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.
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.
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.