Restaurants Catch Up on Their Rent Payments
As price hikes take hold. The proportion of U.S. restaurants that couldn’t cover their rents dropped precipitously last month as small businesses aggressively raised prices to cover soaring costs and declining gas prices left consumers with more money to spend, according to new research. Still, the situation is far from rosy, according to the latest data and analysis from Alignable.com, an online resource center for small businesses. More than a third of the nation’s restaurants (36%) couldn’t pay their landlords in full for the month, even with a tailwind from raised prices, Alignable reported. The encouraging statistic was the 10-point drop-in delinquency rates for eating places, to the lowest level seen by the business since April, the researcher said. The percentage of restaurants that couldn’t pay their rents was 33% that month, after falling to 26% in February. Most types of small businesses found themselves with more money back then because of a robust start to the year, Alignable said. It noted that 29% of the small businesses surveyed in September said they had fully recovered from the downturn of the pandemic. The figure for restaurants was not broken out by Alignable. The company’s report on September rent payments was based on surveys of 4,232 small businesses during the last two weeks of September.
Restaurant Operators Face Tight Real Estate Market
Smaller footprints, flexible approach have been key to navigating the challenging market. Restaurant operators are rethinking their real estate strategies in a challenging market, where top sites are in short supply and costs are rising for both new construction and leased locations. Some operators that have long focused on building sites from the ground up have shifted instead to a strategy centered on acquiring closed locations and remodeling them to accommodate their own concepts. Others have been taking a closer look at nontraditional locations, such as travel plazas and hotels, or at other sites they might not have considered just a few years ago. Many operators are also taking consumers’ ongoing interest in off-premises dining into account in their site selection, as they downsize their dining rooms and boost their takeout options with more drive-thru and pickup windows. David Orkin, restaurant practice leader at real estate firm CBRE, said high construction costs, onerous lease terms, and delays in the supply of equipment and building materials are all impacting operators’ development plans. Landlords are seeking to pass along their construction cost increases in the form of higher rents for operators who lease their sites. In some cases, landlords that had previously increased rents by about 10% every five years or so are pushing for bigger hikes because inflation is driving up their costs at a faster rate.
How Restaurants Can Minimize Impact of Credit Card Processing Fees
Credit card processing fees rank as the third-highest cost of doing business. The foodservice industry is transforming at an electric pace and quickly adopting new internal services like scheduling software, digital inventory tracking, digital reservations, and automated purchasing tools for lightning efficiency. Most consumers use credit cards to purchase for convenience, but this payment represents a considerable drain on quick-service restaurants’ bottom line. As an unstable economy looms, restaurants may soon shift to another model to cut costs. By passing on interchange fees to the consumer, restaurants may soon get the capital needed to withstand and grow during the looming recession. According to an Incisiv study, 2020 fundamentally changed customer behavior and the role of digital across industries and geographies. While it was a disastrous year for restaurants overall, limited-service restaurants needed to invest in upgrading their digital capabilities and, in turn, saw massive growth in digital sales. A record 61 percent of surveyed customers order food digitally at least once a week, up from 29 percent a year ago. A reported 76 percent of quick-service revenue comes from takeout and home delivery compared to 61 percent of fast-casual restaurants as of 2022. While COVID mitigation was the spark that fueled this digital dependence, the ease of digital ordering and expansion of different fulfillment options will ensure digital usage as the industry standard, even as customers resume normal activities and increase their restaurant visits. While many digital processes have evolved, quick-service restaurants still have a long way to go to meet customer expectations while improving their bottom line.
Creating a Leaner, Meaner Independent Restaurant
Five ways indies have become smarter and more efficient in the past three years. Independent restaurateurs have become smarter, more resourceful, more adaptable, and often humbler since the pandemic started. As we enter a new phase of challenges, they have new tools to adapt to the obstacles that they continue to face, with better marketing, more nimble operations, technological advances, a better understanding of their customers, and sometimes a new perspective on what they want from their restaurants and from their lives. “I think we got out of our comfort zone,” said Michael DeGano, vice president of Denver-based Sage Restaurant Concepts, which operates mostly single-concept restaurants in 17 states. “We were able to sit back and reassess how we worked our restaurants.” Here are five ways that independent restaurants have leveled up their operations in the past few years. One of the most significant ways that indies have evolved is in how they reach their existing and potential customers. “We’ve developed new ways of reaching people rather than waiting for them to come by,” said Sarah Cook, owner of Café Carmel in Carmel-by-the-Sea, Calif. She now sends regular emails to her customers announcing celebrations of bacon, National Sandwich Month, the restaurant’s new air purifier and whatever other news Cook can think of. The restaurant made its first Instagram post in December of 2019 and now has more than 450 of them.
31% of Restaurants Have Reduced Menu Size
Due to inflation. In response to inflation, 39% of restaurants started tracking the price of key ingredients, while 38% have adjusted the number of food suppliers they use, according to a Toast survey of 956 restaurant professionals. In terms of the impact on menus, 36% said they have increased pricing while 31% reduced their total menu offerings. As restaurants face increased costs across the board, many have turned to technology to better keep track of inventory and ingredients, Toast said. From beef to flour, restaurants have been facing increased food costs during the last few years. While menu price hikes are the most acute way to offset these costs, restaurants have been responding with other tactics as well. Chipotle began testing radio-frequency identification technology to improve traceability and inventory systems earlier this year. Several chains, including Wing Zone, White Castle and Jack in the Box, have been testing robotics and automation to help reduce labor costs as well. Outside of technology, restaurants have been picking wholesale suppliers that can provide one-stop shopping across all of their food and goods needs. Toast’s survey revealed 30% of restaurants are already substituting lower-cost ingredients in their menus.
75% of Independent Restaurants Plan to Adopt New Technology
In 2023 to combat challenges. Rising costs, labor management, and operational complexities are among the top challenges for independent restaurants. 81% of independent and small chain restaurant operators are still using traditional POS systems. 3 in 4 operators are likely to adopt new technology in the year ahead, and 71% plan to increase their spend on tech. Operators are spending more than 16 hours per week on labor-management tasks like scheduling, payroll, tip distribution, and compliance. SpotOn, the top-rated software and payments partner for restaurants, today announced the release of its State of Restaurant Tech Report, providing insights from independent restaurant operators on the rate of technology adoption, emerging challenges, and predictions for the year ahead. While the rate of technology innovation and adoption has risen sharply over the past few years, a vast majority of independent operators (81%) are still using legacy point-of-sale (POS) systems. However, that appears likely to change, as 75% say they are likely to convert to a new technology system in the next 12 months. Among Fine Dining restaurants, that number surges to 85%.
When it Comes to Supply Chain, There Are No Shortcuts for Restaurants
It’s crucial for operators to be flexible and nurture distributor relationships. Although the supply chain was a disaster during the peak of the pandemic for every retail and consumer goods industry, including foodservice, the challenges have not abetted in a post-COVID world; they’ve just evolved. Supply experts are quick to point out the issues that labor struggles and pricing surges have had on their companies, from not being able to get products on time or struggling to afford ingredients and packaging that they’ve never had an issue with purchasing in the past. While operators might hold out hope for a secret hack to somehow get around supply chain shortages and pricing increases, experts say there is no shortcut when it comes to maintaining a stable supply chain. Success comes down to building solid relationships with your distributors and being flexible about where your ingredients come from or finding substitutions if necessary. The operators we spoke with consistently lamented the same supply chain issues over and over: astronomical pricing and issues with international shipping challenges. Whereas 2020 and 2021 were the years of scarcity and product shortages, now labor challenges and the trucking crisis have caused commodity costs to skyrocket. Almost all restaurant operators raised menu prices to keep up with commodity cost inflation. Denver-based Teriyaki Madness CEO Michael Haith said that his company raised prices like everyone else, but is being conscientious of margins, franchisee profitability needs, and what the consumer would actually be willing to pay.
Hotels Face Their Own Crippling Shortage of Workers
About 91% of the properties in the U.S. said they couldn’t fill vacant jobs last month. More than 9 of every 10 hotels in the United States are unable to fill vacancies in their staffs despite a climb in wages to an average of $22 an hour across the industry, according to new research from the American Hotel & Lodging Association, or AH&LA. A canvass of 200 hoteliers during mid-September showed the typical lodging property is operating with 10.3 positions unfilled, with housekeeping jobs proving particularly difficult to fill. About a third of the respondents (36%) characterized the labor shortage as severe. The vacancies come despite efforts by the lodging industry to sweeten its appeal as a place to work. About 81% of domestic hotels have increased wages, 64% are striving for greater flexibility in scheduling and 35% have expanded benefits, the AH&LA found. The industry currently has about 115,000 job vacancies, and total employment is down by 400,000 positions from the level of Feb. 2020, according to government statistics.
Did You Know?
Restaurant marketing for inflationary times. Restaurant marketing revolves around making your business known. It combines different online and offline strategies to promote a restaurant and increase orders. But is it so simple to stand out from the crowd in 2022? With high inflation and the rising cost of living, people look to reduce spending on leisure activities. Restaurants, in turn, have to deal with skyrocketing prices on products and fuel. What you need is to have positive outcomes for every dollar spent. Let’s look at low-budget restaurant marketing ideas to succeed in inflationary times.
Tips for handling aggressive restaurant customers. No matter how excellent your customer service is, you will always encounter the occasional aggressive customer. You cannot avoid them; sooner or later, you will encounter them. If you’ve worked in the hospitality industry, you’ve already had to deal with an aggressive customer or two. Customer satisfaction is always the top priority in the hospitality and restaurant industry, so it’s essential to know how to handle aggressive customers in a way that will diffuse the situation and leave the customer satisfied. Here are six tips for handling aggressive customers:
Bielat Santore & Company – Restaurant Industry Alert
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