Certainly, 2020 brought challenges for the restaurant industry that most owners and operators didn’t see coming.
COVID-19 has prompted massive changes in how restaurants operate. Some restaurants were forced to pivot quickly to off-premise channels to deal with local business restrictions, changing menus toward a delivery focus. Other restaurants had to shift operations to a limited-capacity model, adjusting labor and food costs to match new sales levels.
No one knows exactly what will happen in 2021, but if you are a restaurant owner or operator, it’s certain you are thinking ahead to what’s next for your business. To prepare for the new year, restaurant owners, operators, and managers need to start planning now.
Here are the top 12 operational challenges restaurant operators should expect in 2021:
1. Generating enough revenue to break even
Your restaurant’s break-even point is the sales you need for a certain period of time to not lose money, or “break even.” Understanding this break-even number, which is based on your operating expenses, informs everything from your staffing decisions to adjustments in inventory.
While all restaurants certainly want to make a positive profit, in tough times, the first priority is to at least match the break-even point. As you make a plan for 2021, knowing what amount of revenue you need to make, at a minimum, for your business to operate lays the groundwork for all other operational decisions.
2. Keeping up with health and sanitation requirements
Guests and staff became more aware than ever of the importance of health requirements during the start of the COVID-19 pandemic. In 2021, health and sanitation will continue to be essential areas of restaurant operations.
To meet this challenge, your restaurant should follow all local and national guidance on best health practices during the pandemic. Staying up to date on any changes in recommended practices lays the groundwork for a safe environment for both your staff and your guests. This includes enforcing health requirements with your employees, and also making sure to communicate your policies to customers.
3. Adjusting to government-imposed business restrictions
During the COVID-19 pandemic, local, state, and federal regulations and restrictions on businesses have fluctuated as case numbers have changed. This approach has been challenging for restaurants in particular, who have labor and inventory that can be difficult to adjust quickly.
However, as we look to 2021, some restrictions on businesses, especially restaurants and bars, are likely to continue in some form. Building flexibility into your restaurant operations, like reevaluating your labor or keeping an especially streamlined inventory, is essential to meeting this growing challenge.
4. Responding to shifting guest preferences and expectations
Customer behavior isn’t something that will likely change overnight, so a challenge in 2021 will be to instill customer confidence in your business while still maintaining healthy operations.
Even if your local area lifts official restrictions on your dine-in operations, your guests may feel a reluctance to visit your restaurant in person. Especially if you live in a region with a winter that prevents outdoor dining, the loss or reduction of this dine-in sales channel will need to inform your future strategy.
As you look to your 2021 planning, make sure to adjust your sales forecasts to adapt to this reality of smaller dine-in sales, decreased check size, or a different at-capacity count. This adjustment should also include your changes in takeout and delivery sales. Then, with revised forecasts, you can look to adjust your menu, food costs, and labor spend to match your new projections.
In addition to addressing customer concerns about dine-in in general, you may want to consider implementing technology changes that allow for social distancing protocols. For example, using QR codes for menus or adding contactless payment options follows customer expectations for a socially-distanced dining experience.
5. Finding, training, and retaining staff
Employees determine the customer service experience in a restaurant. But with the disruption of the restaurant industry in 2020, finding, training, and retaining high-quality staff has become extremely difficult. Reduced or unstable hours, in addition to the general pressures of the pandemic, have prompted many restaurant industry employees to leave the industry.
With a shifting labor market, it’s more important to ensure that the staff you are hiring and training is going to stick around longer. Keeping retention at the top of your mind during the hiring process in 2021 is critical to ensure that the employees you do hire are able to help you reach your business goals.
6. Managing rotating inventory
Restaurant inventory management involves a large number of moving pieces, and ingredient costs are one of a restaurant’s largest expenses.
Especially if you’ve shifted your operations to adjust to different sales numbers or focus on off-premise dining, inventory management is critical. Delivery, takeout, and curbside channels require a focused inventory strategy to keep food costs streamlined.
Restaurant owners trying to keep up with the constant inventory change are turning to inventory management software, which covers the inventory process end to end, from counting and transferring to ordering and invoicing. Certain parts of inventory cannot be automated, like counting by hand, but they can be made more efficient through template inventory sheets on a phone or tablet device. Other time-consuming elements of inventory can be automated, like tracking ingredient costs, and creating journal entries.
7. Maintaining accurate, profitable menu pricing and planning
If your restaurant pivoted toward off-premise channels like takeout and delivery, it is likely that you have had to adjust your menu in 2020. As you plan for any additional menu changes in 2021, one challenge is to continue meeting customer demand while ensuring menu items can hold up to takeout and delivery.
In addition, with shifting sales numbers, your menu should allow for a lean inventory that minimizes the opportunities for food waste. Using ingredients in multiple recipes, for example, can allow you to reduce the number of items in inventory and focus on rotating through ingredients faster.
The final challenge with creating a menu is to balance profitability and popularity. Restaurant owners leveraging restaurant operations software can use menu engineering tools to visualize trends in their menu items, seize new opportunities, and make changes where necessary. Combined with sales data by location or period, menu engineering data can be informed by specialized sales forecasts.
8. Adjusting to increasing food costs
Restaurant operators must continuously track their recipe costing, mapping out ingredient cost, usage, and yield to understand the contribution margin of individual menu items. If your supplier costs fluctuated during 2020, you will want to continue keeping an eye on food costs in 2021.
Automating tools like recipe costing, or using software like smart prep to reduce waste, can help streamline the business and adapt to food cost fluctuations. Tracking food waste trend reports, production stats, and recipe cost by location or time period can help identify inconsistencies.
Restaurant operators will also want to keep an eye on actual versus theoretical food cost variance over time. Restaurateurs can measure out an exact recipe cost to the penny, but if staff isn’t properly trained, the actual ingredient costs may look much different.
9. Keeping up with the rise of mobile
In December 2019, Restaurant Technology news reported that 70% of consumers use their mobile devices when making a dining purchase. With the rise of delivery services in 2020, this number will likely be higher in 2021.
With customers increasingly turning to their phone for information about their restaurant dining experiences, providing a smooth experience for mobile customers should be a priority. Restaurant websites and online restaurant menus should be mobile responsive. Consequently, it’s wise to invest in SEO-friendly updates and quick load time maintenance for website pages, especially on mobile.
Today’s customers also expect to do everything on mobile that they can do on a regular computer, including ordering pickup or delivery and easily viewing different menus.
10. Balancing costs of providing delivery with profitability
In 2020, many restaurants quickly turned toward delivery when faced with customer behavior and local restrictions on dine-in. While quick changes were needed in the spring, as you look toward 2021, now is the time to sit down and examine the profitability behind your different order modes.
Many restaurants are either losing money, breaking even on their delivery — or, worse, aren’t even able to track their financial impact. Restaurant owners using delivery must make sure to use restaurant operations software that can automatically calculate and track the profitability of delivery based on sales, CoGS, and delivery expenses. By automating tracking, your management team can be sure you are making data-driven decisions when designing the delivery system.
11. Maintaining online reviews and social media marketing
In the “reputation economy,” where a brand can be boosted or hurt based on what is being said about them in online reviews, customer service matters. Bad online reviews can be made out of customer service experiences that can outweigh the food, location, or ambiance of a restaurant.
The more locations a brand or franchise has, the harder it is to create a consistent dining experience. To protect a brand’s reputation as a whole, restaurant operators can use online reviews to identify issues and be proactive in responses to future problems. Online reviews can actually be used as a constructive feedback tool, giving helpful insight as well as a platform to control the situation and change the narrative.
By being proactive in social media channels, restaurant owners can affect the perception of their restaurant brands and start to control the perception of the food and dining experience. Restaurateurs already using social media with their brands should consider expanding into other areas like social media advertising, text and email marketing, or loyalty programs.
12. Accurately tracking business intelligence
With all the day-to-day operational challenges of restaurant management, taking a long-term view can be challenging to prioritize. However, business analysis ensures that restaurant operators are making smart, informed decisions in the moment, before small issues become big problems.
To avoid tedious and inaccurate data tracking, it’s best to automate as much restaurant operational reporting as possible. Automating time-consuming tasks like sales and labor goals, scheduling, recipe costing and inventory management allows the management team to focus on making profitable adjustments to the business and reduce costs over time, rather than inputting numbers into a computer.
2020, and COVID-19 in particular, certainly presented new challenges to the restaurant industry. However, by looking forward to 2021 and staying ahead of operational challenges, restaurant owners, operators, and managers are laying the foundation for a successful, profitable new year.
Are you interested in implementing more operations management strategies in 2021? Restaurant365 incorporates restaurant accounting software, restaurant operations software, inventory management software, payroll + HR software, and scheduling software into an all-in-one, cloud-based platform that’s fully integrated with your POS system, as well as to your food and beverage vendors, and bank. Ask for a free demo of Restaurant365 today.