Article contributed by Lil Roberts, CEO and Founder of Xendoo
As one of the hardest hit sectors by the COVID-19 crisis, restaurant operators have been in survival mode, continuously searching for ways to keep their businesses afloat. Even as the industry faces daunting challenges triggered by the pandemic, there is room for optimism. The National Restaurant Association reported that consumer spending in restaurants rose for the third consecutive month in July with restaurant sales up 5% from the previous month.
As the industry continues to see incremental gains, it’s imperative to invest in new operational strategies that will not only help weather the effects of the COVID-19 pandemic but also improve operations long after. Here are six strategies to adopt to keep your restaurants viable:
Implementing cost cutting strategies
Scaling down menu offerings is a relatively quick way to cut costs. Food expenses are one of the highest for restaurants, reaching anywhere from 20% to 40% of total costs according to point of sale system provider TouchBistro. A strategic way to scale down the menu is to create items that share the same ingredients, allowing you to order ingredients in bulk. Not only are you cutting down on spending, but you’re also making your dishes faster and easier to produce, which streamlines operations and subsequently saves on labor.
You can also reduce costs by analyzing your current vendors. Look at the supplies you spend the most money on, and see which areas allow you to switch to vendors with better prices.
Technology is another helpful tool in determining where and how to cut costs. Financial management is critical to restaurant survival in normal times, but during this year’s turbulent environment, it’s even more important. If you’re using this time to analyze your tech stack, consider cloud-based accounting platforms for cost control and financial monitoring. By moving your financials to the cloud, you can connect into bank account and credit card transactions to help track expenses and cashflow, providing a clear picture of financial performance to better inform business strategy.
Optimizing the use of viable technology
While technology can help you better keep track of costs, it can also help drive traffic, boost revenue and sustainably resume operations.
Start by making sure your website is up to date, including current menu, hours of operation, service offerings (delivery, curbside pickup), and phone numbers for orders. This is absolutely crucial as customers have grown to expect regular updates on restaurants’ shifting pandemic-driven policies. It’s also important to use your website and social media to communicate safety and hygiene protocols the restaurant has put in place to safely serve customers. Beyond that, make sure the website is optimized for mobile viewing – an important factor considering mobile accounts for approximately half of web traffic worldwide.
In addition, work on implementing and optimizing a user-friendly online ordering system. This is key in today’s environment to satisfy consumers’ expectations for digital ordering and contactless payment platforms. The pandemic has triggered a seismic increase in consumer use of these platforms with The NPD Group reporting that digital restaurant orders increased by 63% in March 2020 alone.
Consulting firm McKinsey highlighted the importance of optimizing technology to create digital customer engagement saying: “a shift toward off-premise dining options and physical-distancing behaviors will probably outlast the crisis. The digital customer experience will be critical to retaining current customers and capturing next-generation loyalty, and the best way to enhance the digital experience is through deep personalization. Engage customers with personalized offers across multiple digital channels; use customer data to make decisions about merchandising, pricing, and promotions.”
Being strategic about scheduling and hours of operation
Labor costs are one of the top three highest costs for restauranteurs, representing approximately 30% of gross revenue. Start reducing these costs by looking at peak ordering times and determining when it’s absolutely necessary to bring in staff to start preparing the food. Reducing prep time by even one hour can save a restaurant thousands of dollars in monthly wages.
Consider how you can build effective labor strategy around off-peak hours as well. Start by analyzing customer demand and then adjust scheduling appropriately for slow hours. Beyond staff requirements, limiting hours of operation to the busiest times of the day can also save money.
Reengaging with loyal customers
Drive business and stay afloat by retargeting loyal customers. In a time where digital communication is critical, scanning reservation systems and takeout orders for customer emails and phone numbers allows you to connect with customers. Again, remember that customers now have heightened expectations for real-time updates – use this gleaned contact information to keep them in the loop on critical information, such as restaurant re-opening dates, new menu offerings and specials, and hours of operation.
Innovating meal offerings
To boost revenue, get creative with how you can bring the atmosphere of your restaurant into the homes of your customers. Take family meal kits, for example. These kits provide a convenient catering option in addition to a fun activity for families when they put the meal together. Another option is to offer larger portion takeout options for the whole family for delivery or pick up.
After months of cooking at home, many consumers are craving restaurant offerings and comfort food. Take advantage of this by offering specials to apartment complexes, banks and other places of business where employees have returned to the office.
Taking advantage of outdoor space
If you don’t already have the option, or you’re looking to expand, check with local city/municipality regulations on the ability to add outdoor seating. While you need to adhere to social distancing guidelines, there are still ways to maximize outdoor dining and keep everyone safe, like repurposing parking lot space into dining space. The ability to offer that option will help attract diners, as many consumers prefer to opt for outdoor dining options that help them feel safer and more comfortable.
Restauranteurs that are creatively pivoting operations and innovating to meet changing business conditions and consumer preferences will be in the best position to weather the crisis. The decisions you make during the pandemic, whether they’re small or drastic, are truly telling as to how you’ll fare once we reach recovery.