How to Recession-Proof Your Restaurant
We are living in a hot economy where current economic news reflects unemployment at an all-time low, the stock market reaching record levels, and the U.S. economy surpassing expectations as consumers remain confident. Economists believe that recessions occur around every 10 years. Is another recession long overdue? Knowing how to recession-proof your restaurant can protect you from the inevitable economic lulls that we are bound to repeat.
The Effect of the Previous Recession
Dubbed the “Great Recession,” the most recent economic downturn had dramatic results for businesses, including restaurants across the United States. By 2008, the Dow Jones U.S. Restaurants & Bars (DJUSRU) index comprised of 12 restaurant companies, including Starbucks, McDonald’s Corp, Olive Garden, Darden Restaurants, Inc., and Ruby Tuesday dropped 13 percent.
Unlike the fast food sector where dollar menus and cheap limited time offers (LTOs) helped keep cash-strapped consumers coming through the doors, casual dining chains took the biggest financial hit. During that time, Bennigan’s shuttered its doors and national casual dining chains like Baker’s Square, Black Angus Steakhouse, Marie Callender’s, and Steak and Ale declared bankruptcy.
A recession is closer to your business than it was last year. Economic indicators suggest that we are now overdue by 3.5 years. Fortunately for restaurant operators, the overall food and beverage business sector fares better than others during slow economic times. That’s despite casual dining taking such a tremendous hit in 2008 and in the years that followed. Over the past 11 years, consumers have relied on restaurants for a good portion of their dining needs, which has led to growth in click and collect and off-premise dining.
Four Steps to Safeguarding Growth
Staying mindful of business moves and strategies that you can take now will help curtail losses in the future. Brands that want to continue growing despite a likely downturn may should consider following steps.
Step One: Keep differentiating your brand
Emphasize the unique qualities of your restaurant’s core identity to help it shine. Brands that stand out will garner more traffic if consumers cut back on their dining and entertainment budgets due to pessimism about the economy. Consider adding some innovative dishes that deliver a compelling value proposition for your patrons, or by offering daily specials.
Step Two: Diversify your audience
Reach out to different generations and demographics. Are you filling your dining room with an older crowd struggling with their retirement funds by a downturn in the market? Consider courting a younger audience. Millennials have more spending power than any other generation. Over half of all millennials are changing altering their eating habits to follow special diets such as plant-based, keto, vegan, or Whole30. Incorporating a few dishes in one or more of these areas to helps draw in a younger demographic.
Step Three: Jump on the off-premise dining train
With each generation, convenience is becoming increasingly valued. For example, millennials are frugal spenders after facing astronomical student loan debt and an unaffordable entry-level housing market. To financially cope, they have flocked to urban areas, and embraced the sharing economy. In ever increasing numbers, millennials have ushered in a new era for restaurants with off-premise dining. This is great news for restaurants short on square footage for diners, but bad news for those who haven’t adopted to this new way of doing business.
Step Four: Create restaurant efficiencies by going high-tech
Invest in technology that increases restaurant efficiencies in the kitchen, as well as in the dining room. With increased restaurant efficiency, you’ll be better prepared for how to recession-proof your restaurant in a waning economy. As off-premise dining continues to change how diners eat and a restaurant functions, are you prepared for that future?
Routing between in-house and off-premise orders can get complicated. Investing in a kitchen display system (KDS) that offers capacity management means that your kitchen can better throttle orders to reduce kitchen stress. Some front-of-house software can help you provide real-time quotes to your customers or third-party delivery companies about the meals to be picked up or delivered, setting realistic expectations for customers and keeps your kitchen and host stand in the know at all points along the process of a takeout order.
On top of dining trends and introducing software enhancements are key features that restaurants need to address to capitalize on up and coming trends. Whether a recession comes next month or two years from now, preparing for and investing in the right kitchen technology now can help carry you through the tough times. By reassessing how to recession-proof your restaurant now and finding ways to shore up sales and processes, you’ll be better able to ride out a financial storm. You don’t want to be the next Bennigan’s that fails during a recession, and trust us, a whole generation of people wish that World Famous Monte Cristo, Ultimate Baked Potato Soup, and Death by Chocolate had never disappeared.
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About the Author
Amber Mullaney led all things marketing for QSR. A proud Texan native, she graduated from the University of Houston with a degree in Public Relations and spent her career in the healthcare industry before making the switch to QSR and beyond, saying she loves a good challenge. Amber has a long list of things she loves, including tacos (especially tacos), sweet tea, Texas, the outdoors, and traveling with her husband and two daughters.