The restaurant business: How can I increase my revenue?
According to the Canadian Federation of Independent Business (CFIB), 25% of Canadian restaurant owners are seriously thinking of declaring bankruptcy or selling out their business because of the pandemic. Obliged by public health organizations to reduce their business hours or their dining room capacity, even close temporarily, culinary professionals across the country are feeling the pinch and realizing that they must rethink their business model. What can you do to keep your head above water? Here are two options and expert advice to accomplish your goals.
First option: Developing a delivery service
Better mentioned from the outset: For restaurateurs that are plagued with liquidity problems, delivery is not a magic solution. In small municipalities, in the absence of the Uber Eats, SkipTheDishes and other DoorDashes of this world, delivering a chorizo risotto requires tremendous management efforts and heavy investments.
The food delivery platform offer is not the most enticing. Most claim close to 30% of sales. Sandra Ferreira, director of operations for Groupe Ferreira, which holds three restaurants in Montréal, put their voraciousness into perspective: “Uber has brought us many clients and much visibility. As for their cut, I would have had to spend the same amount in publicity for the same results.”
Moreover, the director recommends negotiating with the delivery giants. “We may often feel powerless against a California monster like Uber,” she admits, “but it is possible to challenge their prices and make certain requests.” Undoubtedly, delivery is far from being at the core of Groupe Ferreira‘s financial model. It is a complement, used as leverage to increase their sales figures.
A survey published by Restaurants Canada on December 8, 2020, revealed that 8 out of 10 restaurants are either losing money or barely scraping by. Sixty-five percent are continuing to operate at a loss, while 19% are just breaking even.
There lies the pitfall: Rushing headfirst into meal delivery thumbing one’s nose at the pandemic, hoping for the same revenues as when dining rooms were open.
Philippe Bertrand, founder of the Centre d’Entrepreneuriat en Restauration de Montréal says that for interesting results, it is important to take the time to reflect in order to come up with an effective strategy. Time that owners do not have. In a way, launching meal delivery amounts to tackling a new market, with its suppliers, distribution methods, clientele and marketing strategies. “Think about it: It’s somewhat like launching a new SME. No one goes into business without a plan. It’s way too risky!” maintains the consultant, who cumulates 25 years of sommelier and management experience.
The menu must be adapted, he highlights. Dany Bolduc knows what he is talking about. Owner of H4C, whose gastronomy is appreciated by the gourmets of Montréal’s Saint-Henry district, he would offer lamb beautifully complemented with mouhammara sauce, asparagus and jus de viande. During the pandemic, he chose to box… fried chicken. The crisis was an opportunity for the chef to create high-end comfort food.
“At home, clients have different needs. They are not looking for ambiance, beautiful plates or the choreography of waiters. They want to eat something really delicious and easy to make.” Danny Bolduc sheds light on a crucial element: Delivery enthusiasts have different expectations and the menu must be adapted to better meet them.
Culinary columnist and food consultant, Thierry Daraize, recommends that his clients present a minimalist menu, which will simplify cost and waste management, as well as marketing efforts. “Do not offer a vast choice to try to please everyone,” warns the former chef with over twenty years of experience in the kitchen. It is better to advocate a specialty dish. Just one! Offer a warm hug, something comforting to incite consumers to allow themselves a small moment of happiness, that guilty pleasure.”
He suggests to imitate Auberge Saint-Gabriel. Founded in 1688 in Montréal, the first restaurant in North America to obtain an alcohol permit set aside its meats, fish, and seafood menu, to present one unique product: cheese fondue. The sachet of Gruyère and Vacherin Fribourgeois is delivered with a baguette, kirsch and black tea (according to Swiss tradition) or in a three-course formula, with deli meats and desserts. It is also possible to buy dipping vegetables, a perfectly paired bottle of wine or a gift box including Veuve Clicquot champagne. The idea has met with phenomenal results, claims Thierry Daraize. “Remember to remain consistent with your concept and style,” adds the former executive chef. Your star product should showcase your identity.
Nevertheless, the foremost objective is to come up with a profitable proposition. Calculating the costs (overhead, raw materials, labour, transportation, packaging, etc.) to allow for an interesting profit margin is of utmost importance.
“To compensate for dining room losses, too many restaurateurs turn to delivery without rethinking their menu or calculating their profit margins. If it isn’t profitable for you to be on Uber, then what’s the point? It may allow you to stay afloat temporarily, but you will inevitably go under.”
– Philippe Bertrand, consultant in the restaurant business
How to choose the right packaging? We asked Jean Bédard, owner and president of La Cage,a popular chain in the province of Québec. His advice: “Order out to become an expert!” Taking a look at the bags, boxes, containers, utensils that the competition is using can only help you to inspire better practices.
The goal is not to put on ten kilos testing all the banners. The chartered accountant by training, now a renowned entrepreneur, suggests avoiding being too fussy and particular from the get-go as the pandemic has put a lot of pressure on providers, who are struggling to keep up with the increasing demand. He feels that it is better to opt for a continuous improvement approach to offer, in time, packaging that is more appealing, economical, and eco-friendly. To optimize your delivery service, don’t forget to survey your clientele to know their displeasure and recommendations,” he adds.
Second option: selling product
Marketing your barbecue sauce is one way of diversifying revenues far beyond this extraordinary sanitary crisis. For many independent entrepreneurs, large-scale distribution may seem like a fantasy. However, to access the shelves of Loblaws, certain initiatives can be taken. “Few owners think to visit the corner grocery, even a large supermarket franchise, to test the water,” believes Jean Bédard.
Dany Bolduc went all the way with his idea: In October, he opened his own grocery store. An initiative that allows him to make a living and keep his employees on the payroll (he even anticipates hiring seven new ones), while the door of his SME across the street reads “closed” due to government restrictions. When reservations resume, his new address will be a way to cater to the few health professionals and numerous apprehensive ones among his clientele. It will also reduce waste, as the H4C surplus will be transformed.
In the refrigerators of Dany Bolduc’s La Pantry, can be found the precooked version of the chef’s universe: octopus, guinea fowl, duck leg, pork ribs, meatballs… oven-ready pieces to enjoy with friends, seasoned with spices or novelty ketchups.
“The goal is to appeal to a larger customer base, to look for opportunities outside of my restaurant’s reduced hours to meet the needs of consumers who live and work in the neighbourhood,” he summarizes. Breakfast, lunch, supper, you’ll find what you’re looking for, as fresh bread, pastries and unique sandwiches are freshly made on site. The shop gives H4C a lot of visibility.
“Consumers are changing. They want food of quality without sitting down in a dining room. A rising trend for some time now, ready-to-eat and ready-to-cook has been growing in popularity. To succeed, one must anticipate the trend.”
– Jean Bédard, president of Groupe Sportscene (La Cage)
Light at the end of the tunnel
Jean Bédard remains positive regarding the future of the restaurant business. He feels that COVID-19 will actually give a boost to the industry, which greatly needed it. His arguments? First, the pandemic is forcing restaurant owners to revisit their business model and it’s high time. Second, it is raising awareness for leisure-deprived consumers who are unanimously realizing that a night out for a meal is essential. Third, a relaxing of rules is called for, notably regarding the sale of alcohol.
Finally, it may in part resolve the problem of labour shortage. The industry is renewing itself and reclaiming its former glory; its dynamism cannot help but attract a new generation of cooks. Furthermore, lockdown and the popularity of ready-to-cook means more time in the kitchen for many. Passions and careers will inevitably be born.
Without a doubt, the businessman is an eternal optimist.
The restaurant business: How can I increase my revenue? You may opt for delivery or retail sale. The golden rule: Do not make hasty decisions, without first surveying the market, making a business plan, and calculating your profit margins.
Regarding delivery, consider reducing your menu to adapt it for transportation and to cater to the needs of your clientele at home, while respecting your identity. Weigh the advantages and disadvantages of internal management and outsourcing if applicable in your area. As the case may be, scrutinize and negotiate the offer of delivery platforms. Do not be too demanding when it comes to packaging, as the options are limited during the pandemic; focus on a continuous improvement approach. Order from your competition and survey your clientele to enhance your offer over time.
A small piece of advice concerning retail sale: Even if you do not have the capacity of marketing your products on a large scale, do not hesitate to visit the big franchises locally. Accessing the shelves of your neighbourhood Sobeys is already a good start.