In a recent legislative update from Washington, Sean Kennedy, the National Restaurant Association’s executive vice president of public affairs, said the restaurant industry had lost 45,000 jobs at the end of August. Further, new vaccine and testing mandates at businesses with a certain threshold of employees on staff could also make already-challenging staffing conditions even more difficult. To be sure, this is not exactly the Covid-19 recovery that restaurant operators had in mind – but there are efforts underway to try and change that. Industry advocates are urging lawmakers to continue to replenish the Restaurant Revitalization Fund (RRF), though Kennedy says it appears that members of Congress don’t want to add any Covid-recovery measures to the $3.5 trillion infrastructure spending plan in process, which is focused largely on climate initiatives, paid leave, childcare, education and healthcare. Because funding the spending plan will impact businesses in the restaurant industry, however, Kennedy is urging operators to add their names to Restaurants Act, a grassroots organization for the restaurant industry that is looking to generate broad support from the restaurant industry in order to urge lawmakers to continue to fund the Restaurant Revitalization Fund. (The fund closed to new applicants in May and according to a recent announcement from the Independent Restaurant Coalition, 82 percent of independent restaurants are concerned they may close permanently if the fund is not replenished.) You can join or learn more about the effort to refill the fund at Restaurantsact.com.
As the supply chain is being impacted by factors including labor shortages, extreme weather, gaps in the availability of raw ingredients, and a spike in demand from consumers returning to foodservice outlets, businesses at every link in the supply chain are feeling the stress. At a time when some foodservice operators have been completely dropped by their distributor(s), the strength of your partnerships is paramount. At the time of this writing, the average fill-rate from manufacturers to distributors was running below 85 percent. But the service level for Premier Value 4 members is considerably higher than this average. That is due to the work our distribution partner, US Foods, is doing to rebalance inventory to provide our members with the best possible service. In recent quarterly earnings releases, US Foods and Sysco disclosed their food cost inflation rates: 8.2 percent and 10.2 percent, respectively. To keep this in context, a normal food cost inflation would be in the 2-3 percent range. Value 4 members have protection against this inflation with contracted manufacturer agreements (CMA). CMA’s give access to 350 vendors covering 105,000 products. Over the past 15 years, inflation on CMA products has been half of the inflation of non-CMA products. Our CMA contracts are firmly in place and while we will not know if that 50 percent “savings” rate is less or more until the current hyper-inflationary period has settled, we are confident that using CMA products is your best protection against inflation – and will offer extra security until we return to conditions that feel closer to normal. If you do not have these protections from your suppliers and partners, consider calling Value 4 to see if you qualify for our programs.
The pandemic has forced even well-established restaurant operators across the industry to think and act like scrappy, new entrepreneurs: flexing to new challenges, doing as much as possible with few resources, keeping overhead low, being willing to reinvent when the circumstances call for it, and even flexing work around other commitments at home. As a result, we’ve seen a rise in ghost kitchens, as well as more home-grown, chef-driven meal-delivery concepts springing up on Instagram. Much like how many employees who have spent the past year telecommuting from home are now resistant to working from an office building full-time, the restaurant industry may emerge differently from the pandemic too. Dining rooms may take time to fill and it may be even more difficult to keep people on staff than it was before. Can you find ways to take the best lessons learned in the past year and apply them in the new environment? At your foundation, minimize the resources you need, including ingredients, real estate and staff. Harness technology to monitor waste in areas as diverse as your inventory, ordering, energy use and labor. Take another look at your pre-pandemic service model and assess whether that is realistic now. Embrace multiple revenue streams and look for new ones that could help you adapt more easily to challenges going forward. Finally, think about how you can continue to act at a grassroots level to keep customers engaged with your menu and brand – from creating rotating dinner subscriptions that you promote on social media to offering meal bundles for delivery to different neighborhoods.
In recent months, consumers have ordered restaurant meals via third-party delivery companies in increasing numbers: Marketwatch reports that throughout the course of the pandemic, food-delivery apps’ business has more than doubled. Restaurants have long regarded these apps warily, weighing the benefits of being able to serve convenience-loving customers against the risks of having a delivery app’s fees dissolve their profits. Those fees aren’t likely to come down anytime soon, but what if other restaurant operating expenses can? Ghost kitchens are helping to make that possible by removing expensive overhead – like décor, prime real estate and large dining rooms – and freeing up revenue for delivery expenses. To be sure, the experience of dining in a restaurant is appealing to consumers (and something they will want to return to post-pandemic), but your food is at the core of people’s desire to order from you. Stripping your business down to its key ingredients – quality food and people who enjoy it – is about having space to prepare it and a means of connecting customers to it. That means locating a professional kitchen (minus the pricey real estate), setting up a technology platform through which people can place orders smoothly, and having a partnership with a vendor who can ensure your food arrives promptly and safely. The pandemic has made ghost kitchens a key growth engine for the restaurant industry at a time when few others exist. Businesses that already have strong brand awareness and delivery customers may find that a ghost kitchen can help them turn a more stable profit. Consider a ghost kitchen an opportunity to test a new concept for minimal investment, or to shift an existing concept to a delivery-only mode for minimal investment (especially if the kitchen is shared by multiple businesses). These kitchens aren’t likely to go away after COVID-19 is behind us – consumers have had too much time to get used to their convenience – so they may be one of many lasting changes to emerge from it. There are many ways to approach them. If you want to discuss whether a ghost kitchen could be right for your operation, contact Team Four.
At the time of this writing, the National Restaurant Association had just announced that more than 110,000 restaurants around the country – representing one in six dining establishments – had closed either long term or permanently due to the pandemic. If you’re reading this, your business has likely already developed strong survival strategies, but the winter months are likely to test them yet again as the country manages winter illness spikes and more potential lockdowns. Is your restaurant as ready as it can be? In a recent Restaurant Dive article, several attorneys from the global law firm Goodwin’s financial restructuring group offered guidance to help restaurants weather the challenges of the next few months. Specifically, they said restaurants have two critical capabilities now: their ability to identify and implement practices to enhance revenue and reduce expenses, as well as their ability to connect with stakeholders and create a mutually agreed-upon restructuring plan that maximizes the value of the business and develops a business model that is sustainable in the current environment. As part of this, restaurant operators will need to conduct a thorough analysis of their operations, including calculating all assets and liabilities, and consider potential opportunities for getting concessions from landlords and suppliers, as well as securing external sources of funding. While there are sure to be more restaurant closures ahead before this crisis is over, there will also be opportunities available. Savvy businesses that have a precise understanding of their operation, as well as contingency plans in place to provide help in various scenarios, will be in the best position to seize those opportunities.
Do you remember what your marketing plan looked like from last year at this time? Chances are if you reviewed it today, it would look pretty quaint, considering the countless ways operators have had to reinvent business this year. While the development of a vaccine has provided signs of hope for 2021, the winter season will still require operators to rethink the ways they appeal to their customers. Your breakfast and lunch menus may hold some untapped potential here. For many people this winter, dining out in the evening could be a non-starter if eating outside is their only option. At the same time, the pandemic has also changed lunch from being a quick break in the day to a welcome chance to reconnect with colleagues and get out of the house – particularly for the large swaths of people who continue to work from home. How can you rethink your winter promotions to help capitalize on those changes in our habits? Can you draw people out for a hot lunch outside or entice loyal customers with a lunch delivery subscription? Could you offer a special menu of specialty coffees, breakfast burritos or grab-and-go breakfast items a person could collect following their morning run or school drop-off? Even snack times have new potential this year. The increased numbers of people working from home – and experiencing more blurred boundaries between work and life – may result in guests being more open to picking up a late lunch or meeting a friend for a late-afternoon appetizer. How have the habits of your most loyal guests changed this year? Keep them in mind as you plan for what could be another few unpredictable months ahead.
COVID-19 is not done with us yet, as recent virus spikes and tightening local restrictions around the country have demonstrated. While everyone wants to avoid a repeat of this past spring’s restrictions, if you were suddenly faced another four- to six-week lockdown this winter, could you power through? What would your top concern be? The restaurant industry management platform Restaurant365 asked this question recently in a large survey of operators that included independent restaurants, restaurant groups, fine-dining and quick-service establishments, and full-service franchisees and franchise brands. The top concern – for nearly 26 percent of respondents – was generating enough revenue to break even. So what can you do now to fortify your operation and make sure the items you are offering are generating the largest-possible profits for you? Are there profits lurking on your menu that you could promote a bit better? Now is the time to identify which items give back to your restaurant. Sure, you might be able to tell right away that your bar menu and desserts are money-makers. Can you reinvent those items for take-away? There are likely other items that may not seem profitable on the surface but save you money because they minimize preparation time and ingredients. The app Eat says high-profit menu items that are often overlooked include, among others, low-prep dishes, nose-to-tail items, foods that minimize waste, and foods perceived as value items.
Restaurant businesses have required some radical reinvention in 2020. Everything ranging from menus to service models to hours has required some assessment and adjustment – often with little advance notice. The same may be true of your staffing plan. As we approach the winter months – and the added challenge of flu season – labor is yet another wild card restaurant operators must be able to manage. Now and in the longer term, it will help you to find way to accomplish more (e.g. orders and prep tasks) with less (e.g. workers and kitchen space). If you had to operate with a skeleton crew today, what would it look like? How many staff would you need to accept and prepare delivery orders? What technology or systems could be made more efficient? Has COVID-19 made any new staffing positions necessary or existing positions obsolete? To what extent have you cross-trained staff to help with kitchen, customer service, delivery or even back-office tasks in specific cases? Could you automate any tasks that people currently oversee? Before you need it, fine-tune your crisis management strategy with an updated staffing plan – and test it to determine where it works well and where it needs further adjustment. While this year has been full of challenges, it has also rewarded operators who have been able to pivot to new ways of working. The steps you take now can help you minimize the hurdles you may face in the months ahead.
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.