Compared to 2015, the US population has increased, as well as the number of dine-in restaurant openings. With more people, healthcare costs and minimum wage have too continued their growth.
It has been a restaurant notion for a while that as soon as operation costs increase, so do the menu prices, with the only part shrinking being the portion on your plate.
But is this really the answer? In a Bloomberg article titled “Restaurants Have Pain on the Menu,” the author explains that the slowing sales growth is here to stay and that investors should expect to see the pain continue. But I’m here to tell you that doesn’t mean the future of restaurants is over. I’m here to tell you, be smarter.
So first off. Why is this occurring?
Many restauranteurs have raised menu prices to offset rising minimum wage. The problem for most is that this is coming just a few months after many restaurants already took a price increase to cover the rising healthcare requirements.
While the millennials are driving much of this decline, reports indicate 20% fewer restaurant trips in 2015 versus 2006; I believe it’s not just millennials but our entire society.
If we were to review my personal budget, we would find that food consumption is one of the top three expenses each month. We all have to eat, but when, what and how much is up to us. It is common practice for us to reduce our dining-out budget and slightly increase our grocery budget, especially when we are faced with a financial pinch. We all know that groceries are cheaper than dining out, but the consumers’ choice is no longer black and white with the introduction of the relatively new player eating into guest counts: the meal-kit.
The meal-kit is already a billion dollar market and is expected to increase tenfold by 2020! Combine this with better market and salad bars in our local grocery stores, and the result is less sales for restaurants.
Well that sucks. Then how can we keep our seats full?
Fortunately human beings seek interaction with others, and we enjoy that in a form of celebrations. The energy that can be experienced in well-executed restaurant is something most of us long for. The appeal in diners not having to induce effort towards preparation and clean-up will keep many filling the seats. Approach your restaurant with a thirst for knowledge. Why do your best guests keep coming back? Have you ever asked?
Find out who your best customers are and make decisions to ensure that they will leave with a burning desire to return. Once you know what or why they come in, take immediate action to train the staff.
We’ve noticed that training is something that always takes a back seat when sales flatten and or fall. But that’s exactly what you’re not supposed to do! This is when you should focus more of your energy around your core standards.
On that note, do you have core standards? Does your team make decisions that are congruent with them? Attention spent on the little things can cause managers to lose focus on the important daily actions that result in the biggest profits. As the saying goes, focus 80% of your effort on the 20% of the items that make the biggest difference, and you will be successful.
If you’re having trouble answering those questions, reach out to us at RealFood Consulting for guidance on the food service industry.
We work with clients to create systems, training programs, and menus that have labor elasticity, and to teach operators how to use productivity versus labor percentage when evaluating store performance. RealFood commits itself to these standards because we know that just about anyone can open a restaurant, but not everyone can keep it open.
Written by RFC’s West Coast Director of Operations, Rick Graves, who has worked within the hospitality industry for over 30 years. Rick’s experience in successful openings, operational execution and establishment of training systems gives clients the support needed to create their restaurant vision.