How restaurants are focusing on growth, ROI and reach
The industry’s biggest challenges, including inflation and labor shortages, persist into 2024
10 January 2024
Share this exclusive content from Saladplate
Photo Credit: SeventyFour/iStock/Getty Images Plus
In 2023, many restaurants have focused on growth and technology as they’ve looked to improve return on investment (ROI) and handle a myriad of challenges. These challenges include inflation-driven increases in food and energy costs, necessary menu price hikes, staffing shortages, supply chain disruptions, and consumer demand for enhanced dining experiences and delivery/takeout services.
To better understand the industry’s dilemmas and aspirations, Toast surveyed 847 restaurant decision-makers from May 26, 2023, to June 20, 2023, for its annual Voice of the Restaurant Survey, which was released in November. Here are four important takeaways from the research.
Inflation and profitability are front and center
Inflation remained a top pain point in 2023 for the second consecutive year: 42% of restaurant operators say they raised menu prices as a reaction to inflation in the previous 12 months, up from 36% in 2022. And inflation for food away from home remained a problem for restaurants’ bottom line and is likely keeping operators up at night.
With that in mind, the same study found that improving profitability is a top business goal for the next year, with 34% of respondents saying their margins are a huge priority. One way of achieving that aim is to evaluate menus and identify items with higher profit margins, and focus on promoting and selling these courses.
To improve profitability and efficiency and reduce costs, restaurant operators can leverage technology such as point-of-sale systems, inventory management software, and other decision-enhancing tools, allowing comparisons of profitability and efficiency trends across multiple locations. And with a few taps on a mobile app, operators can use such insights to make key business decisions in real-time and improve ROI.
Bodega Taqueria y Tequila, which has seven locations in Miami, Washington, D.C., Nashville, and Chicago and has four more stores coming soon, uses a digital platform to run and optimize all departments in real-time. Jared Galbut, CEO of Bodega Taqueria y Tequila, said that his teams “have found it helpful to analyze sales and labor trends in order to better manage our business, and we all love being able to see real-time sales data and know how the business is performing as much as we do.”
Expansion aims are on the rise
Retail space demand was up in 2023, which, in some markets, drove up restaurants’ rent prices. But that reality hasn’t curbed the industry’s appetite for new locations: According to Toast’s Voice of the Restaurant Survey, 29% of restaurants surveyed say they hope to expand their restaurant locations in the next 12 months, up from 17% of restaurants surveyed in ’22. While one should not view this as a forecast for the upcoming year’s restaurant openings, it is encouraging to note that respondents express a positive outlook on the industry’s future.
When looking at commercial real estate, expansion-minded operators need to understand the demographics of the area, including age, income levels, and lifestyle, to ensure that they align with the target market. It’s also important to assess the level of competition in the locale to avoid oversaturation with establishments that offer similar menus.
Restaurant operations are increasingly digital, so here’s a mandatory box to check when looking at commercial real estate: thoroughly evaluate a location’s technology infrastructure, including internet connectivity, which is crucial for ordering and reservation systems.
Hiring and training remain a huge priority
Staffing is never easy in this business, but it’s been tougher as of late on two levels.
For the second consecutive year in the Voice of the Restaurant Survey, employee training was restaurant operators’ most important focus area for the next 12 months — in 2023, 49% selected this concern. It’s no wonder when one considers a separate 2022 Toast survey, which found restaurants are using an average of seven service models, such as takeout, delivery, on-premises dining, catering, wholesale, etc. That takes a lot of training.
Hiring enough staff has become a bigger pain point for restaurant operators in 2023. The study found that 39% of operators had extreme or moderate difficulty hiring this year, up from 32% of those asked in 2022.
One way to attract and retain already-trained restaurant talent is to offer employees flexible schedules. When staffers can tweak their hours, the freedom to achieve more work-life balance can make them more content and fired up for their shifts, resulting in fewer call-outs, less turnover, and a productivity boost. It’s not just good for the staff — it can be savvy for the bottom line, too. According to the Society of Human Resource Management, the cost of restaurant turnover today is more than $4,100 per employee.
Handhelds increase in importance
Equipping staff with technology that makes their workflow more productive is a growing concern in the industry. In fact, when Toast asked which tools restaurant operators are planning to implement in the next year to increase employee efficiency, handheld ordering tablets (46%) came in No. 1, with mobile payments (45%) and mobile ordering (45%) right behind.
Giving servers handheld tablets is a wise investment, as they are a crucial tool for restaurants aiming to boost efficiency, cut table turn times, and elevate revenue. Servers benefit from streamlined order management, enabling them to take orders tableside and transmit them to the kitchen from any location. Additionally, tablets empower servers to process payments directly at the table, swiftly collect guest feedback for timely issue resolution, and potentially reduce table turn time through optimized workflow, and cutting steps. With restaurants dealing with the ongoing labor shortage, these efficiencies are critical to maximizing their staff.
All told, the new Toast study shows that some challenges are impacting restaurant operators this year in some ways even more than they did last year. But despite these issues, many of them are looking to lift their profitability, solve their staffing issues, and expand locations with an eye on how technology can help them improve on all fronts.
Photo Credit: L’Effervescence
Photo Credit: L’Effervescence
Source: Nation’s Restaurant News