Even small commodity fluctuations can have a substantial impact on restaurants. Take Chipotle, one among thousands of restaurant brands where guests expect to find avocados. Aaron Allen & Associates reported that in 2017, surging demand for avocados, paired with smaller crops in Mexico and California, had analysts predicting that every 10-percentage-point increase in avocado prices would lower Chipotle’s earnings-per-share by 30 cents on an annual basis. And that was for just one ingredient. Developing a plan to track global shortages and surpluses can help you avoid similar scenarios. Restaurant Nuts recommends several strategies: When you plan promotions to bring people in, make sure the items you promote are those whose ingredients are more widely available and profitable. During periods when producer costs are stable, anticipate times when they may fluctuate and build in incremental price increases early so you can maximize your profitability and avoid shocking guests with price surges. Cost out your menu. Add items that don’t use volatile commodities, and for popular but less profitable items, identify areas where you can easily make substitutions. Mine your data so you understand your most popular menu items and pairings, then design your menu and promotions so you direct guests to those items. Securing long-term contracts with suppliers can help you weather potential market fluctuations. Where this isn’t possible, you can always tell your guests about the challenge (without overusing this tactic). If a major hurricane wipes out a crop of an important ingredient you feature on your menu, for instance, guests are likely to understand if you’re transparent about why that ingredient is temporarily unavailable — and what appealing item you’re offering in its place.
In the first quarter of this year, 46 percent of consumers who ordered Uber Eats in the U.S. also ordered from one of its competitors, according to the data research firm Second Measure. That’s despite these companies offering incentives to keep customers coming back. As a result, Vox reports, third-party delivery companies are currently engaged in a price race to the bottom. But before long, these companies won’t be able to continue their streak of losses and will need to charge higher prices. Their relationships with partner restaurants and customers will be all the more critical. As vendors risk getting weeded out, restaurants may wield some leverage.
New research from the National Restaurant Association found that delivery, drive-thru and takeout food are on track to comprise 63 percent of restaurant sales this year – and many industry insiders see off-premise sales as the industry’s key growth engine. Recent consumer data demonstrates the potential. For example, Foodable reports that more than 80 percent of consumers younger than 35 are using on-demand food ordering apps about twice a week, and Food On Demand reports that delivery sales are 75 percent higher than in-store sales. At the same time, a declining percentage of consumers want to talk to others when visiting a restaurant, according to a recent study from Harvard Business Review. Clearly consumers still crave a restaurant experience but the best way to engage those people may no longer be via an in-person conversation. Harnessing technology to drive off-premise sales is key to tapping into the off-premise opportunity. Do you have a technology blueprint for driving off-premises sales? As of this writing, we were a few weeks away from the 5th annual Takeout, Delivery & Catering Symposium, which will gather industry leaders to forecast what’s ahead for off-premise sales, as well as how operators can use customer analytics to drive sales and engagement, and how technology can make a restaurant operation more efficient. Stay tuned for details from the event in the coming weeks.
As Beyond Meat and the Impossible Burger compete for market share and fast-casual and quick-service brands scramble to bring meat substitutes to their menus, don’t forget some other plant-based meat alternatives that may suit your menu well. In a recent Upserve survey of 9,000 restaurant operators, jackfruit had climbed 52 percent on menus in the past year. Unripe jackfruit has a taste and texture that mimic meat and can work well as a pork or chicken substitute. It is also nutrient-rich, containing calcium, iron and potassium, and because it is a natural plant-based protein, it may appeal to guests looking to consume more whole foods.
The popular guidance on offering restaurant delivery can sound a bit counterintuitive: Find a way to make delivery work, despite the economic challenges it can create, or lose relevance with consumers. A new report in the Washington Post emphasized that point, indicating that the most recent industry earnings calls demonstrated the dramatic impact (positive and negative) of digital ordering and delivery on restaurants. Domino’s, for one, indicated that despite strong sales growth, it felt pressured by the “aggressive marketing of third-party aggregators.” Delivery is also having a big effect on Chipotle, which saw digital sales skyrocket more than 100 percent from the same period last year following a delivery promotion. The demand for digital ordering and delivery is clear. But as third-party delivery companies vie for business with enticing offers, how can you make delivery work for you financially? Consider raising your prices. If recent operator experiences are any indication, the extra cost won’t deter customers who value convenience. A report in Restaurant Business said when Habit Burger launched delivery last year, it increased the cost of delivery orders by 25 percent. Initially, third-party delivery companies were against this move, fearing pushback from consumers. But that has not occurred and delivery companies have softened to the idea. As you flex your business to accommodate more delivery orders, you may be surprised at consumer flexibility on price.
If you’re currently adjusting your approach to managing labor challenges, repetitive kitchen tasks or the overall experience you provide guests, a number of tech companies are working on solutions to help. At the recent food robotics summit ArticulATE, leaders of these companies sounded off on what’s in the pipeline, and as SmartBrief reports, a key theme of discussion was finding ways for technology to blend seamlessly with human employees and guests, while freeing up employees for more creative tasks. The formula isn’t the same for every restaurant. While there is technology available that can automate burger flipping and fryer operation (Miso Robotics), baking bread (Wilkinson Baking Company, among others), serving guests (Bear Robotics) and delivering food, finding the right kind of automation for your business is about understanding what is best for developing your employees and serving guests. As the CEO of Creator, the restaurant in San Francisco that uses robots to make the perfect burger but has not automated the taking of orders, said: “Our goal is not to be the world’s most automated restaurant, our goal is not to have as few people as possible -- the goal is to have the best experience possible.”
Is your delivery menu a mirror image of your dine-in menu? Chances are it shouldn’t be. That’s the verdict of a recent Restaurant Business report about how to maximize the benefits of offering off-premise food options. You need to consider how well your food and beverages travel, how many pages of options people are likely to tolerate scrolling through on their phones, and how efficiently your kitchen can manage the preparation of various items during peak periods. To make your restaurant more guest-friendly when it comes to delivery, as well as more profitable for you at a time when delivery often squeezes restaurant margins, consider how you can scale down your menu. The Restaurant Business report cited an example of one restaurant that placed its entire menu online, requiring viewers to click through six screens, and another that winnowed its menu down to six items on one page. (The latter restaurant generated an average of 10 times more sales than the first.) It also pays to know your highest-margin items and find ways to feature them more prominently on your menu and boost their appeal. Customers might view beverages, for example, as items that are easy to skip in favor of alternatives available at home or elsewhere. But if you create specialty or seasonal beverages served in containers that travel well and come in sizes that can serve a family or group, you can make them a more compelling sell. Finally, ease the pressure on your kitchen at peak times. Operators are experimenting with a range of options to do that, from reserving front- and back-of-house space for delivery orders, focusing the delivery menu on foods that require less effort and time to prepare, and taking delivery out of the restaurant altogether and using ghost or commissary kitchens to prepare and farm out orders.
Your sustainability efforts could soon be visible front and center for people considering your restaurant for their next meal. Yelp just unveiled its Green Practices Initiative in an effort to help consumers understand how restaurants approach sustainability. Yelp reviewers will now be asked if in their experience a restaurant uses plastic bags, utensils or straws, compostable takeout containers, and whether or not the restaurant offers a discount to guests who bring their own beverage containers. The results won’t be visible immediately but will gradually build a trove of data that will eventually be included in Yelp’s restaurant reviews.
It’s pretty simple: Your regular guests are motivated to earn points for their purchases and to get transparent communication from you about what it takes to redeem those points. It’s a lesson many major brands have learned and are now adapting to accommodate. Skift Table reports that Starbucks, Chipotle, Pizza Hut and TGI Friday’s are just a few of the brands that have implemented new points-based loyalty programs in recent months, and to positive reviews. Some of the results have been dramatic. The report said that Punchh, a digital marketing company that helps a range of restaurants with loyalty program development, helped TGI Friday’s UK generate a 66 percent increase in revenue from loyalty program members and a 51 percent increase in new unique guest visits in the first four weeks of launching a new loyalty program in July. According to Mobile Marketing, the number of users referred by the app who made a verified visit to TGI Friday’s UK skyrocketed 300 percent in that same timeframe. The new loyalty program stands out not for its bells and whistles but for its transparency. While it started in 2015 (also with Punchh) as a “scratch, match and win” game designed to generate probability-based rewards, the new program has a spending-based system of points or “stripes” to help customers see the path they need to take to earn rewards.
The foodservice delivery industry seems to be evolving by the day. If you’re adapting your operation for more efficient delivery or thinking about offering it as a new option, take note of how third-party delivery companies are changing the market. Bloomberg reports that Uber has a pilot program underway in Paris that rents commercial kitchen space to restaurants selling food via the Uber Eats app. While the company has not commented publicly about this yet, it raises questions about how such developments could change the industry, perhaps controlling the choice consumers have when searching for a certain kind of restaurant, for example, or giving third-party providers a greater say in the branding of a restaurant business. Uber isn’t alone in this either: Grubhub, Door Dash and others have been investing in ghost kitchens in recent months. Postmates is adding yet another wrinkle to delivery by launching a new app, Postmates Party, to select cities that allows consumers to pool their orders and have them picked up and delivered (for free) by one courier.
The California Consumer Privacy Act (CCPA) could have nationwide implications for how restaurants manage their data, protect consumer privacy and market their business. The National Restaurant Association hosted a webinar recently with Helen Goff Foster, a partner in the Technology + Privacy & Security for Davis Wright Tremaine, who reviewed the implications of the law, which is set to go into effect next year and could likely set similar legislation in motion in other states. The act will impact how businesses manage the consumer data they collect and the loyalty programs they operate. Unlike GDPR, which is about having consumers opt in to providing personal information, CCPA is about allowing them to opt out. In broad terms, for a wide swath of businesses, the law requires businesses to let consumers access the personal information you track, and gives them the right to delete information, and to opt out of the sale of that information. It also requires you to give consumers two methods of contacting you about it (including an 800 number). Businesses must therefore be able to retrieve consumer information across its affiliates, business units, product lines, etc. The law is intended to prevent businesses from providing discounted service or price to certain customers but not others (which clearly creates some hazy territory for businesses operating loyalty programs). There are fines in the thousands of dollars for violating the law and businesses could also be exposed to a private right of legal action by consumers against the business and its affiliates. Franchises could be especially vulnerable because they could bear legal risk but aren’t able to dictate privacy policies of their parent company. Foster advised that the best thing businesses can do now is identify where their consumer information is and how to access it. You’ll need to determine how to provide opt-outs for most of your consumer data and assess the ability of your vendors to do so as well, so update (or establish) your information security program. For more information about the law’s potential effects on restaurants, access Foster’s webinar and Q&A here.
The real power may lie not with restaurants but with the delivery apps and food delivery companies that help them get their food to consumers. That’s the implication of two recent reports in the Wall Street Journal, which indicate that these companies are poised to move away from traditional introductory offers and toward subscription-model services designed to entice consumers into becoming habitual “superusers.” At a time when millennial consumers are believed to lack loyalty, delivery providers have noticed that offering a one-time discount won’t translate to follow-up business. How does your delivery provider entice customers to return regularly? DoorDash, one provider offering a subscription program, says it has more than 30,000 users signing up each week for their service. It now leads the online food delivery market in total consumer spending.
At a time when Instagram is helping restaurant menu items go viral and having a well-curated social media presence is billed as a must for a growing business, it can be easy to overlook the power of email. But the numbers tell an important story: According to research from the Direct Marketing Association and Demand Metric, the return on investment for email marketing is 122 percent compared to just 28 percent for social media (other marketing channels rank similarly low). Email carries a number of benefits. When you pour your marketing dollars and ideas into your email list, you retain control of what happens next. You’re not at the mercy of changes to a social media network’s algorithm and you stand a better chance of reaching your most loyal guests directly. Your email subject line has the power to prompt the recipient’s action at the time you send it — you’re not competing with content on a person’s social media feed or having to wait until people visit their account. As The Rail suggests, you can use your data to deliver a more customized experience via email, sending messages when you know your list is most apt to open them and with a mix of images, video and text depending on what you’d like to promote. There are also ample email tools to target guests with not just birthday promotions but also deals that consider their personal preferences and ordering habits. OptinMonster suggests using your list for such tasks as nurturing your loyalty program and spelling out its benefits, winning back guests who haven’t visited in a while, or following up with people who made a Groupon deal or otherwise expressed interest in your restaurant but haven’t visited yet.
When food is prepared and waiting to be eaten by a hungry consumer, every minute can impact the quality of the meal. Now that so many operators are embracing consumer demand for delivery and are seeking to stand out in a growing crowd of off-premise dining options, the next push is to make that delivery as fast and seamless as possible. For a number of major brands, that means delivering in less than 30 minutes and striving to shave additional time off of that rate. In addition to restaurants adding pick-up shelves for delivery drivers collecting orders and opening delivery-only kitchens in locations with a critical mass of customers, Skift Table reports that some brands are introducing prepaid delivery for third-party couriers and retrofitting vehicles to become mobile kitchens that can cook a pizza on the go. (Pizza Hut, for one, is testing a robot-powered pizza kitchen that sits in the bed of a modified Toyota Tundra.) How can you shave minutes off of your delivery?
Are you among the many operators trying to figure out how to make delivery profitable? At a time when off-premise sales account for 38 percent of restaurant sales, according to Technomic, delivery has become a must for restaurants, even when the margins aren’t necessarily making the service profitable for those brands. Fortunately, new models are beginning to make the numbers work out. Recent Technomic forecasts have predicted that “subscription models that eliminate per-delivery fees in favor of a flat-rate subscription will emerge to present a clearer value proposition to customers.” The Spoon reports that a number of third-party delivery providers have come up with palatable offers for restaurants and consumers alike: DoorDash’s DashPass offers a monthly subscription of $9.99 for delivery of orders priced $15 or higher from a selection of restaurants, and Postmates has a similar offer. In the UK, Deliveroo is offering a £7.99 per month subscription for orders of any amount, and Uber Eats is reported to be testing a loyalty program that could eliminate delivery fees — if the experiment works there, it is likely to make its way across the pond eventually. Even operators who aren’t opting for subscription models are finding ways to make delivery profitable. In fact, delivery may be helping Chipotle make a comeback. Skift Table reports that delivery sales climbed 13 times in the fourth quarter of 2018 as compared to the same quarter of the previous year. Chipotle’s CFO credits a couple of factors for the success: the creation of a separate, digital food assembly line for off-premise orders, which enables the restaurant to process a greater number of orders, as well as a delivery-friendly menu (burritos and taco bowls are good travelers).
At a time when many operators are looking to scale down their restaurant footprints to accommodate service model changes and stay profitable, every square inch of food preparation space counts. At the recent NAFEM, the show hosted by the North American Association of Food Equipment Manufacturers of Chicago, the theme was about helping operators do more with less, using tools ranging from multifunctional prep stations on wheels to compact, high-efficiency ovens to electric bakers with interchangeable molds for accommodating a wide range of snack foods. Nation’s Restaurant News reports that a highlight of the show was a collaboration between the equipment company Vulcan and the quick-service seafood restaurant Captain D’s. The restaurant had challenged Vulcan to devise a more efficient fryer, and the result was a smaller fryer that can be mounted on a freezer base and allows a worker to complete a task while standing in place. In stores currently using the fryers, fry times decreased 30 percent and the stores saved $10,000 annually. Where is there an opportunity to increase the efficiency of your kitchen?
Food safety transparency is here — whether foodservice operators want to be open about their hygiene records or not. HDScores, the tech firm behind Yelp’s restaurant hygiene data, is now offering an app that allows consumers to look up extensive health information for restaurants and coffee shops in many parts of the U.S. Skift Table reports that the app (which costs $1.99 per month) allows consumers to access a restaurant’s local health department score, a historical record of past scores and violations, and a health code score determined by HDScores. While not everyone would be willing to pay for quick access to this information, those with severe food allergies or who have contracted foodborne illness in the past very well might.
The time to be nimble and adaptable with your food safety program is now: This year, Millennials are expected to account for the largest segment of the population, according to Pew research. As a result, their preferences — for convenience, technology, local foods and global flavors — are forcing the restaurant industry to evolve rapidly. Such rapid change could test your food safety program, which needs to be able to accommodate a steady stream of new ingredients and preparation methods (along with the tech tools that can help you monitor them). A Food Safety Magazine report about these challenges highlights such millennial-friendly trends as growing produce, raising animals for food, brewing beer, or offering fermented or cold-pressed beverages — all of which can test a food safety program. Has your program adapted to these sorts of menu trends?
Delivery has long been more about convenience than taste — it’s hard to make a delivered meal tastier than one served right out of the kitchen, right? Well, that may be changing as operators think more scientifically about food preparation and delivery. The Spoon reports that the fast-casual brand Dig Inn just piloted a delivery-only virtual kitchen called Room Service that rethinks food preparation for delivered foods. In a restaurant, for example, Dig Inn cooks salmon to medium-rare at 115˚F and then serves it immediately. Salmon ordered for delivery via Room Service, however, is plated rare at 105˚F, then paired with a hot potato puree that travels well. Along the route, the puree warms the salmon so the transit time improves the quality of the item when served. It’s food for thought for restaurant operators offering delivery. As ghost kitchens become more prevalent and improve upon the methods long used for delivery, how well do your food preparation plan and food safety program adapt?
A new computer model stands to make the identification of foodborne illness sources more accurate than traditional methods and significantly faster too — in fact, close to real time. That’s according to Harvard University’s School of Public Health, which co-led research with Google on a computer model that uses machine learning and aggregated search and location data from logged-in Google users. The model classifies Google searches indicating foodborne illness (e.g. “stomach cramps”), then connects those searches with de-identified and aggregated location history data from users who have saved it. That helps the model identify restaurants that people who searched for the terms have visited recently. A test of the model found that the rate of unsafe restaurants it detected was 52.1 percent, compared to 39.4 percent for inspections initiated by a complaint-based system.
Do you know how to determine your inventory’s magic number? If you can find your optimal inventory level it will help you set your ideal food cost percentage, all while helping you minimize waste and decrease the frequency of selling out of your most profitable menu items. Upserve suggests operators use this formula to determine how much they should be spending on inventory each day: Average monthly food sales x food cost percentage / days in the month.
Delivery isn’t just for Friday-night dinner anymore. As restaurants accommodate consumer demand for off-premise dining options, they are experimenting with non-traditional day parts and occasions to boost the benefits of delivery to their bottom line. Three cases in point: Panera, Cinnabon and Applebee’s. Restaurant Business reports that Panera, one of the rare large brands that uses its own employees to deliver meals to customers, is expanding its small-delivery service to include breakfast (allowing it to better compete with McDonald’s and Starbucks, which offer delivery via third parties). Cinnabon and Applebee’s are venturing into occasion-based delivery, with Cinnabon adding gift boxes containing different-sized orders of its signature cinnamon rolls. Applebee’s, on the heels of Taco Bell offering delivery of its 12-taco party packs for the holiday party season, is offering delivery of catering packages and “Monday Night Football” food packages designed for groups. If single-meal delivery during your Friday dinner rush doesn’t make financial sense for you, what other delivery options might?
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