Meeting Off-Premise Demand While Rebuilding In-Restaurant Sales to Boost Profitability

The pandemic has undeniably changed the restaurant industry. Some restaurant trends may already have been in motion, but the restrictions and adjustments caused by the pandemic accelerated the changes.

For instance, the increase in customer expectations for convenience or the rise of online ordering for takeout or delivery already existed before the pandemic. However, in the era of social distancing, these burgeoning trends took off. Restaurants had to change business models, pivoting to a larger focus on takeout food and food delivery.

But while off-premise demand has grown, in-person sales are coming back as more regions open up again. For restaurant owners and operators, how do you balance between maintaining off-premise business and rebuilding in-restaurant sales—at the same time?

The rise of off-premise dining

Off-premise dining certainly accelerated during the pandemic. Dining room closures or capacity restrictions drove restaurants to increase their sales through off-premise channels. Restaurants started to prioritize drive-thru, takeout, and delivery to remain in business.

Ordering meals online and taking advantage of online food delivery was perceived as safer for many guests during social distancing restrictions. The National Restaurant Association’s State of the Restaurant Industry Report tracked the full shift within the industry. According to the report, roughly half of full-service restaurants said they devoted more resources to expanding the off-premise side of their business since the onset of COVID.”

In addition, across all major segments, from fine dining to quick service restaurants to fast casual, owners and operators reported that “off-premises dining represents a larger proportion of sales than it did pre-coronavirus.”

In fact, P.F. Chang’s has opened eight of its To Go concepts and plans to have more than 50 To Go units in its network by 2022 to meet the increased demand for takeout and delivery. Famous Dave’s, IHOP, and Firehouse Subs have also rolled out smaller format stores in response to the growth of takeout and delivery.

And some chains, including Sweetgreen and Shake Shack, are adding drive-through for the first time to meet changing consumer expectations for off-premise dining.

Is off-premise dining here to stay?

Many restaurants turned to takeout and delivery to remain in business during the pandemic and because of pandemic-related restrictions. However, as the vaccine rollout continues and business restrictions lift across the country, restaurants are now able to re-open dining rooms or increase dine-in capacity.

Many guests are eager to dine in restaurants again. Morning Consult has been tracking “how safe Americans feel dining out at restaurants in light of the pandemic.”. As of early June, “70 percent of all adults said they feel comfortable going to a restaurant, an increase of 3 percentage points from the end of May and a new record high for the activity” (compare this to 42%, the highest rate all of 2020).

However, the promising statistics about consumer confidence levels don’t mean that the restaurant industry will look exactly the same in this new era as it did pre-pandemic.

According to Morning Consult, on-premise dining has become more common than online food delivery, but takeout food still remains the most popular option for diners. “Forty-two percent of consumers said they order takeout at least once a week, while about 1 in 3 (35 percent) said they dine in at a restaurant that often,” the company reports. In the same survey, thirty percent of respondents said they get food delivered at least once a week. All these stats had remained fairly steady in recent weeks.

According to Blackbox Intelligence, off-premise sales are remaining at a historic high for limited-service restaurants, and this number is staying relatively stable. For full-service restaurants, off-premise sales are still “extremely high” but the rate of growth is steadily declining.

The early data seems to indicate that delivery and takeout-focused restaurant concepts are here to stay. The rise of ghost restaurants and virtual kitchens is leading many experts to predict that restaurant owners and operators are investing in off-premise to encourage future business growth.

Ramp up for full capacity

With all this data in mind, as your restaurant adapts to the new dining environment, you may want to examine your operations from every angle.

It is likely that dine-in restrictions in your area are either loosening or completely absent at the moment. As you ramp up operations, it’s a good opportunity to review your dine-in strategy and how your restaurant is operating at full capacity. How can you focus on rebuilding in-restaurant sales, while still meeting off-premise demand?

Attract Guests Back to Your Dining Room

First things first: to rebuild your in-restaurant sales, you need to let new and long-time guests know that your dining room is open again.

Consider implementing new incentives to drive customers back to your restaurant. Rebuilding your in-person business may require a focused marketing budget for a period of time but investing in attracting guests back to your restaurant can pay dividends.

If you currently offer takeout or delivery, consider drawing guests back into the restaurant by including coupons in your off-premise packaging. Since these guests clearly already enjoy your restaurant through takeout or delivery, they may be very open to returning back to your dining room in person.

If you already offer a loyalty program or are considering implementing one, you can leverage that platform to encourage more in-restaurant dining. Consider using promotions, happy hours, or specials aimed at attracting customers to your restaurant (and maybe bringing along a friend or two).

Investing in a digital marketing strategy can also support the drive to rebuild in-person sales. A budget for social media ads, and other localized digital advertising can help kickstart more dine-in sales.

Finally, as you implement different marketing tactics, focus on your FOH metrics to continue optimizing the new customer experience. Whether tracking table turn times or the average spend per guest, knowing your metrics as your restaurant scales up again can help ensure you are providing the best guest experience possible.

Hire to Meet Pent-up Demand for On-premise Dining

As you scale up sales and demand from the customer side, you also need to simultaneously address your operations and labor. If you are successful at attracting customers back to your dining room, you need to have the right FOH and BOH team to support increased sales levels.

Undoubtedly, managing your labor over the past year has been difficult. You may have had to lay off or furlough some of your team in 2020.

However, now you may be in a completely different position and experiencing understaffing. If you are significantly scaling up on-premise dining, hiring is a priority. And yet, the entire industry is struggling to address today’s restaurant hiring challenges as on-premise and off-premise sales continue to grow.

Standing out in a competitive labor field may require you to re-examine your hiring process. Employers are experimenting with how to overcome hiring challenges by using hiring technology and tools and other recruitment tactics. Many restaurants are also considering raising wages, enhancing benefits, addressing employee concerns, and implementing a focus on retention.

Track Your Labor Costs

In the midst of your hiring for new in-restaurant sales, tracking your labor can seem like a small detail. However, when labor is crunched, it is the most important time to have an accurate, timely view into your exact labor costs.

Whether writing your schedules with sales per labor hour (SPLH) goals broken down by day-part or implementing automatic overtime monitoring to keep your managers informed, having access to your real-time labor costs can help optimize your labor spend even while your sales levels are changing.

In addition, with the current labor shortage, training for your staff is particularly important. You may need to adjust your operations in between dine-in and off-premise quickly, so having a staff that is cross-trained and flexible can be a helpful asset.

Keep an eye on your data

Even though the restaurant industry may seem to be on the other side of pandemic restrictions, the restaurant industry is still in flux. From changes in consumer behavior to a new kind of labor market, restaurants need to be ready to adapt to a rapidly changing industry.

Industry experts are predicting that takeout and delivery may be responsible for a large part of sales for the foreseeable future. Even if dine-in sales are increasing, industry trends indicate that guest behavior has permanently shifted.

To adapt, many restaurant operators and owners are considering investing in these channels in a way that makes sense for their particular business. Keep yourself ahead of the trends by making sure to set up the best data tracking possible with your restaurant accounting and operations system.

For example, understanding which order mode is your most profitable is key as the industry transitions to a new normal. Your profit margin will differ between off-premise takeout, third-party delivery, and dine-in sales.

Tracking profitability by order mode will help provide guidance in this new era. If you are losing money or breaking even on delivery with your dine-in costs, you can make adjustments with near-real-time information, instead of waiting for financial reports weeks later.

As you rebuild in-store sales, consider building in a regular review of what mix of on-premise and off-premise sales work best for your restaurant, location, and audience.

The eventual goal? To create your own new restaurant model, with the optimal split between on-premise and off-premise dining.

Conclusion

With all the rapid changes, it’s a new world out there for restaurants. However, if you survived this past year, one thing is for certain: you’re ready for any challenge.

If you’d like to help your stores rebuild in-restaurant sales while meeting off-premise demand, 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.

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