Are you thinking of opening a restaurant or already are running one? We say with caution that as exciting as a restaurant business sounds, it’s a fluctuating tidal wave of commerce that has broken many ambitions and hearts!
Just recently, a cafe serving home-style ‘Continental’ food in Mehar Chand market, Delhi had to shut down, leaving the couple who ran the business broken-hearted.
“Though the restaurant was praised for its food and garnered a following, for a year-and-half we were forced to put in Rs 1 lakh or so every month from our pockets to sustain the business. Only for the last five months were we breaking even“ said the owners.
Before you start hyperventilating, not all restaurant stories end in a shutdown door sign.
You must know the story of Faasos. It opened as a delicious food-quick-bites outlet in Pune. Although the restaurant outlet had raised initial capital seed of 8 lakhs, they quickly began to bleed money and had to shut down their QSR (Quick service restaurant) chain.
However, Faasos realised their mistakes by cutting down unnecessary expenses and concentrated only on food and service. They soon became popular and were able to raise funding of Rs.50 Lakhs from Lunia Investment. Now, they have transitioned into an online model, taking deliveries via social media platforms such as twitter and their good looking food app. The company has ninety offline outlets in Pune, Bangalore, Chennai, Gurgaon etc.
A similar story is of Spring Leaf Retail, a QSR chain that had to shut down its Mast Kalandar restaurants in two of the four cities they were operating in. They are now operating as cloud kitchens to bring down costs. The company has seen the potential in food delivery system and now is pushing it’s online kitchen model MK Dabbawala to enter into tech-savvy cities like Mumbai and Delhi.
What do the statistics say?
- The NRAI India Food Services Report 2016 states that the foodservice market in India stands at Rs 3,09,110 crore and is estimated to grow to Rs 5,00,000 crore by 2021.
- Most restaurant companies aim for an operating margin of 15-20% and even efficient ones could just about manage a net profit margin of 5-6%, Chairman of retail consulting firm Technopak, Arvind Singhal.
- About 50% of the restaurants that have opened in recent years have closed down, President of the National Restaurant Association of India (NRAI), Riyaaz Amlani.
Why such a tough business?
Quoting Francis Bacon, an English philosopher, ‘Knowledge is Power’, it’s always better to know the challenges of an industry than act complacent about the same old. Here’s how restaurants in the present times are facing and overcoming challenges-
1) Too many unnecessary costs?
Restaurants are prone to facing inventory problems. Your restaurant may be selling world-class food, receiving five stars ratings on Zomato and you witness an increase in your gross sales or revenues. Your restaurant business’s top line is flourishing!
Uh oh! But then you look at the bottom line that is the source of your net earnings after you have deducted your general and administrative costs! And it’s looking not so good.
Drip.. Drip.. Your inventory is dripping loss!
Drip loss happens inside the kitchen when the inventory manager may not calculate his purchases correctly. Wastage and food spoilage are common in a restaurant. With the rising food costs in India, restaurant businesses need to be extra careful.
Do you overstock the inventory?
Restaurant owners are more prone to order more purchases if they lack a definite weekly/monthly schedule. If you are purchasing whenever your chef requires or trying to buy in bulk for cheap discounts, you are over-stocking your inventory. We hope you are not letting your vendors making the purchases for you!
One way to tackle this situation is to create a proper ingredient list and enter the list properly into your inventory program to avoid any conflict between virtual goods and real stock. Pay attention to the types of ingredients from which a dish is prepared, required amount for a meal preparation, the amount of waste in the kitchen, quality of ingredients.
Cost and quality control!
Now say, you have a bar in your restaurant and the bartenders keep over pouring. They giveaway shots and free beers to their friends and do not keep tabs on complimentary drinks? Perhaps, you are not serving proper portions of food and drinks to your customers and it fluctuates every time. This is where you need to step up to control such costs that may become heavy at the end of the month.
Your current POS system is a headache!
Inventory problems can originate due to unfit pos systems as well. Tedious POS systems tend to waste chefs/managers time and take them away from concentrating on serving their guests. If your inventory/recipe system requires too much commitment on data set-up/entry and always troubleshoots during service hours, then it’s up to no good. You need to go for less expensive, versatile, easy to implement POS that helps you do better business.
2) Your menu isn’t FAB enough?
If McDonald’s can suffer due their menu and lose their customers and sales to Starbucks, then you should give your menu a once over. When McDonald’s current chief brand officer, Steve Easterbrook took over in 2015, McDonald’s was desperately lacking in it’s “miracle product” in their product to keep the sales in the game. At the same time, it’s reputation for being quick and cheap has hurt the menu pricing. They were not able to raise prices and offer premium food while changing customer’s mentality that quick food doesn’t mean cheap quality.
Does your menu have all the profitable items together? Is your menu interactive with pictures or boring filled with grammatical mistakes?
Do you tell your staff to clean your menus at the end of the night? More importantly, is your menu updated or still selling an old dish that your new chef doesn’t cook?
And the Rupees sign in the menu is a big no no!
They say best chefs can be recognised from the whimsical menu you offer to your customers. If we read ‘deconstructed vada pav’ or ‘banta cocktails’ somewhere, who wouldn’t give it a try!
You can cut down menu expenses by determining proper menu pricing scheme. The strategy of the successful restaurant owners is to set the pricing of the dish according to the cost of making that dish. The small and frequent changes in prices are easier to sell to customers than larger, more noticeable and infrequent ones.
Bring ‘smart menu’ to the table!
Another way of preventing menu expenses is by bringing a smart menu that lets you keep it simple and you can make any changes anytime. If you have a high-tech restaurant and want to impress customers, a smart menu is just for you. Ramaraj Duraiswamy’s U.S.-based Invenger Technologies Pvt. Ltd has developed a smart menu in Mangalore that lets your customer click on the dish of their preference, and the order goes straight to the chefs.
Customise your menu a bit!
According to Technomic survey said, 72% of consumers said they now expect restaurants to allow them to customize meals. A restaurant chain called as Tokyo Joe is able to control their SKU’s by allowing guests to mix and match their vegetables and sauces, letting them build their own dish.
3) Dealing with payment issues?
India is riding the wave of digital transformation and cashless society has started to become a reality. Online transactions now are not only limited to online purchases and orders but are trending in restaurant and cafe businesses in India. On top of that, the government is supporting the change by waiving off service charge on cashless transaction up to Rs 2000.
But there are more reasons to focus on your payment method. Be it online or offline, payment is the last mile of a customer’s journey. Will he come back or not depends whether he left happily.
Providing easy and flexible transactions
“Technology today plays a vital role in delivering great customer service, and we invest heavily in technology to enhance our guest experience,” shared S. Murugan Narayanaswamy, Senior Vice President Marketing, Domino’s Pizza India.
Domino’s has partnered with Mobikwik realising the need of providing payment conveniences to customers. Similarly, restaurants like Haldiram’s, McDonald’s, Barista, CCD has partnered with Freecharge giving the popularity of mobile payments.
Now, say you have a quick service restaurant with great food but long queues. It would be a good time to consider your payment options and going cashless as it helps speed up the line and doesn’t let waiting go unhappy.
Cashback and loyalty programs make customers happy!
It is hard to maintain customer’s data via cash transactions. This may also not provide to you the opportunity to woo them by your cash-back schemes and loyalty programs.
Going for frictionless Point of Sale system
What any business needs is a frictionless transaction by the end. Indian businesses are witnessing a surge of POS upgrades.
According to HT survey, One of only two areas that saw modest growth from 2016 was those restaurants looking to add new functionality or features to existing POS software (60% in 2017 up from 59% in 2016). Mobile payment, integration and tablet-based POS held onto the top three slots with mobile wallet at 49%, integration with other systems at 48%, and tablet-based POS software garnering 45% of votes.
Pay at the table solution!
The future is bringing payment to the table. Typically in a dine-in situation, a customer puts their card in the billfold, the server picks up the check, and swipes the card at the back of the restaurant. What a customer really wants is a quick, safer transaction happening at the table.
This can be achieved by allowing mobile payments, transactions via tablet POS or even using EMV method ( Europay, Mastercard, Visa) where a customer puts the pin at EMV terminal ( card swipe machine).
4) No flexible management for online orders?
Going digital, Mumbai Dabbawallas have embraced technology and have started ‘click-based services’ allowing online orders. They have launched their digital online website, where all you have to do is click to get food delivered.
Promoting online delivery business!
Any restaurant’s dining business is limited to the seats it has and sometimes even, the reservations don’t show up! Research says a good restaurant cannot pass more than 70-80 deliveries a day and phone orders account for only 15 deliveries a day.
Though, ordering through phone has never been a problem. But the popularity of online portals such as Zomato, Swiggy, Foodpanda says something different. Statistics says Swiggy and Zomato do 15,000 and 13,000 orders a day respectively. They solve the challenge of marketing, giving a restaurant a strong presence in the online market as opposed to the pamphlets. You can even scale your deliveries with them. Studies say that mobile experience like ordering online is at higher stakes for restaurant brands as there is a strong relationship between ordering online and brand loyalty.
5) How good is your relationship with customers?
Back then, customers could be made happy by giving them few complimentary drinks or desserts. In the age of Twitter and Facebook, it is likely for a restaurant to get shut down by a single tweet or a post. Something like this happened to a restaurant in Delhi NCR who faced a strong online campaign against it when they denied entry to a differently-abled customer who later tweeted against them.
Restaurants are struggling with ‘reputation economy’, where everything stands on how happy feedbacks you get. Studies show that eight out of 10 consumers trust online reviews about a business as much as a personal recommendation. The millennials have high standards, even for a quick service restaurant franchise. A report from the National Restaurant Association explained, “The typical restaurant guest today is not the same as the typical restaurant guest 20 years ago”.
“Democratization of fine dining”
A customer is mostly left wondering what’s happening inside a restaurant. In the age of social media sharing information about your restaurant online is a good thing! Does your website provide information about allergens/ingredients? Do you solve customer’s problems via social media?
How well do you know your customers?
Many restaurants while focusing on interactions with their customers and keeping it organic, miss the opportunity to record or utilise the customer data. A cool modern POS system with efficient CRM can help you collect data on your menu design, best selling point, ratings and your competitors. They will be able to generate emails to new customers and integrate social media to their operation. Does your POS system help in providing consistent service to the customers in all of your franchise. Who are your recurring customers? Do you take in-time feedback from them? How do you increase your customer retention and make them come back?
Obviously, we are not stating to go over the edge like this restaurant in Japan where robots are serving sushi to the customers. However, being at the top of technological trends may help you top the game of customer service and relationship management.
The future of the restaurants
Perhaps, the future is in the impersonality of the restaurant. Although, it is gasping idea for many restaurant owners who still cling to the organic and personal touch. Eatsa, a restaurant in San Francisco is fully automated where customers order, pay and receive their food without interacting with any person. There is an Ipad for the customers to order and the names appear on another screen for payments. Once the food is ready, the number shows up next to it. It is an example of a waiter-less restaurant that is a cross between a cafeteria and a vending machine.
The bottom line is…
Whether you accept the future or not, one thing is sure that weak bottom line is not going to get your restaurant business flowing in profits. A dripping inventory, bad online reputation, inconsistent customer service and chaotic online order management are fatal for your bottom line. Maybe, it’s time to focus on your net income, net cash from operations and net equity to bring your bottom line to the top.
And if technology helps, then why complaining? Infinia restaurant can provide POS related assistance to help your restaurant combat all the above mentioned challenges.
This article was first published HERE
