Can restaurants keep all eggs in one basket?
The restaurant and food and beverage industry is slowly being dismantled.
Moving forward, we have no idea what’s in store and what the sector is going to look like. It will, in all likelihood, be years before things settle.
But in the short term, it has been clear that the old model doesn’t work — costs are too high and margins are too low and can’t support decent wages. A lot of that comes from customers who care only about “cheap” food.
Restaurants will continue to struggle under these circumstances, especially if they put all of their eggs in one basket and try to avoid calamity as the race to the bottom with prices continues.
The truth is that a majority of restaurants is always playing catch-up: robust, busy nights on Friday and Saturday hope to compensate for slower weekdays.
And all for two- to five-percent margin.
Given that, all it took was a month or so of closure and disruption to reveal what cracks were there, even for businesses that had been in existence for five or six years.
For the most part, owning a restaurant — and making a decent living wage while working at one — is very, very difficult.
In my career, I’ve put my eggs in one basket a couple of times with various projects — and lost. I won’t do it again and try now to keep alive multiple revenue streams. It ain’t easy. And it’s a lot harder for restaurants.
Except for quick-service (QSR) operations relying on drive-thru and take-out, restaurant concepts have been designed to have their dining rooms full, pretty much all week long. That’s the hard-fought goal anyway of the old model that continues to work to fill a dining room — to use the plebeian vernacular, getting “bums in seats.”
Each seat in a restaurant is “worth” a certain amount of money in terms of revenue sales per seat. Restaurants basically gauge a night’s sales across the number of seats (75 or 150, or whatever).
I’m no mathie, but the longer restaurants are open the more opportunity they have to make money. Let’s say a restaurant has 5,000 available “seat hours” per week (number of seats multiplied by the amount of time a restaurant is open). That gets divided into the week’s revenue ($20,000 or whatever) and you determine what value there is in your dining room seats.
The problem in the past has always been keeping those seats filled. And now, we can only imagine, with the disruption and irrevocable change that’s being wrought on the sector we anticipate in a post-pandemic era, that is going to be an even bigger problem. Seat-hours and revenue are going to drop dramatically.
The solution? Who knows right now.
But, many restaurants are re-calibrating and trying to figure out other revenue streams — desperately, as they try to keep the lights on even after laying off 80 percent of their staff.
Currently, a lot of restaurants cover some costs (when a $30 seat doesn’t cut it) with catering. But catering has slowed down now. So what next as another revenue stream?
Delivery and take-out? That isn’t always an option for many restaurants. The former is problematic to food quality and it’s costly, with delivery apps taking something approaching 30 percent off the top.
As for the latter, a lot of restaurants have focussed on those $30 seats and seat-hours in their dining room: they aren’t necessarily set up to do a booming take-out as a QSR is. A pizza joint has delivery baked right in to the business — they use their own delivery guys. Casual dining is about the experience, not the take-out.
And in fact, cooking a bunch of dishes for delivery or take-out can bung up the smooth flow of the kitchen — and that can impact the experience that’s vital for the dining room guests.
Yet, delivery and curbside pick-up will be in greater demand post-Covid, with diners a little reluctant to sit near others in a dining room even if it’s reduced by one-third of its tables.
That’s a big problem for restaurants if they can’t make it work. And where does staff reduction leave front-of-house in terms of employment?
Another solution that some businesses have adopted is selling food as groceries: many restaurants are now selling fresh produce, preserves and beer and wine, drawing on the local producers with whom to collaborate and boost revenues.
With foodservice trucks delivering their supplies anyway, restaurants are offering to sell these supplies to customers coming in for curbside pick-up. It makes sense.
But is it profitable? That remains to be seen: some restaurateurs say yes and some say no.
The future of the industry, from this vantage point, is touch and go. As customers, we can merely keep our fingers crossed, or we can be resolved in helping build a new restaurant model.
