How much of a price increase is too much for guests? Amid record-setting inflation, it’s a question that many restaurant operators are struggling to answer. A recent study by Revenue Management Solutions may provide some insight into the tipping point. While the research focused on quick-service restaurants, it provides a starting point for assessing price across the menu in other restaurant categories – and an incentive to maximize profitability and value. QSR Magazine reported that RMS analyzed in-store price increases during the second quarter of this year over the second quarter of last year at 25,000 quick-service restaurant locations across the country. It found that net sales hit their highest point at around 13 percent. Beyond that, price increases negatively impacted traffic so much so that net sales began to decline. Further, some locations found that declines in traffic began at around the 6 percent increase mark. While this study represents one data point to consider, it reinforces the need to ensure your individually priced items maximize profitability when it comes to ingredients and labor. Where you have menu items that can easily be bundled to boost check totals, emphasize value – consumers continue to seek it out as a means of justifying food spending.
For restaurants, wasted food and packaging mean wasted money. But it’s prudent to think beyond the financial. When restaurants can find inventive ways to reduce their waste, they benefit from not only cost savings but also elevated brand loyalty. Case in point: Taco Bell recently expanded upon its existing relationship with the recycling company TerraCycle. Through the partnership, Taco Bell customers can download a prepaid shipping label and send their used hot sauce packets – from any brand – to TerraCycle. The company then cleans and melts the packets down into hard plastics that are used to make new products. For Taco Bell alone, sauce packets amount to significant waste: The brand says it goes through about eight million packets annually and it now aims to make all of its consumer-facing packaging recyclable, compostable or reusable by 2025. Restaurant Business reports that when consumers send in their used packets, they can earn points that can be donated to a nonprofit, school or charity of their choice. Much like how a consumer buying an item from Amazon can direct a portion of proceeds from the purchase to their chosen charity, Taco Bell is making it easy for customers to give back – and to also feel good about buying a meal from Taco Bell. As you look for ways to reduce your waste – whether that includes excess food, takeout packaging or something else – how can you ensure your efforts have positive effects beyond your brand? Doing so may have an even more positive impact on your brand than it would have otherwise.
In the past four decades, the U.S. has experienced six recessions – but only two of them precipitated a decline for the foodservice industry. While the industry is facing strains, a restaurant downturn is far from certain. As a recent Technomic report indicated, the foodservice industry has some built-in resilience because of the segments of the population it serves (education and healthcare, for example) and because it is designed to offer convenience and experiences – benefits that consumers will seek in both good times and bad. What’s more, consumers are not finding less expensive meals at grocery stores right now, so why not skip the at-home food prep and get a more interesting dining experience from a restaurant? Still, steady sales aren’t a given for restaurants in this environment and value will continue to be of high importance to consumers. Expect guests to scrutinize any unexpected fees on the bill. Delivered food may feel like an extravagance, so provide offers that make curb-side pickup or onsite dining convenient and appealing. Look at your menu and roster of limited-time offers and make sure you’re offering something memorable and different. Double down on your menu cost analysis so every item is profitable but doesn’t feel overpriced to the consumer.
For restaurants, the past couple of years have been a study in becoming more flexible: learning how to scale up in certain areas, scale down in others, adopt new streams of business and change service models based on the evolving lives and habits of guests. While pandemic challenges are waning, economic challenges remain: According to recent data from the National Restaurant Association, 85 percent of operators say their restaurant is less profitable now than it was in 2019. While the specific challenges facing the industry are changing, the need for flexibility is not. Restaurant brands that gave up their dining rooms a year ago in an effort to accommodate more efficient delivery may now find themselves being passed over as consumers seek out restaurants for special dine-in experiences. Dissecting your brand may help you get to the root of what your restaurant needs to offer to more easily navigate uncertain times. What qualities are at the heart of your brand? Sustainability? Comfort? Fresh, in-season ingredients? Consider how you can best serve your guests using a range of approaches and vehicles. From your website, to your dining room, to food trucks, to partnerships with convenience stores, delivery companies, e-commerce companies or other industry segments, how can you offer the experience of your food in ways that allow you to reach guests efficiently and flexibly – and regardless of the current economic obstacles that may stand in your way?
If your curbside pickup business has become an important stream of business for you in the past couple of years, you may be seeing some increased competition from not only fast-casual competitors but also convenience stores. According to research from the National Association of Convenience Stores, 38 percent of c-store operators plan to expand app-based ordering and payments, 32 percent plan to expand mobile ordering for in-store pickup, and 14 percent expect to offer more ordering options at the pump for in-store pickup. As food options available at convenience stores improve, restaurants will need to find ways to differentiate themselves – or even partner with these businesses to capture sales from customers on the go.
While ghost kitchens took off during the pandemic when dining rooms were closed, their popularity began to cool over the summer as more consumers either returned to restaurant dining rooms or reigned in their spending on delivered meals. As a result, while ghost kitchens continue to grow, they are growing at a slower rate than they were. Mott Smith, cofounder and CEO of Amped Kitchens, recently said he is fielding more calls from real estate brokers looking to sell poorly located ghost kitchens – particularly those that aren’t able to adapt to multiple sales channels. (Ghost kitchens that operate as food halls with delivery functionality have been more successful in capturing traffic.) How times have changed once again – and have again demonstrated how important it is to build flexibility into your business model. In the meantime, what will become of the ghost kitchen facilities that have accumulated in less-appealing locations? Restaurants looking to test new concepts or launch additional franchises may be able to find reasonable deals, including hourly and daily lease terms, on shared commercial kitchen space. The benefits of these spaces remain: Newer franchises can benefit from the skills and expertise of more seasoned franchises operating out of the kitchen, all while avoiding the costs and responsibility of real estate when trying to launch a new concept. While ghost kitchens themselves are evolving, they may still be able to help traditional restaurant concepts evolve.
Restaurant culture is a frequent news maker right now, and as evidenced by the popularity of the drama series The Bear, it’s a source of entertainment too. Against the backdrop of workplaces of all kinds being reinvented to suit employees, restaurants – and their reputations as high-pressure environments that can be tough on employees – are coming under increased scrutiny. Changing the industry’s reputation for the better can start with individual restaurants making decisions that support career longevity so you can retain the staff you currently have. As we approach the time of the year when seasonal illness begins to ramp up and holiday gatherings are being planned – both of which put additional strain on restaurants – give your culture a health check. Take care of your team by regularly giving them an outlet to share feedback and ask for support or help without judgment. Make sure they have time and space to rest between shifts. Review your policies for sick leave and overtime so you can anticipate challenges and make fair decisions. Train staff regularly to keep them motivated and engaged. Get to know them as people. As part of your daily conversations, ask what they’d like to learn and encourage them to set written goals to prepare them for positions of increasing responsibility in your business. Give them incentives to keep going by rewarding the stand-out performance of individuals and teams. Then make it worth their while to stay – through a bonus or other benefit for those who stay past a certain period of time.
Back in August, a survey of restaurant operators by the National Restaurant Association found that 65 percent of respondents did not have sufficient staff to meet guest demand. That means there are a lot of restaurants having to streamline tasks, adopt new technology to offset labor loss wherever possible, and make tough decisions about where employees are truly needed most in the business. If you’re struggling to do as much as possible with far fewer staff resources than would be ideal, start with that last point. Considering the people you have available to you, what is the most important function for them to serve? Talk to them about how their skills can best support the business in those places. Then get creative – or even ruthless – about making changes in other places. A recent Reuters report indicated that restaurant brands are taking such steps as introducing new equipment that can accelerate or automate aspects of cooking and cleanup, using more speed-scratch ingredients, and changing preparation procedures so that any time spent waiting for food to cook is time spent completing tasks that previously would have been handled separately at the start of a shift. Scrutinize any wasted labor at each step of a shift. When you look at the preparation of each menu item and your needs to keep your operation clean and safe, where is there room to optimize the staff resources you have on hand? Across a shift and across a restaurant chain, all of those labor efficiencies add up. You may be able to operate with less staff than you had previously thought.