Many hospitality owners dream of rave reviews and lines around the block. But few are prepared for this kind of success.
For French Bistro Madame Rouge, this was a scenario on the cards when it became the only new restaurant in Queensland to win a chef’s hat in the Good Food Guide in 2017 – a national award.
Owner Mary Randles told The Pulse that the bistro could deal with the extra demand due to the award win, but it took her completely by surprise.
“I only went down to the awards because I promised my front-of-house manager we would. We had a lot of a hard work put into the first six to eight months of the business – losing money initially,” she said.
She said the major change was that the restaurant was now booked out during the week – not just on weekends anymore.
It was a contrast to her husband, Phil Johnson’s, award experience. In 1997 his E’cco Bistro won Gourmet Traveller’s Restaurant of the Year Award – still, it’s the only Queensland restaurant to take out the gong.
“He still remembers coming back from the restaurant on the Monday to find layers of faxes on the floor with bookings,” said Randles.
She said situations like that don’t occur as often as before in the hospitality industry. There are more great-quality restaurants to choose from.
Still, there are times when the pressure of running an award-winning restaurant (and the focus that comes with it) becomes too much to bear.
What to do when success is tricky to handle
In late 2017, one of France’s top chefs, Sébastien Bras, asked for his restaurant’s three Michelin stars to be removed. He wanted to stop the pressure of having each dish from his kitchen hyped as a three-Michelin-star meal.
Randles said only a one hat award was a blessing. The bistro received the benefits of increased publicity, but it escaped the extreme expectations that comes with two- or three-hat restaurants.
“There are times when you do feel the weight of the award, but that’s just about perspective. If you’re trying to create the best meals you can and you’re winning awards, it’s about maintaining the approach that won you the awards in the first place,” said Randles.
Dealing with the numbers
Smaller businesses can also struggle with the practical side of success with more customers beating down their door.
Other restaurants that have faced the demand generated by great reviews have turned to tech solutions. There are virtual line apps such as LadderChat – where people are placed in a ‘virtual queue’, and the app notifies them when their table is ready. No lining up is needed.
Also, solutions like Open Table allow businesses to show their open reservations online.
Some restaurants still use the old-school pen and paper booking system to manage wait times for eager diners. Or those that instruct wait staff to turn tables as soon as possible (and face some miffed diners in the process).
Success can also deter restaurateurs to innovate.
Why try harder when you’re No. 1?
When you win an award, there can be a temptation to repeat the winning format.
If it got you the award in the first place, why not do it again?
How to avoid a costly promo disaster in your restaurant or café
Offering promotional deals is a tried and tested way of driving new customers to your hospitality business, but how do you make sure your promo doesn’t backfire?
Coupons, giveaways and discount deals are a top choice on every hospitality business’ marketing menu, but they don’t always go to plan.
A Chengdu-based hot pot restaurant recently gained global media attention when it was forced to close after its ‘all-you-can-eat’ offer left it more than $100,000 out of pocket.
The restaurant created a deal that saw customers receiving unlimited food for a month – all for the cost of a $25 membership card.
The result? It was soon serving over 500 customers per day, but at a loss.
A world of promotional opportunities
Restaurant and Catering Australia’s Deputy CEO Sally Neville says the popularity of promotions in the hospitality space is driven by a crowded marketplace, with restaurants using them to grow their share of new customers, causing “operators to promote their business to grow their share of new customers and to remind and incentivise past customers to return”.
This has created an array of promotional options that’s “as broad as the industry itself”.
“From 25 to 50 per cent off menu prices, to ‘buy two get on free’, to ‘vouchers with incentive to return, to ‘complimentary glass of wine with the main course’, to ‘special pricing’, to ‘free BYO’, to ‘value add’ – the list goes on,” said Neville.
And the distribution channels for these promotions are just as diverse, including traditional methods like print vouchers and letter drops, or more new-age ones like email marketing, or apps that can push messages to customers as they pass nearby the shopfront.
While each of these types of promotion and methods for delivering them can be effective, it depends on what business owners are willing to put into testing and learning.
“The success of any promotion depends on the product on offer and its perceived value by the customer, the distribution reach of the channel, the age and demographic of the target market, as well as their preferences and trust in certain channels over others,” Neville said.
Five ways to make sure your promotion hits the mark
In the past ten years, new ways to promote restaurants or cafés caused businesses to see varied results as they trialled each new option.
According to Neville, there are plenty of cases where hospitality operators got burned in the process (though perhaps none so extreme as the recent Chinese hot pot example).
“Businesses sometimes oversold the vouchers which led to an influx of business that was low or no profit which meant that the product offering was compromised,” said Neville.
“The result was a poor customer experience, so although there was quick revenue generation, the venue’s reputation was damaged in the eyes of the consumer if the experience was poor.”
What can you do to keep your promos on point? Neville offers the following five tips:
- Keep the offer simple – “Customers don’t like being surprised or embarrassed by hidden fees and charges.”
- Make the message clear – “The offer must ultimately work for the business, so if it’s only cost-effective to make your deal available from Monday to Thursday, the wording must make that clear in order to be understood by guests, staff and operators.”
- Ask for feedback – “An invitation to have a coffee or a glass of wine with the owner will generate loyalty and provide valuable feedback from their guests on what promotions are valued. Staff will also have ideas given they are at the front line of the business.”
- Test, measure, rinse and repeat – “The owner or manager must assess the performance of all promotions to determine whether they are generating profit or simply turnover. Has the promotion brought in new business that is likely to return? After all, that’s the holy grail’ of hospitality – raving fans that return and spend.”
- Build your promos into long-term marketing plans – “New businesses have a shorter honeymoon period than ever before since we have more businesses opening than in the past. A plan to continuously engage with your customers throughout the life of the business is imperative to keep the business growing.”
As competition for new customers remains fierce among retail and hospitality businesses, the promo phenomenon has become par for the course.
For business owners, it’s become clear that the selective use and constant refinement of these dollar-driving deals must be a mainstay in any marketing plans with the clear aim of driving foot traffic, repeat customers and increasing revenue.
Is home delivery doing restaurants a disservice?
In Australia, UberEats was the subject of an ACCC investigation that saw the company agree to change and unfair condition which meant that restaurant owners were liable to refund customers for errors made by the program’s delivery drivers.
In the UK, the BBC made headlines when it successfully joined the delivery platform as a ‘fake’ takeaway venue without any identity, bank details or food hygiene rating checks.
Since then, UberEats has amended its onboarding process after releasing a statement describing the company as “deeply concerned by the breach of food safety policy,”. UberEats now demands all new sign-ups have a valid food hygiene rating.
It’s not just UberEats that restaurants have an issue with. Deliveroo and Foodora have had their share of bad press over ‘wage theft’ and new contracts that shifted the liability of incorrect orders to the rider rather than to the platform itself.
We spoke with some restaurant owners to find out what they think of these platforms and listed some key factors to consider when deciding if home delivery services are right for your business.
Will you be gaining more customers?
The Thirsty Wolf is a casual bar and eatery in Sydney. When they were located on King Street in Newtown, they found themselves in a ‘dead zone’ when it came to passing traffic. After weighing up their options, they decided to engage several home delivery companies to help them reach nearby diners who were unlikely to walk past the venue.
Very quickly, it became apparent that this was the right decision for them financially. As they looked around for a new location for their venue, the home delivery service kept them afloat by increasing their food sales by several hundred per cent.
Many other venues across Australia have similar feelings when it comes to home delivery services. They believe that these apps allow them to reach customers who would not usually dine at their venue, or if they have a venue that not designed to cater for many dine-in guests, the home delivery service allows them to sell more food than they would if they only served customers face to face.
Salmon & Bear found that once they offered home delivery, the venue saw an increase in food sales, but almost simultaneously noticed a dip in decline in their ‘in-venue’ traffic. It turned out that once the option was available, customers chose to dine at home rather than visit the venue. They chose to cancel home delivery to encourage customers to come back into the venue for the full experience’.
It’s essential to consider what you hope to achieve by using a home delivery service and then keeping a very keen eye on your business financials to work out if you’re actually making money, or if the association is actually one that is not working for you.
Does it enhance your venue’s offering?
Jared Merlino owns some of the best small venues in Sydney including Kittyhawk, Big Poppa’s, The Lobo Plantation and his latest venue, Bartolo. Bartolo is an Italian restaurant and bar that offers a modern spin on traditional Italian dishes such as homemade pasta, ragu and fresh Italian focaccia.
Merlino does not offer home delivery, and in fact, never plans to.
“We believe that most great food does not travel well. Additionally, the room you dine in and the service you receive is half of what makes the Bartolo dining experience so special,” he said.
“On top of that, I really worry about people judging the Bartolo experience on something they may eat at home after its travelled halfway across Sydney.”
Many venues share the same concerns when putting their reputation in the hands of a third-party company. With the never-ending issues surrounding how long it can take for food to be delivered and then the arguments about who is responsible when food doesn’t arrive in the same condition it was sent, there’s a lot to consider.
What’s your goal?
Before deciding whether to sign up for a home delivery service or not, you need first to understand your goal. If your goal is to pump out food that travels well and sell it to as many people as possible, then delivery might be for you. If your goal is to create a more curated experience for your customer or offer food that doesn’t travel well, you may need to consider whether delivery is for you.
Whatever you decide, watching your profit margins and listening to customer feedback is n essential to monitor the situation and catch any problems early.
Key decisions to consider when launching new takeout and delivery models for your restaurant
There’s little denying the devastating, widespread impact of COVID-19 on the U.S. restaurant and foodservice industry.
By March 22, 2020, some 38 states across the country had responded to the global crisis by implementing stay-at-home orders and forcing restaurants to limit their operations to take-out and delivery only. For many restaurants and similar types of businesses, such restrictions came as a major blow.
Despite initial projections of $899 billion in sales by the end of 2020, the National Food Service Industry wrote to the White House in March 2020 warning of a $225 billion decline in sales, a decline that would have a direct effect on the livelihood of the 15.6 million workers employed in the industry.
Even major national chains were affected. McDonald’s and Starbucks’ likes were all forced to make temporary closures, while the Union Square Hospitality Group, often widely praised for their exemplary employee standards, laid off thousands of employees.
However, for others, the switch to an online ordering and delivery model presented an opportunity to stay afloat in unchartered waters. According to recent research from Datassential, some 57 per cent of consumers were happy to order from restaurants if they operated a drive-thru service. In comparison, 47 per cent would willingly use a delivery service, and 46 per cent would use a takeout/carry out service. Stories are rife in the popular press of businesses that have used this kind of data to their advantage and successfully adapted their business to a new way of working.
Months later, as lockdown restrictions lift and return, COVID-19 remains a real danger. So, while many businesses in other sectors work to find new ways of operating in a socially-distanced manner, those in the restaurant industry already have a tried-and-tested solution.
Yet, even though switching to this particular “new normal” may overcome one challenge, it presents many more of its own.
Introducing a new menu
It’s a fact, often overlooked, that not every item on your in-house menu is entirely suitable for takeout or delivery. Dishes that need to be served uber-fresh may not be at their best after a 20-30 minute journey across town, while others simply may not be practical to serve them up in any other way than in-house.
That’s one reason to consider adapting your menu for a new way of operating. Another reason is that you may find that your customers ignore the majority of your menu items.
In the United Kingdom, food delivery startup Deliveroo said that 80 to 90 per cent of orders are concentrated on less than half of the menu items, and there’s no reason why this wouldn’t be the same in other countries, too.
Of course, adjusting your menu to a post-lockdown world means taking a clear look at what’s working and what isn’t.
With custom reports, restaurant owners don’t need to wait until the end of the month, or even the end of the week, to monitor sales. Sales reports can be generated and emailed to key stakeholders as, and when, required. With time very much of the essence, this helps to make fast, informed decisions about your delivery and takeout menu, eliminating waste and maximising revenue in the process.
Accounting can also prove invaluable in managing inventory so that you can improve efficiency, identifying those ingredients that simply aren’t suitable for your new way of working and making smart decisions when it comes to re-ordering.
Setting up online ordering
While there is nothing inherently wrong with telephone order, it’s far from the most efficient system available. During busy periods, answering the phone becomes a full-time job all by itself, taking staff away from food preparation and other essential duties. As a result, it doesn’t take much to infuriate more customers than you successfully serve.
For this reason, an efficient online ordering system has become so essential, especially during the current climate. There are countless apps, Software as a Service (SaaS) solutions, and bespoke tools to help restaurants accept online orders, but setting one up is often only half the battle.
You also need to ensure that software integrates with your point of sale (POS) software and that your POS, itself, works in conjunction with other tools, such as your accounting and inventory management software. This ensures that online orders are properly tracked, invoices and receipts are properly generated, and inventory is properly handled.
For example, should your famous sweet potato fries suddenly experience a surge in popularity during a single shift, your inventory management system can alert you that you need to reorder your supplies to avoid being out of stock.
Integrating your online ordering app with QuickBooks Online Advanced will allow you to track every dollar generated through online ordering, helping to ensure a seamless transition from your previous model and keep tabs on your best-selling items, again improving your decision-making processes.
A unique challenge posed to mid-sized chain brands is deciding which branches to keep open while focusing on online ordering and delivery.
One of QuickBooks Online Advanced’s advantages is that it makes it easy to track data from multiple locations and access all of that data in one dashboard. This can help you identify which branches are the most in-demand and which aren’t doing so well. Armed with this information, you’ll be able to minimise costs by temporarily closing down underperforming branches, perhaps relocating staff to those locations that need the most on-site help.
A shift in overhead costs
It isn’t just the cost of running more locations than necessary that will impact your bottom line. A shift to online ordering and delivery means a shift in day-to-day overhead, too.
For example, fewer in-house customers mean less use of electricity to power lighting, background music, and other essential elements to the customer experience. However, you’re likely to spend more on suitable containers for take-away and deliveries, not to mention the cost of hiring delivery staff. Meanwhile, that revamped menu discussed earlier will also bring changes to your outgoing costs, all of which need to be effectively managed if your business s to successfully adapts to the “new normal.”
QuickBooks Online Advanced provides a number of helpful features to support this change:
- Time-tracking payroll features enable you to get a better handle on your staffing costs. Simultaneously, the ability to automatically categorise your expenses and view them from one central location makes it easy to control costs.
- Elsewhere, QuickBooks Online Advanced users benefit from effortless integration, with more than 600 different apps designed to do everything from managing inventory to scheduling your workforce.
Combined, such features provide you with all the information you need to work out exactly how adapting to a new way of working affects your costs and manages those costs effectively.
Navigating food delivery to your restaurant customers
None of the businesses affected by our shelter in place orders has been affected more than the restaurant industry. Upscale restaurants have been hit particularly hard. Don’t believe me? Take a look at OpenTable’s statistics around the globe. This is probably the worst economic impact the restaurant industry will ever see, and it will change the face of the industry forever.
Given the current situation, the forecast isn’t bright for restaurants. Most likely we’re looking at eight weeks before we even start to see recovery (no, not a full recovery, just the start). How will restaurants survive?
So delivery, right?
We’ve seen a lot of restaurants pivot quickly toward delivery and take out, and we’ve even seen some businesses succeed in making this change. Should you do the same? Not necessarily. There are a lot of operational questions to consider before switching:
- Does your POS allow for online ordering? If they have a newer POS that allows people to order from their phone or without calling, you’re in good shape. This takes the weight off of the front of the house having to take orders over the phone. Here are 22 reasons why you need to have online ordering.
- Is it enough? At the end of the day, if you were doing $8k of sales a day, is $1k to take out sales enough? This might be an exercise in futility, and it may not even be a profitable endeavour.
- Health and liability. Having employees work right now may not be something that they want to do; you have to be okay with the fact that you may be putting employees at risk.
- Does it fit the concept? Some restaurant concepts do not translate well to delivery, and some things might cost their reputation. For example, iI=f you have an oyster bar, delivery is probably not in your deck of cards. A famous mantra comes to mind: “Do it Well or Not at All.” If the takeout menu is not something your customers will love, it is going to affect your business’ reputation, and is it only generating a small amount of revenue? It’s probably not worth it.
- Don’t use delivery services: Food delivery services take the lion’s share of profits, and the restaurant will end up losing money on the service. Don’t use them. End of story.
Many of our restaurant clients are opting to just close the doors, batten down the hatches, and wait for this storm to pass. Delivery has to make sense on all five points in order to create a viable business.
Decrease inventory and change menu design
If you decide to go with delivery, the primary issue you’ll face is eliminating their excess inventory from your sit-down restaurant concept. There are some items that might not be well suited for take-out. For example, if ceviche is on the menu, well, that’s not going to happen. Figure out how to eliminate the excess inventory, and then retool the menu for taking out. Here are a couple of additional considerations:
- Family style is the way to go: Conventional take out and delivery restaurants are not geared toward families if the restaurant can create a prix fixe menu for two, four, or people that take the weight off of the parents’ shoulders.
- Value-oriented: Even wealthier families are looking at their pocketbooks right now, so skip the truffles, and focus on getting people fed. Comfort food is what is killing it right now.
- Takeout boxes: McDonald’s doesn’t put their fries in a closed container, so why on earth are you? Think about the execution of the menu and stop putting everything in a box; no one wants steamed french fries.
Free cash flow tool
How will you survive? To be honest, it isn’t going to be easy. The next few weeks will be critical in determining the future of the restaurant industry. Prix Fixe Accounting has put together a cash flow worksheet specifically for restaurants. Feel free to take a look and download a copy here. Here’s a video on how to use the spreadsheet.