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.
If you feel like the rising costs of ingredients, labor and transport give you no choice but to raise prices at your restaurant, you might take comfort in knowing that across the country, brands are following through and raising prices -- and customers (so far) aren’t blinking. As the Wall Street Journal reported recently, Chipotle, which raised prices last year, experienced a 10 percent rise in sales largely as a result of bigger orders. Mondelez and McDonald’s have been experiencing similar results after boosting prices. While talk of a recession looms, U.S. consumer confidence is still at near-record highs since the recession, according to the Conference Board. If you need to raise prices in the coming months, find ways to make consumers feel it’s worth their while to pay you a visit. Link your price increases to discounts and other promotions, particularly for your most loyal guests. As Psychology Today reports, those deals tend lead to greater overall spending – an item regularly sold at a stable, discounted price will seem more valuable and worthwhile when the price is raised and a generous coupon is offered to offset it. Be strategic about the promotions you offer. As Toast advises, for a promotion to be most successful for your business, you should take time to understand your target customers and tailor promotions to what motivates them; address the business operational challenges you face (and which your point-of-sale system – not your gut -- will best help you identify); tap into local media, which can broaden awareness and interest well beyond the time frame of your promotion; and know your margins so you can bundle items that will lead guests to try higher-margin items on your menu (i.e. offering free fries with every milkshake purchase is better than simply giving away fries).
Any chef can confirm it: Running a restaurant well can require the skills of a lawyer, doctor, designer, HR manager, mechanic, janitor, and the list goes on. And that’s on top of having to offer an appealing, in-season menu that can be readily adapted to different nutritional needs. While that ever-changing environment can bring interest and variety to each day, chances are you were drawn to the restaurant industry more because of the food than for your ability to negotiate a beneficial contract or identify the best cleaning supplies. Further, the multitasking often required in a restaurant setting can kill productivity: A University of Michigan study found that when a person attempts to accomplish more than one task at a time, productivity drops by 40 percent. Team Four’s Palette program can serve as an extra pair of hands, taking on some of the responsibilities on your plate so you can multitask less and focus more on parts of the business that suit you best. For example, Palette can help you fine-tune your brand, including redesigning your menu or updating your graphic identity on your website, signage and marketing materials. You can also access restaurant equipment, linens, office and cleaning supplies, along with services for managing waste collection and pest control. And in case your menu or inventory needs attention too, we can help you develop new recipes, identify cost-effective menu substitutions, improve your food safety record and offer negotiated contract pricing to help ensure you’re getting the products you need at the best value. You can access the full list of services included in Team Four’s Palette program at www.palettefoodservice.com.
Restaurants can be a tough investment — and when operators are beholden to investors looking for swift profits and some say in financial and operational matters, the challenges can multiply. But a handful of new investment groups, with restaurant industry veterans at the helm, are coming onto the scene and could be changing the model for restaurant investment. Ron Shaich, founder of Panera, along with his partner and fellow Panera veteran Keith Pacal, just announced a $300 million investment fund for restaurants. Skift Table reports that the fund gives “evergreen” capital and industry expertise to operators in an effort to give them additional time to build a business that has staying power. (This is opposed to traditional venture capitalists or private equity firms that invest in companies with the intention of building business quickly and selling at a profit after three to five years.) While profits matter to the fund, there is less of a rush about them — perhaps because of the industry insiders running the operation. Shaich’s goal for the fund, he says, is to give operators an alternative to having to fundraise, negotiate board disagreements or navigate Wall Street culture when they are trying to run a restaurant — all challenges for him when he ran Panera. The fund comes on the heels of Danny Meyer’s similar private investment firm, as well as the Kitchen Fund, which Eater reports has invested in such industry successes as Sweetgreen. These funds could represent an emerging new model for operators looking for financial tools and operational support with fewer strings attached.