Reimaging the Restaurant Business Model: 5 Tips to Drive Revenue and Reduce Costs During a Crisis

This article was written by Kristi Turner, CMO of Compeat.

In this unprecedented crisis, every restaurant operator is being forced to reimagine their operation business model in a matter of a day in order to counter the new restrictions and sudden revenue reductions. At the core of the reimagined business model is the required shift from on-premise to off-premise revenue while simultaneously adjusting labor and food costs to serve the new normal.

Below is a look at theoretical operations shifts as restaurants’ revenues decline by 50% to 75%. Look at what happens to a restaurants net revenue before fixed costs, if it reduced its labor costs to 15% or 20% of revenue and reduce its costs of goods to 25% of revenue.

Now the hard part, how does a restaurant get its revenue and its costs to this type of level to sustain its business through this crisis? Here are five ideas for restaurant operators to get to the new operations model of driving off-premise revenue while simultaneously reducing labor and cost of goods sold:

  1. Drive Off-Premise Revenue: Redefine your offering to consumers considering the individuals and families that are at home and quarantined. Offer a “Single Meal To-Go” or “Family of Four Dinners To-Go” that makes it simple for consumers to pick up.
  2. Limit Menu Items Offered: Offering a full menu will be too costly. Reducing your offerings simplifies the choices for your consumers while also reducing your costs of goods sold. When pairing down the options, consider things like which items are your most popular menu items, which plates share common ingredients across multiple menu items, and will these menu items travel well in to-go containers.
  3. Use Your Customer Loyalty Data for Birthdays, Anniversaries and Special Celebration Packages: Cater to individuals who are dealing with the social distance anxiety during times of celebration. If you have customers birthdays or anniversary data, send them a special offering. Develop “birthday specials” or “anniversary for two” romantic meals to-go. Everyone still wants to celebrate these occasions.
  4. GM and Ghost Kitchen Staffs: Most restaurants by now are down to the GM and a few workers packaging to go items and a skeleton kitchen crew to run what is now referred to as a “ghost kitchen.” This minimal staff is how restaurant operators are getting their labor costs down to 15% or 20% of revenue versus the traditional 30% we historically have seen in the industry.
  5. Stay Top of Mind Online: Now, more than ever, you still must market to your loyal customers as well as to new customers in your community. Your potential customers will be searching online more than ever for restaurants that are open and special offers. Make sure your website is up to date, improve your SEO, and make sure your online ordering is easy.

Restaurant operators around the world are being forced to reimagine their current business models during this crisis. It can be done, but speed is of the essence. Restaurants who adjust quickly are capable of seeing off-premise revenue increase by 200% quickly.

Read also:

Five Strategies to Smoothly Prepare Your Restaurant for Delivery and Take-Out

COVID-19 Relief is Emerging. Where to Turn for Help

Nine Business Strategies for Coping During the COVID-19 Crisis