2022 has been a year of transition for restaurants, balancing evolving consumer demands with new industry-wide challenges. Restaurant sales are growing — the National Restaurant Association reported that consumers spent $90.4 billion at restaurants in November, representing the fourth consecutive month with a sales increase of at least 0.9%. At the same time, operators are struggling with fundamental issues like inflation, supply chain disruptions, and labor shortages.
At the recent DoorDash Main Street Summit in Los Angeles, Greg Dulan of Dulan's Soul Food Kitchen, Lien Ta of Here's Looking At You and All Day Baby, and Briana Valdez of HomeState discussed how they're overcoming these challenges to set themselves up for success in 2023 and beyond.
Watch the full session on YouTube and keep reading to learn how these three restaurateurs found new ways to tackle today's industry challenges.
Restaurant challenge #1: Managing inflation
Inflation continues to affect consumers and businesses across all industries. For restaurants, the increased prices of key ingredients like eggs, butter, poultry, and cheese is impacting their food cost percentage and profits. Combined with the rising costs of wages, rent, utilities, and other overhead expenses, inflation is creating a tremendous strain on restaurants.
It's really tough because we not only have to deal with food inflation, but labor, rent, and everything else. We're getting hit on a lot of sides in this industry.
But raising menu prices to combat higher costs is a delicate balance, as too much of an increase will turn off even the most loyal customers. "If the price goes up too much, people are going to start pulling out their cookbooks and asking, 'How hard is it to fry chicken?'" Greg says. (In case you're wondering, he added, "It's really hard.")
As a result, operators have come up with creative strategies to offset rising costs. Here are a few ideas to combat inflation from real-world restaurant owners.
1. Adjust your operating hours
There are two ways to approach adjusting store hours to manage costs. First, operators can reduce their hours to minimize labor expenses.
On the other hand, operators can expand their hours to capture more sales. Lien originally opened All Day Baby as a daytime-only concept — but she recently launched a pop-up concept Tet a Tet to serve dinner at All Day Baby four nights a week. Lien was able to increase revenue, reach new customers, and offer more regular shifts to help retain staff.
2. Reinvent dishes with plant-based ingredients
Briana suggested introducing vegan menu items — such as their new black bean taco — which reduces the cost of the dish and also caters to consumers' growing preference for plant-based ingredients.
"We just changed our cookie milk to be oat milk-based, then shared it on Instagram," she explains. "It got people interested in ordering a lower-cost beverage and also got people excited because our menu doesn't change that often."
3. Promote items based on profitability and inventory
HomeState leverages social media to influence sales of specific items based on cost or inventory. For example, if they're selling a lot of brisket tacos at night, they will promote bean tacos the next morning to reduce food waste.
"When we post those images, we see a direct response from our guests. It's like our head of social media is a puppet master," she says. "We posted Frito pie and then the whole dining room is eating Frito pie on the same day."
4. Brainstorm efficiencies with vendors
Inflation is affecting every restaurant industry-related business, including suppliers. In addition to bulk ordering, experiment with new packaging and shipping strategies to reduce costs and streamline operations for your vendors.
Briana worked with her vendor to repackage her butter shipments into five pound blocks instead of traditional sticks. She also reduced costs by having her supplier blend eggs in advance instead of shipping them in-shell. This method also saves time for her own team, who no longer has to crack thousands of eggs each day.
You can't just say to your vendor, 'Hey I need to get my prices down.' It definitely has to be a partnership, so think about what solutions you can bring to them.
5. Diversify your revenue streams
Greg notes that creating new revenue streams has always been critical for his business. In addition to a banquet room for private events, he has a food truck for catering, does collaborations with other restaurants, and is building a new takeout-only kitchen.
"You have to have diversified revenue streams if you're going to make it in this industry," says Greg. "We just try to think of any way we can to bring in revenue to the business. Even things you wouldn't ordinarily do, you have to just try."
For HomeState, catering has also been a significant revenue driver. "We're putting a lot of effort in our catering because we know our tacos travel well and bring people joy," she says. "Our goal is to replace the kids' birthday party pizza, or office bagel breakfast."
Briana also made investments in their online ordering system to create a seamless experience for catering customers. "We structured our online system to make it really easy, so you don't have to call or have so much back-and-forth," she notes. "You just click and then we approve the order, and it's done."
Restaurant challenge #2: Retaining employees
How do you hire and retain staff when restaurant workers have their choice of jobs at any of the hottest, trendiest spots in town? Lien urges operators to think of employee training as an industry-wide duty. "Whenever I find myself on the brink of feeling frustrated or helpless, I just have to remember that we're responsible for breeding this new culture of restaurant workers," she says.
Once you've found great employees, here are some ways to make sure you hold onto them for the long term:
Invest in training programs
Give high-potential employees a clear path to career growth through internal training and development programs that help them rise up the ladder. HomeState went as far as hiring someone solely dedicated to leading internal training and development. "Hopefully that will start to pay dividends in the team's experience, the guest experience, and the organization as a whole," says Briana.
Offer a retention bonus
The cost of hiring a new employee is a lot higher than the cost of keeping your current one. HomeState began offering a $500 bonus to employees who stay for three months. While it may sound like a lot, it's helped to not only keep employees, but motivate them to recruit their friends and family.
"It's bred a lot of loyalty and has encouraged our team members to go out and tell their friends what they love about working here — which is a very authentic approach to recruiting," explains Briana. "People like working with their friends, and it's helped to breed a nice culture."
Think outside the typical restaurant worker
Tired of hiring college kids who are only home for summer break? Consider recruiting more seasoned team members, who may be on their second career and are looking for part-time work.
"Hiring folks who are a little more senior has worked really well for us," says Greg. "They're wonderful employees, they're respectful, they converse well with customers, and you can train them quickly. That's what's been getting us through these times."
Promote from within
When hiring managers, look around at existing employees who may be ready for a leadership role. Because they already understand your operations and culture, it's often faster and more effective than waiting for the perfect external candidate.
Shaping the future of restaurants
Despite the hardship of the last few years, these operators remain hopeful for the future. Briana recalls that the reason she got into the industry was to help shape a new restaurant culture — and today's state of transition only deepens her commitment to it.
"I wanted to shed some of the old skin that we've been living in for so long, and think of new ways to do things, treat people, distribute tips, and deliver higher quality food," she explains. "I'm excited to continue to explore what's possible for our team, and for the industry. We're in a state of change, but that's an exciting thing, and it hopefully will end up in a much healthier place."