCU did.

The Lesson: Why Every Restaurant Owner Should Consider Selling the Naming Rights to a Menu Item

Let’s face it—restaurants operate on razor-thin margins, making it crucial to find creative ways to generate profit. One innovative solution is selling the naming rights to a menu item. Just like stadiums and venues do, selling naming rights can create a unique advertising opportunity for local businesses, generate extra revenue, and build stronger community relationships. This approach not only brings in direct cash but also establishes long-term partnership and it enhanced brand visibility for both the restaurant and the business purchasing the naming rights.

A big lesson here is that all business owners shouldn’t chase sales just for the sake of sales. If Slice By Saddleback opened up a new restaurant location that generated a similar amount of sales, it would take between $50,000 and $100,000 minimum just to open. But that new location would only generate about $50,000 of net income per year. Whereas a simple sale of the naming rights to a menu item generated $10,000 in annual net income, for literally no work or headaches at all. I would take that everyday!

I see it all the time—owners taking on new clients, starting new projects, or lowering prices just to boost sales & revenue. I’ve made the same mistake myself. But it’s not about growing sales—it’s about growing profit. Look for easy ways to grow profit.

Sometimes it’s better to say no to unprofitable clients or avoid adding new lines of business that are more hassle than they’re worth. Focus on what’s actually making you money, stick to your core business, and prioritize profit over everything else!

If you enjoyed this, could you do me a huge favor and send it to two of your friends? That’s all I ask. Just share it with someone that you think would get value out of it. Thank you!

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