You’ve made your budget for 2021, but Q1 is over and now it’s time to adjust and tweak as you’ve seen your results. Summer is nearing and encouraging news is hitting the nation with Covid vaccines in arms, re-openings, and there’s positivity to draw on moving forward. With the ice slowly melting and patios regaining the spotlight, every restaurant knows that the extra square footage means extra sales – so now it’s time to plan.
This week on The Tip Share, RASI New Business Strategist, Dave Downs, sits down with RASI Squad Lead, Sondra Monaco, and RASI Client Advisor, Adam Walsh to chat about what they’ve seen when working with clients across the nation as they work down the P&L to adjust budgeting and forecasting to meet the new demands that come with summertime!
1. Getting Creative to Drive Restaurant Sales
A creative Denver client recently opened up their patio for springtime, and with Colorado weather always a bit on the frantic side; snow one day and 80-degree weather the next, they created a deal for a beer and a blanket totaling $10 to cover their bases on the cooler days. The combo has already increased their overall retail sales a few percentage points, and patio season has only just begun!
Keep in mind that when restaurants create marketing specials like a beer and a blanket, there’s always an opportunity to up the ante with the use of a logo to get a name out there as well. Customers use the blanket, bring it back the next time they come, others see it and want one as well, and it creates a positive cycle of sales and marketing.
2. Restaurant Forecasting & Budgeting Adjustments
Adjusting for Sales Changes
As a result of the lasting impacts that COVID has had on the restaurant industry, most restaurants have taken to a very slow-roll approach to building out their budgets. They’re bringing over November and December sales, and projecting those numbers up through April.
In fact, many restaurants don’t expect to return to full business until midsummer, at best. What we’ve seen in sales numbers is quite the contrary; restaurants have perhaps been overly conservative with their projections and they’ve already seen a skyrocketing in sales from the end of January throughout February and now into early April as well.
The combination of warming weather that’s enabled patio sales, vaccinations on the rise, and people feeling more comfortable to go out and spend time in those restaurants and bars that they were accustomed to, have already helped sales growth more than most were anticipating.
Adjusting for Cost of Goods
It’s imperative for restaurants to take into consideration, higher prices. With supply chains working overtime to try and accommodate the need for certain products, there’s been a major delay country-wide with production.
Because of that, prices are obviously going to be higher for certain products. If operators aren’t factoring that in and making sure they’re considering those increased prices within their budget, they’re not setting themselves up for success.
“I have a client with a burger joint and Angus went through the roof last year during the height of Covid; prices have come down a little bit, but he’s still anticipating higher prices at least for the foreseeable future. So, one of the things we plan to work on as we build out the budget is really focusing on keeping their meat costs at a relatively stable percent. That being said, we do have opportunities to look at reducing that meat cost as the year moves forward so long as he’s diligently watching those price fluctuations. My point being, that restaurants need to pay very close attention to the commodities market in order to have the biggest impact on their budgeting precision.”
– Adam Walsh, RASI Client Advisor
3. Managing Restaurant Labor
Unfortunately, the restaurant industry may still struggle with labor this year. Covid presented some fears in terms of people wanting to work in contact-facing positions, so it’s critical that restaurants are budgeting for potentially higher labor costs.
If they come in lower than that, fantastic, but the most important tactic is for operators to get in front of the situation and continue to hire to ensure they’re well-enough staffed to accommodate for the increasing summertime sales.
It’s important for restaurants to remember that they may be running a little bit of a higher labor percentage in the near term, but long term, that’s really going to help build their business and build their brand when they’re able to provide guests with a positive experience coming back into the dining-out world again.
Obviously, with the need to increase staffing, restaurants are looking for targeted tactics to attract the right candidates and get them through the door; a few that we’ve seen successfully done are the following:
- Increased pay
- Increased Employee Benefits
- Health Insurance
- Paid Time Off Structure
When utilizing any of the tactics above, it’s crucial to include them in the budget labor costs.
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4. Planning for Restaurant Direct Operating Costs
Just like operators should plan for higher Cost of Goods, they should also anticipate higher operating costs, at least in the near term. Items like disposables, soaps, and chemicals are in high demand right now; however, much like the commodities market,
it’s not unreasonable to expect those prices to return back to normal as the world continues to move forward.
So, keeping an eye on those prices and ensuring they’re planned for ahead of time will allow operators to continue to weather the storms until they truly pass.
It might be in an operator’s best interest to budget 3% for their paper products, whereas in a normal year they might budget 1½% – 2%. Being more conservative in that regard can only help an operator make better plans moving forward.
5. Managing Restaurant Comps
Building Business Comps and getting those repeat customers back, especially when it comes to delivery right now, is a major facet that restaurants should be aware of and it’s a large area of opportunity.
Asking for direct business and providing an offering of a free dessert, or a discount of some sort of a customer calls the restaurant directly to order, or orders directly from their website. There’s no better time for operators to look at their marketing and review their website to see if it’s optimized to really drive business.
A restaurant’s website can truly act as a revenue center where operators can sell Gift Cards, or blankets, or any of the retail type of items in addition to their core product, which is the food and beverage offering that they’re trying to get out of the door.
RETHINKING THE RELATIONSHIP WITH 3RD PARTY DELIVERY Services
Beyond that, operators can rethink the relationship that they have with 3rd Party Delivery Services. They can use those services as less as a lifeline moving forward and more as an opportunity to really reach guests and customers that they may not otherwise be able to.
Throw in a promo with their next meal expressing that it’s usable only if a customer goes to their website for the next order – again using these 3rd party services as a means to reach a new guest, and then drive them directly to the website.
Building Back Business
When operators are building out budgets and looking at areas to cut costs, it’s really important to drive away from that advertising expense in terms of trying to save money.
It’s so important to build that business back up after the hit Covid took (and is still taking) on most restaurants.
People are primed and they’re ready to go back out, and anything that a restaurant can do to attract those customers to their business, or put their restaurant at top of mind, is really going to help out in the long run. Those advertising dollars are very well spent when operators are looking at it from a budgeting perspective.
6. Planning for lease repayments
With many of the budgets being built out, operators have their baseline rent payments in place. If an operator has been able to work directly with their landlord to have their rent abated in the last year, now is most likely the time they’re going to have to begin repayment.
That is certainly a consideration when it comes to budget building. It’s also something that’s very important when an operator is looking at the bottom line. If an operator can front-load abated rent payments now, it’ll position the operator in such a way that they can continue to be successful.
Every restaurant operator should keep a close eye on their cash flow statement; if they’re seeing an increase in cash, paying down that debt when they have the money is going to help them in potentially slower times.