Michael Maxwell – Partner, Blue Orbit Restaurant Consulting
Everyone has said for a year now that restaurants will not be the same when we come out of The Pandemic; that evolution is inevitable. Well, spring is here, shots are in arms, and restrictions are being lifted. It is time to decide what we have become, buy some land, and get those shovels in the ground.
Maybe the best way to look at this is to target what has changed.
Making “A Living Wage” is a Requirement. When restaurants shut down, workers migrated to other jobs and discovered they could make more money doing easier work. Our trained restaurant workers now find themselves in one of two places: happy in a better paying job or long term unemployed with debt piling up. No matter which one, we are going to have to pay more to get them back. While we do that, we should focus on really becoming an employer of choice. Step one in this process is hiring at fair wages, committing to standardized work and pay reviews, creating opportunities for advancement, and offering decent benefits. Turnover in restaurants has always been high because we have never truly looked at it as career employment and invested in training and developing our workers with the intent to keep them until they retire. The time is now to change that. We may find ourselves hiring and training an entirely new group of people that have never worked in restaurants. That means more time required to train, but with people who have no preconceived ideas about the industry. Higher wages, benefits and more training means spending money in a category that has already been hard for restaurants to control, but we have suggestions for combatting that coming up in the remainder of this article.
Spend More to Build. Year after year, restauranteurs have been giving up more kitchen space to get more seats. We believe it is time to reverse that trend. While a small kitchen gives you efficiencies and requires less labor, it limits your ability to grow and take on new revenue streams. Simple things like an increase in take-out food have proven difficult in small kitchens, crowding storerooms with takeout supplies and turning a small expo window into a jumble of boxes while you are trying to get food out to regular diners. At the same time, larger dining spaces burden you with the task of filling those seats and staffing areas that may often be empty. Large dining rooms overwhelm kitchens, smaller dining rooms allow for a steady flow throughout the day, one giant rush requires more labor than a steadily paced day.
New restaurants may still have small efficient cook lines, but these kitchens need bigger walk-in coolers, more freezer space, more storage space, a “real” prep area with ovens and kettles, assembly tables, and hot holding boxes, and maybe even a pickup window for cars. Seats are no longer the primary generator of sales; they are just a part of the equation. Restaurants need to be designed not only to handle take out easily, but also to add more revenue streams as needed. A larger kitchen allows you to take on larger parties, off site catering, the addition of a food truck, or bottling, packaging, and storage for online sales. Many local governments are continuing to allow takeout of alcoholic beverages, including cocktails bottled on premise, so be sure to carve out some space for your “package store”.
While we encourage you to build smaller dining rooms, we also suggest that you build dining rooms with more open space. Guests may never again be comfortable with a long banquette of 2 tops approximately one foot apart, but they will let you put tables closer together if the overall space has an open-air element to it. Incorporate higher ceilings, larger windows that can open, or nano walls and garage doors that allow the outside to come inside. Invest in heating and cooling outdoor areas allowing you to use them no matter the weather.
Spend Less to Operate. A restaurant with a higher build cost and a higher payroll hitting daily operations, still needs to make money. Let’s break some more old habits to make that happen, beginning with hours of operation. You do not need to stay open till 11 pm to capture those last two tables and you do not have to stay open between lunch and dinner if there is no traffic. If Saturday morning is traditionally slow till 2 pm, then don’t open till 1 pm. The point to be made here is that we no longer need to operate from a plan to be everything to everybody. One thing the pandemic has done for us is teach guests to appreciate when we are open, and not to be angry when we are closed. Limiting your hours of operations will save lots of hourly labor dollars and will probably even allow you to eliminate a management position since there will be fewer hours requiring management coverage.
Menus need to be carefully engineered to deliver desired profits, meaning food and beverage costs need to be lower than the current standard to offset higher labor costs. Proper training and strict recipe adherence can ensure the success of this engineering. Using technology for digital menus or online menus can eliminate the constant cost of replacing menu covers and reprinting menu pages every time there is a change. This also gives you more flexibility to change your menu quickly as the cost of raw products fluctuate. In fact, technology can be used to do almost everything that has required paper and office supplies in the past, eliminating office supply costs completely.
Shopping for the right POS system can consolidate credit card processing, payroll generation, labor controls, menu costing, product ordering, invoice management and daily POS needs into one software fee often eliminating thousands of dollars spent working with multiple software platforms that do not integrate. Many payroll companies are taking on HR functions and bookkeeping functions that until now have been outsourced at a cost.
Other cost savings can come from things like eliminating cleaning companies and giving those hours to in house staff, developing power up and power down schedules to reduce utility costs, or adding a washer and dryer to your layout to clean your own kitchen towels.
As one P&L line item goes up, another must come down. Throw away old norms and rethink each line.
Raise Prices. For 10 years the price of everything needed to operate a restaurant has increased annually while we agonized over increasing the price of a chicken dish by 25 cents. It is time to face the fact that our costs are going to continue to go up, COVID certainly did not change that trend. COVID did however make people understand that restaurants do more than serve food. We are places where communities gather. We bring families and friends together and promote happiness and wellbeing. We are not just businesses; we are social institutions. It is time to acknowledge our value and charge accordingly.
Make Landlords Your Friend. The landlord tenant relationship has always been an adversarial one. The minute things go bad, a rent reduction is the first thing restaurant owners ask for. At the same time, restaurants are the single most important business needed to attract shoppers to a location. As landlords sit on vacant spaces due to COVID’s effect on the economy, restauranteurs are rushing to take them for everything they can get in rent deals. Continuing this adversarial game of “I got you” is going to get us nowhere. It is time that landlords and tenants realize they need each other and determine the best ways to work together. It’s really pretty simple, we always want a few free months to get up and running, a fair rent, and our CAM dollars spent to keep the location looking good. But then we get hit with higher rent based on sales growth. Ultimately that is punishment for doing a good job and helping the landlord to be successful. 2021 is time to negotiate leases that go up and down with sales, not just up. This would make it easier for restaurants to weather a few bad months and would also encourage landlords to be more active in the success of the overall property. Just like restaurant owners, landlords and commercial real estate investors have been forced to rethink their business model. It is the perfect time for landlords and tenants to create win-win rent structures and marketing plans.
Give Them Something New. Over the past year we all realized, we did not miss restaurants, we missed the experience of going to restaurants. We know this because when we went back, the experience wasn’t there. As we looked around, we realized there also was no theatre, no concerts, no holiday fireworks, and no birthday parties for 50 kids with a bouncy house. New restaurants need to offer new experiences to a population that is dying to feel something again. Restaurant concepts must be just that, a concept, with themes and missions and beliefs that are executed with perfection every day. We are not talking gimmicks, but we are talking fun, quality, and something different from a server in a mask and ketchup in a disposable packet. Now is the time to do things that will be talked about.
Rethinking the way we have always done things is a hard job and there is no one size fits all solution. Careful understanding of your targeted market and their needs along with a clear understanding of every cost incurred is the best place to start. Redefining restaurants is a team effort and Blue Orbit Hospitality Consulting can lead that team for you.