Businesses globally are concerned about inflation, and a recession as a result. People are still focusing on the impact COVID, and the problems it caused for businesses, however for some businesses the struggles are now more prominent with little to no external support. Individuals and businesses face these problems alike, so reduced footfall is likely, but boosting performance and creating a more successful and sustainable business is still possible.  

The inflation rate is defined by the Consumer Price Index across many contributors, and it currently sits at 6% in the US, 9.2% in the UK, and 6.9% in the Eurozone with rising energy prices and food costs being the largest influencing factors. Both influence the industry hugely, with restaurants being reliant on these to produce food for their customers.

These rising costs are not matched with salaries rising at the same pace and it results in people going out for meals and drinks less regularly to try and save money where possible. These tips help you compensate for reduced footfall, control unnecessary costs, and improve performance elsewhere in your business.

1. Hack your labour productivity by gamifying the process

Labour productivity is the amount of sales per labour hour you bring in. By controlling labour costs and maximising sales you not only decrease your cost of labour as a percentage of sales, but also increase overall revenue - a win win.

To increase labour productivity, you need to be able to accurately gauge when your demand will be at its highest and lowest so you can effectively deploy labour. Getting an accurate forecast can help you increase productivity by up to 15%. More on forecasting in tip 5!

Once you’ve got the team in place, try gamifying each shift by setting average transaction value or time to serve targets that everyone works together to beat. This is a great way to incentivise teams, but these targets must be achievable to allow a regular sense of achievement, and boost morale.

Incentivising employees to reach, or even surpass, these targets makes improving productivity and restaurant performance much more straightforward. Incentives could be in the form of bonuses, extra tips, or even monthly competitions to win varying prizes.

2. Upsell to increase margins

Upselling can also be encouraged by incentivising staff; helping to not only increase sales but also potentially decrease costs as a percentage of revenue.

Menus will inevitably have varying profit margins for each item. Ideally, you want your best-selling items to have the highest profit margins, but for those that aren’t; staff encouraging customers to order items with relatively higher profit margins means increased profitability.

Another way to improve profitability, with very little extra effort required by kitchen staff, is to allow add-ons to different menu items, and then encourage staff to upsell these. An example of this can be adding cheese to fries; if your restaurant sells an average of 40 portions a day, and there’s the option to add cheese for £2, if 25% of customers choose to add it, you could make an extra £600 in revenue every month.  

3. Create a Cost-Effective Menu

Food costs should be between 25-35% of your restaurant’s revenue to maintain a high-performing restaurant, varying for the level of restaurant with higher-end restaurants usually having a higher percentage of food costs.  

Creating a menu with cheaper ingredients allows for both increased profit margins, as well as reduced menu prices - encouraging more customers to your restaurant over competitors.

It’s important to note that customers still expect quality, people are more reluctant to part with their money and are more likely to be willing to spend a bit more on something that’s value for money over spending small amounts regularly.

Create a cost-effective menu that doesn’t cut corners on quality. Buying ingredients in bulk form the same supplier can save up to 30% of unit cost and helps develop a good relationship which can help secure more favourable pricing. Also consider buying the whole product (eg carrots with carrot tops included or a whole side of beef) and using it throughout the menu - this reduces cost per menu item.

4. Invest in Technology

Investing in technology throughout your business is crucial in improving performance; it helps to improve efficiency and save money - it also causes less stress trying to get visibility into the business. Labour costs are expensive, especially now, so being able to utilise technology and save your employees for where they work best allows you to provide more than service: hospitality.

Being able to visualise all your data in one place is more valuable than you could imagine. Technology, such as Tenzo, that integrates with not only inventory systems but also POS, labour, and review platforms allows you to identify trends throughout your entire business in real-time, allowing you to act and make informed, data-led decisions as a result.

Getting real-time data on your business allows you to see the impact of changes within your business immediately, meaning any new strategies implemented can either be doubled down on, or removed if they’re not working; ensuring you're maximising your ROI and being as profitable as possible.

5. Trust AI for Forecasting

Forecasting is a vital aspect of technology that helps your business maximise sales, reduce waste, and control costs by being able to prepare effectively for the upcoming periods, whether that be days or weeks.

Food waste is a huge issue globally, and in the US restaurant industry alone it equates to $162 billion in losses annually, damaging not only the performance of businesses, but also the environment. Avoiding all food waste can be challenging, but preparing effectively allows you to reduce this as much as possible.

Using AI to get the most accurate demand forecasts possible allows you to predict the number of covers you’re expecting in the coming days allows you to order food effectively. Dynamic PAR ordering is a method where the PAR level of food changes depending on forecasted events, ordering food to reach this PAR level means that wastage due to food spoilage is unlikely.

Preparing effectively for service that day is also helped by forecasting: many restaurants require food to be prepared, or cooked, in advance to ensure a good customer experience. Knowing how many covers to expect at each service means you’re less likely to have food prepared and then disposed of as a result of poor planning; saving you money on food waste, as well as labour time.

Deploying labour effectively can also be helped via forecasting. The weather, what day of the week it is, and special events could all affect business and which items are most likely to sell. Deploying the correct number of staff improves your profit margins, by reducing labour costs during quieter periods, or maximising sales when it’s busy. Ensuring the correctly trained staff are working is also important; for example, more baristas during morning periods when coffees are most likely to sell.

Conclusion

The current level of inflation leaves many worrying that there is a recession imminent, and therefore a fear that, as a result, restaurant businesses will suffer. However, it doesn’t mean restaurants can’t build on and improve their performance.

Make changes to control costs where you can, and maximise profits elsewhere. Being efficient with labour deployment, creating cost-effective menu changes, and introducing technology to help throughout the business helps to manage costs.

Tenzo powers restaurant performance. Bring your entire tech stack together in one place, get meaningful recommendations on how to hit your targets and shift from surviving to thriving. Please get in touch if you’d like to know more!

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