Operations

A Business Model that Allows Restaurants to Break-Even or Better in a 50% Capacity World

The bad news: It is estimated that, by year’s end, the restaurant industry could face a loss of $240 billion. A survey conducted by The National Restaurant Association found that 75 percent of operators believe that they will not be profitable within the next six months.

The good news: RESTAURANTS Act—proposed legislation that would create $120 billion in grants for small local restaurants and bars. If such a fund is not created, it is estimated that 85 percent of independent restaurants could be closed by the end of 2020. Wait, that was supposed to be good news.

Despite the heart-wrenching statistics and slow-moving legislation, there are restaurants that have found a way to make a profit during this current pandemic that, like a roller coaster, seems to fall, only to rise again. Let’s take a look at the choices they’ve made that are leading to a successful business model.

Seven Reasons in Washington, DC

Delivery and takeout, as with many restaurants that have found some measure of success during this pandemic, was the move that Seven Reasons, a Latin American hot spot, used to garner success. Business Insider reported on their excitement as they watched, with amazement, the growing interest. One night, after switching over to a takeout/delivery model, they brought in $1,000, the next night it rose to $3,000 and climbed upward from there. The restaurant was up to $60,000 for the second week of April. Orders for takeout and delivery are placed through Tock.

Go to Seven Reason’s website and you’ll see that they are strong communicators, giving their customers exact information on how the procedure of dining in will look like now that restrictions are lifting. They include the need to make reservations online using Tock, the dining options that will be available, the safety measures in place, and information regarding the QR code that they will now find at their table. Guests simply scan the code with their phone in order to view a contactless menu. They are also adding a 22 percent service fee to every check which replaces tipping.

Wolfgang Puck Fine Dining Group

Wolfgang Puck spoke with Boris Groysberg from Harvard Business School regarding the changes they have made at their restaurants during the pandemic. The keyword is adaptation. They try unique solutions, keeping those that work, and throwing out those that fail.

Delivery and takeout play a big part, but instead of the usual menu, Puck decided that, at Chinois, his longtime Asian fusion restaurant in Santa Monica, the focus would be on giving the customer an experience—as if they were dining in their establishment. An example he shared was a meal for $39 that included “Chinese chicken soup with wontons in it, potstickers with spicy sauce, vegetable spring rolls with dipping sauce, the Chinois chicken salad, the choice of half a lobster or a portion of short ribs with candied ginger sweet potato puree, and finally cookies.” While they didn’t make a lot of money on that item, they did attract a lot of customers.

At Spago, in Beverly Hills, their burgers on Thursdays offering flopped. Switching to fried chicken, they found their best seller. They also started selling wine and cocktails to go, which proved to be very popular. On certain days, he transforms his catering kitchen into a studio in order to give home shopping a try—selling steaks and air fryers—and offering a virtual cooking class. Puck can see ghost kitchens in the company’s future.

Support for Delivery and Takeout

As is evident by our two examples, takeout and delivery have proven to be a major force for restaurant restructuring during the pandemic. Many have turned to Tock, the once online restaurant reservation platform turned delivery service, that recently raised $10 million in new funding. Tock to Go came into being after CEO, Nick Kokonas, found restaurants that had no previous experience in delivery struggling under the weight of the pandemic. The company charges a flat delivery service fee of 3 percent, far less than the often 30 percent charged by third-party delivery apps. When determining which items on your menu will travel well, consider adding some that are specific to your to-go menus such as lunch boxes and family packs.

Online Presence

Digital engagement has soared since the pandemic left millions of people at home and on their computer or tablet. A strong online-ordering presence and a digital loyalty program are both essential to surviving the new norm. There is a multitude of restaurant app developers vying for your business. ChowNow is one of these, offering both monthly and annual payment plans.

Social Media Messaging

Many once brand-ambassador guests have shifted their one-time dining habit to cooking at home and meal-delivery kits. Encourage their return by sending them personalized messages that include special offers and why it’s safe to return to your restaurant for dine-in service.

Wing Zone uses social media and their website to deliver messages about how they are sanitizing their hot bags and other safety precautions being taken by their delivery drivers. They also use these platforms in their aggressive marketing campaigns. It’s important to remember to maintain the voice of your brand no matter what message you’re delivering, and to engage customers across multiple digital channels.

Focused Menu

Focus on value items and then upsell. Keep an eye on consumer behavior and adapt accordingly, capturing current trends such as plant-based proteins while simplifying and limiting the overall concept. Now is the time to optimize your COGS through menu pricing, portioning, and leveraging your restaurant’s PMIX to reduce food costs.

It’s apparent that restaurants are in survival mode, and that those who will weather the storm that will likely continue until a vaccine is in place, have a strong capacity to adapt. Some have gone so far as to close their restaurant and create a new business in the same space. Olmsted, once a restaurant in Brooklyn, N.Y., is now Olmsted Trading Post. Customers are responding by lining up every day to purchase specialty items and prepared foods such as duck pastrami, chutneys, and batched cocktails.

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