How Hospitality & Numbers Can Save Restaurants

Without a doubt the restaurant industry is undergoing a pressure test for the ages. The Ukrainian-Russian war, supply chain disruptions, and a bird flu outbreak have caused inflation to reach unprecedented levels. Restaurants tried to make up for it by raising menu prices, only to infuriate consumers even more. The labor shortage remains ongoing, with the industry still short 2 million workers . Combined with the current banking crisis, lack of confidence in the commercial real estate market, and post-pandemic shifts in consumer behavior, restaurants are taking a beating.?

The Solution?

As a result, what it takes for a restaurant to be successful today has drastically changed. Being in the right location, having the right marketing, and selling the right food is no longer enough.

What is it then – the secret formula of success??

Everyone, it seems, has a different opinion. Some say it’s robots as servers, shorter business hours, smaller menus, and higher menu prices. Others say it’s self-serve kiosks, reduced food waste, and meatless food items.?

These are all good and well, but in my opinion, just a drop in the bucket.?

Having had the opportunity over the past couple of decades to work alongside thousands of restaurants to open, close, expand, and downsize their physical footprint, I’ve realized success in this business really comes down to two simple things: having the right numbers and having the right hospitality.?

The Right Numbers?

When it comes to numbers, restaurants really have two big ones to worry about: their total variable costs and their total fixed costs.?

Traditionally, a successful restaurant has been defined by how well it’s able to minimize the former, such as food costs, packaging costs, labor costs, you name it. The problem with this approach is no matter how hard an owner or operator tries, they’ll never be able to fully control these.?There will always be some outside factor, whether it be a new labor law, a freak storm, or a supplier’s bankruptcy that can send any of these numbers skyrocketing.

A better alternative is for restaurants to focus on what they do have a greater degree of control over – their fixed expenses. A large, often overlooked, part of that comes from their start-up costs.?

Business Insider found that the average cost to start one of the biggest fast food chains can range anywhere from $250,000 to $3 plus million dollars. The biggest contributor – the cost of the commercial kitchen equipment.?

It’s a story I’ve seen play out time and time again.?

An entrepreneur comes up with a new restaurant concept. They write up the business plan. They get the funding. And then they go broke buying $30,000 walk-in refrigerators and $20,000 fryers, and paying a contractor $50,000 to make it all fit into the space. Suddenly, they’re deep in the red, before serving a single customer. So deep, that no amount of cost-cutting acrobatics can save them from the pain of a hefty debt payment every single month to offset it.?

It’s part of the reason why 60% of restaurants fail within their first year of operations, and why 80% go on to fail by their fifth year.?

Becoming a successful restaurant starts with having the right numbers from the beginning. It’s a matter of throwing aside the long-standing practice of buying everything brand spanking new and buying previously owned or used equipment in the aftermarket at a fraction of the price.?

The Right Hospitality?

Curtailing your upfront costs, however, won’t be enough. The second key approach restaurants can leverage to ensure their success is a hyper-focus on hospitality.?

I’m not going to mince words here – since the pandemic, service at restaurants has gotten collectively worse.?

Chili’s has probably been the only company I’ve seen that’s come close to quantifying it. One key company metric across all 1,129 of their restaurants is G-WAPs or guests with a problem , and a year ago, that metric got so high they had to take immediate action to reduce employee workloads to ensure staff could give guests the attentiveness they wanted.?

Mind you, this is coming from a company at the forefront of restaurant tech, who installed self-ordering tablets at each dinner table.?

I fully get why it happened. With nearly 2 in 3 restaurants understaffed during the pandemic, owners forced a lot onto their employees’ plates. But, as so eloquently stated in a recent New York Times article , “We gave restaurants a pass for many, many months, and I think we are at a place where people really miss the human touch and the little details.”?

The core of the restaurant business is hospitality. It’s the whole reason why people decide to eat out as opposed to making their meals at home. It’s what will keep customers coming back, even though restaurant prices now outpace grocery prices for the first time since inflation started accelerating in mid-2021.

The best part is it doesn’t take a lot. It’s a matter of owners and operators putting in place the right people, training, tools, and support, so that workers feel motivated to go above and beyond for guests. Even if your resources are limited, it’s a matter of saying, doing the work can wait, so long as the guest is served first. ?

Keep It Simple

‘Overspend on this, cut costs on everything else, and market your way out of the hole.’ This has essentially been the restaurant business model for years. I say, ‘save on everything and be nice’ will be the new model that’s needed to guide restaurants to long-term success in today’s ever changing economic climate. Only by taking this approach of having the right numbers from a restaurant’s conception to having the right culture of hospitality day in and day out can a restaurant truly fortify itself against anything.