COVID-19 has not only been a devastating public-health crisis; it has also been the restaurant industry’s greatest challenge, to date.
The way it has transformed consumer concerns, lifestyles and habits have impacted restaurants massively and as they open up again, they now find themselves operating in a new world.
Social distancing, the shift to more people working from home, quieter high streets with less passing footfall, concerns about the safety of eating out and the possibility of future lockdowns have forced a rethink of restaurant strategy, operations, finances and marketing.
In this blog post, Futura Restaurant Growth Partners and Paperchase Accountancy identify seven strategies that restaurants can adopt to keep their doors open and increase cashflow and profitability post-lockdown.
Adapt Your Operations
The Coronavirus pandemic necessitates a complete re-think about how you operate and at least, in the short term, the need to streamline your operations. Have a chat with your suppliers about extending your credit terms and your landlord about rent payment terms.
Assess whether you can minimise overheads by keeping your restaurant open only for the busiest days of the week; for many of our clients, opening only Thursday to Sunday has been an effective strategy.
Evaluate if you can reduce the number of items on your menu, eliminating low margin items and minimise on money held in food stock and to minimise food wastage.
Coronavirus has given rise to a new bench-marking parameter for restaurants hygiene. You now need to go the extra mile to convince your customers about your hygiene standards and what safety measures you are implementing – and communicate these on every marketing channel possible.
Reinvent Your Menu
Menu reinvention can be one of the most powerful strategies for re-invigorating a business in tough times, especially for older restaurants to change your long-term appeal and profitability. As consumer lifestyles and preferences continue to evolve, as your market splits more evenly between “eat in” and “eat at home” it makes sense to reinvent and adapt your menu accordingly.
Closely monitor emerging food trends, such as “clean” food, paleo diets, plant-based protein, and others. Introduce new menu items that your competitors don’t have to act as a magnet for new customers price those items competitively, and market them to consumers.
Rethinking Delivery & Takeaway
Before the pandemic, for many restaurants, delivery and takeaway was a “nice to have” revenue source but now, it may become the mainstay of your business and a vital, if not major contributor to cashflow.
Now is the time to think out an end to end strategy for your delivery and takeaway business, as a specific business model, rather than it merely being an extension of your restaurant.
Invest the time in creating a dedicated delivery menu focusing on foods that travel well. Consider the fact that now, more than ever, the number of restaurants on delivery platforms like Deliveroo and Uber Eats has increase and your menus need to really stand out and offer something different to woo new diners.
Don’t think of your delivery offering as mere food in containers. Consumer preferences and lifestyles have shifted and you now need to think how you can create and market experiences that customers can enjoy in their own homes, as well as strategizing the right channels to market these on.
Attract New Customers
With more and more of your customers now working from home and being present even more than they were before on digital channels, it’s essential that your restaurant is now present in a strategic and effective way on every channel possible and creates original content to win diners’ attention and custom. Social media marketing is still highly effective but with all your competitors now present on the same channels you need to ensure that your content and messaging are primed to stand out.
Google My Business is another excellent way to gain business from customers in the local vicinity who are actively searching for restaurants and this is another channel that needs to be actively updated. Email marketing is an often forgotten and under utilised marketing gem and combined with the right content strategy can retain loyal diners and increase the frequency of them dining with you.
Decide how to use the 5% VAT reduction
The government is reducing VAT rates to 5% on food and drinks for restaurants from July this year until January 2021 (at a cost to the government of £4.1 billion). What is interesting is that it is up to the business how exactly they choose to implement the cut. Larger fast food and chain operations, such as McDonalds, Nando’s, Pret A Manger and Starbucks are choosing to reduce their prices. However smaller, lower margin operations are choosing not to implement price reductions in their menus. In fact, 85% of smaller operators polled by leading Hospitality Leaders poll MCA/HIM (such as pubs and restaurants) are choosing to not to implement a VAT cost reduction for their customers to help their own finances.
Deciding on the correct course of action for your business depends on the type of operation you have. As the VAT cut applies to food and non-alcoholic beverages, the majority of bars and pubs, whose income is far less dependent on food sales have decided not to pass on the cut to their customers.
Schedule holiday intelligently
While it may seem as if staff returning to work from furlough have had plenty of time off, their holiday entitlement amount remains intact. This means that retained staff have been accruing their holiday as normal, regardless of furlough.
You may think that with already pared down workforces, restaurants would require as many of their staff working as possible, but with a spate of no shows ( Big Hospitality reports 25% of online bookings no show) and lingering customer reticence to return to in house dining, you may find yourself overstaffed. Workers are still entitled to take their holidays and you may be better served having them available working later in the year when hopefully restaurants are operating at fuller capacities.
You are entitled to both, require that an employee takes holiday and cancel holidays, provided you do so with enough notice (double the length of the holiday for time for required time off, while cancelling holidays requires a notice period equal to time off). For this to work more effectively, staff rostering will have to be set less far in advance with staff made aware that rotas will be subject to change more frequently than usual.
Apply for the Coronavirus Business Interruption Loan Scheme (CBILS)
The CBILS is designed to help small and medium sized businesses with a turnover of up to £45 million, access to finance up to £5 million. The government has through the British business bank approved a number of lenders for this scheme including Funding Circle and the Co Op. 80% of finance of any agreed finance is guaranteed by the government to the lender and any interest and fees for the first 12 months are paid. However, there has been considerable scepticism within the hospitality industry towards the scheme, with worries that it is run to protect lenders and not borrowers (lenders remain accountable for the entirety of the debt), while increasing their overall debt. There are also concerns surrounding the likelihood of lenders paying out owing to strict eligibility criteria.
However, as of the 12th of July, according to Big Hospitality magazine, the government has paid out £11.85 billion with roughly 50% (approx. 54,000 out of 109,000) of applicants receiving funding.
Instead of simply trying to revert to business as usual, now is the time to seize new opportunities, to innovate for the new normal, thus shaping your restaurant’s future and that of the industry as well. Priorities should include rethinking restaurant design, assessing your finances, reinventing the menu and core offering, adapting your marketing strategy, and digitizing the customer experience.
If you need any help with the above areas or would like an obligation free 15 minute chat, please contact us using the details below and we will be in touch to schedule an appointment:
Futura Restaurant Growth Partners
Restaurant Consulting, Strategy, Branding & Marketing Advice
Restaurant Accountancy & Financial Advisory Consulting