With this news that the UK may enter a technical recession after a year of slow-moving growth and high-interest rates, our economy and the resilience of our clients have been a persistent topic on my mind. And even though most of the time we can predict or prepare for this type of situation, they usually come unprecedented.
First things first, patterns and economic crisis.
An economic crisis is very much like a storm. We can use scientific tools to predict it and take measures to survive it, but it’s still something that we can’t control.
The fact that we can’t control it does not mean we can’t face it when it comes. We can always take out our rainy clothes, our umbrellas, and all other safety precautions for when the storm comes.
So what are those safety precautions in the restaurant business?
The usual pattern of a restaurant during an economic crisis is cutting your costs, and negotiating with your suppliers and your landlord so that your business can survive the storm. But when times are tough, restaurants should not only focus on cutting costs but also on driving revenue. Rather than offering discount deals or increasing prices to supplement lost revenue, entice diners to your restaurant during meal periods that are not as profitable with special dishes that are unique and offered at a lower price that are only available during that time. For example, if you have a fine dining restaurant where lunch is slow, consider marketing an affordably priced pasta and salad lunch set, as this could attract customers who normally could not afford to dine at your restaurant. This will ensure you maintain your brand and customer experience while attracting budget-conscious customers.
Adaptability without disruptions should be an ongoing process and while making cuts is necessary, they cannot come at the cost of your brand. When customers are more spend conscious they may forego a cocktail with dinner. Consider offering a lower-priced alternative, like mocktails that still highlights your restaurant and increases average check while appealing to tighter purse strings.
Throughout my career, I’ve observed that during an economic downturn, most restaurants become more efficient. They are forced to step out of their comfort zone and improve overall. Because what happens when you’re out of your comfort zone? You have less time to stop and think, less time to analyze and make decisions, but you have more of an instinct to innovate and be creative.
One great example of this is, is businesses that implemented take-out options or delivery during COVID. The economic impact and method varied between businesses, but those that were able to pivot made sure they were still employing their staff, keeping their standards, and ensuring their customers and target audience were engaged with the brand in one way or another.
If you find yourself in survival mode, what could be your preparedness checklist?
As I mentioned before, there’s no realistic way to prepare long-term for an economic crisis, since in hospitality we are dealing with people daily and factors that might be outside of our control. But there are always three crucial elements in this industry: staff of course play a huge role, the number of covers or customers your business has, and the other is your selling prices with your target customer in mind.
Most times, you can’t reduce your staff too much without jeopardizing your business and the level of service that you provide, but you can make your staff more versatile. Do not allow panic to make you lose sight of what is important to your guests: that they feel at home in your restaurant. Rather than cutting to a skeleton staff, cut the days and shifts where you are losing money, it is better to have a capable staff work fewer hours than a shoestring team that is stretched thin. Ultimately when it comes to labor we need not let panic set in and forget the core of our business – hospitality. Utilize a versatile staff that is comfortable acting in different areas to maintain that hospitable feeling, while also keeping labor costs low.
Let’s use the masters of hospitality in France as an example. At many lean restaurants there, the person who greets you is also the person who serves your drinks and delivers your food. This might require more training, but it’s a viable adjustment to save your business during tough times. A better solution to an economic crisis is not a skeleton staff, it is utilizing your managers and the versatility of your team as you do during a good economic year
As discussed earlier, you need to think creatively to attract customers rather than offering discounts or raising prices. Adapt your menu to consumer habits and trends in your area and offer daily specials to increase revenue during slower periods.
Selling prices play a crucial role during an economic storm. Re-evaluating your menu does not mean downgrading the quality of your dishes. For instance, if the specialty of your restaurant is a fish dish, make sure it’s properly listed so the guest can quickly find it on your menu. If your customers are constantly ordering a low-cost item like a package of cookies, but ignoring the rest of your desserts, consider how you could repackage this item to make it more profitable.
Maximize your menu’s profitability by focusing not just on low-cost menu items, but also on high cash margin dishes that will appeal to customers and give you a greater share of the profit. An operator’s inclination may be to prioritize a low-cost dish like risotto, but ultimately it is just as important to highlight those dishes, like lobster that may cost more but also sell for more, as these have a greater profitability than the low-cost dish due to greater cash margins.
And lastly, how can you ensure you’re catering to your customers based on cultural habits around the world?
The winners in an economic downturn are the restaurants that creatively utilize their staff without sacrificing service, think ahead by renegotiating leases or leveraging future purchases to guarantee fixed pricing from vendors, and engineer their menu to increase profitability. But whether it’s a bull or bear year, restaurants that succeed make their restaurants culturally relevant to fit customer’s needs.
Let’s take a look at the Middle East for example, where locals love ordering dessert at the end of their meals compared to international guests who might not even browse that menu. This is an opportunity to properly train your staff and adapt your menu so that you’re able to not only offer dessert to those who might want it but also cater to the non-desert crowd while still increasing your average check by offering a final mocktail or a cheese plate to split.
Dietary restrictions also come into play everywhere around the world but are especially prevalent in areas surrounded by nature and adventure sports. Being more health conscious is now not only a trend, but a lifestyle for many people, so by updating your menu with nutritious and healthier options, you won’t miss an opportunity to reach different customers and their needs.
As someone with my fair share of experiences in this industry, I know that with every challenge comes an opportunity, because as a business operator, challenges become part of our day-to-day. So whenever you are faced with a challenge, know that there are people who have been through exactly what you’re going through and they might have more tools to help you get through it.
Paperchase has helped restaurants grow in bust and bubble times for over 30 years. We’re here to help you prepare your rain gear in case of an incoming storm and ensure you come out stronger in the end.
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