Across the restaurant industry right now, profits range from 0 to 15 percent, according to Toast, and profits between 3 and 5 percent are most common. That doesn’t leave much wiggle room for making errors or adapting to industry changes such as the rising demand for off-premise dining. Operators have to be continuously creative when it comes to finding and mining sources of revenue, whether from new products, services or partnerships. (Note the current fervor around restaurant brands partnering with Beyond Meat, with Subway and Hardee’s being just two of the latest companies to tap into the meat substitute’s popularity.) Restaurant Nuts suggests operators consider options such as joint ventures – for example, partnerships with grocery stores to sell your products can help you promote a special offering while lowering your sales and marketing expenses. Or, as All Food Business suggests, you can partner with a corporation to offer expense accounts, business dinners, client programs or events that can generate income. You can align with a business or charity whose mission complements yours if it helps you to expand your audience, offer a special event you wouldn’t be able to offer on your own, or tap into resources (such as technology or delivery capabilities) that benefit both parties. Within your business, building out a catering menu can help you make the most of your food costs (and minimize waste) while serving lucrative off-premise and corporate customers. Depending on your business, there may also be opportunity to offer retail products like clothing or take-home versions of signature sauces that your restaurant is known for.
Want to win over customers? It’s not about having mouth-watering new specials or transforming your marketing strategy. It’s all about your operations. (At least that seems to be the trend based on recent performance results of a number of major brands.) As reported in Restaurant Business, brands including Dunkin’, McDonald’s, Starbucks and Wendy’s have prioritized operational changes over menu innovation in recent months. Wendy’s has focused on eliminating tasks and training employees to improve speed of service. McDonald’s continues to experiment with automation and has held competitions to find ways to serve guests faster. Dunkin’ has streamlined its menu and changed the layout of stores to improve flow of operations. As for Starbucks, third-quarter same-store sales increased 7 percent and store traffic increased 3 percent, due to what the company says is its focus on simplification – reducing the tasks that need to be completed in-house and shifting employees’ focus to guests. How can you simplify your operation – both with and without technology – to deliver better service?
Any chef can confirm it: Running a restaurant well can require the skills of a lawyer, doctor, designer, HR manager, mechanic, janitor, and the list goes on. And that’s on top of having to offer an appealing, in-season menu that can be readily adapted to different nutritional needs. While that ever-changing environment can bring interest and variety to each day, chances are you were drawn to the restaurant industry more because of the food than for your ability to negotiate a beneficial contract or identify the best cleaning supplies. Further, the multitasking often required in a restaurant setting can kill productivity: A University of Michigan study found that when a person attempts to accomplish more than one task at a time, productivity drops by 40 percent. Team Four’s Palette program can serve as an extra pair of hands, taking on some of the responsibilities on your plate so you can multitask less and focus more on parts of the business that suit you best. For example, Palette can help you fine-tune your brand, including redesigning your menu or updating your graphic identity on your website, signage and marketing materials. You can also access restaurant equipment, linens, office and cleaning supplies, along with services for managing waste collection and pest control. And in case your menu or inventory needs attention too, we can help you develop new recipes, identify cost-effective menu substitutions, improve your food safety record and offer negotiated contract pricing to help ensure you’re getting the products you need at the best value. You can access the full list of services included in Team Four’s Palette program at www.palettefoodservice.com.
Now that Uber Eats is testing a “Dine-In” feature on its app, expect other third-party delivery providers to follow suit. The feature allows a person to order food at a restaurant, track the process of its preparation so she can arrive at the restaurant in time to eat it, and also leave a tip. The benefits to restaurants could include having to pay a smaller fee to the delivery provider than would be required for third-party delivery, faster table turnover, and the opportunity to offer deals that could attract dine-in guests during slow periods. It remains to be seen how accurate the app’s food preparation tracker will be at peak periods, but if you’re struggling to fill seats, it might offer an opportunity to entice guests to come in and sit down.
An emerging model for restaurant investment?
Restaurants can be a tough investment — and when operators are beholden to investors looking for swift profits and some say in financial and operational matters, the challenges can multiply. But a handful of new investment groups, with restaurant industry veterans at the helm, are coming onto the scene and could be changing the model for restaurant investment. Ron Shaich, founder of Panera, along with his partner and fellow Panera veteran Keith Pacal, just announced a $300 million investment fund for restaurants. Skift Table reports that the fund gives “evergreen” capital and industry expertise to operators in an effort to give them additional time to build a business that has staying power. (This is opposed to traditional venture capitalists or private equity firms that invest in companies with the intention of building business quickly and selling at a profit after three to five years.) While profits matter to the fund, there is less of a rush about them — perhaps because of the industry insiders running the operation. Shaich’s goal for the fund, he says, is to give operators an alternative to having to fundraise, negotiate board disagreements or navigate Wall Street culture when they are trying to run a restaurant — all challenges for him when he ran Panera. The fund comes on the heels of Danny Meyer’s similar private investment firm, as well as the Kitchen Fund, which Eater reports has invested in such industry successes as Sweetgreen. These funds could represent an emerging new model for operators looking for financial tools and operational support with fewer strings attached.
Turn your customers into subscribers
As Amazon has disrupted consumer perceptions about the accessibility of food and other products, some food delivery companies are taking cues from its playbook by offering Amazon Prime-style subscription services. DoorDash, for one, recently unveiled a program in which subscribers pay $10 per month in exchange for free delivery from participating restaurants. Subscriptions could be a winner for restaurants and delivery companies alike, according to Skift senior research analyst Seth Borko, who said such services tend to encourage higher consumer spending and utilization. The challenge, he says, is making sure consumers feel they are getting their money’s worth.
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