As if it wasn’t important to know your true food costs before the pandemic, it’s all the more crucial now as many restaurants around the country are having to operate at a reduced capacity, rethink their menus and determine where to best allocate diminished resources. By getting an accurate handle on your waste, over-portioning, theft and even the shrinkage of ingredients, you can see what menu items are really costing you – then adjust your promotions so you encourage guests to select your highest-margin items. A recent webcast from Restaurant365 reinforced the power of tracking actual vs. theoretical food costs as a means of accomplishing this. Theoretical food costs are what your food costs should be based on the cost of your ingredients, while actual food costs are what your restaurant actually spent. There will be variance in those numbers, but getting a more precise understanding of where it comes from can help you minimize it. While there are a number of places to focus to help cut waste, it can be most helpful to analyze your individual ingredients and identify those with the greatest cost variance. Drilling down like this can help you zero in on what needs attention or adjustment, whether it’s your portion control of a certain dish, the prices you are getting from a supplier, or the need for a substitute dish on the menu.
If you currently lease your space, you have likely had some interesting conversations – hopefully productive ones – with your landlord in recent weeks. While restaurant operators may be struggling to pay rent, it’s not like there is a long list of businesses waiting to take your place if you were to vacate. Use any good will you have accumulated to negotiate more beneficial terms to your lease. Even the big guys are testing their leverage: Restaurant Business reported recently that Starbucks has asked its landlords for a year’s worth of rent breaks due to the pandemic – and The Cheesecake Factory claimed it wouldn’t be paying rent in April at all. Of course, landlords have their own bills to pay, so if you’re struggling to pay rent, acknowledge your shared challenges. Can you get your rent reduced for a few months initially and then deferred over the course of your lease if you continue to pay taxes, maintenance and utility costs, for example? Can you pay rent on a sliding scale based on your revenue in the coming months – and provide proof of your efforts to keep business flowing? If you are getting support through the Paycheck Protection Program, how can you factor that into your negotiation? Refusing to pay rent likely won’t help your case, but if you can have a discussion about what fixed costs need to be met, you may be able to come to an agreement that’s preferable to the one you started with. What’s more, you may buy yourself a bit more time to adapt your business to current challenges and keep business coming in.
If you spent years paying business interruption insurance premiums in case your ability to conduct business was ever compromised, you have likely been unpleasantly surprised to find that your policy does not cover pandemics – even, perhaps, when there is no language in your policy excluding them. Now, a number of world-renowned chefs are fighting for that protection. Thomas Keller, Wolfgang Puck, Daniel Boulud, Jean-Georges Vongerichten and many others recently teamed up with the attorney and insurance specialist John Houghtaling to file the country’s first court action to recoup losses from insurers, according to a report from Keller on NBC. They formed the non-profit Business Interruption Group (BIG) (https://werbig.org/) in an effort to help restaurant businesses, large and small, collect insurance claims on the losses they believed would be covered by their business interruption policies. (Foodable conducted this interview with Houghtaling about how restaurant operators can understand their insurance cover and navigate denied claims.) (https://www.youtube.com/watch?v=RkdA9bxoNkg&feature=emb_title&utm_source=Foodable+Report+Downloads&utm_campaign=48c90208c4-Foodable_On_Demand_19_015_copy_02_7_29_2019_9_46_C&utm_medium=email&utm_term=0_402dfc13cf-48c90208c4-78342785&ct=t%28Foodable_On_Demand_19_015_Wed_9_4_19_9_3_2019_COPY%29 ) BIG has already gotten the attention of the White House, with President Trump urging insurers during a recent press briefing to pay business interruption claims if pandemics are not specifically excluded. (Follow BIG’s progress here.) (https://twitter.com/werbigorg) Meanwhile, the White House has invited number of the founding members of BIG to participate in one of 17 Great American Economic Revival Industry Groups intended to kick-start the foodservice sector.
The restaurant industry is a community – and those community connections are providing a lifeline for businesses that need support right now. Beyond government stimulus programs, there are new resources coming about on an almost daily basis in an effort to help restaurants manage through the volatility of these months. One new resource to look to for information and basic moral support is the Coronavirus Facebook group, Coronavirus in the Food and Beverage Industry, for people working in the foodservice industry. The food and beverage market intelligence company Winsight formed the group, which had nearly 4,000 members as of this writing. At a time when it can be hard to keep track of quickly changing news and the formation of new groups aiming to provide industry support, the group is a good one-stop shop for information about topics ranging from COVID-19 news, to restaurant technology, to sources of aid for foodservice businesses. Recent posts included information on new restaurant relief funds, sources of interim employment and discussion on how businesses can maximize the Paycheck Protection Program in the Coronavirus Aid, Relief and Economic Security (CARES) Act.
While the news headlines may be gloomy, don’t lose hope – there actually are foodservice operators who are managing to make lemonade from a whole lot of lemons right now. The ones forging a way through these stressful times are getting creative: Wingstop, which is experiencing an uptick in sales right now, is tapping into an oversupply of chicken and offering a free delivery promotion that is driving sales. Farmers Restaurant Group has shifted to a bodega concept that sells meal kits customers can schedule for pickup using OpenTable. Another operation that has nimbly shifted its approach is Front Burner Restaurants, which operates eight restaurant brands in six cities in the southern U.S. At the start of the pandemic, Front Burner had to furlough 4,000 employees, but it quickly shifted gears to create Furlough Kitchen, a non-profit concept that offers one free meal kit a day from its restaurants to hospitality workers who have been furloughed as a result of COVID-19. Through the support of community donations and anticipated federal stimulus funding, the company rehired employees working in its catering operation, as well as some of its hourly employees who take orders, post on social media and carry food out to customers for curbside pickup. Regular customers, suppliers, vendors and others in the community have been generous with donations and other support, and tips are collected into a pool that is distributed on the pay cards of furloughed employees. Furlough Kitchens currently has two locations and expects to open five additional locations from its existing restaurants soon. In a recent Restaurant Business podcast, Front Burner CEO Randy Dewitt said they are currently funded through the next 60 to 90 days. He thinks that finding a way to keep his restaurants open – even if they’re not profiting right now – should help with their eventual recovery. The community goodwill he is building in the meantime won’t hurt.
On March 26, President Trump signed the CARES Act stimulus legislation into law. The law provides support for restaurant and foodservice owners and workers in the form of payroll incentives, employee benefits, emergency grants and tax relief. (The National Restaurant Association provided a summary of the CARES Act’s benefits to the industry. https://restaurant.org/Articles/News/CARES-Act-provisions-whats-in-it-for-restaurants ) But will the benefits go far enough? Chef Tom Colicchio says no – particularly in the case of independent restaurants. Colicchio is founder of Crafted Hospitality and a visible member of the Independent Restaurant Coalition (IRC), a newly formed group that is aiming to help save local restaurants impacted by COVID-19. The CARES Act’s Paycheck Protection Program, a key part of the new law, lets owners of restaurants with fewer than 500 employees apply for a loan of up to $10 million or two and a half months of payroll, whichever is less – and Colicchio said in an interview with Forbes that he thinks it is unlikely the industry will be back on track in that time frame. He is now working with the IRC to advocate for a six-month income replacement program worth $440 billion. Restaurants of any size could benefit on the condition that they continue to fully employ all restaurant staff, as well as pay rent and suppliers to keep money moving through the supply chain. The coalition is aiming to build a strong, united voice that can address lawmakers about what support the restaurant industry needs right now. In addition to providing daily legislative updates, it provides people on its mailing list with a social media toolkit, calls to action that can help operators mobilize their communities and networks, and key messages to use when speaking to the media to help get the word out about what independent restaurants need right now.
For many restaurant operators around the U.S., recent weeks have been a stressful blur of trying to keep business open, keeping themselves and their staff safe and healthy, and easing the fears of customers who have been receiving mixed messages about whether or not they should visit restaurants. It’s a time when restaurants need support in many forms – and an important time to lean on your network, at both national and local levels. Consider supporting the National Restaurant Association’s efforts, as well as grassroots efforts underway through Change.org to urge Congress to pass a plan that helps restaurants recover. Food + Tech Connect is assembling a growing list of resources that restaurants can turn to, and Food & Wine has assembled resources too. Also look within your community and join forces with other foodservice organizations to collectively benefit from scale. For example, the Restaurant Response Program in New York is bringing together 30 restaurants in the city, giving them a sum of $40,000 to use their existing food supply and operate as a pick-up/delivery-only food distribution center for a short term. In San Francisco, Instagram cofounder Mike Krieger launched SaveOurFaves, a directory of local restaurants selling gift certificates to help them offset lost income due to COVID-19. In other cities, restaurant operators are forming online groups where they can share each other’s business needs and collaboratively approach the community and legislators for support from a single point of contact. At Team Four/Value Four, we have created a working group to develop customer-centric strategies and services to help your business recover and build sales momentum. We are committed to helping our customers weather the current challenges and continue to support you as life begins to return to normal – and it will.
If you serve avocado on your menu, you’re well aware of the rollercoaster ride it has been taking lately with regard to supply and demand. According to a USA Today report, the price of avocados in early July had skyrocketed 129 percent since the same period during the previous year. While restaurants are making adjustments such as diversifying suppliers, raising prices and finding substitutes for the beloved avocado where possible, these are steps that should be taken not just when one key ingredient is in short supply but across the spectrum of a restaurant’s inventory year round. When you monitor your inventory more closely – even in times of plenty – you can more easily ride out times of scarcity. MarketMan suggests you take such steps as tracking food costs throughout the year so you’re more able to spot seasonal fluctuations in price, as well as what you have paid historically. (Team Four can help you with this.) Where possible, fill your menu with seasonal produce to minimize costs – it will also encourage guests to visit you while a favorite item is still available or when a new one is about to be featured on the menu. Partner with your chef to make sure he or she is able to use what’s in season and can minimize costly extras. When it comes to suppliers, try to lock in prices for the long term and don’t hesitate to shop around for better deals when it’s time to renew your contracts. Look around for deals online, particularly for non-perishable items that can be purchased in bulk. Monitor your spending regularly using software with purchasing and ordering management features that can help you stay on top of price fluctuations.
At a time when restaurant finances are getting squeezed from many directions, do you know which budgetary battles are most important to fight? In other words, when you’re managing such expenses as labor, ingredients, rent and third-party delivery, does your balance sheet give you clear answers about how much each of those expenses is impacting your bottom line? It needs to, since your gut instinct may not be correct. Case in point: The results of a recent study by New School Center for New York City Affairs and the National Employment Law Project found that restaurants in New York City were more negatively impacted by rising occupancy costs and the fees charged by third-party delivery services than they were adversely affected by the near-doubling of the minimum wage paid to hourly employees in the past five years, Restaurant Business Online reports. The Fight for $15 wage battles of recent years had many operators concerned they would need to boost menu prices beyond what guests were willing to pay – and minimum wage escalation isn’t an insignificant expense for operators to be sure. But while New York isn’t like every market, the rising minimum wage in the city has had a smaller-than-expected impact in a diversity of regions, whether in Manhattan, Queens, Brooklyn or the Bronx. As the minimum wage has been ascending in geographical regions across the country for years, you may be able to protect your bottom line by focusing on negotiating more favorable terms with a third-party delivery company, adjusting your business model so you can occupy a smaller or different footprint, or getting a stronger handle on hidden back-of-house costs.
Across the restaurant industry right now, profits range from 0 to 15 percent, according to Toast, and profits between 3 and 5 percent are most common. That doesn’t leave much wiggle room for making errors or adapting to industry changes such as the rising demand for off-premise dining. Operators have to be continuously creative when it comes to finding and mining sources of revenue, whether from new products, services or partnerships. (Note the current fervor around restaurant brands partnering with Beyond Meat, with Subway and Hardee’s being just two of the latest companies to tap into the meat substitute’s popularity.) Restaurant Nuts suggests operators consider options such as joint ventures – for example, partnerships with grocery stores to sell your products can help you promote a special offering while lowering your sales and marketing expenses. Or, as All Food Business suggests, you can partner with a corporation to offer expense accounts, business dinners, client programs or events that can generate income. You can align with a business or charity whose mission complements yours if it helps you to expand your audience, offer a special event you wouldn’t be able to offer on your own, or tap into resources (such as technology or delivery capabilities) that benefit both parties. Within your business, building out a catering menu can help you make the most of your food costs (and minimize waste) while serving lucrative off-premise and corporate customers. Depending on your business, there may also be opportunity to offer retail products like clothing or take-home versions of signature sauces that your restaurant is known for.
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