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.
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?
Longtime restaurant workers learn a wide range of hard and soft skills that can apply widely within the foodservice industry and outside of it – from team leadership to supply chain oversight to customer care. A new AI-based service called Talent Exchange is helping workers impacted by COVID-19 to quickly find jobs that align with their skillset. Backed by McKinsey & Company, the company counts Starbucks, Mondelez International and Pizza Hut among its participating companies. It may be worth considering if you’re an operator helping a longtime team member find a temporary job or if you’re scaling your staff back up. Restaurant Business reports that companies can upload a list of information about their furloughed or laid-off employees, then AI can suggest candidates to hiring businesses based on how well they are likely to match a role. Managers can also keep track of where furloughed employees landed so they can reconnect with them down the line.
Your business likely looks a lot different than it did at the start of the year. Does your insurance? Your coverage may need to adjust to the current environment – and you may be able to negotiate more beneficial terms and payment options. QSR Magazine suggests contacting your advisor to discuss the possibility of a pay-as-you-go option and to ensure your worker’s compensation coverage has kept pace with changes to the number of people you have on staff. Finally, if you’re approaching renewal time, look for a business owners policy that bundles your liability and property insurance at a cost savings.
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.
If you spent years paying business interruption insurance premiums in case your ability to conduct business was ever compromised, you have likely been unpleasantly surprised to find that your policy does not cover pandemics – even, perhaps, when there is no language in your policy excluding them. Now, a number of world-renowned chefs are fighting for that protection. Thomas Keller, Wolfgang Puck, Daniel Boulud, Jean-Georges Vongerichten and many others recently teamed up with the attorney and insurance specialist John Houghtaling to file the country’s first court action to recoup losses from insurers, according to a report from Keller on NBC. They formed the non-profit Business Interruption Group (BIG) (https://werbig.org/) in an effort to help restaurant businesses, large and small, collect insurance claims on the losses they believed would be covered by their business interruption policies. (Foodable conducted this interview with Houghtaling about how restaurant operators can understand their insurance cover and navigate denied claims.) (https://www.youtube.com/watch?v=RkdA9bxoNkg&feature=emb_title&utm_source=Foodable+Report+Downloads&utm_campaign=48c90208c4-Foodable_On_Demand_19_015_copy_02_7_29_2019_9_46_C&utm_medium=email&utm_term=0_402dfc13cf-48c90208c4-78342785&ct=t%28Foodable_On_Demand_19_015_Wed_9_4_19_9_3_2019_COPY%29 ) BIG has already gotten the attention of the White House, with President Trump urging insurers during a recent press briefing to pay business interruption claims if pandemics are not specifically excluded. (Follow BIG’s progress here.) (https://twitter.com/werbigorg) Meanwhile, the White House has invited number of the founding members of BIG to participate in one of 17 Great American Economic Revival Industry Groups intended to kick-start the foodservice sector.
The restaurant industry is a community – and those community connections are providing a lifeline for businesses that need support right now. Beyond government stimulus programs, there are new resources coming about on an almost daily basis in an effort to help restaurants manage through the volatility of these months. One new resource to look to for information and basic moral support is the Coronavirus Facebook group, Coronavirus in the Food and Beverage Industry, for people working in the foodservice industry. The food and beverage market intelligence company Winsight formed the group, which had nearly 4,000 members as of this writing. At a time when it can be hard to keep track of quickly changing news and the formation of new groups aiming to provide industry support, the group is a good one-stop shop for information about topics ranging from COVID-19 news, to restaurant technology, to sources of aid for foodservice businesses. Recent posts included information on new restaurant relief funds, sources of interim employment and discussion on how businesses can maximize the Paycheck Protection Program in the Coronavirus Aid, Relief and Economic Security (CARES) Act.
While the news headlines may be gloomy, don’t lose hope – there actually are foodservice operators who are managing to make lemonade from a whole lot of lemons right now. The ones forging a way through these stressful times are getting creative: Wingstop, which is experiencing an uptick in sales right now, is tapping into an oversupply of chicken and offering a free delivery promotion that is driving sales. Farmers Restaurant Group has shifted to a bodega concept that sells meal kits customers can schedule for pickup using OpenTable. Another operation that has nimbly shifted its approach is Front Burner Restaurants, which operates eight restaurant brands in six cities in the southern U.S. At the start of the pandemic, Front Burner had to furlough 4,000 employees, but it quickly shifted gears to create Furlough Kitchen, a non-profit concept that offers one free meal kit a day from its restaurants to hospitality workers who have been furloughed as a result of COVID-19. Through the support of community donations and anticipated federal stimulus funding, the company rehired employees working in its catering operation, as well as some of its hourly employees who take orders, post on social media and carry food out to customers for curbside pickup. Regular customers, suppliers, vendors and others in the community have been generous with donations and other support, and tips are collected into a pool that is distributed on the pay cards of furloughed employees. Furlough Kitchens currently has two locations and expects to open five additional locations from its existing restaurants soon. In a recent Restaurant Business podcast, Front Burner CEO Randy Dewitt said they are currently funded through the next 60 to 90 days. He thinks that finding a way to keep his restaurants open – even if they’re not profiting right now – should help with their eventual recovery. The community goodwill he is building in the meantime won’t hurt.
On March 26, President Trump signed the CARES Act stimulus legislation into law. The law provides support for restaurant and foodservice owners and workers in the form of payroll incentives, employee benefits, emergency grants and tax relief. (The National Restaurant Association provided a summary of the CARES Act’s benefits to the industry. https://restaurant.org/Articles/News/CARES-Act-provisions-whats-in-it-for-restaurants ) But will the benefits go far enough? Chef Tom Colicchio says no – particularly in the case of independent restaurants. Colicchio is founder of Crafted Hospitality and a visible member of the Independent Restaurant Coalition (IRC), a newly formed group that is aiming to help save local restaurants impacted by COVID-19. The CARES Act’s Paycheck Protection Program, a key part of the new law, lets owners of restaurants with fewer than 500 employees apply for a loan of up to $10 million or two and a half months of payroll, whichever is less – and Colicchio said in an interview with Forbes that he thinks it is unlikely the industry will be back on track in that time frame. He is now working with the IRC to advocate for a six-month income replacement program worth $440 billion. Restaurants of any size could benefit on the condition that they continue to fully employ all restaurant staff, as well as pay rent and suppliers to keep money moving through the supply chain. The coalition is aiming to build a strong, united voice that can address lawmakers about what support the restaurant industry needs right now. In addition to providing daily legislative updates, it provides people on its mailing list with a social media toolkit, calls to action that can help operators mobilize their communities and networks, and key messages to use when speaking to the media to help get the word out about what independent restaurants need right now.