Posted on Aug 10, 2017

The Restaurant Recession

If you’ve been to a restaurant recently, then you have most likely witnessed the decrease in foot traffic. Since 2008, foot traffic across restaurant chains dropped approximately 15%. Moreover, in the second quarter of 2017:

• Comp sales are down ~1%.
• Comp traffic is down ~3%.
• Same-store sales have been negative the past six quarters.

In this blog post, you will learn more about the restaurant recession and the steps you can take, if you are in the food industry, to minimize risk and maximize value. 

Supply and Demand

When it comes to running your own business, a restaurant is most likely one of your first ideas. There’s always a demand for food and drinks, right? While it’s great to have entrepreneurial spirit, there are already a lot of restaurant options; too much supply, not enough demand. And yet, we continue to see more restaurants and chains open. For example, Logan’s Roadhouse and Joe’s Crabshack are filing for bankruptcy. TGI Fridays and many other suburban chains are also struggling with the decrease in foot traffic. 

Most first time restaurant owners fall under the ‘fast casual’ and ‘bar-and-grille’ category. Even though these styles of restaurants are popular, so many other people have the same thought process. It’s a simple product with a simple market. However, these types of restaurants had the worst quarter of 2017. Even though this trend might not continue, you should be mindful of it when deciding which category your restaurant falls under. 

Interestingly enough, fine dining and ‘upscale casual’ restaurants performed the best in Q2 of 2017. Many attribute this growth to the “experience” that customers have when they eat at these fine dining restaurants. You should always be trying to give your customer the best dining experience, even when they don’t return that experience. 

Increased Competition

Overall, there has been a significant increase in restaurant competition. Food delivery, grab-and-go options, and meal replacements are obtaining a lot of market share. The sheer number of food delivery outlets are a good indication of the evolving market. For example, there’s UberEats, Blue Apron, GrubHub, and BiteSquad. That’s not even a quarter of them! 

Large commercial grocery outlets are catching on too. Almost all of them offer some form of grab-and-go food option. There’s Wholefoods’ hot bar, Publix Subs, and Amazon Go to name just a few. Not to mention the convenience store and food truck options too. 

High Turnover Rate

When it comes to owning and operating your restaurant, you depend on good talent. When that lunch or dinner crowd hits, you find comfort in knowing that your customers will be well taken care of. As a result, keeping good talent is hard, especially in the restaurant industry. Turnover rates for restaurant managers is at a 10-year high. Competition among the ‘good’ talent is also high. 

The competition from other restaurant employees results in the pressuring of restaurant wages. 

“75% of restaurant companies report they are offering higher wages as an incentive for potential employees.”

What are the Solutions? 

Now that we have discussed some of the problems attributed to the restaurant recession, let’s start talking about solutions. One solution is the service you offer at your restaurant. People notice and appreciate great service. And when they do, they give their reviews to friends and family. Try your best to leverage great service as a competitive advantage. 

Another solution lies in selling high-profit margin items. For example, frozen beverages and ice cream generate profit margins of up to 90%! You can sell frozen beverages like frozen strawberry lemonade, margaritas, smoothies, and practically anything with sugar. They are a versatile investment. If you add fresh fruit to many of these drinks, you can sell them for even more. 

The cost per frozen drink/soft serve ice cream runs ~15¢. You can sell them anywhere from $2-5+$. Talk about a return on your investment.  

Call to Action

Nevertheless, Summer is officially in full swing and people have money to spend! At Slices Concession, we have helped hundreds of local and national restaurants add high-profit margin items to their menu.

Give us a call today at (352) 262-9627 to see how we can help your restaurant or small food business. 

BROWSE OUR MACHINES 

* Follow all local and national health codes. Always refer to local and national rules. This article is just a suggestion.

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