With the cost of doing business rising and operators facing the triple headwinds of labor shortages, supply-chain disruptions and inflation, emerging restaurateurs should know their brands well and perfect their operations before opening new units.
That was the advice provided by veteran operators in the first of a six-part monthly series geared toward emerging operators and hosted by Nation’s Restaurant News and its CREATE educational program, in partnership with investment group Savory Restaurant Fund and research firm Black Box Intelligence.
This particular webinar was sponsored by geo-fencing platform Radar.
Andrew Smith, Savory’s managing director, told attendees that his company doesn’t define growth as opening new units. That, he said, is “scaling.”
Growth is improving operations, and therefore profitability, of the restaurants you already have, he said.
“Growth is increasing revenue through repeat transactions — repeat consumers,” he said, cautioning that raising prices could give you a false sense of growth by inflating same-store sales figures.
“[It’s] making sure you take care of what's under your roof, or multiple roofs that you have today. It's not adding more roofs. … Fortify the position that you have now and make sure the foundation of this business is as strong as it could be,” before thinking about opening new restaurants.
Victor Fernandez, Black Box’s vice president of insights and knowledge, agreed that, although most restaurants have had to raise prices due to rising costs, it’s not necessarily great for business. He said restaurants that have raised prices the least are seeing faster growth in sales than those restaurants that have raised prices the most. He added that customers have noticed which restaurants’ prices have gone up the most: They score lower in terms of value perception.
Restaurants also are scoring better among guests who dine at the restaurants than those who order takeout and delivery. On a 5-point scale, in-restaurant dining at full-service restaurants on average score 4, while off-premises scores average 2.8, with the most criticism coming from delivery times.
Coby Berman, co-founder of Radar, said technology can help speed up delivery times. For example, through geo-fencing restaurants can anticipate when customers, or third-party-delivery services, are going to arrive so the food can be prepared just in time.
Additionally, the technology can alert the front-of-the-house when a customer is arriving, “So you don't need to constantly pick your head up and run out to see if someone has arrived. You have that information automated, ultimately making your job much easier,” he said.
Jason McGowan, founder and CEO of Crumbl Cookies, now with nearly 550 locations; Lauren Bailey, CEO of Upward Projects, which operates 24-unit Postino as well as several single-unit operations (and two-unit Joyride Taco House) near its Phoenix headquarters; and Jeff Chandler, CEO of 32-unit Hopdoddy, all agreed that perfecting operations in the units you have is essential if you’re going to scale your concept successfully.
McGowan has expanded Crumbl through franchising, but he said having a good tech stack was essential to making that work in order to provide delicious cookies consistently and to spot problems.
For example, customers are invited to upload pictures of their cookies, and then Crumbl has an internal system that looks at the cookies and rates them, and then sends scores to franchisees comparing them to other franchisees while also indicating what looks wrong with each cookie so they can fix any operational problems..
“We invested a lot in technology to really help us scale,” he said.
He added that there is a lot of off-the-shelf technology available to operators, such as those for operating loyalty programs, but if something is core to your business and not readily available, “I wouldn’t hesitate to invest a little bit in technology.”
Chandler said that when he joined Hopdoddy it was too complex a concept to franchise because of a lot of scratch cooking and other brand idiosyncrasies, but he used the time during the pandemic to develop internal processes that means the company now views franchising as one of three avenues for growth, in addition to organic company growth and acquisitions, such as Grub, another better burger chain with 16-units that Hopdoddy has acquired.
Bailey said that it’s important for operators to understand how customers use their restaurants and to foster use of multiple dayparts and occasions.
“One of the things we're most proud of [at Postino] is that the daily sales go over multiple different hours of the day, so you don't just have lunch and dinner. … You might see someone drinking wine and working on their computer. You might see girlfriends meeting for a drink after work. You might see people on a first date. If you want [to earn] more than $1,000 per square foot you've got to really think about these different dayparts and use cases.”
Fernandez indicated that there was opportunity for restaurateurs to expand beyond traditional dayparts, especially since the fastest-growing time of day is the mid-afternoon, between lunch and dinner.
He said that had to do with more people working from home or working for themselves, meaning how they order their lives is more flexible.
When it comes to taking on capital investment, Smith warned operators to be methodical. He said it’s important to structure deals in such a way that the investors don’t insert “silver bullets” into the contracts of the deal that makes it difficult to buy them out or take on more investment.
“Make sure that you get an attorney to review all documentation before you take money from anybody,” including family members and friends.
He also warned against structuring deals that put your valuations too high.
“Then you’re living with that sin for a long time of trying to chase that valuation.”
To see the entire webinar and register for future presentations, visit nrn.com/livelearning.
Contact Bret Thorn at [email protected]
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