The concept of anchoring: why so many entrepreneurs open burger, sushi and coffee shops

It is often believed that entrepreneurs copy trends due to a lack of imagination. In reality, they often make an economically rational decision.

Conversely, those who innovate have a completely different mindset, which is actually more related to their psychological profile than to a simple entrepreneurial strategy.

Depending on which side you choose, you will find yourself in two completely different strategies. But before that, I suggest we define together what the concept of anchoring is.

This article concerns the restaurant industry, but the concepts can be extended to other sectors of activity.

What is an anchoring concept?

An anchoring concept is a category of products or food service that is immediately identifiable by the consumer:

• Burger
• Sushi
• Pizza
• Ramen
• Poké
• Bubble tea
• Matcha
• Coffee shop

The customer doesn't need to think. In a few seconds, they understand what is being offered, imagine the taste, estimate the price, visualize the type of meal and know if it appeals to them.

In other words, the concept already does part of the commercial work.

Many people simplify the market into "franchise" and "non-franchise". However, between the two, there is precisely the concept of anchoring which interferes: does my product already belong to an existing market, whether it is franchised or not?

Examples:

• The matcha latte with oat milk belongs to the recently emerged "coffee shop" anchoring concept, and it can also be linked to famous franchises.
• The word "chicken" belongs to the "chicken" anchoring concept that has recently emerged (Tasty Crousty, Master Chicken, etc.). But be careful: KFC wasn't part of the "chicken" anchoring concept; it was linked to the "US fast food" anchoring concept. And understanding this distinction is crucial for identifying your target audience.
• Finally, my Libshop brand, for example, belongs, whether it likes it or not, to the "Lebanese" brand concept, although it is finding it increasingly difficult to connect with a new, emerging brand concept: fast Mediterranean cuisine, which originated in America. This kind of transition is extremely critical for a brand.

A franchise without the franchise

When an entrepreneur opens an independent burger restaurant, they benefit from the brand recognition of McDonald's or Burger King. But they also benefit from the brand recognition… of the burger itself:

• The consumer already knows the codes.
• He knows how to eat it.
• He knows the approximate price, depending on whether it's a low-cost or premium offer.
• He imagines the side dishes.
• He knows how long the meal will last.
• He has virtually no mental effort to make.

The concept acts as a cognitive shortcut. And this is also true for "ramen," without the need for a franchised ramen chain to exist: the simple association with ramen is sufficient in itself, because independent businesses have established ramen in pop culture.

The hidden cost of innovation

In contrast to anchoring concepts, there is the case where the entrepreneur invents a completely new concept, or at least a hybrid one (modern Lebanese, omelet sandwich, or even the premium coffee shop several years ago…): he must then first explain what he is selling:

• Why this product exists.
• How it is eaten.
• What time of day?.
• At what price?.
• Why it's better than anything else.

All of this represents a huge cost: not just in advertising, but also in education. Every minute spent explaining the concept is a minute not used for sales. Even worse, you can't imagine the lack of imagination among consumers, and the number of people who can spend years staring at a concept without ever showing any interest, until it's evangelized. Or those who do take the plunge and end up extremely disappointed.

Innovation is therefore often more expensive than one might imagine.

Why some trends explode

When an anchoring concept becomes popular, it quickly attracts a multitude of independent businesses. This is the effect of imitation, or the herd mentality.

We saw it with:

• gourmet burgers; ;
• poke bowls; ;
• bubble teas; ;
• giant cookies; ;
• matcha bars; ;
• Smash burgers.

The reason is simple: the market is already educated, customers spontaneously search for these products, search engines list them, social networks spread them, and word-of-mouth works naturally.

The entrepreneur now only needs to convince others that he is doing better than his competitors. He no longer needs to convince them that the concept deserves to exist.

For the pioneers, it's a devastating blow, because the new entrants are not enthusiasts, but rather optimizers (I'll come back to that). Supply multiplies, sometimes exceeding demand, and it becomes "barbaric".

The trap of the fad effect

When you decide to launch a brand based on an anchoring concept, you have the advantage of tapping into an educated market. However, an anchoring concept also has its downside: because it is easy to replicate, it attracts a lot of competitors, as we just saw.

The market is quickly becoming saturated, a price war is raging, margins are shrinking, and differentiation is becoming difficult. Even worse: consumers may even penalize those who differentiate themselves, because they are looking for the very essence of Japanese culture and nothing else (for example, the "real" Japanese person who doesn't want to make sushi).

Hangover

When the tide goes out, you can see those who were swimming without swimsuits. And once the euphoria has subsided, there are the amateurs who were working at a loss, the vultures who were looking for a "cash cow" concept without much effort, and the over-optimizers fresh out of business school.

The problem is that in the meantime, for those who put their heart into it, it is often impossible to hold out against tough competitors who either did not know the market and saturated it unnecessarily, or knew it too well from a financial point of view (business schools), in addition to having the network to raise debt.

Some pioneering entrepreneurs have nevertheless managed to make the leap, transitioning from pioneers to rationalizers. They are rare, but when it happens, they can be considered true tough guys!

Two rooms, two atmospheres

So you understand that I'm separating the concepts of anchoring on the one hand, and the concepts of innovation on the other. There are, of course, shades of gray, but I'm simplifying things as much as possible here.

These two approaches are not playing the same economic game at all.

The anchoring strategy: connecting to what already exists

The anchoring concept consists of optimizing an existing market (even if it means innovating a little, iterating, differentiating oneself).

Choose an anchoring concept, It means accepting that you don't have to reinvent the wheel.

But above all, it's about making a choice of economic rationalization. You don't buy a market, you tap into it:

• The customer is already here.
• The demand already exists.
• The codes are already established.
• The comparison is immediate.

In this model, the strategy is simple:

• Reduce mental friction; ;
• Reduce customer acquisition costs; ;
• Accelerate understanding of the offer; ;
• Maximize the input volume.

In other words, you are optimizing a machine that already exists.

Your role is not to explain why your product exists, but to convince others that you execute it better than them.

Marketing is becoming comparative, almost industrial.

And performance relies primarily on:

• the location; ;
• execution; ;
• regularity; ;
• the operational; ;
• cost control.

The innovation strategy: creating a market where none exists.

Conversely, innovation consists of creating a category. This means that the market doesn't yet exist in the consumer's mind. Therefore, you're not just selling a product. You're selling a... understanding of the product.

Therefore, you must:

• explain ;
• to reassure ;
• to educate; ;
• to convince that the need exists.

It's a market evangelization strategy, and believe me, it's one of the most difficult there is.

Because before you can generate revenue, you need to generate understanding. However, while you're trying to make yourself visible (because as a non-existent concept, you're invisible), the expenses keep piling up.

So you are financing a dual activity:

• the production of your offer; ;
• AND the creation of demand.

That's why the costs are often underestimated.

But if this phase succeeds, the advantage is considerable:

• you become a reference; ;
• you set the rules of the game; ;
• you create your own standards; ;
• you capture a higher margin; ;
• You have a time advantage (first mover).

Unfortunately, when pioneers do the evangelistic work and it's successful, imitators often end up destroying them. And that's where, as a pioneer, you need to develop a whole post-evangelistic strategy and expend an immeasurable amount of energy (as a pioneer, you have far less than newcomers) to stay relevant. I could write an entire article on that if you'd like.

The real economic arbitration

From an economic point of view, it could be summarized as follows:

• The anchoring concept reduces the cost of market entry: it is relatively less difficult to copy than to create processes and an offering.
• Innovation increases the cost of creating a market: it is very expensive to create a market and demand, and often it is passion and grit that guide the pioneer (often at the expense of his health and personal life).

In one case, you play a pre-defined game. In the other, you write the rules as you play, which leads us to two different types of entrepreneurs.

Entrepreneur profiles

It then becomes clear that these two strategies correspond not only to business models, but also to profiles of business leaders.

The "optimizer" profiles«

Operators and optimizers naturally gravitate towards anchoring concepts. They are penny-pinchers who know how to copy, duplicate, and imitate, and who quickly learn the rules of corporate finance. I'm not talking here about the "tourists" looking for an easy anchoring concept without putting in the work (whom I mentioned at the beginning of this article), but rather the "pros" of entrepreneurship.

They seek transparent markets, replicable models, rapid cash flows, and marginal optimizations. They know how to read financial statements, negotiate with bankers, raise debt, and have the "codes".

Pioneer profiles

The builders, on the other hand, are attracted to innovation.

They accept uncertainty, long cycles, continuous learning, and sometimes have a "dreamer" profile, which can be their downfall. if they do not train in finance and management.

These are not the same mental processes.

Conclusion

Ultimately, there is no right or wrong choice.

There are only arbitrations adapted to:

• your entrepreneurial profile; ;
• your resources; ;
• your risk tolerance; ;
• your time horizon; ;
• your ability to perform under uncertainty.

Ultimately, entrepreneurs are not distinguished solely by what they build.

But by the way they choose to enter the consumer's mind:
by using an existing door, or by building a new one…