Pricing

by David Klemt David Klemt No Comments

FTC Targets Restaurant Fees and Surcharges

FTC Targets Restaurant Fees and Surcharges

by David Klemt

The Federal Trade Commission Building

The Apex Building, also known as the Federal Trade Commission Building in Washington, DC.

Well, that didn’t take long. Less than two months after asking for the public’s input, the Federal Trade Commission is proposing legislation targeting additional fees and surcharges.

The proposed rule is known as the “Unfair or Deceptive Fees” rule. As one may imagine, the FTC is going after hidden and so-called “junk” fees.

As it stands, according to multiple outlets, this rule would prohibit restaurant and bar operators from surcharges that are commonplace. For example, larger-party fees, delivery surcharges, and even credit card processing charges would be banned by the rule.

Instead, operators would be compelled to list total prices on menus, whether for goods or services. Further, the FTC is directing operators to provide larger groups with “larger group” menus. These separate menus would show total prices calculated to include any surcharges.

Even further, it’s being reported that the FTC is also addressing tips. The Commission’s rule directs operators who charge service fees in place of tips to remove the fee and return to tipping.

Interestingly, the National Restaurant Association is reporting that the FTC never identified restaurants as a targeted industry when asking for public comments about junk fees. However, other sources claim that restaurants were indeed included when the FTC put forth the request for public feedback.

Regardless, it’s a fair statement to say that the Commission doesn’t understand restaurant operation and costs. It appears that the FTC either didn’t work with any operators when drafting these proposed rules. Or, if they did seek out restaurant operator input, they put very little stock into it.

Costing Independents

One thing that’s clear is these proposed rules will cost operators. In particular, compliance will cost independent operations, which account for nearly 70 percent of American restaurants.

According to the NRA, the cost of changing menus will cost nearly $5,000 per operator, for starters.

“The FTC doesn’t take the realities of the restaurant industry into consideration,” reads the Association’s fact sheet. “Its estimated compliance cost—$3.5 billion—would equal a cost of $4,818.27 per operator for menus alone. Small independent operators run on a 3-5% margin and make an average of $45,000/year. The cost of making this change would be approximately 10% of their total income.”

As independent operators can attest, credit card swipe fees are a dynamic cost that affects them disproportionately in comparison to their chain restaurant counterparts. Since these fees are calculated on a per-transaction basis and not fixed, adjusting menu prices to comply with the FTC’s rule puts them at a costly disadvantage.

Then there’s the simple fact that when restaurants raise prices, traffic tends to drop. When traffic drops, revenue goes with it. And when traffic and revenue drops, hours are cut back, and people lose their jobs.

Harmful Legislation

As far as I can tell, this is another example of a government agency attempting to impose rules on an industry it doesn’t understand.

When drafting legislation that affects restaurants, a group of operators and industry advocates that truly represents those who will be impacted should be impaneled. Input should be taken into thoughtful consideration before drafting rules, and drafts should be provided to the panel to receive feedback.

Unfortunately, the past few years have made it clear that our industry has very few friends the federal government. Our lobby, such as it is, simply isn’t respected as valuable enough to warrant consideration before imposing harmful rules on the industry.

This, despite the fact restaurants and bars in America employ more than 12 million people. That’s a lot of voters too many elected lawmakers are willing to dismiss as unimportant.

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by David Klemt David Klemt No Comments

Meet Customers Where They Are, Part 3

Meet Customers Where They Are, Part 3

by David Klemt

Person using Google search on their phone

If you truly want to meet your potential guests where they are, you need to be as discoverable as possible via mobile and desktop search.

The first part of this series discusses meeting guests in secondary and tertiary markets. Also, part one recommends looking into suburbs and watching moving data.

Part two looks into the importance of being top of mind for delivery, takeout, and pickup guests. Even with the current demand for socializing and in-person dining, off-premise dining guests are an important focus.

Now, I’m talking about being discoverable. Why? Because of where your guests are: their phones and desktops.

So, there are few crucial elements of your business to consider. Your website still matters. You need to ensure you own your venue listings. It’s crucial that your location information is up to date across platforms.

And now, meeting guests where they are will mean improving the odds that AI chatbots recommend your business.

Another ongoing KRG Hospitality series is our conversations with ChatGPT, Bing AI, and now Google Bard. It’s our chat with the latter that shows the importance of improving online discoverability.

Below, interactions with Bard and ChatGPT about using AI chatbots to discover restaurants, bars, and hotels.

Google Bard

Can people use Bard to discover new restaurants and bars, and book reservations?

Yes, people can use Bard to discover new restaurants and bars, and book reservations. Bard can access and process information from the real world through Google Search and keep its response consistent with search results. For example, if you ask Bard to find a restaurant with good Italian food in San Francisco, it will look for restaurants that have been rated highly by other users and that serve Italian food. Bard can also book reservations for you through OpenTable.

What criteria do you use to determine the best restaurant, bar or hotel for someone asking you to conduct a search of such businesses?

I use a variety of criteria to determine the best restaurant, bar, or hotel for someone asking me to conduct a search of such businesses. Some of the most important criteria include:

  • Customer reviews. I look at customer reviews to see what other people have said about the restaurant, bar, or hotel. This helps me get a sense of the quality of the food, service, and atmosphere.
  • Location. I also consider the location of the restaurant, bar, or hotel. I want to make sure that it is in a convenient location for the person I am recommending it to.
  • Price. I consider the price of the restaurant, bar, or hotel. I want to make sure that it is within the person’s budget.
  • Type of food. If the person is looking for a specific type of food, I will try to find a restaurant that serves that type of food.
  • Atmosphere. I also consider the atmosphere of the restaurant, bar, or hotel. If the person is looking for a casual or formal atmosphere, I will try to find a restaurant that fits their needs.
  • Other criteria. I may also consider other criteria, such as the hours of operation, the availability of parking, and the presence of accessibility features.

By taking all of these factors into account, I can help the person I am recommending it to find the best restaurant, bar, or hotel for their needs.

How can a restaurant, bar or hotel improve the odds that Bard would recommend them to someone?

There are a few things that a restaurant, bar, or hotel can do to improve the odds that I would recommend them to someone:

  • Provide excellent customer service. This means being friendly, helpful, and responsive to customer needs. It also means going above and beyond to make sure that customers have a positive experience.
  • Offer a unique or memorable experience. This could be anything from a special menu item to a unique atmosphere. Something that makes the restaurant, bar, or hotel stand out from the competition.
  • Be consistent. This means providing the same level of service and quality every time a customer visits. It also means being reliable and keeping promises.
  • Be responsive to feedback. This means listening to what customers have to say and taking their feedback into account. It also means being willing to make changes based on feedback.

By following these tips, restaurants, bars, and hotels can increase the odds that I would recommend them to someone.

If I asked you to find me the best cocktail bar in Las Vegas for early evening drinks and the best upscale restaurant for a late dinner in Las Vegas, what would you recommend?

Sure, I can help you with that. Here are my recommendations for the best cocktail bar and upscale restaurant in Las Vegas for early evening drinks and late dinner, respectively:

  • Cocktail bar: The Vesper Bar at The Cosmopolitan of Las Vegas. This award-winning bar offers a wide variety of cocktails, as well as a beautiful atmosphere. It is perfect for a romantic evening or a night out with friends.
  • Upscale restaurant: The Dorsey at The Venetian Las Vegas. This Michelin-starred restaurant offers a tasting menu of modern American cuisine. The atmosphere is elegant and the service is top-notch. It is perfect for a special occasion or a romantic dinner.

I hope this helps!

ChatGPT

Can people use ChatGPT to discover new restaurants and bars, and book reservations?

As an AI language model, I can provide recommendations and information about restaurants and bars, but I cannot directly book reservations for you. However, I can suggest several online platforms that allow you to book reservations at restaurants and bars, such as OpenTable, Resy, and Yelp Reservations. These platforms allow you to search for restaurants and bars based on various criteria such as location, cuisine, price range, and availability, and make reservations online.

If you’re looking for restaurant recommendations, I can provide suggestions based on your preferences such as cuisine, location, price range, and other factors. Additionally, I can provide you with information such as hours of operation, contact information, and customer reviews. Please let me know if there’s anything specific you’re looking for and I’ll do my best to assist you!

How do you help ChatGPT users find the best restaurants, bars, and hotels?

As an AI language model, I can help ChatGPT users find the best restaurants, bars, and hotels by using natural language processing and machine learning algorithms to understand the user’s preferences and provide personalized recommendations.

To find the best restaurants and bars, I can consider various factors such as cuisine, location, price range, ambiance, and customer reviews. I can also take into account any dietary restrictions or preferences the user may have, such as vegan or gluten-free options.

To find the best hotels, I can consider factors such as location, price range, amenities, and customer reviews. I can also help users find hotels based on their preferred style of accommodation, such as luxury, boutique, or budget.

In addition to recommendations, I can also provide users with useful information such as hours of operation, contact information, and directions. I can also assist with booking reservations or finding deals and discounts if available.

How can a restaurant, bar or hotel improve the odds that ChatGPT would recommend them to someone?

There are several ways a restaurant, bar, or hotel can improve the odds of being recommended by ChatGPT to someone:

  1. Positive Customer Reviews: Positive customer reviews are one of the most critical factors in ChatGPT’s recommendation algorithm. Encourage your customers to leave positive reviews on platforms such as Google, Yelp, or Tripadvisor, as these can greatly improve your chances of being recommended.
  2. High-Quality Photos: High-quality photos of your establishment, food, and drinks can make a big difference in attracting potential customers. Ensure that your website and social media pages have high-quality images that showcase the ambiance, menu, and overall experience of your establishment.
  3. Accurate and Up-to-Date Information: Ensure that your establishment’s information is accurate and up-to-date on various platforms. This includes your address, phone number, hours of operation, and menu.
  4. Responding to Customer Queries: Respond promptly to customer queries or complaints on various platforms, including social media. This shows that you value customer feedback and are willing to make improvements to provide an excellent experience.

Offering Unique Experiences: Offering unique experiences or features, such as signature cocktails or locally sourced ingredients, can help your establishment stand out and increase the likelihood of being recommended by ChatGPT.

If I asked you to find me the best cocktail bar in Las Vegas for early evening drinks and the best upscale restaurant for a late dinner in Las Vegas, what would you recommend?

For the best cocktail bar in Las Vegas for early evening drinks, I would recommend The Chandelier at The Cosmopolitan of Las Vegas. It is a three-story bar with a stunning chandelier centerpiece, offering a wide range of signature cocktails and a luxurious ambiance. It’s perfect for early evening drinks with friends or colleagues.

For the best upscale restaurant for a late dinner in Las Vegas, I would recommend Joel Robuchon at MGM Grand. It is a Michelin-starred restaurant with an elegant dining room and exceptional French cuisine. They offer a variety of tasting menus, including a vegetarian option, and a vast wine selection. The service is impeccable, and the atmosphere is perfect for a romantic dinner or a special occasion.

Takeaways

First, the bar and restaurant recommendations. As a Las Vegas local for creeping up on two decades, they’re solid. I think a first-timer would find them helpful and be happy with those selections.

More importantly, however, is what each bot reveals about discoverability. Operators need to make sure they’re responding to reviews quickly and properly; that they’re listings are under their control and the information is accurate; and that they’re courting reviews in the 4.0- to 4.7- star range. (More on that rating range in the near future.)

Then there are the other important considerations, such as pricing, cuisine, and atmosphere. When taking control of listings, operators must categorize their venues accurately.

Technology innovations often present a paradox. Ostensibly, technology makes lives easier. However, many operators likely find that much of tech makes things more difficult.

Leveraging tech often requires more work on the operator side—innovations often make things simpler for our guests. Of course, tech can make things easier for operators, it just takes a lot of work initially.

As people rush to develop AI—some say too quickly—it’s going to be top of mind for people searching for restaurants, bars, nightclubs, eatertainment venues, hotels, etc. Operators are going to have to meet their guests where they are: search engines and chatbots.

KRG Hospitality. Restaurant. Bar. Hotel. Feasibility Study. Business Plan.

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by David Klemt David Klemt No Comments

Reduce Discounts, Increase Profits

Reduce Discounts, Increase Profits

by David Klemt

Scientific calculator on top of cash

There’s reason to be optimistic about generating revenue this year but operators must also be savvy if they want to boost their bottom lines.

Put another way, the growth some industry organizations and experts are predicting isn’t just going to occur. We’re optimistic about 2023 as well, but it’s going to take hard work and shrewdness.

As we know now, the National Restaurant Association is forecasting massive sales this year. In fact, the NRA projects the foodservice industry will generate $997 billion in sales. That’s nearly a trillion dollars just from the foodservice space.

Clearly, that’s a big number. It’s also $60 billion more in sales than the industry generated in 2022. That’s impressive in and of itself, surpassing the 2022 sales forecast by almost $40 billion.

Okay, so those are a lot of big numbers. Should foodservice outperform the forecast again, the industry will pass the trillion-dollar mark. And I know every owner and operator, be they independent, chain or franchisee, wants a healthy share.

However, impressive as those numbers are, they’re just that: numbers. Operators will still have to do the work to increase traffic; convert first-timers to repeat guests; and increase revenue. Fail in those tasks and there’s no reason to expect profits to rise.

It’s math, after all, not magic.

One way operators can increase revenue and profits is to offer fewer discounts. Really, this isn’t an incredible concept: If more guests pay full price, operators see more profits.

Real-world Example

Costs are up nearly across the board, and it can be tempting to offer discounts in an attempt to increase traffic. However, one group has shown over the past couple of years that discounts don’t need to be an operator’s go-to traffic- and sales-boosting tactic.

Carrols Restaurant Group is a Burger King franchisee. According to Restaurant Business, the group operates more than 1,000 Burger King restaurants. So, they operate approximately one out of every seven Burger Kings in the US.

Last quarter, Carrols managed to generate more than $14 million in free-flow cash. That’s higher performance than the group has seen in the past couple of years.

A significant factor for Carrols and Burger King is backing off of discounting. Again, this isn’t groundbreaking but it’s still noteworthy. A brand that once was reliant on discounting is now backing off that model and seeing dividends.

Of course, guest perception, the guest experience, and marketing play a role. Guests must still feel they’re getting value for the dollars they spend. They must also feel that their experience, from QSR to full-service, shows that they’re valued by the restaurant. And the marketing messaging must truly speak to a brand’s guest base and bring them through the doors to spend their money.

Premiumization over Discounts

The bottom line for an operator’s bottom line is this: If prices are continually discounted, that lower price is now the actual price. At least, a discounted price is now the normal price in the eyes of guests.

In other words, an operator who discounts all the time is training their guests to only visit and buy items when prices are lower than usual.

The superior option? Offering premium LTOs that speak to a brand’s base and tempt them to spend more. LTOs don’t need to come with discounted prices. In fact, they should be treated as premium promotions and command premium prices.

Create seasonal LTOs (in one concept’s case, inventing a fifth season), as an example, to generate buzz and increase traffic. Offer premium items at premium—but fair—prices to leverage the traffic, increase sales, and boost profits.

Another strategy that’s more effective than discounts? Building a brand with which guests resonate. Guests who relate to a brand tend to visit more often and support it with their dollars.

It’s tempting to discount. Don’t give in to temptation.

Image: Karolina Grabowska on Pexels

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by David Klemt David Klemt No Comments

Canadian Trends 2023: Technomic

Canadian Trends 2023: Technomic

by David Klemt

Tortilla with beans, cotija cheese and egg

Restaurant, bar, and hotel operators will find this year’s data-driven trend predictions from Technomic for 2023 insightful.

Interestingly but perhaps not surprisingly, some operators may be looking beyond North America for inspiration.

Per Technomic, Central and South American cuisines could influence menus in Canada this year. Other food trends that might take hold are “retro” health items, and all manner of pickled foods.

Of course, not every Canadian trend prediction involves F&B. According to Technomic, tech and the guest experience will play important roles.

To review last year’s Technomic predictions, click here. Now, let’s jump into Technomic’s 2023 predictions.

Guest Experience

Certainly, the guest experience should always be top of mind for operators, their leadership teams, and their staff.

In this instance, Technomic isn’t suggesting that the guest experience in general will be a trend. Obviously, with as important as it is to the success of any business, it’s a cornerstone.

Rather, Technomic predicts that guests will continue to feel the need to rein in their spending due to ricing costs and prices. However, the foodservice research firm also believes there’s still heavy desire for social interaction.

So, both those financial and social influences translate to the following: overdelivery.

Operators and their teams must ensure they position their brands well; make guests feel special every visit; and really dial in the guest experience. Specifically, Technomic suggests focusing on younger generations and menus with at least a couple specialty items that aren’t easy for a guest to replicate at home.

In other words, do whatever it takes to entice guests with memorable experience and quality menu items, and keep them coming back for more.

Technology

Multiple industry sources believe that 2023 is the Year of Tech for the hospitality industry. In particular, some sources believe that POS systems will receive significant attention from operators looking to upgrade.

Compellingly, Technomic sees the situation a bit differently. In particular, they’re suggesting that QR code menus may find themselves on the sidelines. Traditional menu, according to Technomic, will make their comeback this year.

Also making a (possible) resurgence? Per Technomic, in-person ordering for carryout and in-person dining.

As far as tech innovations that Technomic expects to take off this year, they see the following as standouts:

  • loyalty programs;
  • enhanced/upgraded cooking equipment;
  • automated inventory software/platforms; and
  • digital menu boards for back of house.

Culinary

As hinted at above, Central and South American cuisines are expected to take off in Canada, per Technomic.

The research firm provides specific—and delicious—examples:

  • Honduras: Baleadas tacos
  • Dominican Republic: Wasakaka sauce
  • El Salvador: Curtido slaw or relish
  • Peru: Aji amarillo and rocoto peppers
  • Bolivia: Saltenas, similar to empanadas

Another culinary trend Technomic predicts will perform well in Canada? Pickled everything.

Okay, maybe not everything. However, Technomic expects “pickling, fermenting, dehydrating and freeze-drying” to “increasingly pop up on menus.” The firm expects that operators will offer a wide range of “unusually pickled items outside of the typical veggies, including proteins and seeds.”

So, if you’re an operator reading this, it may be time to motivate your back-of-house staff to get creative with their pickling ideas.

Finally, pandemic-driven, health-based trend foods like turmeric and ginger may start to fade in popularity. Instead, predicts Technomic, items with “classic” health descriptors such as “natural,” “real,” “free,” “reduced,” and “lower” will get attention from guests looking to eat and drink healthier.

For your own copy of this Technomic report in its entirety, click here.

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by krghospitality krghospitality No Comments

Dynamic Pricing or Dynamic Menus?

Dynamic Pricing or Dynamic Menus?

by Doug Radkey

Two sportbikes racing

A key phrase used throughout 2022 was “the new normal.” In 2023, a key term you will likely hear a lot is “dynamic pricing.”

What is dynamic pricing? It can get quite complex, but the global consulting company, McKinsey, defines dynamic pricing as “the (fully or partially) automated adjustment of prices.”

The term is not entirely new to hospitality. Hotels and the overall travel industry have used modules of the pricing model for years. But for restaurants and even bars, yes, it is something new.

It is also a model getting a lot of attention of late, which begs the following question: Why?

As the bar and restaurant industry recovers from the effects of the pandemic, a dynamic pricing model that optimizes revenue opportunities may seem quite attractive. After all, our industry is looking to rejuvenate its sales to pre-pandemic levels.

Essentially, a dynamic pricing model within this industry would work like this: increase prices when demand is up (peak periods), decrease prices to draw guests in when demand is down (off-peak times).

But should this be a model that disrupts the industry in 2023 and into 2024?

While I am all for a little disruption, the industry needs to tread carefully through this potential transition to dynamic pricing (or perhaps just around the phrase itself) that’s based on demand levels.

Guest Experiences

We all know (or should know) that we do not sell a product. What we sell is an experience.

If we can create a positive, memorable guest experience first and foremost, the revenue will follow.

While hotels and travel, as examples, have boasted “positive financial results” over the years through their different approaches to dynamic pricing (while still trying to focus on the end-user guest experience), independent bar and restaurant brands must be careful not to create a hostile brand perception.

Why? Because many consumers view changing prices based solely on levels of demand as being unfair.

Being unfair will certainly create a negative guest experience and/or brand perception. The hotel and airline industries have been able to navigate this perception successfully by offering alternatives. For example, different rooms and amenities or less convenient flight times at different price points. Essentially, companies in lodging and travel provide options and flexibility before customers make the choice to spend.

What about rideshare and surge pricing as another example? Many of you reading this have likely been burned by surge pricing as a consumer, which can be by definition a form of dynamic pricing.

Have you ever tried to book a rideshare during peak periods in a major market? What would normally be a $20 ride is suddenly $40 to $60 (or more) because of their dynamic pricing model.

What did I do in this situation during a recent business trip? I walked another 25 feet up to the cab staging area of the airport and got my ride for $25.

The end results? I had a negative customer experience with the rideshare company, first and foremost. Additionally, that negative experience drove me to the competition. The key here is I was given a choice.

Now let’s switch that scenario to a restaurant.

The Restaurant Scenario

You book a table at your favorite restaurant and order that incredible steak dinner you always enjoy. But instead of it being $50 like you have grown accustomed to, it is now $75 or more. How are you as a consumer going to feel about this new price just because you visited your favorite spot during a “peak period” on a Saturday night? Were you given a choice before the spend?

Of course, this can work in the opposite direction: ordering a meal during a non-peak time and getting it for a cheaper price, thereby getting a discount.

But should we be confusing our customers based on their chosen, convenient time to visit your restaurant or bar? Should you also focus on “discounting” to drive people to your business?

I have even seen recommendations for offering an increased price for peak period but using what was the previous regular price during the non-peak times, labeling the normal price a “discount.”

Should we be framing our regular priced menu options as a discount just so we can charge and make more during a peak period? Is this being fair and ethical to your loyal customers? Should we be going down this road?

With this model (and the phrase “dynamic pricing”), which is based on demand, it is very easy to see how you can quickly confuse or alienate your loyal guests. Unless the industry in its entirety migrates over to this demand-driven model, a similar scenario as outlined above can play out for you and your guests.

Without extremely strong but transparent communication systems in place (which will be a challenge in itself), it is safe to assume that they will likely visit another restaurant up the street and/or provide negative feedback because they feel your pricing model is confusing or unfair.

Dynamic Menus

The phrase that is much more simplified and will be more easily embraced by both operators and guests is “dynamic menu.”

So, what’s the difference?

While it is still by definition “the (fully or partially) automated adjustment of prices,” it is not based on demand throughout the day. Rather, pricing is based on simple supply chain and operational cost adjustments.

According to the National Restaurant Association:

  • 95 percent of restaurants have recently had significant supply delays or shortages of key food items; and
  • 75 percent of restaurants have had to change their menu because of supply chain issues.

With a more dynamic menu, you can adjust pricing to suit those changes accordingly, through the lens of real-time ingredient cost, labor costs, productivity levels, and even the availability of certain menu items.

This simply means that the incredible steak dinner a guest has always enjoyed at your place is perhaps now $53 instead of $50 because the price of beef went up the past week or month. This ensures that as an operator, you will have a minimal gap between your theoretical and actual food costs.

Again, this should work both ways, meaning if the price of beef has gone down, so too should the price.

This means that your guests are paying an accurate value for each item, based on your intended sales mix and contributions, without a loss in margin on your end or negative experience on the guest end.

This means that everything on your menu is “market price” or MP. Where have we seen that before…?

Market Price

We all know restaurant menus will commonly deduct a price and replace it with the term “market price” (often abbreviated to “MP”). This means the price of the menu item depends on the market price of the ingredients, and the price is available upon request. It has been used for years for seafood in particular—most notably lobsters and oysters—in many restaurants.

Therefore, this pricing model is not entirely new. So, why should it stop at just high-priced seafood?

The reason many operators would use the abbreviated MP was because they did not want to reprint menus every single day as the prices fluctuated greatly.

As we move towards digitally savvy restaurant operations, implementing integrated technology and menus, we can begin to find alternatives and ensure that we are actively pricing our menus accordingly based on the market (and overhead costs) to strengthen top- and bottom-line results.

Knowledge is Power

To make a dynamic menu work, whether you’re a QSR, sports bar, casual-dining or fine-dining concept, or any other category of bar or restaurant, you need to know your target customers, provide a targeted menu, and know your numbers (the data).

Curating and engineering a menu should be a simplified process. To be honest, this should have been streamlined prior to the pandemic.

Your menu should be developed based on data, consumer sentiment, regional ingredients, regional suppliers, and local talent within the confines of the overall concept. Food and beverage programs should be developed with thought, care, speed, precision, execution, and last-but-not-least: consistent profits in mind.

Keeping menus “small” (10 to 12 or even 15 items at maximum) will be the new threshold of a successful, more profitable operation. This size of menu will allow bars and kitchens to operate more efficiently; keep inventory costs both low and controlled; control training and labor costs; and provide guests with the most flavorful and exciting items that they truly want.

Be Nimble

You also want to provide menu flexibility by continually reviewing your supply chain. Maintaining a strong personal relationship with your suppliers is imperative. You must also review your costs and inventory on a daily and weekly basis to make dynamic menus work.

To keep inventory, purchase orders, and potential waste to a minimum, it will be crucial that you to ensure your menu is small but innovative. The only way to accomplish this is through effective data management.

However, the new challenge for many independent brands is making data timely, relevant, digestible, and actionable for operators and their leadership teams. The ability to collect, interpret, and effectively react to key datapoints is going to be crucial for anyone who wants to implement a dynamic menu, and for moving forward in general.

At the end of the day, profiting from a dynamic menu is all about making decisions based on accurate cost and productivity data. Of course, there’s only one way to obtain data: embrace technology and create strategic clarity around it.

The Tech Stack

The key to successfully implementing a dynamic menu is integrating a stack of technology that provides real-time data and trend reports.

From point-of-sale software and reports to accounting software, inventory and recipe management software, and invoice management software or a suite that includes all of the above that’s integrated and working together, you can obtain real-time data to adjust your pricing based on real-time ingredient and productivity costs on a daily or weekly basis.

You want seamless movement of data from front- to back-of-house that will position you to make decisions and have a more complete picture of inventory stock levels, costs, and ordering needs, plus itemized sales, contribution margins, and productivity levels.

In Summary

While we must find ways to be innovative, potentially price-gouging our guests during peak periods and discounting during slow periods is not the way for this industry to recuperate and build loyal customers.

Building a strong brand through the creation of memorable experiences and by building connection with your community along with strategic planning, effective marketing, the elements of culture, and efficient operations, you can build sustainable revenue and profit channels.

By following a more dynamic menu approach within your operations, you can still maintain transparency with your guests with less challenging communication methods, remain a fair and well-respected brand within your community, and improve your margins by three to five percent or more with the right people and systems in place.

That sounds like a pretty good deal to me. The question here remains: Are you Team Dynamic Pricing or Team Dynamic Menus?

Image: Joe Neric on Unsplash

by David Klemt David Klemt No Comments

Traffic Up but Margins Thinner

Traffic Up but Margins Thinner

by David Klemt

Chef checking tickets

The One Table 2022 report from Datassential focuses on the state of the operator and what the industry can expect moving forward.

This informative report shares survey results from 801 operators across America. While some of the findings are positive, it’s clear many operators are enduring significant challenges.

For some, traffic and sales are up. However, that’s not the situation others find themselves in.

To download and review the Datassential One Table 2022, please click here.

The Respondents

For this report, Datassential shares the survey answers from 801 respondents.

Most survey respondents are independent operators. In fact, they account for 71 percent of the participants. Making up the rest of the field are chain operators (15 percent) and franchise operators (14 percent).

As far as segment types, the majority of survey participants operate in the fast-casual space (18 percent). Unsurprisingly, fine dining is the smallest group of respondents at six percent. Thirteen percent operate midscale restaurants, and 12 percent are at the helm of casual-dining concepts. Somewhat surprisingly, just ten percent of participants operate QSRs.

Interestingly, the service format is fairly even among survey participants. Fifty-three percent of operators are full-service and 47 percent are limited-service.

Similarly, survey respondents represent the country’s regions pretty evenly:

  • South: 30 percent
  • Midwest: 29 percent
  • Northeast: 21 percent
  • West: 20 percent

In terms of market type, most respondents operate in the suburbs (49 percent). Following somewhat closely are urban-market operators, at 31 percent. Just 20 percent of survey participants operate in rural markets.

Traffic, Sales and Margins

At first glance, Datassential’s survey reveals positive news.

Now, I’m sure people find the terms “pandemic, “pre-pandemic,” and “post-pandemic” exhausting at this point. However, there’s no denying we continue to feel the aftershocks sent through the industry by the pandemic.

So, how do things look now in comparison to pre-pandemic traffic and sales levels?

First, the positives. Nearly half of survey respondents—47 percent—say their traffic is up in comparison to where it was pre-pandemic. Add to that the 14 percent who say their traffic is the same and 61 percent of operators appear to be in good shape.

In terms of sales, 51 percent of survey participants have good news. That news is that their sales are higher in comparison to pre-pandemic levels. Again, add the 14 percent who don’t see any change. So, that’s 65 percent of operators who appear to be performing well.

But with the good there’s bad. Unfortunately, 39 percent of respondents report lower traffic than pre-pandemic levels. And sales are lower than they were before the pandemic for 35 percent of survey participants.

Operator margins are lower for all respondents. Generally speaking, the profit margin for operators before the pandemic sat at 21 percent. Now, the average is 13 percent. QSRs and fast-casual restaurants are a bit higher among survey respondents: 17 percent and 15 percent, respectively.

On paper things do look up for many operators. However, the industry is still suffering, with a third struggling to rise to even pre-pandemic levels of traffic and sales.

Image: Daniel Bradley on Unsplash

by David Klemt David Klemt No Comments

Restaurant Rewards Making Headlines

Restaurant Rewards Making Headlines

by David Klemt

People toasting with Dunkin' Donuts cups

Loyalty programs are making waves and grabbing headlines but not all of the news is good, according to consumers.

Dunkin’, Chipotle, Taco Bell, and Starbucks are among the restaurants whose programs are receiving attention.

Now, there are still those who cling to the idea that all publicity is good. Personally, I’ve found that idiom to be outdated. In fact, I’ve believed that phrase to be false for several years.

Instead, when it comes to publicity, I find this quote from Warren Buffet to be far more accurate: “It takes 20 years to build a reputation and five minutes to ruin it.”

It’s important for operators—for all entrepreneurs, really—to protect their brand’s reputation. At the end of the day, long-term success depends on the reputation one builds. And make no mistake, that reputation is made—or broken—every day, with every interaction.

So, what does all of that have to do with loyalty or rewards programs? It’s simple—such programs aren’t just about revenue. A loyalty program, when executed well, is a branding tool that boosts engagement, recognition, and perception.

When a loyalty or rewards program is executed poorly it doesn’t just mean low membership numbers. A brand’s reputation can take a severe hit if loyal consumers cry foul.

Let’s take a look at some brands that have made headlines the past couple of weeks.

Taco Bell

This rewards program, the Taco Lover’s Pass, is a bit of an anomaly in the loyalty space.

It was first launched in Arizona in September 2021. Depending on the location, the pass cost either $5 or $10. In exchange, people could get a free taco a day for 30 consecutive days, and they could choose from seven tacos.

Back in January of this year, Taco Bell brought back the Taco Lover’s Pass. This time, the program was available throughout the US, and it cost $10. Again, those who snagged a pass through the chain’s app could get a free taco each day for 30 consecutive days.

And just two weeks ago, Taco Bell made the Taco Lover’s Pass available again. This time, people had one day to download the app (if they didn’t have it already) and grab the pass.

Time will tell if Taco Bell will eventually make this wildly popular program permanent. For now, this occasional reward program seems to be serving the chain just fine, and their loyal guests don’t seem to be angry that the Taco Lover’s Pass, thus far, appears fleetingly.

Starbucks

Another interesting approach to loyalty sees Starbucks partnering with Delta Airlines.

As of yesterday, members of Starbucks Rewards and Delta SkyMiles can link the programs together. Members of the former can receive double stars on days on which they’re flying Delta (at participating locations). For the latter, members will earn one mile for every dollar they spend at Starbucks.

Essentially, linking the two accounts ensures that members earn points across both programs for a single purchase. Not a bad move—it should be an effective way to boost loyalty for both companies.

Chipotle

Ah, Chipotle. It’s safe to say this brand has experienced plenty of ups and downs over the past several years.

But credit where credit is due: It seems that the chain manages to come back from each scandal or mistake. And that’s what’s so frustrating—they wouldn’t have to correct missteps if they took care to avoid making them in the first place.

So, why are people upset with Chipotle now? The backlash concerns the restaurant chain’s Chipotle Rewards program.

When someone signs up the program, they can redeem a nice perk immediately: free chips and guacamole. On their birthday, they have access to another perk. In general, the biggest benefit is earning up to 10 points for every dollar spent at Chipotle.

The points a member earns are redeemable in multiple ways: free menu items, a charitable donation, or merchandise. Seems very straightforward, right?

Well, Chipotle updated their rewards program, and it’s not an upgrade. In response to inflation, Chipotle has increased prices, just as innumerable restaurants have also done.

However, the chain updated Chipotle Rewards so that members must spend more to get their free entree reward. Members must now spend an additional $20-plus to get their reward, and they’re understandably unhappy.

It should go without saying but a rewards program is for increasing visits or orders per member. With people declaring they’re “done” with Chipotle, the brand’s update is driving down visits and potentially harming their reputation.

Dunkin’

Things in the reward and reputation space may be worse for Dunkin’ than any other restaurant brand at the moment.

The chain first launched its DD Perks loyalty program eight years ago. Last week, Dunkin’ “reworked” loyalty, launching Dunkin’ Rewards.

Unfortunately, according to several reports, social media, and Reddit, the new program deflated the value of members’ points. From what I’ve seen members must now earn more than double the points they needed to prior to the Dunkin’ Rewards rollout for a gratis beverage.

Oh, and free drinks on a member’s birthday? The new program eliminates that perk. As is often the case on social media, some people are seething.

However, a statement from Scott Murphy, the president of Dunkin’, suggests that people are perhaps misunderstanding or misrepresenting the new program.

“Dunkin’ loyalists told us they wanted the ability to redeem for more than just beverages and we listened,” Murphy said to The Washington Post. “They also wanted to bundle points for larger orders, which we accomplished. And they told us they wanted to be recognized for their loyalty, which they can now achieve through Boosted Status and earn points even faster when they come to Dunkin’ more often.”

In short, Dunkin’ Rewards is built to allow members to redeem points for a wider array of menu items, including meals. For now, however, it seems the knee-jerk reaction is that many members feel the points they earned prior to the new program’s launch are devalued. And they’re furious, with some calling for a boycott.

Obviously, a boycott is the opposite effect one wants from their loyalty program.

Loyalty is a Tightrope Act

If there’s one takeaway here, it’s that rewarding guests for their loyalty isn’t as simple as offering points for dollars.

Perhaps it should be simple, and maybe it was was that simple a while back. But now, operators must be far more cautious when designing a loyalty program.

I’ll continue to dislike offering discounts for most brands. In my opinion, once a guest becomes accustomed to receiving a discount regularly, that discount becomes the standard price. That’s not good for most operators.

It may seem counterintuitive, but I’d rather see loyalty program members receive a free item than discounts. At least they’ve paid full price to earn that perk.

Another issue, however, is making changes to loyalty programs. Operators are facing incredible strain when it comes to costs, and this industry’s margins are already razor thin. It appears that some brands aren’t just increasing costs, they’re also increasing the points it takes to earn loyalty perks.

That may make sense on paper but program members are showing that they don’t take kindly to this type of change.

Slow Down

Look at loyalty programs through the eyes of consumers, not just the eyes of an accountant.

When the costs of living rise and a person’s dollars don’t go as far as they did before, they tend to cut back or eliminate expenditures. Commonly, restaurant visits are among the first things suffer. Loyalty programs can offer guests a way to stretch their dollars—there’s an attractive perk around the bend that allows them to justify continual visits.

If a brand devalues a loyalty program member’s points or requires them to spend more to earn the same benefits, why would they be happy? Why would they remain loyalty? As far as they’re concerned, their incentive to do so no longer exists. The perceived value is no longer there.

Before an operator launches or “revisits” a loyalty program, they need to slow down and analyze it from every angle. These programs are a delicate balancing act, demanding they make sense for both the bottom line and the guests.

If an operator hasn’t yet implemented a loyalty program, perhaps they should hold off until costs become more reasonable. With inflation affecting costs and therefore prices, the wisest move may be to take the time to really dial in the program, prepare the necessary assets, and implement when it won’t impact revenue negatively.

On the flip side, operators considering making significant changes to their loyalty programs need to take the time to strategize before implementation. A misstep, even if it’s a misunderstanding from the member side, can do irreparable harm.

Image: Isabella and Zsa Fischer on Unsplash

by David Klemt David Klemt No Comments

Sales Jump Shows Guests Will Pay More

Chipotle Sales Jump Shows Guests Will Pay More

by David Klemt

Close up of calculator buttons

Chipotle’s latest earnings report may show that guests are willing to pay more at their favorite restaurants.

In Q3, the fast-casual giant’s net sales grew by nearly 22 percent. Per reports, same-store sales rose by just over 15 percent.

Is it possible that Chipotle’s earnings—which exceeded Wall Street estimates—indicate that guests will tolerate price hikes?

Rising Costs

No, it’s not a “hot take” to state the obvious: Everything is more expensive.

All operators and managers are aware that costs are rising across the board. Beef, chicken wings, cooking oils… Prices are increasing and the trend is expected to continue.

Not that any of us need a real-world example, but Chef Brian Duffy shared on episode 53 of the Bar Hacks episode that he now has to price a pound of chicken wings at $13.

One reason that Chipotle made the choice to raise prices comes down to rising beef prices. Another is increased freight costs.

As every armchair economist knows, when a business’ costs rise that increase falls on its customers.

The reason is fairly simple: If prices remain the same while costs rise, the situation becomes untenable, the business doesn’t generate enough revenue, and doors close.

So, Chipotle’s decision was simple. The fast-casual chain announced in June that menu prices would increase by about four percent to defray rising costs.

Rising Wages

Chipotle’s June announcement followed one the company made in May.

Six months ago, Chipotle announced the hourly wage for their restaurant workers would increase to $15 by June.

How did the company afford to raise hourly wages, offset ingredient costs, and deal with rising freight rates? The aforementioned menu price hike.

Now, Wall Street didn’t seem to anticipate backlash toward Chipotle for increasing their prices. However, plenty of other people have said—and still say—that customers won’t support restaurants or bars that raise prices.

It appears that a significant percentage of brand-loyal customers will remain loyal and continue to support the businesses they like even through price hikes.

Is This the Way?

I’ll address a crucial detail: Chipotle is a fast-casual brand valued at close to $52 billion.

They’ve got incredible brand recognition and tremendous purchasing power. Reportedly, there are 2,857 Chipotle locations in the United States. In fact, the company announced in February of this year that it planned to open 200 more locations this year.

So, no, there’s not a direct comparison to be made between Chipotle and an independent restaurant or bar.

However, that doesn’t mean there’s no lesson to be learned here.

Chipotle was transparent about the reasons for their price hikes. The Great Resignation has shined a spotlight on wages, and Chipotle addressed that concern.

The pandemic has also unleashed havoc on supply chains. Again, Chipotle was forthcoming about the challenges the company was facing.

Moving forward, it may be wise for restaurant and bar owners to address menu price increases. There does seem to be some level of understanding among the more rational guests out there that if they support increased wages for hospitality workers; understand supply chain challenges; and know costs are up for everything, they’re going to see price hikes.

You very likely need to raise at least some of your prices. When you do so, consider telling your guests why. You may be surprised by the support you receive.

Image: fancycrave1 from Pixabay

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