One Piece of Advice That Will Change Your Restaurant Business
You need to stop thinking about price and start thinking about value. It’s Friday night. The lights are dimmed, the tables are set, and the smell of your signature dish wafts through the air. But as you stand there, surveying your restaurant, a knot tightens in your stomach. You’ve worked so hard—too hard—yet the seats remain far from full. Every glance at those empty chairs feels like a punch to the gut, a reminder that despite all your efforts, something isn’t working. Maybe you’ve already started cutting back on staff, making smaller orders, or skimping on ingredients. You’ve watched as other restaurant owners have quietly closed their doors. You wonder if you’re next. But hold on. Before you throw in the towel, I’m going to give you some advice—one simple thing you can do to turn it all around. It’s not a magic wand, but it is something powerful. And the best part? It starts today. Years ago, when I owned a chain of restaurants across seven states, I was standing where you are now. Some locations thrived, others struggled, and I found myself asking: Why? We did a survey, asking more than 1,000 customers about their experiences, and one thing blew my mind: 10 percent of our customers were first-timers. Every single day, no matter what, 10 percent of the people walking through our doors had never been there before. Think about that. Even in my worst-performing locations, every single day, 10 percent of the people who came through the door had no idea what happened yesterday. They weren’t comparing the food to a bad experience last week. They weren’t disappointed because their favorite dish was taken off the menu. They were fresh. They were hopeful. What does that mean for you? It means every day, you’ve got a shot. Even if only 50 people come through your door, five of them are new. Those five have no clue about the stress or the struggle you’re going through. They don’t know that you’ve been cutting back or that you’re at the end of your rope. They just know that they’re here for a meal. And that’s your chance. Those five could be the customers who save your business—if you treat them right…
The Strain of Success
How the labor shortage is affecting America’s restaurants. According to the most recent Department of Labor report, there are more than 8.2 million job openings in the United States, yet only about 7.2 million unemployed workers are seeking to fill these roles. That means if every job seeker were hired, a million positions would remain unfilled. Many of these vacant jobs fall in the service sector, with a high concentration in the restaurant and hospitality industry. While the rate of job openings for hotels and restaurants has fallen recently, the restaurant sector is struggling to fill positions, reflecting a deeper issue within the labor market. Many restaurants are operating at reduced capacity or with limited hours because they cannot find enough staff. This is not merely an inconvenience—it’s a significant barrier to a business’ economic success and customer satisfaction. Multiple factors contributing to this shortage including early retirements, increased childcare costs, and restrictive immigration policies .Further compounding the issue, the Great Resignation 2.0 could be on the horizon, with nearly three in ten workers expected to quit their jobs by the end of 2024. Survey findings released by Resume Builder indicate that 28 percent of 1,000 full-time workers plan to quit, with the highest percentage coming from the service industry and workers ages 18-34. The labor shortage in the restaurant industry is not only a persistent issue but one that is expected to worsen. According to a recent survey highlighted in Tech.co, 62 percent of restaurant owners anticipate the labor shortage will continue or get worse over the next year. This aligns with the findings from Resume Builder, which indicate that nearly 30% of full-time workers, particularly in the service industry, plan to quit their jobs by the end of 2024. As restaurant owners grapple with the current staffing challenges, these projections underscore the urgency for effective solutions to attract and retain workers in the industry. The impact on restaurants is evident: longer wait times, inconsistent service, and increased use of technology like self-service kiosks and automated ordering systems are on the rise. While technology can improve efficiency, it cannot replace the personal service that defines great dining experiences. Restaurant owners have attempted to mitigate the shortage by raising wages and enhancing benefits, but these measures have not been enough to bridge the gap…
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Focus on Increasing Revenue
Before cutting costs. Imagine a small family-owned restaurant in the heart of a bustling city. The owners are a passionate couple who pour their hearts into creating incredible food, yet they struggle to make ends meet. They decide to focus on cutting costs. They trim the menu, reduce staff, even compromise on ingredients. But instead of thriving the restaurant loses its charm and customers begin to drift away. Now let’s consider a different approach, one that emphasizes increasing revenue rather than decreasing your expenses. It’s a path that leads to growth, innovation and financial freedom that every restaurant owner dreams of. (Disclaimer: eventually you have to get to cutting costs with systems. But when you need sales, focus on increasing revenue first.) I often talk with restaurant owners just like the couple I just described. They fit that description, and their annual sales are under $850,000 a year, most often ranging from $350,000 to $750,000 a year. When your restaurant is in that range, you likely won’t be able to afford a full management team, and you will be key in the day-to-day operations. When I talk with these restaurant owners, I let them know they need to increase their volumes first. Here is why: If I helped save 10 points on a $500,000 a year restaurant, that’s $50,000. When you’re already in a financial bind, this just means working your butt off with not much reward. But if a restaurant is able to get sales well up to $850,000 or $1 million, that 10% could become life-changing money. Imagine making $100,000 more per year on the same sales you’re doing right now. To get there, this means increasing sales first and finding efficiencies before cutting costs. When focusing on a revenue-first approach and getting your sales up, you need to focus on what makes your restaurant unique. Invest in a great hospitality experience and in marketing. There are a lot of strategies you can use to increase your revenue. (I offered a plan for how to increase restaurant sales $250,000 year on my podcast, “The Restaurant Prosperity Formula,” episode 45…
How Interchange Fees Are Reshaping the Restaurant Industry’s Bottom Lines
What Is an Interchange Fee? In the modern dining landscape, where convenience and customer experience are paramount, restaurants increasingly rely on electronic payment systems to facilitate transactions. However, behind the scenes, interchange fees play a crucial yet often overlooked factor in shaping these establishments’ financial health. These fees, charged by credit card companies to process transactions, can profoundly impact restaurants of all sizes. As a percentage of each sale, interchange fees may seem minor individually but can accumulate to significant amounts over time. For restaurants, especially those operating on thin margins, these fees can influence pricing strategies, profitability, and even operational decisions. Understanding how interchange fees affect restaurants is essential for grasping the broader economic pressures they face and exploring potential strategies to mitigate their impact. Interchange fees are charges set by credit card networks (Visa, Mastercard, etc.) and represent a percentage of each transaction. These fees go to the issuing bank and cover the costs of processing the transaction. Across major credit cards, percentages fall between 1.5% and 3.0%. As of October 2023, Visa charges restaurants between 2.1 and 2.2 percent interchange fees for transactions, plus a minimum of $0.04 or $0.08 depending on the tier. Interchange fees are non-negotiable and credit card companies adjust them regularly. Specifically, every April and October, Visa and Mastercard publish new rates every April and October. Interchange fees can significantly affect a restaurant’s bottom line in various ways. This includes higher prices and reduced cash flow. With high interchange fees, merchants have to raise operating costs, which are often passed onto the consumer with higher prices or may seek out additional resources and capital to adjust to new and rising credit card fees. As fees accumulate, restaurant owners often have difficulty managing cash flow and may be forced to cut essential services for their employees or other overhead costs…
How Operators Can Navigate Low Consumer Confidence
Without overusing discounts. It’s no secret that consumer confidence is low, with 62% of people living paycheck to paycheck, according to data from Technomic. Inflationary challenges are present on restaurant menus too, with menu prices now 28% higher, on average, than in 2020, Technomic senior principal David Henkes shared during CREATE: the Event for Emerging Restaurateurs last week in Nashville, Tenn. This dynamic of skyrocketing menu prices juxtaposed against stagnant household budgets has really resulted in concerning traffic numbers. “As non-prime costs continue to proliferate,” Henkes said, full-service dining is faring even worse than limited-service operators when it comes to maintaining traffic numbers. With this dynamic expected to continue (36% of consumers expect their restaurant visits to decrease in Q3), many operators are taking the discounting route, though it’s not the only option. “When you’ve got higher prices and declining traffic, you see deals,” Henkes said Wednesday during CREATE’s “Restaurants 2030” session. “The value wars have really erupted, not only in the QSR, where a number of chains are doing different promotions, but even on the full-service side… So what do you do if you’re a restaurant? How do you then excite your consumers? Restaurants are trying to appeal to customers by bringing out the LTOs.” According to Technomic, limited-time offers are up 46%, which is where most of the menu innovation is happening since the core menu at many restaurants has not changed much. Beverages are a particularly hot category for innovation, particularly in the wake of non-alcoholic beverage chains growing in popularity, in categories like boba and dirty soda. “There’s a lot of trial and error going on, and it’s typically all happening on the LTO side,” Henkes said. “I increasingly believe that beverage is one of the battlefields for restaurant innovation right now. If you look at what McDonald’s did with CosMc’s, and H-Tea-O, Swig, 7Brew, creative beverage concepts and drive-thru beverages are having [a moment]…”
How Restaurants Can Thrive in the Experience Economy
Explore Flavors with a Tasting or Cooking Demonstration. One of life’s greatest pleasures is enjoying a delicious meal out with friends and family—an outing prized for the camaraderie as much as the food itself. Increasingly, consumers are focusing on experiences rather than material goods, and restaurants are in the sweet spot to take advantage of this “experiential economy.” The American Customer Satisfaction Index (ACSI®) Restaurant and Food Delivery Study 2024 finds that while customer satisfaction is up, consumers are becoming more discerning with their discretionary spending. A 2024 Datassential report finds that most consumers treat themselves to a meal out at least once a month, and nearly 60% attend a premium or unique dining experience at least once a year. Further, it finds that “Gen Z and Millennial consumers in particular are especially eager to try out interesting events and concepts, from tasting menus and dinner theater to themed restaurants and molecular gastronomy.” This enthusiasm has sparked a robust market, with events emerging as a key ingredient to boost traffic, build brand loyalty and drive revenue. It’s a winning way to keep customers coming back; more than half of diners say they are interested in new and different experiences, according to Square’s 2024 Dining Report. Wondering how your eatery can take advantage of this trend? Here’s what you need to know. Tasting events and cooking classes/demonstrations are two of the top three choices diners cite as coveted experiences. To decide where to focus, consider what your restaurant brand is known for and make those signature offerings the star of the event. For example, if you have an extensive drink menu, try a wine or coffee journey. Or plan a crowd pleaser with a dessert tasting where guests can try bite-sized treats to sample a variety of flavors and textures, from classics to innovative trends…
Did You Know?
Mastering worker classification: seven essential tips for restaurant owners. Navigating the bustling world of the restaurant industry comes with its own set of challenges, and one critical area that often flies under the radar is worker classification. Understanding whether your staff are employees or independent contractors isn’t just about following the rules—it’s key to maintaining a fair, compliant and smoothly running establishment. Misclassifying workers can lead to a slew of headaches, from costly fines to tarnished reputations. Here’s a streamlined guide with seven essential tips to help you tackle worker classification like a pro. Tip #1: Understand Why Worker Classification Matters…
Employee Tip
How education can attract workers to QSRs amid high turnover. Attracting and retaining top talent is a widespread restaurant industry challenge. What can operators do to address this problem? In this Q&A, Travis Larrier, Solutions and Strategy Director at InStride, provides insights on how investing in employee education can give a boost to talent acquisition and retention strategies. Drawing from his experience working with organizations and QSR brands, Larrier shares practical tips for strategically leveraging workforce education to gain a competitive edge and provide a key benefit for workers…
