“Necessity is the mother of invention,” goes an old English saying.
If we had said at the start of January 2020 that restaurants would be adding a gallon of milk, a roll of toilet paper and a head of lettuce to online orders, the idea would’ve seemed preposterous. But that might be the new norm if restaurants want to survive in the era of COVID-19.
Just how have restaurants pivoted their business models and what changes do they expect are here to stay to ride out and survive these times?
We surveyed nearly 90 restaurant owners and managers about how they’ve had to restructure their business and operating models and what marketing and promotional strategies they’ve implemented since to drive sales for survival.
- To adjust to decreasing demand, restaurants are reducing their operating hours while focusing on promotions and gift cards to drive their business. [Read more]
- To drive sales, restaurants are changing up their menus by introducing specials and spreading the word over email newsletters, their website and social media. [Read more]
- Restaurants are finding online delivery platforms to be critical to sustaining their business during the COVID-19 pandemic. [Read more]
Fight decreased demand with fewer operating hours, more promotions
Once the COVID-19 pandemic hit, restaurants across the country were almost entirely shuttered, leaving them with the option of either closing their services completely or providing curbside, pickup, or delivery service to their customers as a means of survival.
As a result of the nationwide lockdowns, our survey found that over half of our restaurateur respondents had to reduce their operating hours to adjust to declining customer demand and labor costs.
In an interview with Bon Appetit, Frank Chung of Henry’s Hunan Restaurant made a simple but powerful observation: “I’ll only be able to open a few hours every day for take-out because I think business will be really slow. Our main clientele are office workers and no one is coming into work.”
But just because customers aren’t there to dine at your restaurant doesn’t mean they can’t support you online. During this economic uncertainty, who doesn’t love a good deal? Especially when, according to Gartner, nearly half of consumers said their household income had already been affected by COVID-19 in the form of layoffs, reduced hours, and closures.
To drive sales outside of their restaurants and understand the new financial strain customers are now under, restaurateurs are digging deep by offering promotions and gift cards.
Staying engaged with customers when your doors are closed or hours are limited is crucial to weathering and surviving this storm. As much as 30% of restaurants could close down permanently before the end of the COVID-19 pandemic, and it’ll take resilience and creativity to avoid this fate.
- Continue to engage them with promotions tailored to the current situation.
- Gift cards also offer a diversified stream of revenue and give customers the option of contactless payment which they can receive through email or text message.
- Most retail POS systems come with a set of gift cards tools that can help you get set up in no time.
Push new, creative offerings on digital and social platforms
Operational changes won’t solve all your problems; many restaurants have had to reconsider their menu mix in efforts to improve their margins for the survival of their restaurant. Some are coming up with family dinner specials while others are delving into pre-prepared meal kits.
One thing is consistent across the board: restaurateurs are all trying to figure out what their customers expect to spend and what they’d be interested in purchasing, all while weighing these new expectations against their new business economics.
As more families are staying home, customers are looking to get the most bang for their buck in order to feed more. In an interview with Restaurant Business, Molly McGrath, culinary director and chef of Roti Modern Mediterrarean, shared an opportunity to launch family meal boxes for takeout and delivery and found the result to be positive:
“We always hoped to strengthen our dinner business, and these have been a good way to introduce families and kids to Roti. I’m hoping to sustain and grow the dinner business now that I see it catching on.”
The restaurant specializes in rice plates accompanied by various proteins, toppings, and sauces and is now providing family dinners to go for customers in residential neighborhoods where some of its restaurants are located.
But it isn’t enough to just change up your menu mix—restaurants recognize that there are still customers who are wary of venturing out and are marketing their business by raising awareness where their customers are at: online. And they’re doing that through existing and free or low-cost methods, such as email newsletters, social media accounts and websites to spread word of their changes, as our survey found.
- Focus on your highest-margin menu items: Look at your data on your POS to determine what customers are ordering and then pare down your SKUs.
- Bundle your meals: Make group ordering as visible and easy as possible. For example, “$30 dinner for three” positions your meal as a special deal. Bundling will take your labor costs down. Avoid single items unless they’re high margin.
- Find opportunities to upsell: Consider sides such as drinks, desserts, and appetizers that you can throw in to complete the meal.
- Use all digital platforms available to share useful and concise content: Most likely your customers are getting a bunch of COVID-19 related emails so you’ll want to make sure yours is useful information with bulleted key points that are easily scannable.
Sustain business with online delivery platforms
Where possible, restaurants have pivoted to delivery or takeout models as a result of the COVID-19 pandemic. As much as 25% of restaurants were forced to shutter completely during the pandemic.
Once optional for some, takeout and delivery is now a critical lifeline for restaurants. The restaurants that have survived have been the ones that were already well-positioned for—or pivoted swiftly—to delivery options to meet consumer needs.
Our survey confirmed that just as much the importance of delivery services – nearly 45% of restaurants have launched delivery services as a result of the pandemic.
According to Gartner, customers are attracted to ordering from restaurants for a myriad of reasons, mainly convenience, variety, a break from cooking, desire for certain favorites, and the desire to support local restaurants.
COVID-19 is reshaping restaurant business models
About a quarter of restaurants have also changed their pricing and business model during the pandemic.
One example is Revolution Catering, which, prior to the pandemic, specialized in corporate catering in the form of drop-off meals and full-service events for companies in the Boston area.
As a result of the pandemic, the company has since pivoted to deliver fully prepared restaurant quality meals throughout New England.
“One in four of our orders is a gift for a client or a friend/family member,” Mike Spiegel, owner of Revolution Catering, tells Software Advice. “We didn’t even see that as a thing or know it was possible. Now we’ve got our sights set on disrupting the entire food gifting industry.”
According to Spiegel, after pivoting, the company has since been able to drive its break-even figure down by 50% and recreated about 25% of its revenue within a 30-day period—after losing 100% of its revenue in mid-March.
Steps Revolution Catering took to pivot its business model for survival
Launched renewed mission and messaging
“Our goal is to support every day busy schedules or sent as a gift to reach out and connect with clients or loved ones.”
Overhauled food offerings
“We now feature rotating weekly menu items as a restaurant would.”
“We’ve iterated our websites four times already [during the COVID-19 pandemic.]”
Sought out avenues for donations of meals to families in need
“We’ve served about 1600 of those to 200 families who have been laid off from the hospitality industry.”
Stepped up social media presence, and email marketing
“You can see for yourself it was pretty pathetic before March.”
Worked out shipping arrangements with UPS
“We now can serve nine states in the Northeast overnight. We’ve shipped as far north as Maine, and as far south as central New Jersey. Before we serviced only a 25-mile ring around Boston proper.”
Implemented daily cash flow and financial monitoring
“We were not irresponsible with this before but we became hyper-aware of this. We cut nearly a dozen subscription services, reduced waste removal, renegotiated some delivery fees with vendors-the list goes on. We were able to save thousands a month here just by doing that.”
Created a new weekly meeting schedule between departments
“The goal is to immediately work out food quality and consistency issues, as well as logistical problems so that things are nipped right away because each box that goes out is so much more important now. We were turning down multi-thousand dollar events eight weeks ago, and now every penny counts.”
Took professional quality food photos for the website
“We learned how to take professional quality food photos for our website prior to weekly menu changes. We’re asking our team to create new weekly items now. Before this, it was quarterly with a seasonal change.”
Solidified relationships with professional vendors
“We had an incredibly solid group of professional vendors who were able to help us navigate rules and programs. They made their value apparent at the most challenging times. Many of them also became advocates for us and customers in their homes.”
What can your restaurant do now to respond?
The takeaway here is to recognize the changing expectations of your customers and start thinking about how you can meet those new expectations and reinvent your marketing and promotional strategies for survival. If you’re not using online delivery, you can start today.
What you need to know about online restaurant delivery:
- Buyer’s Guide for Online Ordering software
- 5 Top-Rated Restaurant POS Systems with Online Ordering
- Why You Need to Take Your Restaurant Food Ordering In-House
- 3 Impactful Ways to Drive Your Restaurant’s Online Ordering Sales
Want to know more about how best to execute promotions and gift cards? Check with your restaurant POS vendor about how you can integrate those into your system.
What you need to know about promotions and gift cards:
- 3 Proven Ways to Drive Gift Card Sales and Increase Your Profit
- Why Your Business Should Start Offering Gift Cards Now
Before revamping your menu, you need to first dig into your data and the food costs of each item to see which product will be able to get you the highest margin.
What you need to know about implementing a profitable menu:
- 4 Strategies for Creating a Profitable Restaurant Menu
- Reduce Your Food Costs With This Food Cost Calculator
Next, schedule a call or live chat with one of our advisors for free. Our advisors will be able to cut down the time you spend finding the right tool from days and weeks to just 15 minutes. Just let them know what you need to achieve and they’ll send you a shortlist of the best systems that fit your restaurant.