What happens to restaurants during a recession?

What happens during a recession?

When conjectures regarding a recession start churning, people typically start panicking. 20 or 30 years ago, people would cut out enjoyment during times of recession, but more recently—in 2000, 2008, and 2015, that hasn’t really been the case. While consumers may not go out as frequently, most will still allocate some disposable income and will go enjoy themselves. Another trend the industry has seen in recent recessions is when customers trade down. Perhaps a weekly fine-dining outing is replaced by casual dining, casual dining becomes fast-casual, and so on.

During the COVID-19 pandemic, many restaurateurs asked themselves, “How are we going to pivot?” This mindset shift opened new revenue streams such as off-premises dining, meal kits, and more. The same has always happened during an economic recession. Instead of resting on their laurels, successful restaurateurs have looked to see how they can improve. More recently, operators have looked to restaurant technology to accelerate forward.

Strategies to implement during uncertain times

The kitchen brigade, created by Auguste Escoffier in the late nineteenth century, is the foundation of the modern kitchen. It is the “hierarchical system that delineates responsibility for each station in a professional kitchen” according to a recent Masterclass article. The system works when your best people are leading stations within the kitchen. We can draw parallels between the challenges restaurants faced then, to now, and see how going back to our roots as an industry could be the path forward while facing a labour shortage and inflation.

Recently I spoke with an operator who slashed business hours and now relies upon a smaller workforce. His actions resulted in increased revenue, stabilized staffing, and a more focused operation.

The first question any restaurant should ask themselves is: What makes sense? Can your business operate only in the evenings with a reduced staff and menu? Data from a reporting and analytics dashboard can help you determine if these changes could work for your business. Restaurants can see what kind of traffic they are getting and where it comes from. This information can help them make decisions about whether they need to change their hours or add/subtract items on their menus.

Optimizing operations with restaurant technology

Recession or not, now is the time for restaurants to take a hard look at their technology stack. The pandemic probably accelerated mobile usage by two years; the trick now is taking various channels and creating efficiency.

For quick-service and fast-casual brands, self-service kiosks can help shift your labour from the front to the back of the house. You’re not eliminating the position, but rather, sending staff where they are needed most. Additionally, we’ve seen in the field that when you give a customer a device to order—whether it’s web, mobile, or kiosk—average spend can increase by 10%. We also have seen that if you have a strong online presence, your sales will increase as well. When you invest in the customer experience, you will generate customer loyalty.

Max Hamburgers, a quick-service restaurant that started in Sweden, deploys a smart customer experience within their restaurants. Self-service kiosks are located at the front of the restaurant intentionally so that by the time you walk to the back of the restaurant to the collection point, your order is ready to go.

Another cog in the customer experience machine is geofencing technology. With geofences, if a customer places an order on their mobile phone and they’re 30 minutes away, they don't want their food sat on a shelf, waiting. As soon as they go past that virtual geofence, it triggers it into the kitchen, so when the customer gets there, that food is in optimal condition. Geofencing platforms, such as BlueDot, can be integrated directly into your restaurant POS system.

When auditing your restaurant technology solutions and partners, take time to analyse your delivery companies. Make sure you're partnering with the right ones, and not just giving all your profit away. It’s no secret that third-party aggregators provided a boon for restaurants during the pandemic. It’s equally known that those providers charge a premium for services—sometimes up to 30%. Is it possible to reduce your dependency on third-party and perhaps bring that business in-house? Recent Oracle Restaurants restaurant trends show that most customers prefer to deal with restaurants directly. GloriaFood’s online ordering platform enables restaurant operators to directly offer takeout and delivery. You can set it up for free within five minutes.

Finally, actionable real-time data will drive to your bottom line. There's a balance between what I call "analysis paralysis" and meaningful information. A transaction platform such as Simphony restaurant POS system has all the normalized aggregated data within reports that you can use to make smart business decisions. Oracle reporting and analytics has a set of reports that show you where to focus. So instead of experiencing data overload and pouring over everything, you can leverage a solid set of reports built on an aggregated, normalized set of data that you can then build on and analyse:

• Streamlining labour
• Bestsellers vs. menu items to cut
• Staff performance
• Peak operating hours
• And so much more

Oracle Simphony is one transaction platform, one data source with real-time access to the information, empowering operators to make decisions that are relevant to their business. Many operators out there are leveraging systems that force them to wait until the next day to access reports. By that time, they’re only left to wonder, "If only I've done this." By having real-time, aggregated, normalized data that's then presented in an actionable format, team members are empowered to act on that information to make decisions that will affect the P&L on that day.

Investing in restaurant technology

Now is the time to grab hold of restaurant technology to navigate through and accelerate ahead. It can be expensive, but it will pay dividends in the long run. Anyone that invests in technology in a slowdown has a faster recovery. It doesn’t have to happen all at once. Incremental steps can propel your business forward.

My best advice: go with a supplier that has a vision for the future, that's looking 12, 18 months down the track. Go with what gets acquisition and get customer service out first, then worry about labour costs, food costs, and things like that. If you invest in customer service, then people will come back.

Looking forward with Oracle

Oracle can help you maximize your move to the cloud—identifying new opportunities across the Oracle ecosystem to open new sales channels, protect your revenue streams, and sustainably introduce innovation. Get in touch to see how Oracle can help or contact us directly by phone: US: +1 866-287-4736; UK: +44 207 5626 827; AU: 1300 366 386; LAD: 52 559 178 3146