Operations

Maximizing the Profitability of Each Dine-In Customer

While most restaurants around the country have returned to varying degrees of in-house dining, the capacity restrictions and social distancing measures have left an indelible mark. Globally, there remains an almost 30 percent year-over-year decline in seated diners as of October 17, 2020.

For fine dining, that figure is even lower and comes in at an alarming 38 percent.

As states see rising cases of COVID-19, and falling temperatures see an end to outdoor dining in many regions, it’s clear that the challenges brought on by the pandemic are going to be with us for some time.

In order to survive, restaurant operators are required to focus on maximizing the profitability of each guest that enters their establishment. In most cases, this involves a return to the basics, good business practices that have been in existence since the first U.S. restaurant, Delmonico’s, opened its doors in 1827.

Increasing Check Averages

There are several tried-and-true methods for increasing check amounts. These include upselling and cross-selling, maximizing the beverage program, and menu psychology.

To determine the check average, simply divide the total number of sales by the total number of customers. Keep an eye on this number as you implement changes to see which strategies are working for you.

Upselling & Cross-Selling

Upselling and cross-selling not only increase profits, but they also enhance a guest’s experience. It is estimated that over half of the diners that enter a restaurant are unsure about what they will order.

Knowledgeable servers and bartenders listen to these guest’s preferences and then help steer them in the right direction. Called suggestive selling, it requires trained employees able to communicate—sharing their understanding of food, flavor, and pairing.

When upselling, a server or bartender will recommend a premium version of the guest’s request. Cross-selling involves selling complimentary dishes, like the cliched, “Would you like fries with that burger?” It’s clear that the most important aspect of this type of marketing is trained employees.

The following statistics demonstrate the importance of enhancing a guest’s experience:

The Temkin Group estimates that just a moderate increase in the customer experience creates, on average, an increase of $823 million over three years for a company with $1 billion in annual revenues.

Review Trackers analyzed over 300,000 online reviews on more than 1,300 restaurants. “Service” was the most frequently mentioned keyword.

Maximizing the Beverage Program

Alcohol sales offer the highest profit margin if created and priced effectively. A few successful strategies include the following:

  • A strong wine-by-the-glass program. On average, restaurants have around a 70 percent profit margin on wine.
  • Signature cocktail drinks are often priced anywhere from $10 to $20, adding to the bottom line while promoting brand awareness.
  • Don’t forget non-alcoholic drinks and the latest trends. Mocktails, alcohol-free spirits, and cannabis/CBD-infused drinks are all gaining traction in the restaurant industry.
  • Just as with the food menu, consider placement, highlighting, and descriptions on the drink menu.

Menu Psychology

Menu psychology, also known as menu engineering, involves restructuring and redesigning a restaurant’s menu in order to encourage guests to select high-profit items. It’s estimated that guests spend, on average, less than two minutes looking over the menu. This quick glance means that there are specific ways to draw their attention to targeted items:

  • Include a unique border or color around two of the targeted menu selections.
  • Place high-profit items in the golden triangle—the top right and top left corners, and the center.
  • The first two- and last-line items in a list draw people’s attention. Display the appetizer, entrée, dessert, and beverage selections with this in mind.
  • The price should follow the entrée, written in the same font, and without a dollar sign.
  • Describe the menu items in a way that captures the imagination and taste buds. Medallions of Steak Covered with Black Peppercorns and a Rich Mushroom Wine Sauce, as described on The Cheesecake Factory menu, is much more enticing than pan-fried beefsteak covered with mushroom sauce.

Increasing the Turnover Rate

With such limited capacity, increasing the availability of tables is a prime consideration. Fortunately, there are some proven strategies to increase a restaurant’s table turnover rate without nudging guests out the door.

It starts when the guest is first seated. According to industry standards, servers should arrive within one minute to greet and take drink orders. Within 10 minutes, the order should be taken. Of course, this timetable is dependent on the concept.

The pandemic has, in a rather ironic manner, offered some technical solutions to increasing table turnover rates. The growing demand for contactless payment and ordering options has decreased the time required for both ordering and payment.

Thinking out of the box and finding creative options to increase sales is one of the most important skill sets needed to survive the current pandemic. Like a chameleon changing colors, restaurants that endure will need to embrace change and the art of transformation.

Some of the top restaurants in the U.S. have dug deep into their creativity coiffures. Chicago’s Alinea opened a rooftop pop-up. Seattle’s Canlis created a breakfast bagel shed, a drive-in movie theater, and an outdoor crab shack.

While many restaurants do not have the space or financial backing to transform their business model to quite the same extent, most are able to offer premium to-go meals and cocktail kits and create brand-oriented retail products. And it is these types of changes that will enable a forward movement.

Data Essential’s September PULSE Operator Sentiment Report found that operators are slightly more optimistic about their chances of survival. Over 50 percent, though still worried, believe that they will make it through the current crisis. One third have had to implement changes and adapt and, because of these changes, may emerge from the pandemic stronger than ever.

Author:
Categories:
Operations
  • Subscribe to our latest insights

Are you capital raise ready?