Out of all of the businesses affected by our shelter in place orders, none have 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 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’s 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 of take out sales enough? This might be an exercise in futility, and it may not even be a profitable endeavor.
- 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 take 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 takes 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 box, 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 cashflow 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.