Recent data published by USA Today suggests that the average upper middle-class couple spends around $200 per week on groceries. That’s 21 meals for two people over seven days. From my experience, it is difficult to experience a dinner for two in a moderate full-service, independent restaurant for less than $120 without gratuity. Do the math. If you are part of a working couple, managing a budget, paying for a mortgage, supporting two cars, and probably still paying off your student loans, then does going out to dinner make sense?

Strict economics would require most people to think hard about spending that kind of money. Of course, running a restaurant is difficult, wholesale prices of ingredients have risen dramatically since the pandemic, labor costs are out of control, and landlords have no mercy when it comes to establishing lease arrangements. We all know this is true and there is little hope that this will change in the future. So, what does the independent restaurateur do?

Those family-owned restaurants in your town are the lifeblood of the community. These are your friends and neighbors; they are cornerstone businesses that support local little league teams, charities, and causes that unite the people around you. They are the businesses that provide gainful employment for all age groups, and in some cases – those jobs for youngsters entering the workforce for the first time. You want to support them. You relish the chance to shake their hands and smile when they know your name and ask about your family. If you are going to invest in “dinner out” then this is where you would prefer to spend your money. Unless…it just doesn’t make financial sense or if you just can’t see the value in doing so.

Small business is the heart and soul of America and the American economy providing nearly 50% of the jobs that keep communities alive, yet increasingly economic reality gets in the way of their success. How, in this case with restaurants, do these operators find a way to financial success?

During an election year there is always a focus on what both parties call: “kitchen table issues” – the cost of groceries, mortgage, insurance, child-care, energy, and education, and how much is left for disposable income to be spent on the things we would like to do vs. what we have to do. Typically, we like to point the finger at someone or some group for our kitchen table woes, but no matter the promises and the good intentions, those third parties rarely improve the situation to our liking. In the case of restaurants, there may be better ways to turn the tides and make a difference. Maybe independent restaurants should decide to drive the change rather than find someone else to wave a magic wand. Here are some thoughts:

PRODUCT:

Take a hard look at your menu. Start by looking at the economics of producing and selling what you THINK must be there. Look at the cost of raw materials required to produce those items and ask a simple question: “Can we afford to sell these items and will people pay the price we need to charge?” Ah…now this is where a well-seasoned, talented chef can help to save the day. Maybe, just maybe, part of the solution is to take a chance and educate your customers about alternative dishes that can be produced just as flavorfully, just as attractively on the plate, and far more profitable and affordable for all involved. Maybe the old formula that involved steak, shellfish, and everyone’s “go to” entree, is no longer feasible. Assign the task to your chef to create a menu that is exciting, innovative, delicious, accessible, and financially tolerable. Reverse engineer your menu from this perspective.

PLACE:

If you are seeking a location now to support a menu concept, then do what smart restauranteurs in major urban centers have done for decades – become an advocate for urban renewal and jump into an area that needs revitalization. This is where rents are more affordable and negotiation with landlords is typically wide open. If you already operate a restaurant and are struggling to survive – sit down with your landlord and discuss options that might be mutually beneficial. Modest standard lease payments with the addition of shared profits through a percentage of sales can help to stabilize restaurant finances while allowing the landlord to indirectly invest in the operation’s long-term success. As the business does better so too will the landlord.

PEOPLE:

Independent restaurateurs can work with key employees in ways that larger chains would find difficult. Profit sharing, bonuses based on meeting financial goals, non-monetary benefits like training, allowing employees to buy some groceries through you at wholesale costs, and linking their compensation with partner arrangements with health clubs or local retailers, can all help to keep rates of pay in check and engage employees in a type of partnership.

PROMOTION:

Restaurants have always been targets for donations and sponsorships in local communities. This is part of the symbiotic relationship that brings life to a neighborhood. Restaurants could choose to look at these as less of a cost and more of an investment if they were approached as such. “What’s in it for the restaurant” is a much smarter approach. “Yes, we are happy to sponsor your little league baseball team, now how, in turn, can you help to fill the seats in our restaurant?” This is, after all, how you would approach any other expense – the exchange of money for a product or service.

PROMISE:

The promise of something more than the food before them – an experience that can include individual attention, connections to the history of the place, over-the-top service details, the sincerity of the staff, a feeling of home away from home, a little bit of pampering, those extra few moments to assemble a beautiful plate, accommodating special nutrition requirements, and so on. The promise of something special adds unique value to a meal that elevates the experience beyond the transaction of product for price. Bringing back the hospitality in the hospitality business can go a long way toward overcoming the need to charge what we charge and the sticker shock that can keep good customers away from your tables.

PORTION and PROFIT:

It’s time for restaurants to give up the race to the largest portion on the plate. We can’t afford to offer it, the customer can’t afford to pay what we need to charge, and no one needs the calories. Portion wars are not healthy for anyone, so let’s stop the competition. The road to profit is complex requiring everyone’s concentration and effort, especially in the current environment where we are quickly slipping back into the mode of dining out is a luxury, not a part of the American lifestyle. This is not a place where restaurants want to live.

So, are we pricing ourselves out of the market? Is it sufficient to simply blame the marketplace where the price of raw materials, labor, rent, and insurance have increased beyond acceptable levels – or should we become proactive and find a way around the obvious challenges? It’s time for restaurants and restaurateurs to do what they have done so many times in the past – engage in creative problem solving.

PLAN BETTER – TRAIN HARDER

Harvest America Ventures, LLC

Restaurant Consulting

www.harvestamericacues.com  BLOG

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