The Three Pillars of Restaurant Success In 2023

Nate Lozier
Nate Lozier
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If you’re a restaurant manager, you may roll your eyes a bit when asked “what you do”. You’ve probably even been cornered at parties by people who love to cook and have even told you about their dream of opening a restaurant of their own one day. And although you won’t repeat it, you’re probably familiar with the joke “if you’re thinking about opening a restaurant, don’t.”

While that joke is a little cynical, there’s some truth to it. Most restaurants don’t turn a profit for several years. Owners and managers pour their blood, sweat, and tears into their work just to break even. It’s truly a labor of love. And you’re probably aware that anyone who got into the restaurant game just to make money is in it for the wrong reason, another popular turn of phrase.

This isn’t to dissuade anyone from getting into the restaurant game. One of our four core values at R365 – and one you probably share – is “love good food”. It’s also about providing people memorable experiences through that food. But these mantra are just the starting point of running a successful restaurant. It requires a lot of hard work, a little bit of luck, and a deep understanding of a business that has a lot of moving parts and curveballs.

Despite all of this, the future of the restaurant world isn’t a bleak one, but of massive opportunity. One of the (very) few benefits to the pandemic was that, while it forced many restaurants out of business, it also jumpstarted innovation. And if you’re a restaurant operators or manager who has made it this far, also some the confidence that you can succeed and thrive under even the hardest of circumstances. 

At Restaurant365, we pride ourselves on helping restaurants do exactly that: thrive, even in tough times. Part of that responsibility is helping restaurants prepare for what’s to come. Like the pandemic in 2020, the ongoing labor crisis from 2021, or food inflation in 2022, there will be curveballs in 2023.

Our industry experts, who have decades of experience in the restaurant industry, are here to offer their thoughts on the expected trends in the coming year, as well as suggestions to prepare for them. It’s our hope that these predictions and suggestions will help set you up for success both today and in 2023.

Here are what we consider the Three Pillars of Restaurant Success in 2023

Maximizing Revenue: Sales Fix Most Things

Probably the biggest change to your restaurant during the pandemic was a rapid growth in delivery. Delivery rates continues to grow each year since 2020, but not as rapidly. We expect delivery rates to level off, as your average customers become more price sensitive. The convenience of paying delivery fees will feel too much for more and more customers, who are willing to get the food themselves to save a few bucks.

Because of this, takeout/pickup will continue to grow in 2023. Restaurants should prepare for this growth, and the opportunity to take back control of the delivery market. A lot of that preparation comes with offering your customers incentives to select takeout, order by phone or even your own website, if you have it.

We suggest offering a nominal discount by ordering through your restaurant. Include coupons for pick-up orders, particularly in every delivery service bag. This reminder will bring customers back for pick-up, and in-house dining, putting you back in control of the guest experience.

In order to leverage these revenue streams, restaurants need to look at their menu mix, product mix, and cost of goods sold, and make sure these revenue streams aren’t hurting but helping your bottom line. With so many added fees, restaurants need to be wary not to overindulge with their menu offerings to lower cost items and let them shine.

Recession May Or May Not Be on The Horizon, But Restaurants Have Already Been Through it

The dreaded word recession has been on people’s minds for the last two years, and many expect an economic downturn in 2023. But restaurants already weathered their own recession in 2020. As an industry, they are much better primed to deal with any economic changes. They’ve already drastically changed how they do business very quickly to deal with things like inflation, food cost, and supply chain issues. They’re better prepared than most.

 

Operational efficiencies are a huge part of this. Ensuring cash flow and bank reconciliation are monitored closely and timely will give restaurants keen insights into the financial health of their operations. This means looking at P&L statements and other reports on a weekly or even daily frequency through the right software tools.

 

Another area is menu engineering and price points. In a recent survey, we found that over 90% of our customers were forced to raise prices in 2022, and we expect that trend to continue. The ways you raise prices though are not all the same. Use the basic practices of menu engineering to help your “stars” (lower cost, high popularity) shine because it will have the largest contribution to your bottom line.

 

Many restaurants think of menu pricing as a top-down approach, but there’s great opportunity in bringing in other members of your team for their input. As front of house workers, cashiers, and other team members if they’re seeing anything interesting. They see your business from a totally different angle in their daily tasks, and often see things managers/ownership do not.

 

Minimizing Prime Cost: Reducing Food Cost and COGS

 

We spend a lot of time at R365 talking about food cost and Cost of Goods Sold (COGS), as it’s one of the core areas R365 software helps restaurants improve store operations. Our Guide to Controlling CoGS for Restaurant Businesses will walk you through this process.

A good place to start with controlling COGS is investigating your Actual Vs. Theoretical food costs.

Restaurant365 Solutions Architect Marc Cohen says this is a great area to implement the 80/20 rule:

Don’t focus on the little things, but the big stuff. Focus on the 20% of your products that are making up 80% of your menu mix. Focus on the proteins, on the volatile produce items. Dial in on your top 20 key items and I guarantee you if you have an AvT program set up, you’re going to move the needle on your food costs. If you can shave just one or two points off, it’s a lot of money.

Marc Cohen

Minimizing Prime Cost: Rethinking Labor Costs as Revenue Stream

Most businesses think of customer service as a cost, but the restaurant industry flips this idea on its head. Your employees, particularly front-of-house workers, are really one of your biggest revenue streams. They can often make the difference between a lost customer and a loyal one. In the restaurant industry, where patrons have nearly unlimited options, the value of repeat customers is even more valuable.

 

It’s more important than ever to do right by your employees. Customers aren’t the only ones who need love. Salary and benefits are obviously a huge part of this, but there are other components as well. Today’s restaurant workers and managers are looking for anything that makes a high-stress job a little easier. Think about the tools your employees use every day. Not just knives in the kitchen, but software as well. Invest in tools that make their lives easier. Are you employees logging into multiple systems every day for different tasks? How do new employees view your hiring, onboarding, and training processBringing everything together under one ecosystem isn’t just easier for you as a manager, it’s easier for your employees too.

 

From training and onboarding, to payroll, to swapping shifts, find a software solution that simplifies these tasks to relieve the stress of your employees. Making their lives easier means, ultimately, making your business more profitable.

Providing Excellent Customer Experience & Improving Customer Loyalty

 

The importance of customer loyalty has increased in importance for restaurants over the last several years. Competition is high. Most people can get a burger, or pizza, or even sushi online from a dozen places in your area in the click of a button. With the playing field leveled in the delivery era, the guest experience is the biggest way to differentiate yourself from your competitors.

Third-party reviews and word-of-mouth advertising has grown exponentially in the last two decades with the popularity of Yelp, Google Reviews, and other review sites. Customers are more savvy, as they respond less to advertising, and more to objective sources about your business. At this point, restaurants are keenly aware of the importance of Yelp reviews, check them frequently, and even respond to reviews on the platform themselves.

You average restaurant-goer sees dining as more than just a chance to get great food, but an experience, similar to interacting with their favorite brand. This is where offering a consistent omnichannel experience becomes important. Whether it’s dine-in, take-out, or delivery, restaurants need to offer the same experience (within reason) to customers.

There’s no surer way to find out how consistent you are than to place some orders yourself. The “undercover boss” approach shouldn’t be about punishing any specific worker or shift, but rather getting an accurate picture of what customers are experiencing. Getting one pickup and one delivery wont give you an accurate look at your entire operation, but it’s a good place to start to find inconsistencies in your dining experience. 

This omnichannel experience extends to your online presence as well. Having a consistent brand across social media can be a great way to interact with your customers. It’s also a way to boost that interaction. But do your customers have a consistent experience when finding you online. Do you have the same general content on Facebook, Instagram, Twitter or your website? If not, it may be time to think about this consistency when posting.

You may or not be familiar with search engine optimization (SEO). At its most basic form, SEO is the methodology behind how websites are ranked on Google. Not all websites and pages are created equal, and there are practices that can help you boost your ranking spot when people search “pizza near me”.

Bringing It All Together

The past two years having been a rollercoaster for the restaurant industry. A global pandemic, a labor shortage, inflation… the list goes on and on. If you’ve made it this far, you should congratulate yourself for braving the storm — or storm after storm.

There are sure to be curveballs in 2023 as well. But these pillars of restaurant success underline what is necessary to maintain a strong foundation for your restaurant. They’re the backbone that will help you hit the next curveball out of the park. Good luck!