According to The New York Times, restaurants were hit the hardest during the recent recession. Restaurateurs across the country were forced to adapt to a reduced number of patrons along with the patrons’ shrinking budgets, which culminated in restaurants reporting up to 20% losses during these tough times. This, coupled with rising food costs, placed restaurants in an extremely troubling situation. Though the statistics might seem grim, the following are nine tactics that restaurant owners can institute in order to stay afloat during a tough economy:
1. Find Ways to Cut Costs Without Sacrificing Quality
Paying close attention to every expense within your business is important, but be careful to not lose track of what matters most: profit. Cutting costs will not make much of a difference if your profits are negatively affected. The key is to make sure that menu items with the largest gross profit margins stay, while the ones that have the lowest go. Only after you have a good handle on protecting profits should you worry about lowering food costs.
Besides your food, look to other aspects of your restaurant to cut or reduce. Do you have machinery that’s unused or that can be replaced with a cheaper alternative? Can you reduce your utility bills by keeping a TV off or by using less heat? Can you lower your marketing budget without hurting the effectiveness of your campaigns? These are all things to consider when trying to find ways to slash expenses. Don’t expect these changes to boost revenue, but if you can keep your revenue steady while cutting expenses, your restaurant’s chances of survival are bound to increase.
2. Don’t Waste
Analyze every ingredient you are using, and find ways to be both eco-conscious and financially responsible by using the entire product. If your restaurant serves meat, find ways to not waste any part of it. Renowned chefs, including Chris Cosentino, Gabrielle Hamilton and Mario Batali have found inventive ways to use offal, or the typically discarded parts of an animal, and have found much success doing so. When it comes to fruits and vegetables, save all edible parts and incorporate them into your menu. In terms of stocking your kitchen, be sure to organize your supplies so that you are using first-to-expire ingredients as soon as possible, ensuring that there is minimal waste in your kitchen.
3. Ask for Deals From Your Vendors
Do your research, and inquire about food prices through all possible providers. Talk to your suppliers, farmers, warehouses, etc. to see if you can buy ingredients in ways that are cost effective. See if you can change your payment terms or cut shipping costs, but don’t simply go from vendor to vendor to find the best “discounts.” Instead, try to strike deals by building stronger relationships, staying mindful of how you and your suppliers might be able to benefit. Remember that the survival of your vendors depends on the survival of the restaurants they supply, so prove your loyalty and ask about ways your vendor can help you cut costs.
But be careful about what “cost effective” actually means. Buying things in bulk does not guarantee that you save money if you end up creating more waste and spoilage.
4. Communicate and Be Transparent With Employees
Let your employees know about the tough economic situation you’re facing. Knowledge is power, and you can empower your employees with information about your business. They’ll have a reason to be more mindful of cost-saving initiatives, and they may even have solutions for how to help. Furthermore, tell your employees how much you appreciate them; encouragement can be a great boost of morale even in a tough situation. As Dale Carnegie instructs in his famous book How to Win Friends and Influence People, you should “give honest, sincere appreciation. Be ‘hearty in your approbation and lavish in your praise,’ and people will cherish your words and treasure them and repeat them over a lifetime—repeat them years after you have forgotten them.” That is certainly one way to get your employees on board with your shifting financial focus while recognizing them for their positive contributions.
Unfortunately, layoffs or furloughs might be in order. Some employees might sense this and jump ship early, and if these employees are your top performers, it could be the demise of your restaurant. Avoid this by being completely transparent with your workers. Tell them that their hours might be cut, but assure your top performers that they will not be affected (if this is in fact the case). If feasible, sit down with each worker to learn about his or her individual situation, and inform those who are at risk of losing hours that they might need to find secondary sources of income. They may not be happy about the situation, but they’ll respect the warning as well as the honesty.
5. Focus on Unique Menu Items
Create menu items that cannot be found elsewhere or at least cannot be found in your local neighborhood. By becoming known for a particularly spectacular and unusual dish, it will pique your customers’ interests and perhaps have them coming back for more. This is particularly true for dishes that cannot be easily replicated at home.
6. Get Creative on Social Media
We mention above that you should consider cutting your marketing expenses, but one way you can optimize your marketing strategy without breaking the bank is by focusing on social media and other inexpensive marketing channels. Social networks, such as Facebook, Google+ and Twitter, are free resources that you can utilize to market your restaurant. Social media marketing lends itself perfectly to the restaurant business, as many customers are already adept at taking photographs of well-displayed dishes and excited dining friends, and they love sharing their experiences with their networks.
To better leverage your social media campaign, optimize your entire network by setting up complete profiles across all social sites, and engage your users by constantly updating your posts and responding to queries or concerns. You may even be able find a savvy (but cheap) marketing student that’ll run your social campaign as an intern. Think about creative campaigns you can employ in order to engage your customers and to encourage them to share with their friends. Attract their attention and get them involved by issuing contests, secret menus, discounts and other fun but valuable perks that are exclusive to your online followers. Spending a lot of cash on marketing may not be feasible, but completely neglecting marketing is a disaster in the making.
7. Ask Your Customers What They Want
Be sure that you are focusing on the types of menu items, atmospheric elements and pleasant experiences that your customers truly want. Include comment cards with your patrons’ bills to get feedback on their visits. Offer online surveys, and take to social media to inquire as to what your customers would like to see improved or changed to their liking. This market research will not only benefit the effectiveness of your campaigns, menus and changes to your dining room, but it’ll also assure your customers that you value their input, which is always a good thing for customer service.
8. Be an Active Member of Your Local Community
Attend local events in order to stay abreast of concerns in your neighborhood and to get to know your area’s key players, including businesses and local business influencers. Your presence and attendance will provide a personal touch that can positively impact your restaurant. In fact, you can do strategic networking by using Hoovers and LinkedIn, for example, to find out which companies in your area are the top revenue producers and which people are the main decision-makers. By targeting key players, your networking efforts will be optimized rather than simply left to chance.
9. Open Yourself Up to Creative Options
There’s an old saying that tells us “necessity is the mother of invention.” So rather than focusing on your diminishing resources, use what you currently have as catalysts to spark your creative juices. Reframe questions from how you can stay afloat to how you can improve customer experience, service and create a social atmosphere that will bring people in. Think about borrowing tactics from other industries and implementing them into your business. Let your creativity fly, and you just might come up with some impressive solutions to your financial woes.
If you’re in the restaurant business, don’t let a tough economy get you down. Use your limited resources to continue to stay the course during stormy weather by incorporating the nine tips above.