The Top 5 Ways Guest Spend in Restaurants Changes the Business Model -> And how to lower stress when spending habits change.

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Now on to the the Top 5 Ways Guest Spend in Restaurants Changes the Business Model.

In the dynamic restaurant industry, guest spending patterns play a pivotal role in shaping and evolving business models. From fast food joints to fine dining establishments, how much a customer spends influences everything from pricing strategies to operational efficiency.

1. Menu Pricing and Profit Margins

Guest spending directly affects how restaurants structure their menus and set prices.

A higher average spend allows restaurants to offer premium ingredients and more elaborate dishes, resulting in higher margins. On the other hand, if guests are spending less, the business may need to adjust by offering more budget-friendly options or smaller portions.

Restaurants must constantly balance providing value to guests while protecting profitability. Many establishments adopt tiered pricing strategies where higher spenders get premium experiences, while more frugal customers still find affordable options on the menu.

Understanding how your guest spends their money in your restaurant is crucial to success.

In times of economic uncertainty, customer spending tends to decrease, and restaurants have to make swift adjustments to retain their guests. Some introduce smaller plates, set menus, or combo deals to maintain customer volume without sacrificing too much on profit.

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2. Revenue per Table and Table Turnover

Higher guest spending also affects how restaurants approach revenue per table and table turnover rates. Fine dining restaurants that encourage guests to spend more on meals, wine, and desserts may prioritize a more leisurely dining experience, resulting in fewer table turnovers but higher revenue per customer.

Understanding how the combination of cover counts and average spend impact your model is crucial.

This slower turnover works because the margin per table is significantly larger.

Conversely, in casual dining or fast-casual environments where guest spending is typically lower, faster table turnover is necessary.

These businesses rely on volume to generate profits, meaning they need to serve more guests within a shorter timeframe. When average guest spending increases in this model, it often results in a positive shift toward profitability, with customers opting for more expensive add-ons like appetizers, drinks, or desserts.

3. Staffing and Labor Costs

Guest spending habits can also impact staffing levels and labor costs. When customers spend more, restaurants often need additional staff, especially if the business is offering more complex, high-margin dishes that require extra preparation time. For instance, a restaurant known for its tasting menus or extensive wine list may need more chefs, sommeliers, or servers to ensure the experience justifies the higher spend.

On the flip side, when guest spending trends lower, restaurants may reduce labor costs by simplifying their menus, automating some of the service processes, or hiring fewer staff to handle the anticipated volume. Understanding and predicting these spending habits is crucial for restaurant managers looking to optimize labor efficiency.

At the end of the day, not two labor models are the same, even within the same concept.

As soon as guests start to behave or spend differently it will affect the model and using the same target at multiple locations can have a detrimental impact.

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4. Loyalty Programs and Upselling

Restaurants are increasingly turning to loyalty programs to encourage repeat business and higher spending. When guests are willing to spend more, restaurants can create sophisticated loyalty schemes that offer discounts on higher-ticket items or exclusive access to events or premium menu options. By incentivizing guests to spend just a little more with each visit, restaurants can boost overall revenues without significantly altering their core business model.

Upselling is another key tactic, and it thrives when guest spending is already on the rise. Training staff to recommend pairings, suggest dessert, or propose a second drink can further increase per-customer revenue. This requires a balance between guest experience and maximizing sales without being overly pushy.

5. Innovation and Investment in Technology

As guest spending patterns evolve, restaurants must innovate to keep pace. Higher guest spending often allows for greater investment in technology, such as point-of-sale (POS) systems, digital menu boards, and mobile ordering apps. These innovations can enhance the customer experience, streamline operations, and even enable more personalized service, such as targeted promotions based on spending history.

For example, with higher guest spending, restaurants may invest in contactless payments or self-ordering kiosks, which improve efficiency and cater to tech-savvy diners. When average spending decreases, the investment in technology may focus more on cost-saving measures, like automated kitchen systems or reduced-waste programs.

Conclusion

Guest spending is a crucial variable that influences a restaurant’s business model in myriad ways.

From pricing strategies and staffing levels to table turnover and technological investments, understanding and responding to customer spending habits is key to remaining competitive in the ever-changing restaurant industry.

Until next week.

Jim

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Oh and one more thought...

Whenever you are ready here are a few other ways I help restaurateurs every day.

• If you are a restaurant operator or owner who realizes that increased productivity, improved employee workload, and lower turnover are the only responsible ways to succeed in our industry these days... I've got you covered. Let's connect for a discussion. DM me at Jim Taylor , email me at [email protected] or you can even text me at 6047898991.

• If you are a consultant, or service provider to the restaurant industry and you are wondering how to create opportunity, looking to build your business in 2024, or find it to be lonely as a solo-preneur there is a spot for you right here and I would love to meet you.