What to Do Now? How Restaurants Survive in a Tough Economy

Eateries such as Bennigan’s, Village Inns, Old Country Buffet, Bonanza, Black Angus, and FatBurger have all filed for U.S. bankruptcy protection within the past 18 months. This is harsh evidence that the restaurant industry is not immune to today’s economic crisis. This crisis has left independent, chain, and franchise operators wondering what to do now?

Before addressing the question let’s consider what we know about today’s business climate. We know consumers are spending less. Given the lack of easy credit, substantial loss of wealth, and massive job losses; consumer simply do not have the spending power that they once enjoyed. As a result, we can also conclude that less total spending will translate into some combination of less frequent restaurant visits and less spending during each visit.

Given these realities there are three things restaurant operators must do now to improve their potential to survive and thrive:

1) Tune-out the noise

2) Tune-in to market opportunities, and

3) Tune-up their operations.

Tuning-out the noise

Most of us are inundated with negative information on the economy. It is difficult to turn on a media source without getting some report of economic bad news. Although it is useful to monitor industry trends and relevant news, it is important to avoid becoming caught up in the depressing economic hysteria.

The fate of AIG, General Motors, and Chrysler, is not something you can likely impact. Spending an inordinate amount of time on such macroeconomic concerns can become a distraction. Under the current circumstance, our operations needs our full, focused, and sober attention. Quieting some of the sources of noise could prove helpful.

Tuning-in to your market opportunities

In his 2008 book, Tuned In: Uncover the Extraordinary Opportunities that Lead to Business Breakthroughs, Craig Stull describes a powerful “Tuned In Process” for delivering products and service that resonate with consumers. The author believes that by understanding your customers and their evolving needs, you are better able to create products and services that succeed in the market place.

Now is the perfect time to look to the market for new opportunities. You may want to consider how your guest’s needs have changed in recent months, if your current promotions are working, or if your marketing channels are reaching the intended customers. The hope is that by focusing on your guests and potential guests, you can discover new ways to increase traffic and sales.

Tuning-up your operation

No one can afford to leave profits on the table today. So, once you know what your market wants and how to reach them, the next step is ensuring that your restaurant is operating efficiently. Assuming you have identified a few new ways to increase sales, focusing on maximizing margins and controlling costs will help you realize better profits. Your menu, recipes, production practices, and service standards are good places to start.

Have you analyze your menu’s performance lately? Have you consider removing slow selling items? Have you thought about replacing low margin items? Do you feature or promote popular high margin items? These are just a few ways to easily improve your bottom-line.

When it comes to recipes and production practices, have you tested any new items recently? Have you looked at recipe batch sizes and productions routines to reduce waste. By producing smaller batches more often you can improve quality and reduce waste? Finally, have you minimized waste associated with over portioning and service mistakes. I’ll admit that these nuts and bolts aspects of the business aren’t sexy. However, they are the most frequently overlooked sources of untapped profits.

It was Winston Churchill who said “It is a mistake to look too far ahead. Only one link in the chain of destiny can be handled at a time” As much as I favor a strategic approach to business, I must agree with Mr. Churchill. Times like these require us to Tune-out the noise, Tune-in to market opportunities, and Tune-up our operations.


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