Updated: May 27, 2020
In a mad rush to meet government COVID-19 guidance, restaurants large and small are attempting to change their business overnight into delivery/take-out formats. The sentiment is noble — I’ll make rent, keep my employees, contribute to the economy, and feed the people! But not every restaurant is better off keeping their doors open.
Is pushing delivery the right answer for your restaurant? Well, it depends. To succeed as a take-out business, you need to already have the following in place (or quickly get it).
SOMETHING WORTH KEEPING: The Odds
Restaurant Finance Monitor recently reiterated their belief that 20% of restaurants will close their doors permanently during the next recession.
We’ve long believed a recession would wipe out 20% of the outlets. But now it looks as if the virus, the collapse of crude oil, and the Federal Reserve’s deity toward President Trump’s plea for zero interest rates, will accomplish it in one month. — Franchise Times Corp.’s President John Hamburger in the Restaurant Finance Monitor
Before pulling all-nighters to figure out how to save your business, make sure it is worth saving. Your financials will tell you where you stand:
1. A business that makes money. If your profitability was marginal at best before COVID-19, lower revenue and higher delivery fees are not going to make it better. Look at restaurant-level cashflow (Revenue minus Costs, excluding Depreciation & Financing). Does your business regularly generate enough cash to more than cover Debt Payments and taxes? If not or just barely, consider closing the unit permanently as soon as possible to minimize your losses.
2. A business on the right trajectory. If sales were falling before COVID-19, convincing customers to interact with you differently is not going to make it better. Look at your restaurant-level transactions. Were they stable or up year-over-year for the last few years before COVID-19? If not, consider closing the unit permanently. If you have the funds and the ideas, use the temporary shut-down to reformat your menu, prices, décor or other serious issues that you have been putting off.
CUSTOMER RELATIONSHIPS: Double Down
Loyal customers are the most important asset a business has. It is much harder to find a new customer than to keep an existing one. Help your loyal customers help you by making it a win-win for them to support you. For this you will need:
You can make any member of your blog a writer so they can write posts for your blog. Adding multiple writers is a great way to grow your content and keep it fresh and diversified.
3. A customer database that enables you to tell customers what you are serving, when, and how. Ideally this is Instagram, Facebook, email, text, or a combination of the four. The more able you are to reach consumers directly, the better you can influence their behavior to work for everyone.
You need to immediately communicate with your customers: what are you doing to stop the spread of COVID-19? How are you meeting their needs? How are you supporting your employees? Your customers will sense instantly if you are in it for yourself (“Stuck inside? Order wings!”) vs. in it for them (“Can’t go grocery shopping? Order essentials along with your meal.”) [More on this in our upcoming “Your COVID-19 promotional email says a lot about your brand” article.]
If you do not have customer information, or do not have much of it, you have two choices: use a delivery service provider’s access to consumers or temporarily close your doors. Remember, your storefront can no longer communicate for you. Consumers aren’t driving by to see your banner that says you are open for takeout.
4. A website that is online order capable and telephone ordering for the old-school. When your customers are hungry for your meals, you cannot lose the sale just because you aren’t ready to take it. Many cloud-based POS companies make it easy to add a “widget” to your website that enables online ordering (e.g., Toast). Contact your POS company to see how easy it is to add online ordering. [More on this in our upcoming “how to ensure your website accepts online orders” article.]
If you have the staff available and your customer base is older, consider offering telephone ordering. Feature your phone number prominently on your website and social channels but *only if you want customers to call you*.
5. A convenient and inexpensive delivery mechanism. Customer pick-up or “self-delivery” is the most straightforward way to get orders to your customers if you have not been previously engaged in delivery. Tell customers this is what you want them to do and make it easy and safe for them to do so. Curbside pickup where the consumer does not leave the car, contactless handoff where consumers are able to pickup from a shelf instead of a person.
Third-party delivery companies also offer two ways to work with them — white label delivery where orders come through your website but are fulfilled by them and full delivery service where orders come through their platform and are fulfilled by them. Typically, taking the order through your own website is preferably financially and consumer-relationship-wise.
The delivery service providers have contributed to the solution here by offering no delivery fees to independent restaurants. While this does not help you prioritize your restaurant on their platform over others, it does help the profitability of each order when you receive them.
Finally, if you have the staff available and think you can fully utilize a driver, you can consider delivering yourself. Note this may require new or different insurance to cover your employees.
GETTING TO THE OTHER SIDE: The Prize
Restaurants are in the midst of a great shift that has nothing to do with the Coronavirus. Consumers are applying their digital shopping and IWWIWIWI delivery habits to food at increasing rates. The industry is in a position to learn from the disruption that occurred in consumer products and retail to innovate ahead of new entrants. Becoming tech-savvy and testing and learning during the crisis is a great way to pass your quarantine time. It might be scary now, but there is a light at the end of the tunnel.
6. You are unlikely to earn substantial sums during the crisis. Accept that your financial mission in the next few months is to survive and to set yourself up to thrive afterward. Your immediate mission is to save jobs, ensure your community eats, and limit the spread of COVID-19 through safe food-handling and customer service practices.
7. Survival now will create success later. Your employees and customers will remember how you handled this situation. The trust you create by treating people fairly, serving your community, and keeping people healthy will pay you back. While you might just get by in March and April, mastering strong customer relationships and off-premise sales, positions you well for the future of restaurants. The desire for digital ordering and delivery is not going away. It is not a fad. If you can figure out how to master it now out of need, you’ll be ahead of the competition when the Coronavirus restrictions are over.
HEALTH & SAFETY: The Table Stakes
The great news about the restaurant industry is that it has largely mastered health and food safety. As a tightly regulated industry with frequent visits and ratings from local health departments, the restaurant industry has invested a lot of innovation energy into creating the safest possible way to get food from farm to table. The entire supply chain right up to a consumer receiving his order is regulated by the government, whether USDA, FDA, CDC, or the local Health Department. The CDC says:
As a former chain restaurant executive, I can speak proudly about what restaurants do day in and day out to ensure the health and safety of their employees and customers.
However, if your restaurant has struggled to consistently maintain that “A” rating in the past, now is the time to understand and address the root causes of any imperfections. Make sure you feel confident about the following:
8. Clear, robust in-restaurant employee health routines following your local health department’s guidelines every time. Washing your hands is not rocket science. But creating a culture of washing frequently and sufficiently, using hand sanitizer following each wash, changing gloves often, and keeping hands away from face is harder than it sounds. Every leader in the restaurant must role model this behavior and support the team in consistently executing it.
9. Clear and supportive sick-leave guidelines. Your employees need to know when to stay home and what will happen to them if they do. In this respect, COVID-19 is just like with every other communicable disease. The best policies offer sick-pay and health benefits eligibility with a health provider’s note. This is an area where restaurants have lagged other industries, but have started to improve in recent years.
Restaurant leadership also plays a big role here — if employees are observed coughing or sneezing excessively, with runny noses, frequent trips to the bathroom, or appearing feverish, it’s important to ask how an employee is doing, share your company’s policies and resources, and send employees home.
During this time of heightened concern around communicable diseases, it’s a great time to add a wellness check for employees before clocking in. Chipotle added this to their routines and it not only keeps sick employees recovering in bed instead of spreading infection at work, it reminds every employee at every shift the importance of protecting their community.
“We are maniacal about food safety,” Chipotle CEO Brian Niccol says in QSR Magazine. Author Sam Ochres continues, “anyone who enters a Chipotle kitchen has to complete a wellness check, answering a few simple questions related to personal health. — QSR Magazine “How Chipotle Got Its Groove Back”
10. Upgraded customer health protections. Avoid customer entry into the restaurant where possible (i.e., curbside delivery). If consumers are entering the premises, ensure the availability of hand sanitizer, indicate 6-foot gaps in the line using tape on the floor, limit capacity to the number of places in line your restaurant accommodates, and consider gloves and sneeze shields for front-of-house workers. All product should be packaged in a tamper-evident container (e.g., stapled paper bag, branded stickers across openings).
CLOSE OR DELIVER CALCULATOR
The economics of changing your business over are not obvious. Use our free calculator to see what your results might be. The calculator is set to tell you your restaurant’s breakeven sales requirements based on your restaurant’s costs. Once you enter the $ and % for your business, you’ll immediately see what sales you need to achieve.