So much can feel out of control right now with regard to the supplies you need to run your business. One supply (among many) that has been climbing in price and scarcity in recent months is natural gas. In September, CNBC reported that prices had climbed 99 percent higher on a year-to-date basis due to escalating demand and concerns around supply. But unlike the many other items in short supply right now, natural gas consumption is something you can take active steps to reduce in your business without a significant downside. If you experience an especially cold winter or simply broad fluctuations in the traffic coming to you, being more efficient with your natural gas usage in cooking, washing and heating could generate significant savings. The Rail suggests that when cooking, aim to avoid overusing appliances – so limit the time you spend preheating, avoid using a larger oven when a smaller one will do, precook foods in a steamer prior to frying, limit use of the range top and schedule your cooking to ensure you are making most efficient use of ovens and cooktops. When washing, wait to use your dishwasher until it is full, turn off water heaters when the restaurant is closed, and ensure that water tanks and pipes are well insulated. When heating, use smart thermostats and set them to align with the business schedule and occupancy. Finally, keeping appliances maintained, clean, and free of buildup – whether grease, limescale or dust – can help ensure you’re not overusing energy.
Amid supply shortages, rising food prices and wages, and inflation increasing at the highest rate since 1982, restaurant operators have had no choice but to pass some of their costs on to customers. Accordingly, menu price inflation hit a 39-year high in November. Data from the U.S. Bureau of Labor Statistics indicated that prices for limited-service restaurants, which have been hit especially hard by labor shortfalls, have increased nearly 8 percent in the past year, while prices for full-service restaurants have increased 6 percent. While the environment continues to pose challenges to restaurants, there are steps operators can take to strengthen their position. In the back of the house, it’s more important than ever to have a keen grasp of menu costs and to use forecasting tools for inventory and sales in order to minimize waste and find suitable substitutes for ingredients that aren’t available. In the front of the house, it’s crucial to show customers that you provide an experience worth paying for – and one that many of them continue to crave as the pandemic keeps people at home. Consider how to make your offerings special – by elevating the dining experience in-house and developing creative menus that guests wouldn’t prepare for themselves at home. Finally, while you don’t necessarily want to draw guests’ attention to price increases, you can share the efforts you are making to contain costs and source quality ingredients. After all, consumers are paying more at the grocery store now too – so a higher bill at their favorite restaurant shouldn’t come as a shock.
As Covid-weary diners flock to dining rooms and short-staffed restaurants struggle to meet the demand, some operators are shutting off less profitable streams of service (like delivery) during periods when they couldn’t otherwise manage all of them at once. The Wall Street Journal reported recently that Applebee’s, Olive Garden and IHOP were among the restaurants choosing to shut off online orders at specific times. This capability, if you don’t have it already, is one to consider implementing this year as part of your tech toolbox. Going forward, there may well be times when you need to scale up and scale down order streams at the flip of a switch. Being able to handle those transitions smoothly – and also marrying those actions with corresponding offers designed to attract guests to your other service areas – can help ensure a steadier flow of business.
At the time of this writing, retail vacancy rates were forecast to rise to 19.2 percent for the end of 2021, surpassing the previous high of 17.6 percent in 2010, according to Moody’s Analytics. But what sounds like bad news for the state of the industry could actually be good news for restaurant operators looking to negotiate and renegotiate contracts with landlords. Landlords want to keep their good tenants operating, and according to Amy Eskola, a partner with the law firm Messner Reeves who specializes in real estate transactions and contract negotiation, there is a lot of opportunity for operators to secure more beneficial terms right now. During a recent podcast interview with Elliot Maras of Kiosk Marketplace, Eskola said operators are (often successfully) seeking to adjust their contract terms in a wide variety of ways right now, including rent adjustment, abatement or deferment; basing rent on a percentage of sales, and for new locations, negotiating longer buildout periods, arranging to have rent commence at the time of permitting or opening, or securing a lower rent for the first year of operation. Anything is possible if you can present a solid, thoughtful case for it. Before approaching your landlord, conduct some market research so you have a clear sense of what terms similar businesses in your area are getting. If you’re seeking an agreement that hinges on your sales, also ensure you can present clear and organized financial statements that demonstrate your plans to manage expenses and build the business over the long term.
Two years into the pandemic, many people working or investing in the restaurant industry are still (understandably) operating in defense mode – cutting back on expenses, trying to anticipate the next challenge and otherwise playing it safe until somewhat more normal conditions return, whenever that may be. But for others, it is prime time to take risks. For instance, Fortune recently reported that since the start of the pandemic, Mercado Partners' Savory Fund has doubled down on restaurant investments. It raised two separate funds of $100 million each, aggressively invested in seven new restaurant brands and opened 55 new restaurants. On a smaller scale, forward-thinking operators are also finding opportunities for reinvention right now (and at a lower-risk entry point than might exist when the restaurant industry is flying high). QSR Magazine reports that when the restaurant Otto’s Tacos was concerned about having to close, neighboring restaurant Mighty Quinn’s Barbecue, which had a similar inventory, equipment, commitment to quality and footprint in New York City, saw an opportunity to grow both businesses. Otto’s Tacos has survived as a virtual brand run out of Mighty Quinn’s kitchen facility. While the pandemic continues to throw curveballs at restaurant operators, it is also revealing opportunities for positive and profitable change – if you know where to look.
For many consumers, it can feel like life is returning to pre-pandemic times, complete with in-restaurant meals and holiday gatherings. But as we begin another winter with Covid hovering in the background, restaurant operators are still having to develop strategies for keeping business humming during uncertain times. Beyond efforts to make outdoor dining a comfortable reality, indoor dining well-ventilated, and off-premise sales seamless, the industry has also been pushing Congress to replenish the Restaurant Revitalization Fund. The effort has reached a critical point and the Independent Restaurant Coalition is urging operators to make noise in Congress right now by contacting representatives and encouraging restaurant patrons to get on board too. If you want to get involved but aren’t sure where to start, the coalition has developed some resources to help, including an outreach guide, which includes background about the fund and sample scripts that can be used as the basis for emails, calls and social media posts, as well as state-specific resources. If your loyal guests are willing to help you in the effort, here is a flyer you can share with them – it includes some information about the fund and how they can help spread the word on your behalf.
At this time last year, it would have been unthinkable: During the first three quarters of 2021, sales for DoorDash and Uber Eats have plateaued, after a steady rise in 2000. To be sure, off-premise solutions are still needed and not going anywhere – particularly after the lockdowns made restaurant takeout and delivery the only means of getting restaurant food. But even as consumers have been enjoying a gradual return to in-restaurant dining this year, the stagnation in sales for third-party delivery providers does demonstrate the need for restaurant operators to be nimble in response to fluctuating demand from different sources. When you are faced with changing conditions – be it the weather, supply hiccups, foot traffic outside your storefront or something else – how quickly can you adapt? Lean on forecasting tools and information on historic sales to schedule staff and predict traffic, along with a Kitchen Display System that can help you streamline and prioritize orders from different streams. On the lower-tech side, consider approaches including cross-training staff in a range of tasks and using more speed-scratch ingredients in the kitchen in order to free up staff to take on different tasks as demand requires.
Times of challenge create opportunity – and while the pandemic has presented plenty of hurdles for restaurant operators, it is also revealing new possibilities for those with the resources and flexibility to snap them up. Case in point: A number of large restaurant brands are planning aggressive franchise expansion right now. According to a recent Restaurant Dive report, lower taxes, milder weather and more relaxed Covid restrictions have made the South and Southeast U.S. attractive targets for restaurant expansion lately. Shake Shack, for one, announced that it will be adding up to 50 new locations in 2022 – its largest expansion to date. Even for independents and smaller chain restaurants, there are opportunities. As restaurants have closed during the difficult months of the pandemic, some are leaving behind real estate pre-configured for drive-through business, along with heavy-duty equipment that may be available at a reduced cost. With an excess of restaurant real estate on the market, look for more preferable terms from landlords as well – particularly in higher-end locations that may have been out of reach pre-pandemic. Finally, if you’re open to less conventional arrangements, consider other restaurants or even complementary businesses that may want to join forces via sub-leasing arrangements or other partnerships that can help you both bring business in the door.
Your off-premise business no doubt looks a lot different than it did just a couple of years ago. According to research from NPD Group, off-premise restaurant orders were up 20 percent in September compared to where they were in 2019. But what happens when you’re not only struggling to source key ingredients but also the cups and containers you need to enable your food to get out the door? Ongoing global supply chain challenges have resulted in increased costs and scarcity of these items, with key suppliers having to limit the number of cases restaurant customers can purchase from them. Some major brands are finding alternatives that have fringe benefits. Sara Burnett, who leads sustainability efforts for Panera Bread, told CNBC that the brand had switched to a compostable thermal wrap for their sandwiches – and it happens to use 60 percent less material, is easier to transport and has a smaller carbon footprint. But as the pandemic ebbs, there may be less consumer concern about the need for single-use items – and perhaps an opportunity for restaurant brands to revive the pre-pandemic programs they had in place for reusable containers. As Nation’s Restaurant News reported recently, Tupperware has created reusable packaging for Tim Hortons as part of the brands’ partnership with the zero-waste platform Loop.
Even before the pandemic, the shift from on-premise to off-premise dining was happening. But the pandemic truly accelerated it, and even as people return to restaurant dining rooms now, there is still a way to go before things look the way they did a couple of years ago. To be sure, the trend is especially stark for full-service restaurants – new data from FSR Magazine indicates that in September of 2019, 80 percent of traffic at full-service restaurants was on-premise (compared to 20 percent for carryout), whereas the mix in September of 2021 was 56 percent on-premise, 44 percent carryout. Still, across restaurant categories, an operator needs to make a clear-eyed assessment of their business model in light of current market conditions, then take steps to protect the business for the long term. That means expanding, not limiting, opportunities to serve guests – and resisting the urge to revert back to how you were operating pre-pandemic. Consider new opportunities for catering, particularly as businesses are looking for ways to maintain connections between hybrid workers and clients. Keep communication open with neighboring restaurants and complementary businesses that may be able to pool resources, share staff, or collaborate with you on promotions. Think about how to make it easier and faster for your food to reach guests who want to eat it off-premise, whether that means assessing third-party delivery providers to find the best-possible arrangement, starting an in-house delivery service or using a ghost kitchen.