This year has demonstrated the power of managing your inventory like a pro. As operators have had to shift to offering takeout only, inventing new business models, partially opening their dining rooms, and responding to evolving consumer habits all within the space of days or weeks, they have had to ensure their inventory can keep pace. The next several months could bring even more ups and downs for restaurant businesses, so what is the best way to ensure you’ve got enough (but not too much) of the right ingredients at the right time, when you your traffic may be difficult to predict? Befriend your freezer and stock it with batches of foods ranging from soups to sauces to vegetables in an effort to extend your inventory and minimize waste. Prepare some extra portions of frozen meals that can be promoted and sold individually to guests – or offer a promotion to dine-in guests who may want to purchase extra portions of their favorite fresh dishes. Consider brining vegetables as shelf-stable (and on-trend) side dishes – and preserve fall fruits in dried form or in sauces or chutneys. If you have operated as a grocerant in recent months, keep it going. Do a detailed assessment of each item on your menu to confirm its actual cost to make sure you’re minimizing waste and maximizing profit.
Even before the pandemic, ghost kitchens were on the rise for their ability to ensure faster, less expensive food preparation and more efficient delivery to customers looking for off-premise dining options. Now, many restaurant operators are looking at ghost kitchens as a critical way forward at a time of great uncertainty for the industry. They may be on to something: Recent research from Euromonitor found that the global market for ghost kitchens could reach $1 trillion by 2030 – and in the process, capture big slices of industry segments including drive-thru sales, take-out foodservice, ready-to-eat meals, pre-packaged cooking ingredients, dine-in foodservice and packaged snacks. But when you’ve been running a traditional brick-and-mortar restaurant, what actions (and investment) are required to pivot to the ghost-kitchen model? Food distributor US Foods is aiming to give operators a hand with that transition through its newly launched US Foods Ghost Kitchens program. The company promises that for an average start-up investment below $5,000, they can help operators open a ghost kitchen concept in about three weeks and achieve an average profit margin exceeding 35 percent. The program includes market research, marketing support, a digital technology framework, menu optimization and management guidance.
Even restaurant operators with the best of intentions struggle when it comes to building and maintaining a healthy, supportive employee culture. Will COVID-19 change that? While it may seem like an impossible time for restaurants to invest in better pay and benefits for staff, some believe the current climate will create a bigger opportunity for operators who already have the building blocks of a strong team culture in place – and create yet another obstacle for those who don’t. For instance, restaurants with a strong existing employee culture have not had difficulty rehiring staff – even at a time when many workers are not seeing the benefit of coming off of unemployment. In a Forbes report, owner of the Cincinnati restaurant MashedRoots said, “I think it has become apparent that the way the industry is structured does not create healthy, stable work environments that are able to absorb disruptions and quickly adapt to changes.” As a result, he is changing the way he runs his business and develops staff. Has the pandemic brought to light any aspects of your restaurant culture that, with some adjustments, could fortify your business to survive challenges in the long term?
Just like an investor diversifying a portfolio to protect against risk, restaurant operators would be wise to identify inventive new revenue streams right now – particularly those that have potential to generate sales and loyalty if business from more traditional channels lags in the months ahead. In addition to the obvious benefit of sustaining business, new revenue streams are also an opportunity to reinforce your brand values and, in turn, build loyalty. Chipotle, for one, recently announced it is launching a Chipotle Goods line, which includes not just the usual branded t-shirts but also leggings, baby clothes, jackets, cell phone cases, water bottles, socks, tote bags and even luggage, Nation’s Restaurant News reports. As part of this effort, Chipotle is upcycling 300 million avocado pits it uses each year to create a plant-based dye that is used in some of the products – then donating proceeds to organizations that make fashion or farming more sustainable. When you consider your restaurant’s values, what are you hoping your guests take away from their experience with you? If you take a step back, can you identify how your most loyal guests might be interested in supporting new branches of your business – simply because they make it possible to experience the best of your brand?
As COVID-19 spikes threaten to force restaurants into a cycle of loosening and tightening restrictions, loyalty programs may provide some much-needed stability. In a recent interview with The Spoon, the president and cofounder of Paytronix said during the worst of the downturn, one customer – who was representative of what the company observed with others – saw sales from non-loyalty members drop 75 percent, while sales from loyalty members fell just 20 percent (and their spending was not significantly lower than pre-COVID levels). It’s likely, for this reason, that major brands including Starbucks, Wendy’s and Taco Bell have been either introducing or upgrading their loyalty programs recently – adding new benefits and offering more convenient app-based payment methods. What can your restaurant do to entice customers to become more loyal to your brand?
Consumers are willing to pay a subscription fee for everything from podcasts to vitamins to tech gadgets these days. So why not their favorite restaurant? According to research from the Global Banking and Finance Review, 70 percent of business leaders say subscription-based business models will be central to their future prospects – and yet for many businesses across different industries, subscriptions remain an area of untapped potential. When it comes to restaurants, subscriptions for drinks, food and really anything consumers crave may an emerging way for foodservice businesses to monitor loyalty to their brand and build in some longer-term sales security through recurring revenue. Grub Street reports that Panera, for example, which launched a monthly coffee subscription service for $8.99 last winter, is now considering other ideas including a lunch subscription service focused on kids who are learning from home this fall. It’s easy to see why: A parent who has paid for their child’s lunch subscription is more likely to make a point of coming to Panera for lunch – and perhaps ordering a meal of their own. If you have been offering meal kits or dessert boxes or family-style dinner bundles during lockdown, these items could easily convert to subscription-based services that not only give you some advance warning to source the items you need in your inventory, but also help you secure some recurring revenue for the uncertain months ahead.
As restaurants have struggled to accommodate the need for meal delivery during the pandemic, a number of cities have stepped up to limit the steep fees third-party delivery providers can charge. Restaurant Business reported in late July that Philadelphia – which had just joined the effort alongside cities including New York, Los Angeles, San Francisco, Oakland, Portland, Ore., and Washington, D.C. – would immediately cap total fees on delivery orders at 15 percent. The report said delivery commissions could not exceed 10 percent of the order total, and separate nondelivery fees could not surpass 5 percent – until 90 days after the end of the current public health emergency. As for what happens in other cities, and, for that matter, across the country after the threat of this pandemic passes, restaurants need to dissect their data and understand their customer base so they can negotiate the best terms of third-party contracts. Even with the major providers, there is room for small restaurant brands to bargain – particularly as provider consolidation remains likely. This Fast Casual report (https://bit.ly/33vocmi) provides some tips about the best ways to secure a fair deal with third-party companies – including what you should know about your profits, customer habits and existing ordering channels to get the best leverage when negotiating an agreement. If you think in-house delivery might work for your restaurant with a little guidance, you can also check out the Native Delivery Best Practices Work Group, an effort launched by the Restaurant Technology Network.