Sponsored by Stratas Foods
A shortage of products and ingredients, higher prices, and inconsistent supply continues to plague the entire restaurant industry, but the situation has been particularly hard on small and regional chains. With no end in sight to this disruption initiated by the COVID-19 pandemic, small operators — more so than their bigger, better-resourced counterparts — need to find ways to deal with the uncertainly and volatility to stay competitive, or, merely afloat.
While some small operators may have supply chain figured out, recent research reveals that many do not. According to a new survey of small and regional chains conducted by Stratas Foods, makers of Frymax and Mazola Frying Oils, in conjunction with Nation’s Restaurant News, 40% of survey respondents report they are still considering how to deal with ongoing supply chain changes.
Whether your brand has supply chain management under control or not, here are four tactics to consider:
Tap into technology
Digital technologies have no doubt been a game-changer for large chains that were able to quickly pivot to online ordering and delivery during the pandemic. But for small chains, big tech can often feel far from reach, even though it can offer significant ROI, especially when it comes to supply chain issues.
In the last year, Chronic Tacos, a Mexi-Cali taco chain with 60 locations, deployed a digital platform that has facilitated more effective inventory management, price monitoring, and product cost shifts.
"The platform lets us do auditing virtually with our franchise," Michael Mohammed, CEO of Chronic Tacos, said at a panel discussion at the Fast Casual Executive Summit, held virtually Oct. 21 and 22. "This also keeps your distributor honest in terms of pricing as it can fluctuate, so you have to be on top of that.”
Maintain quality, flexibility
Seventy-nine percent of operators surveyed reported “quality” as the most important consideration when sourcing products. Rather than sacrifice quality when sourcing proves challenging, many smaller chains have leaned into being more flexible, nimble with their menus.
Independent restaurant owners like Ashley Lai of Dumpling Haus in Houston, Texas have suffered the pains of dramatic increases in produce, noodles, meat, and other essentials in the last year. To account for missing or no-longer-affordable ingredients she uses in her restaurant, Lai has made some tweaks to her menu and switched brands of chili powders or bamboo shoots, among other creative machinations.
“Instead of just taking something off the menu, we'll wake up extra early and go to three different stores to find the ingredients,” Lai said in a recent interview with The Leader News.
Some operators who aren’t interest in conducting early-morning searches or making substitutions are pulling resources with other small chains to source essential ingredients, such as high-quality fry oils.
“Groups of smaller restaurants should buy larger amounts through a local distributor that they all pull from with the intention of sharing it,” said Vincent Barcelona, director of national accounts and culinary for Stratas Foods. “It’s easier on everyone’s bottom line and gives restaurants a little extra buying.”
Exchange short-term pains for long-term gains
While the easiest way to deal with rising product prices is to pass the cost on to customers, doing so can also erode customer loyalty. Instead, some small chain operators are finding that it’s better to take a hit today to ensure customer loyalty tomorrow.
When lobster prices spiked, Luke Holden, founder and CEO of Luke’s Lobster, maintained the best quality and most affordable lobster rolls that are core to the brand’s value proposition by raising prices only by a few dollars — and letting his profit margin take a hit.
“As we [make] one tough decision after the next, we're just staying grounded in that and not making any sacrifices that would ultimately move us against … building momentum toward our brand mission, which is to become the world's most respected seafood brand,” Holden said in a recent video interview with Nation's Restaurant News. “So we’re definitely taking a long-term approach on this, but definitely feeling a lot of short-term pains.”
Get creative (again)
The pandemic pushed operators to shrink their menus and cut out creativity, but many of the operators surveyed said they are ready to get back to being creative in the kitchen.
According to the survey, 32% of operators report they are ready to return to menu innovation, and 19% said they’re already back at it.
Among the small chains innovating again is Noodles & Company a 410-unit chain, which reported same-store sales up 16.3% in the third quarter, driven by menu innovation (particularly its June introduction of a new Tortelloni pasta) and a healthy digital sales mix, the company reported in late October.
“We have seen ongoing success with culinary innovation that’s on-trend, resonates with guests and builds loyalty,” Noodles & Company CEO Dave Boennighausen said in an October earnings call. “[…] Tortelloni has been a great hit and we have a long runway ahead of us. As people get introduced to the brand and the rewards program, the time between visits continues to shrink.”