Approaching almost two months into 2023, there is one thing for certain. None of us has a crystal ball to predict every spike or decline we may see in our economy and the restaurant industry, but we can examine the current financial climate to prepare today and protect ourselves financially as inflation continues to creep in.
That’s the advice from Lauren Fernandez, Founder and CEO of Full Course, who has operated and sold 11 restaurants and created a successful career in the hospitality industry as a franchise operator, restaurant developer and executive. Fernandez notes that the top economic stressors that will affect operators are:
- Rising costs of labor due to ongoing staffing shortages
- Rising cost of goods as a function of inflation and supply chain issues
- Consumer behavior during inflationary periods resulting in less top-line sales
Despite these challenges, she offers some guidance. “You can rely upon your ‘superpowers’ of nimbleness and constant tweaking to outwork and outsmart what is happening in our current economic environment. Restaurant operators who can adapt to different circumstances, adjust restaurant practices and meet new market needs will better combat inflation and its impact,” says Fernandez.
She encourages operators to deploy these strategies:
Commit the time for regular inventory.
With product prices skyrocketing, you have to manage inventory, or it will manage you. Invest time each week in an inventory check so you get an accurate picture of the costs of goods sold. “Without this, you can’t develop appropriate menu pricing,” says Fernandez. If this is too daunting, it may be time to invest in an inventory technology solution that provides real-time visibility to cost of goods sold (COGS).
Adjust menu pricing to reflect market and margins.
Menu prices are basically a math equation that are dependent on the COGS, which includes issues in commodity pricing and supply chain disruptions. Long gone are the days when you can change your menu once a season, or even once a year. “Take the time to print new menus or move to a menu style like a QR code that allows you to dynamically adjust pricing,” says Fernandez.
Show some love to your Loyalty Program.
Customer retention is the name of the game as you continuously strategize to grow a loyalty program. “Your team’s mission needs to be love-bombing on those top customers, because people still eat out during recessions, but you’re fighting for their frequency,” she says. Consider creating staff incentives, like a $25 gift card, for signing up X number of people for the loyalty program in a week.
Hire a great accountant.
Every penny counts! Allocating money toward a skilled accountant will pay dividends now, and well into the future. “You’ll catch so many more pennies with a really good accountant and doing regular inventory,” says Fernandez. “You’ll probably catch some theft, you’re going to catch huge amounts of waste, and that’s sometimes up to two to three percent of your margins.” Reliable data, including COGS, start with good data from your accountants.
Bundle, don’t discount or coupon.
Customers appreciate value, and when you bundle complimentary items, you can make the ordinary extraordinary by creating appealing deals. “Let’s say you sell a ton of an amazing breakfast sandwich, and it has a decent but not great margin. Now’s the time to bundle it with that breakfast cocktail,” says Fernandez. The answer is not couponing or discounting product, but rather, creating perceived value with an offer that has a good blended profit margin.
