Top Challenges for Operators in 2018

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on Nov 19, 2018 9:00:00 AM
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Toast recently published their 60+ restaurant statistics gathered from reports, studies, and articles that spanned the internet. They also interviewed restaurateurs. When asked about the biggest challenges they faced in 2018, 59 percent of restaurant operators responded with staffing which included hiring, training, and retaining staff. This has been the number one concern for two years in a row. It was followed by 42 percent of operators who said their biggest challenge lies in high operating costs including food, and 33 percent who said attracting and retaining customers was their top challenge.

Hiring, Training, and Retaining Staff

What I found interesting was the following statistics: 47 percent of operators said they have scheduled employees for fewer hours each week due to higher labor costs while 18 percent said they halted hiring efforts in order to lower labor costs. This illustrated the different approaches no-growth versus successful restaurants react to today’s challenges. According to Toast’s Restaurant Success in 2018, successful restaurants are more likely to invest in programs for new hires and no-growth restaurants are more likely to lay off employees, schedule workers for fewer hours, raise menu costs, and halt hiring efforts.

Training staff starts with the foundation—your company’s core values and mission statement. It defines your company’s culture and gives staff a direction. Hiring employees that align with you and your restaurant’s values creates a cohesive whole, leading to less turnover and an increased sense of unity.

The next key to this current challenge is ensuring your staff is trained to succeed. Setting them up for failure by

failing to incorporate a fully-functioning training strategy is like setting out to sea without a compass. Fortunately, today’s e-learning and cloud-based sharing sources has given even small restaurants access to tools that were once only available to large mega-companies.

A new training system implemented by McDonald’s resulted in lower staff turnover and higher customer-satisfaction scores.

High Operating Costs

Operating costs are the Achilles heel of most restaurant operators and the reason that profit margins have slowly declined. While 10 percent use to be standard expectations, 5 percent is now the going rate.

One area of growing concern is food costs. Almost 60 percent of operators reported an increase in their average food costs in 2017 when compared to the same time frame in 2016. Some establishments are turning to local food sourcing in order to decrease costs and appeal to customers looking for sustainable practices, and local, farm-fresh product.

Another hot-item this year is vegetable-centric menu offerings that include animal protein as more of an accent than a main fare. As plant-based diets grow in popularity, look to cultures found in Greece and Southern Italy that inspired the Mediterranean diet—a diet high in fruits, vegetables, legumes, olive oil, nuts and seeds, and fish.

Some good sources for local, farm-fresh food include your local Farmer’s Markets, food hubs that manage the distribution for several local farms, distributors, and grower associations.

Attracting and Retaining Customers

Have you heard of a VoC program? It stands for Voice of the Customer and refers to the importance of listening to what your customers are telling you about their experience, including what changes you might consider implementing in order to improve their response.

When McDonald’s introduced their All-Day-Breakfast, both sales and stock prices soared. This wasn’t a “let’s try this and see how it works” approach. This was a response to listening to their customers and responding in kind.

As those in the industry know, it is far less expensive to retain a customer than to go out in search of new ones. According to Invesp, it costs five times as much to attract a new customer as it does to keep an existing one. Despite this statistic, 44 percent of companies focus on customer acquisition compared to 18 percent that focus on retention.

Even more interesting, research done by Fred Reichheld of Bain & Company showed that increasing customer retention rates by 5 percent led to increased profits of 25 percent. It makes sense. After all, returning customers are more likely to refer their friends and family, and are less likely to switch to a competitor.

While these challenges can seem daunting, in every obstacle lies an opportunity to be better as a restaurant and operator than you were yesterday.

When McDonald’s was reported as one of Dow Jones Industrial Average’s worst performers with a 7.5 percent decline in 2018, did they hang their head and shuffle their feet in hopes that one day they’d experience a turn-around. No! Those depressing statistics made the headlines in July. Just four months later they are riding high on impressive earnings and their stock has gained 17.7 percent compared with the industry’s 14.2 percent rally. Some chock this rally up to their focus on delivery while others note their Experience of the Future restaurant design which includes kiosk ordering and table service.

Here’s what we do know—McDonald’s has listened to their customers and made changes accordingly. And their third-quarter report showed it with revenue at $5.37 billion compared to the expected $5.32 billion.

A lesson to be learned from the mega fast-food chain is this: don’t stand still when faced with challenges. Rise to the occasion, make necessary changes, listen to your customers, and respond.

 Download Now: Improving Restaurant Culture!

Topics: Staff, Capital, Supply Chain

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