A look at how restaurants survived the recession

The restaurant industry is always evolving, always competitive and has the ability to roll with the punches.

Indeed, sales in the United States increased by 3.5 per cent in 2011 compared with the previous year, reaching US$610.4 billion. Revenue for 2012 is projected to be $631 billion, according to analyst Chris Tripoli, speaking to delegates at the Cayman Islands Tourism Exchange.

Americans, he said, were eating out at all levels and there was a value perception in that limited service restaurants were a bargain. Guest perception, he said, was in fact the reality.

Speaking to the development of the industry, he said that in 1955 the industry share of the food dollar was 25 per cent which has now risen to 49 per cent as people eat away from the home. Although times have been tough, people still ate out but perhaps selected different venues.

Mr. Tripoli told the delegates that comfort food such as sandwiches, burgers, breakfasts, coffees and speciality beers had all gained traction and that healthy options were also attractive to the consumer now. Because customers associate quality with health, it was important to talk about local ingredients, seasonal menu items and farm to table innovations.

The analyst and experienced restauranteur then indicated the makeup of each dollar coming through a restaurant. With sales, salaries, operating costs, general and admin and occupancy all taken into account, 93 cents from every dollar was going back out typically for full service restaurants, leaving a 7 cent margin for pre-tax profits.

This, he said, often surprised people and therefore a useful exercise for management and owners was to talk staff through exactly how those dollars were spent.

“This is a pennies business,” he said.

Buying habits

In order to make the most of the recovery, it was important to be in sync with customer buying habits and concentrate on menu, management and marketing.

When evaluating a menu, he said, it was important not to fall into a trap of simply looking at item cost. Rather, look at what sells the most and think about price points and what else could be introduced which may be similarly popular. Building sales does not necessarily mean adding menu items, which pushes up inventory, food costs and the potential for inconsistency.

“Do more interesting things with the inhouse ingredients and what you have,” he counselled.

Profit, he said, comes from mixing all the sales. Some items could sustain a higher food cost but pricing other items to drive people toward what you really want to sell was key. Surrounding items such as coke, coffee and so on could bring in more of those vital pennies so it was important to beware of underpricing because thousands of those items were sold yearly.

Other aspects of the presentation included menu design, the importance of planning meetings and constant dialogue to keep on track with yearly, monthly and weekly targets and selecting and retaining the right kind of staff at all levels.

Ongoing training, cross training and communication was key to developing staff and a good leader shares the success and praise but shoulders the blame and failure, concluded Mr. Tripoli.

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