Writing anything about BREXIT without a crystal ball is quite a challenge!
Managers of casual dining chains are challenged by tight margins, high staff turnover, and rising costs. Most will report progress to investors via their P&L and a number of Key Performance Indicators.
Cash flow, RevPASH (revenue per available seat hour), table turnover rate and others are great for comparing progress:
- How did we do compared with last month?
- How does this compare with the same time last year?, and even..
- How are we doing against our competition?
But which restaurant KPIs actively drive business improvements?
Topics: Restaurant profitability
The casual dining market works on very tight margins. Added to that, diners demands appear to continually increase on all levels:
- good quality food delivered quickly
- attention to detail regarding food preferences
- authentic experience of different cuisines
- an interesting / entertaining dining experience
And it is against this backdrop, that some are struggling to compete, whilst others are expanding.
So what is it that the more successful casual dining restaurants in the UK do that sets them apart from those who fail?
Big names like Jamie Oliver, Byron, Strada and more have closed restaurants in the past couple of years, and others have responded to the market with discounts, budget menus and other price-cutting measures.
However, when combined with cost pressures such as rising business rates, increases in the National Living Wage and the rise of high street rents, the pressure on margin is a recipe for disaster. Added to that food prices have risen (largely due to the falling pound), and Brexit still provides some uncertainty here in the UK.
All of these things are out of our control, but all of them impact ALL restaurants. So why do some fail, when others are expanding?
Fast table turnover is a key topic for both customers and restaurant managers in the casual dining sector. Diners are demanding fast, good quality food delivered in a way that suits their needs at that time - be that a family get together, a party atmosphere, an intimate dining experience, dinner with cocktails, a particular style of cooking.... the choice is huge. And those who don't deliver a unique experience AND serve up good food, fast are losing market share.
In the UK, the average restaurant table turnover rate is 50-80 minutes and interestingly, the fastest growing casual dining chains are the ones that are achieving the sub-60 minute mark.
The concept of casual dining has been around for a while, but in the past couple of years there has been a positive shift in “out of home” dining towards casual dining.
Millennials, for example, spend a whopping 13% of their income on dining out.
According to the FCSI, whilst the restaurant sector as a whole saw a decline of around 43m visits in the year to June 2018, the casual dining sector reported an additional 35m visits during the same period.
That’s the good news.
Traditionally, business leaders have looked at the trend in overall profit (or loss) for the group as a measure of success. Most will break this down by restaurant and/or geography to facilitate restructuring / growth decisions.
They will look at their profit margin compared with the competition and to improve margin, they will work the levers of increasing revenue and/or reducing the cost of goods sold.
But things have changed enormously in the past couple of years.
Disruption in the UK casual dining market from alternatives like Deliveroo, UberEats, Foodhalls, drive-throughs and others, plus the seemingly ever-increasing demands of a very fickle consumer means that this traditional approach to control simply doesn’t work.
Those who survive must differentiate themselves. They have to provide entertainment value, atmosphere and good food. And they have to do it more efficiently than the next person to sustain their place in a world of tight margins and fickle customers.
So rather than asking yourself "What is the root cause of the problem in our business? (Is it the theme, the menu, our cost base, our efficiency....), casual dining restaurants have to step back to discover the most profitable use for their resources.
The question should be "How do I work with what I have to make the most profit?"
We have a methodology for doing that...
Because all restaurant “products” are for human consumption, any maintenance issues that affect food storage and preparation can, at best, lead to wasted food and at worst, the possibility of illness and/or legal action.
These are unique features of the restaurant business. If you then overlay the potential costs of restaurant downtime due to property issues, it is easy to see that having robust maintenance contracts, procedures and trusted contractors are critical elements for the profitable running of restaurants.
So how can companies reduce maintenance costs without increasing risk?
This case study illustrates the approach InsiderPro took with one of our customers, reducing both risks and costs to the tune of £850,000 per year.
We recently worked with a chain of restaurants in the UK casual dining sector who wanted to reduce the cost of maintenance across all properties and equipment used by the group.
They thought we would be looking to negotiate new contracts.
Our approach and the impact that we had took them by surprise...
"Enterprise Value" is a term that is used to value a business beyond it's market capitalisation. The usual definition is market capitalisation (share price multiplied by the number of outstanding shares) plus net debt.
But we think that enterprise value can and should be looked at in an entirely different way....
Disruptive procurement is the process of creating real business value and competitive advantage by:
- deconstructing what the business really needs,
- challenging established business processes,
- leveraging knowledge from outside the normal points of reference, and
- designing, assembling and managing the supply chain in new and innovative ways.
Topics: Disruptive Procurement