Restaurants lost $270 billion in 2020 due to COVID-19 shutdowns and restaurant restrictions, and the crisis sent many companies into a tailspin. According to the National Restaurant Association, in 2020, 110,000 restaurants closed permanently, and 2 million restaurant industry jobs were lost.
Business in the restaurant industry is once again starting to look brighter. The economy is recovering, and the restaurants that have made it on the other side of the pandemic are looking forward to increased customer demand and warmer weather.
However, many CFOs are still facing uncertainty, particularly from pandemic-related complications that are still challenging operations and restaurant profitability.
But where there are challenges in restaurant reopening, there are also opportunities for companies to set themselves up for future growth. Are you wondering how you can help your restaurant group through this recovery period? Here are some tips for CFOs.
1. Evolve, innovate, adapt
Every industry learned last year that unpredictable external events can turn your business upside down. With social distancing, changes in consumer behavior, and other swift changes, the COVID-19 pandemic quickly upended many restaurant business models. It was a sink-or-swim moment for many restaurants, who had to make fast-paced changes to keep business afloat.
Few areas of restaurant operations were immune from changes. The restaurant industry saw new trends like:
- Increased sales for take-out and delivery
- Use of automation and self-service for both in-store ordering and drive-thrus
- Changes in restaurant layout to minimize indoor dining rooms
- Changes in restaurant layout to maximize outdoor space, plus adding temperature controls
- Touchless or cardless transactions on online channels that allowed customers to close checks without involving a server or cashier
- Increased focus on restaurant loyalty programs or custom mobile apps
- Rise of ghost or virtual kitchens targeting delivery-only sales
Considering all these changes, restaurants need to evolve, innovate, and adapt to a new kind of restaurant industry. As the economy is beginning to recover, you must determine which of these trends are crucial to your restaurants and how to incorporate them into your restaurant business going forward.
2. Leverage new opportunities to grow the business
The restaurant industry in 2021 looks significantly different from the pre-pandemic restaurant industry. Companies needed to evolve and innovate to survive the restaurant restrictions and shutdowns, but this has left surviving businesses primed to take on new opportunities.
While at some points of the restrictions, your restaurant may have looked to just get through, now is the time to grow restaurant profitability. Most restaurant groups are racing to recover lost sales, which means that gaining ground on your competition is more important than ever.
Restaurants are exploring new formats, as consumers change where they work and live. Other restaurants are diversifying with format and locations. Still others are looking toward innovations in e-commerce to imitate a seamless online experience. Whatever opportunities you pursue, business in 2021 and beyond should look significantly different than it did in 2020.
3. Negotiate updated terms with vendors
Your suppliers will always be critical to your restaurant’s success, and it has never been more important to work closely with them. Strong vendor relationships can help you ensure continuity in product, better pricing, and high-quality standards for inventory. Ultimately, managing your vendor relationships is an area of risk management.
Some suppliers shifted their operations during the pandemic, and many even went out of business. During 2020, you may have negotiated new terms with your vendors. Whether that was changing the scheduling of timing of your payments or changing order frequency to adapt to new inventory usage, it is time to revisit these terms.
As you open back up and your sales increase, your vendor negotiations may look different. Your updated terms with vendors should include details about sourcing your inventory or negotiating any prepayment or updated credit lines.
4. Keep close tabs on PPP and RRF spending
Many restaurants have taken advantage of some of the federal government’s forgivable loans as part of the Payroll Protection Program (PPP) or grants from the Restaurant Revitalization Fund (RRF).
If your restaurant group received a PPP loan in 2021, you need to follow specific guidelines on how to spend that money in order to qualify for loan forgiveness. Similarly, if you received an RRF grant this year, you must ensure that you use the money for eligible expenses only. Keeping tabs on the latest updates is critical.
The cost of borrowing may rise in 2021, in addition to the existing risk and unpredictability that is already taking place in financial markets. Understanding all the details you can about your current cash, loan, and grant status are essential as you look to make large-scale financing decisions.
5. Ensure access to capital
No matter where your restaurant group is with reopening right now, many restaurant CFOs are now looking to solidify access to capital. This may involve keeping more cash on hand, understanding ways to generate liquidity quickly if needed, and maintaining a healthy line of credit.
Having access to capital is also critical for risk mitigation, in the case of another event like a new wave of infections.
In addition, greater access to capital can help your restaurant group pursue strategic business initiatives. There is no shortage of new capital investments that your restaurant can take on in this new era. Depending on the timing and size of your investments, access to capital can be key to grow a competitive advantage or establish new business ventures.
6. Maintain a firm grasp of downside risks
The changes caused by the pandemic have offered innumerable lessons to restaurant CFOs. But while many may think of financial lessons first, the disruptions in the restaurant industry also point toward the importance of risk mitigation.
CFOs should prioritize scenario planning as a tool for exploring downside risks. Scenario planning will look different for different companies, but it may cover everything from bolstering inventory (and how much inventory you have on hand for key products) to lining up back-up vendors. Other restaurant groups may explore everything from consolidation of existing locations to diversification in types of restaurants.
7. Develop financial strategies for the hiring crisis
One of the biggest stories in the restaurant industry in 2021 has been the restaurant industry labor shortage.
For CFOs looking to address the labor crunch, one approach may be to reduce labor needs by leveraging restaurant technology. Restaurant management tools like sales forecasting and labor forecasting can help store-level managers make data-driven decisions in real time, dynamically adjusting staffing to coincide with sales.
Your managers are also likely spending a lot of their limited time trying to fill gaps in staff roles. To optimize your managers’ time, restaurant groups may also consider implementing hiring tools to streamline recruiting, interviewing, hiring, and onboarding employees.
Finally, restaurant groups shouldn’t forget that while 2020 was a challenging year for businesses, it was also difficult for employees as well. Revisiting your company culture is vital to maintain as high a retention rate as possible. As CFO, you have the opportunity to analyze and evolve your restaurant group’s culture in 2021 and beyond.
8. Support technology investment to improve operational efficiencies
Investing in technology can help grow your restaurant group’s competitive advantage, both in the short term and long term. Restaurant technology solutions can help improve everything from your operational efficiency to employee retention.
As you begin and sustain your restaurant recovery, this may be a good opportunity to invest in new restaurant technologies or take advantage of new features available with your current restaurant management platform.
Improving your operations (and bottom line) happens through small daily and weekly changes on the store level. With greater visibility and efficiency from restaurant management software, you can better implement operational changes. New technology investments can help provide transparency into the data you need to take on new opportunities while minimizing challenges.
Today’s restaurant CFOs can use tech tools, in addition to time-tested business principles, to overtake competition and continue growing as the restaurant industry reopens for business. This period of restaurant reopening is a tumultuous time, but with a strong vision from restaurant group leadership, you can guide your restaurants through the recovery.
If your restaurant business is focused on long-term profitability, equip your team with tools that will help increase operational efficiency. Restaurant365 is an all-in-one restaurant management system incorporating restaurant accounting software, restaurant operations software, inventory management software, payroll + HR software, and scheduling software into a cloud-based platform that’s fully integrated with your POS system, as well as to your food and beverage vendors, and bank.