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There are no shortages of obstacles that pop up while running a restaurant. As we continue to recover from the pandemic and brace a rising recession heading into the new year, owners and management teams are facing four key challenges:
- Tackling inflation and rising food costs
- Finding and retaining quality staff
- Controlling growing operational costs
- Reaching new customers
As the restaurant industry shifts, it’s important to stay on top of current trends and pivot your restaurant business plans accordingly. Here are some actionable solutions to help you overcome these obstacles and thrive.
Challenges restaurants are facing
1. Tackling inflation and rising food costs
Running a restaurant during a down economy can be extremely difficult. As we approach the end of 2022, the country has been flung into a recession. A recession – or a period of economic decline that lasts for months – can have an effect on everything from food costs and pricing to employment and salaries. Restaurants may experience less business, causing them to close their doors.
Solution: Control food costs and optimize your menu pricing
Recession-proofing your restaurants is possible with strategy. The first step is to check your finances to see how flexible your business’ cash flow is. Your goal is to get a positive cash flow at your restaurant so you can grow your bottom line.
You may find that you need to cut costs. You can do this by simplifying menus, nixing menu items and using more versatile ingredients. You can also cut back on the portion sizes of your dishes to conserve ingredients. Make sure you re-evaluate the revenue you are making on each menu item. If the costs of ingredients have gone up, it’s a good idea to raise the price of the item to account for lost revenue.
However, you also need to consider the customer’s willingness to pay. While your delectable tacos may be a fan favorite at $15, if you bring the price up to $20 you may find customers turning away.
You should only increase pricing in small increments to avoid losing your customer base. Incorporating captivating menu descriptions could help elevate your dishes’ delectability. No matter what kinds of price changes you are making to your menu, it’s essential to keep the customers informed. You may find that your diners are more understanding when you are transparent about why pricing has changed.
While it can be hard to predict how a recession can affect your favorite ingredients, understanding what’s in season and sourcing for low cost goods can help you keep prices down. Here are some more tips on keeping costs down:
- Incorporate more grain into your recipes. Grain is a cheap ingredient, allowing it to retain a high-profit margin during a recession.
- Focus on making products from scratch instead of buying the product itself. Sourcing ingredients to make something yourself can allow you to make larger batches of dishes without breaking the bank.
- Buy ingredients in bulk. The more of an ingredient you buy, the lower the per-unit cost will go. Buy your ingredients in batches so that you can save money while feeding a crowd.
- Source local. Ingredients from down the street are a lot cheaper to transport and acquire than food coming from halfway across the country.
2. Finding and retaining quality staff
When a recession hits, a labor shortage is not far to follow. Why? To combat persistent inflation, the U.S. Federal Reserve aggressively raises the interest rate. Raising interest rates can slow investments, and therefore hiring. As a restaurant owner, it can be difficult to decide how to allocate your resources when your cash flow is tight. You may need to make tough decisions about cutting back staffing in order to stay afloat.
Solution: Build a culture around your restaurant that makes potential employees want to work for you
Your restaurant can’t keep running without a dedicated staff, so keeping them motivated is essential. Attracting and retaining staff during a recession may mean raising wages. But how can you do this while maintaining your bottom line?
Look to cut expendable costs, but be cautious about cutting employees. A unique aspect about this recession is that it hit after a pandemic that rocked the restaurant industry. This also left many Americans jobless, giving businesses the power to dictate wages. In fact, there are 5.3 million more jobs than workers, meaning that there are many people eager for employment. The best way to whether a recession is to create a dependable team that is dedicated to your restaurants’ mission. Having a smaller, hard working staff can help you reduce superfluous expenses and avoid day-to-day mishaps.
To keep quality employees, you need to offer a culture that’s more attractive than your competitors. Staff turnover is common in the hospitality industry, but it’s also costly. To keep your employees happy it’s good to bake in some appreciation into your management recipe. During a time of economic distress, your staff will appreciate small incentives that can help them bring some extra dough.
- Offer bonus incentives to reward staff members that have gone above and beyond for your restaurant.
- Add on perks into your employee package. You can’t go wrong with edible perks. This can be anything from free meals during shifts to giving family meals for your staff to take home.
- Encourage feedback from your staff and take action based on their input. Your employees will feel more invested in your restaurant when they feel like their opinions are being heard.
- Be understanding with sick leave, especially as the nation recovers from the pandemic. Your employees will appreciate you encouraging them to put their health first.
Looking for more ways to let your staff know you appreciate them? Check out more simple yet effective employee recognition ideas.
3. Controlling growing operation costs
In addition to the rising cost of food, staffing and general operational costs have surged. The pandemic shifted the way we view dining – from a rise in third-party delivery apps to the change in on-premise dining options, there are a lot of additional costs that go into running a restaurant these days.
The strategy that goes into keeping your restaurant afloat has also changed as new restaurant concepts enter the picture. Diners are used to on-demand cuisine that caters towards niche cravings. So how can you keep up with this demand?
Solution: Maximize your restaurant’s revenue potential with a virtual restaurant
Virtual restaurants are delivery-only operations that offer restaurateurs a way to tap into soaring delivery demand without taking on an entirely new business. Virtual restaurants allow restaurant owners to cross-utilize ingredients from their existing menu and leverage their existing staff to execute additional delivery orders.
Interested in getting started? Look to Bill Brick’s Wood Fire Pizza owner Ric Gruber for inspiration. Gruber launched several unique virtual restaurant concepts based on which cuisines were trending on Grubhub to target new customers and directly meet their demand.
While Gruber’s initial concept was pizza-focused, his virtual restaurant offered everything from specialty salads to pasta dishes. “With revenue loss during the pandemic, my virtual restaurants have helped me fill those gaps with an additional couple thousand dollars per concept every week,” Gruber said.
For more information on how to launch a virtual restaurant check out our VR checklist to make sure you don’t miss a step.
4. Reaching new customers
These days it’s hard to walk down a street corner without seeing an advertisement about where to get the best milkshake or scroll through social media and avoid photos of mouthwatering pasta. We get it – It’s hard to catch diners’ attention in a saturated market.
If you cook a killer carbonara and no one knows about it, all you have is a bowl of quickly cooling pasta and rapidly increasing debt. To thrive, restaurants have to catch the attention of local diners on all channels. When diners turn to digital channels to hit up restaurants and research new eateries, you want to make sure your restaurant has the ability to catch their attention.
Here is why going digital matters:
- 90% of customers research a restaurant before dining
- 77% of consumers are likely to check out a restaurant’s website before they decide to dine in or out takeout/delivery
- About one-third of diners read other guests’ reviews before choosing an eatery
Solution: Build a 360-degree marketing strategy for your restaurant
Diversifying your customer base can help you avoid depending on one type of customer when money is tight. But the real challenge comes with knowing how to attract different types of customers. That’s why every restaurant needs a solid marketing strategy. This formal blueprint serves as a road map for all your marketing, promotions, outreach and more. Your strategy can be broad (“attract more diners”) or specific (“fill all the seats for upcoming wine dinner”). The basic plan will look very similar, but how you flesh out each step depends on your objective.
You can also grow your online presence through social media marketing. Start by choosing the right social media platforms for your demographic and intent. Then use tactics like social media contests and user-generated content to gain traction to get potential guests excited about your restaurant. Make sure every profile includes a link to your online ordering.
A strong online presence also includes an updated, optimized restaurant website. When 90% of diners are researching local restaurants, they should find your site where they can read about your chef, check out your menu and even place an order for pickup or delivery.
With Direct, you can create a custom branded restaurant website that does just that. And the best part is you can use Direct to start taking orders for zero commission, allowing you to invest more money into your bottom line. Check out the Direct Success Playbook to learn how to effectively drive online traffic to your restaurant.
More ways to make extra cash during a recession
No matter how you plan on cutting costs, it can always help to make some extra money for your restaurant on the side. Try some of these alternate ways to drive revenue:
- Sell merchandise. Slap your brand on a t-shirt, hat or bag and sell your merch online and in-store. You not only will make some extra dough, but you’ll also get some free advertising as your diners rep your brand.
- Offer catering. Expand your customer base by offering catering. With Grubhub, you can easily add catering services to your restaurant and start taking orders ASAP.
- Promote gift cards. Think of gift cards as instant cash for your restaurant. Encouraging diners to buy gift cards can grow your revenue while promising customers in the future.
- Host a cooking class. Get creative and encourage your community to become involved in your restaurant by hosting a cooking class. This can also help you bring some business in during quieter times.
- Rent out your venue. Do you have a stellar brick and mortar restaurant that you love to show off? Consider renting out your venue to groups looking for a place to celebrate. You can even offer catering to turn your restaurant into an all-in-one gathering venue.
Overcome the biggest challenges of being a restaurant owner with Grubhub by your side.
Running a restaurant during a recession is not without its challenges. But by using existing tools and partnering with Grubhub, you can optimize your operations and prepare for success without stressing your bottom line.
Whether you’re interested in commission-free online ordering solutions or want to capture new customers using our proven solutions and technology, we’re ready to put your restaurant first.
Get started with Grubhub today.