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RESTAURANT STRATEGY
This is How to Recession-Proof Your Restaurant
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#560 - This is How to Recession-Proof Your Restaurant ***** This week's episode is brought to you by: RESTAURANT SCALE SECRETSVISIT: https://restaurantscalesecrets.com/Chip This week's episode is brought to you by: OVATIONVISIT: https://ovationup.com/chip/ ***** The Restaurant Opening Bootcamp will save you tens of thousands of dollars in costly mistakes. Run by restaurant coach, Chris Hughes, this 12-week program will teach you everything you need to know about opening a restaurant. LEARN MORE: https://www.restaurantstrategypodcast.com/restaurant-opening-bootcamp-inqury-form ***** Business is down. We all know that... so how do you recession-proof your restaurant? By focusing on these 4 areas! ***** If you want to snag a copy of Chip's book, The Restaurant Marketing Mindset... CLICK HERE: https://www.therestaurantmarketingmindset.com/ If you're ready to learn more about the P3 Mastermind... CLICK HERE: https://www.restaurantstrategypodcast.com/p3-mastermind-program If you w...
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Hey there, Chip Close here, host of the Restaurant Strategy podcast. I spend a meaningful amount of my week talking to, working with, coaching restaurant owners from all over the country. And one of the things I'm hearing over and over again is that if revenues are not down, they are at least flat. But that covers are definitely down. And I think that's unsurprising. I think it's right in keeping with what we're watching in the news that, that even if we're not in a full blown recession, there's a lot of uncertainty in the marketplace. And we know that restaurants are one of the things that get cut from a family's budget, that maybe they're not going out to twice a week anymore, they're just going out once a week. Or instead of, you know, five times a month, it's two or three times a month. Meaning they're still celebrating birthdays, anniversaries, graduations, promotions. But those, you know, casual dinners on a Wednesday and Thursday night, they're not necessarily going out. They're just holding on to their dollars a little bit more firmly. So what does all that mean for us? How do we recession proof our restaurants? That's what we're going to talk about on today's episode of Restauran. There's an old saying that goes something like this. You'll only find three kinds of people in the world. Those who see, those who will never see, and those who can see when shown. This is Restaurant Strategy, a podcast with answers for anyone who's looking. Hey everyone, thanks for tuning in. My name is Chip Close Again, this is the Restaurant Strategy Podcast. We put out two new episodes every single week, all meant to help you level up building more profitable and sustainable business. I run a coaching program. It's called the P3 mastermind. I host live events all throughout the year. You're gonna hear more about our next event, the Profitability Summit, which happens in October. We'll have more news on how to get your tickets in the coming weeks. I write books, I give talks. But did you know, for the first time ever, we're launching our restaurant opening boot camp? It's 12 two hour sessions, so 12 weeks in a row, every Thursday afternoon. It's taught by my mentor and one of the P3 coaches, a guy named Chris Hughes. Twelve two hour sessions meant to teach you everything you need to know about opening a restaurant. So if you've never opened a restaurant before, this is the thing that's going to save you tens of thousands of dollars. And even if you have opened Numerous places before. Learn from someone who has done this over over at a very high level. Learn how to save yourself tons of money in stupid avoidable mistakes. The link is in the show notes. Go click. You're going to submit an inquiry form because we only have 20 spots and we want to make sure that these spots are held for the people who really need to know this information. If you are opening a restaurant anytime in the next 12 to 24 months, this is definitely somewhere you want to be. Two ways to do it. Either you can just take the boot camp, the 12 two hour sessions or if you also want to add on private sessions with Chris, you could do the 12 two hour sessions in the group format. Right? Those 12 lectures basically and you get 12 private coaching sessions with Chris. Especially if you need a little bit more handholding. You really want someone to dial in on it. It's a great way of doing it. Two ways to to experience this Boot camp. The restaurant opening Boot camp happens July, August and September. If you're opening anything in the next year or two, you do not want to miss it again. That link is in the show notes Restaurant owners. You want a steady predictable flow of new customers, right? If that is the case, then you need to check out Restaurant Scale Secrets. They have a fully done for you marketing system that has already helped tons of restaurants including more than 50 members of this restaurant strategy community. They work with a ton of my P3 members. I recommend Restaurant Scale Secrets because I know it works. They run meta ads, they run Google Ads and they have an entire automated system to get people into your orbit and to get them coming in and coming back. The program works. It's why I recommend it not only here, but to all of my P3 members. You get to fill tables and add tens of thousands to top line revenue. So if you're ready to take that whole piece of marketing off your plate and start filling your seats, head to restaurantscale secrets.com chip book a free discovery call. There's no pressure. Get to meet Monica and her team and you'll see what they do and what they have already done for so many people in this community. Again, restaurantscalesecrets.com chip as always, you'll find that link in the show notes. Okay, so on today's episode we are talking about how to recession proof your restaurant. The beauty part of this conversation is that I'm not gonna say anything really new. It just magnifies the stuff that I already know we need to do. There are four main areas I wanna focus Your attention of four things that you can absolutely do to win when everyone else is just trying to tre. How do you not only survive but thrive in, in an environment, in a, you know, in a, in a time as uncertain as this? I'm telling you, it's not as bad as you think. And let's drill down so you understand how to really focus on these four things. Number one, we have to focus in on profitability, right? I talk a lot about consistent, predictable 20% profits. It sounds crazy to some people, right? Because they, they're stuck at 5, 6, 7%. Every once in a while they make 10, 11, 12%. They can't imagine 20%. But I'm tell you, the biggest restaurant groups and chains in the world target 20% plus because they know that gives them cushion, that even if they fall, if they fall below a certain month, they're going to do 16% instead of 20%. They target 20% from the beginning. So the very first thing I want you to do is focus in on profitability. Big picture, 30,000 foot view, think of a bigger number than you may think realistic. 20, 25% is absolutely possible, more if you're in a quick service or fast casual. So 25% plus if you're in a full service, somewhere around 20% is right. If you're in a challenging state like California, Oregon, Hawaii, Washington, then maybe you're looking at 15, 16, 17%. I understand the challenges that you guys face from a labor perspective, but I'm here to tell you 20% is absolutely possible. For quick service and fast casual, 25% is possible. What you need is a way to hit your revenue targets. A system to put into place to make sure your managers understand what they need to do to hit their revenue targets. You focus on PPA per person average. So you make sure that your servers, your bartenders, your managers know that you need to generate a certain amount from every single body that walks into your restaurant for lunch, every single body that walks in for dinner. You have to make sure you're getting enough covers at the desired price per head. That's how you first focus on the revenue side of things. You need to understand your entire pie, chart all of your different revenue streams. So catering, private dining, you know, in person dining, your merchandise, all of that are different revenue streams. What do you need each of those to bring into your business? That's another way. So we talk about revenue management quite a bit on this podcast and it's something that I never hear people talking about, but if you're going to set a budget, your budget is off a revenue number. So first things first, you have to make sure you're hitting your revenue targets. How many covers do you need at what ppa, at what price per head? Right, the per person average. That's what PPA is. And getting focused on that. On the flip side, then managing your expenses, in particular the key expenses in your business, we know it's prime cost COGS plus labor, making sure that prime does not go over 60%, right? Labor should be about 30. COGS should be no higher than 30. The closer you get to 55%, the better off you're going to be. So having all in labor at around 30%, having all in cogs at 24, 25, 26, that's a recipe for success. And you can absolutely hit it. Now, if you're in a challenging state like Hawaii or California or Minnesota, let's say, right, Maybe your labor is going to be at 33, 34, 35. Well, fine, then that means that your cogs have to be at 22, 23, 24, max, 25, so you can get prime cost. Again, prime cost is COGS plus labor is no higher than 60. There's very few things that I say are chiseled in stone. It's, you know, it's scripture as far as restaurants concerned, 60% prime is chiseled in stone. You can't move off of that. Any sort of business, as we move forward that goes above 60, you're not going to be talking about max profitability. Not when rent and utilities we know are through the roof, not when insurance is through the roof and increasing every single year. The controllables, right, are revenue, cogs, labor. Make sure you hit your revenue target. Make sure you keep cogs and labor combined below 60%. You focus in on profitability. And then the other piece to this, right, is something we talked about in the P3 leadership retreat a couple of weeks ago. And it kept coming back over and over and over again, which is no sacred cows. If you love a dish but it doesn't sell, get rid of it. If you love a dish but it's no longer profitable, even if guests love it, but it's no longer profitable, get rid of it. No more loss leaders. Lost leaders work. When you're, when you're a giant supermarket chain and you're losing money on Coke, where you're losing money on the turkey, but you know you're going to make money and all like the produce and potatoes and sweet potatoes and all that, the people are going to get for Thanksgiving or you know, you lose money on the soda, but you're going to make money on all of the grill items that people are going to get for the big barbecue. Fine, but you don't do that sort of volume. You're not doing millions of dollars every single week. You're not. So you can't do it if you're doing 50, 100, $200,000 a week. You cannot afford to be in that. Loss leader convers by focusing in on profitability. It's the revenue side, it's the expense side and being really, really firm, really rigid about the items you're serving. It has to be profitable. That's the first way you recession proof your your business. Number two, you focus on making a memorable experience. Nobody talks about good, nobody talks about average. Nobody talks about a really good meal. They talk about a great meal. I was talking to a client just the other day and I said, you know, I, you need, you need this, a subtitle, a slogan, a tagline for your restaurant. And the way I explain it is this. When people say, oh, we should go out to restaurant xyz. And the other person says, oh, I don't know that restaurant. What is that restaurant? And then I say, oh, it's really great. It's sort of this like, you know, upscale gastropub. Oh, but they do fill in the blank, right? They're an upscale gastropub. Oh, but you'll never believe they're famous for this or they do this or they do that, that. The way you stand out, the way you lodge yourself in the memories of your diners is by having a tagline, a slogan, something you're famous for, something that is immediately memorable and you don't get off that. And you probably need multiples, right? So if you say, oh, they're the place that, you know, they're a blah, blah, blah, but you'll never believe what they do, right? Oh, it's this really cool steakhouse. But they do this, they do that. I can give a thousand examples of this. And I think if you look around, you see the very best restaurants in the world do this. Something remarkable, something that stands out. You need to focus on making a memorable experience. Good food, good service is no longer enough. A beautiful dining room is no longer enough. It's not. You need something that will lodge in your customers brains so they can't help but remember you when it matters most. You have to be top of mind. We talk about being in the consideration set, the way that you're in the consideration set is being at the forefront of somebody's brain. It's hard, especially when we lead such busy lives and social media and, and, and the news are pulling us a million different directions. How do you remember some specific restaurant? You have to be somebody's favorite or you have to be somebody's top five favorites. And the way you do that is by having something really memorable. Even if it's, oh, we have to go to restaurant X, Y and Z. Oh, I don't know that there. What is it? Oh, it's this really great, you know, American bistro. But I know the owner, but the they always take great care of me. Oh, but we always have the same bartender. Even your people can be part of it. It doesn't really matter what it is, but it has to be memorable. It has to be better than good, it has to be better than even very good. It has to be exceptional and it has to be unique and differentiated. That's the second thing you can do now. Do you want to pulse on what's actually happening in your restaurant? Ovation gives you real time understanding about your guest experience, transforming guest feedback into clear, clear, actionable insights so you can stop guessing and start making smarter decisions about your business. Their AI driven reporting breaks down every review into restaurant specific categories like speed of service, order accuracy, or food quality. And it shows you where to actually focus. One operator put it like this. Ovation is a game changer. It helps us identify issues early before they turn into bigger problems. Another operator starts every staff meeting by reviewing recent Ovation data, giving the team one source of truth to work from. With heat maps, goal tracking and performance dashboards. Ovation doesn't just tell you what's wrong. It actually helps your team fix it. You can even assign action items and track the follow through on those items. So if you want to get all the answers without having to ask all the questions, go to ovation up.com chip to book a demo. Mention this podcast and guess what? They'll waive your setup fee. As always, you'll find that link in the show notes. Here's the third thing you can do. And I'm gonna, I'm gonna warn you of the dangers here. You guys are not gonna want to do this because it takes work. It's not hard, but it takes work. I want you to focus on making meaningful connections. I say this a lot. I'll take the stage, talk to a room five, 600 restaurant owners and I'll say, you know, I. What? What? I don't Think you know your guests as well as you think you do. You know a lot about a handful of your guests, but you know virtually nothing about 97% of your guests. So challenge yourself to make meaningful connections. Even with 20 or 25% of your nightly guests, it will make an impact. They're like, oh, man, that guy cares about us. And it doesn't have to be you. Your managers, your staff, your. Your. Your bartenders, your servers. They can be an extension of you. But challenge yourself to shake hands, get to know people. What's. Where do you live? Where'd you go to school? What do you guys do? What's your son's name? What's your daughter's name? Are you guys going on vacation? When are we gonna see you again? Make a meaningful connection at an appropriate time throughout the meal. I do this with managers, and you can do this yourself. You could do this to your managers. Challenge them to get a little. I get them a little moleskin notebook and say, I want you to touch every single table. And don't ask, hey, how's everything here? Because they're gonna say, it's good. And you're gonna walk on. On. But challenge yourself to make a meaningful connection. So go over and say. Or challenge your managers to go over and say, hey, I'm so sorry to interrupt. I wanted to introduce myself. My name is Chip. I'm one of the managers here, and I feel like I've seen you before, but I've never come over and introduced myself. Right. To which they will respond, oh, yeah, we're here all the time. We love it here. It's nice to meet you. And then you have a conversation, or they'll say, actually, we've never. We've never been here before. This is our first time. And you say, really? That's so funny. You just seemed so familiar to me. That's amazing. I'm so glad you came in. Do you live in the area? Do you work in the area? Like, well, what brought you in today? How did you hear about us? And they will tell you a little bit about your marketing. They'll talk to you about the marketing that worked or friends told us about this place. Oh, we drive by this every day. Oh, our daughter takes dance right down the street. And we always. We keep meaning to come in. They will tell you something meaningful. So I would challenge yourself to touch every single table. Again, the quick script is. Hi, folks. I'm so sorry to interrupt you, but my name is Chip. I'm one of the managers here. I wanted to Introduce myself. Looked familiar. It's such an easy thing. Is a little white lie. Yep. It's going to be a little white lie because some people you will not recognize, and they will say, well, no, we've actually never been here. To which you will respond, oh, I'm so sorry. You just, you looked so familiar. It's still a pleasure to meet you. And you start a conversation. This feels awkward. This is uncomfortable in the beginning, but you can do it. Here's another hack to do it. Look for anybody with like a college logo on their shirt, on their hat or something, or a sports team on their shirt or their hat, especially if it's somebody out of town. So if you're in Philadelph and they have a San Francisco Giants hat. Right. If they've got a Philadelphia Phillies hat in Philadelphia, that's not unique. That's not, of course, everybody, tons of Phillies fans, but a Giants fan, you'd be like, oh, hey, we don't. We don't get a lot of Giants fans out here. You just. In visiting. Did you move here from there? Whatever. Make conversation. When you see the, you know, when you see a logo on the shirt, oh, did you go to Stanford? They're going to say, oh, no, but my, My daughter went to Stanford. So by extension. Right, right. They're going to tell you something about what matters to them. They're going to tell you something about who they are. I'm telling you, when you do this at scale, every table, every guest, every single night, when your whole team makes this a priority, you will beat out everybody else, because then you will have made a meaningful connection. There's something that draws you in. And by the way, if you see the connection here between making a memorable experience and making a meaningful connection, I told you just a second ago, part of making a memorable experience is something that they remember. They're going to remember, oh, that manager came over and was asking me about my sweatshirt and we were talking about my daughter and how she got into Stanford, et cetera, et cetera. They're going to remember you something. You just need to do something that will lodge your restaurant, lodge you into their brain, that will make them remember you when it matters most. Those are the first three things. The last four could not be more important. In a recession, you have to take a less is more approach. I know we like to think more is more. We want to give everybody an option. We want to make sure we have something on our menu for everyone so that nobody walks by, looks at the menu and says, Nah. And I'm not going to find anything I really like here and walk on. I know that's what it feels like. It's counterintuitive. But you need to focus on the things that you do better than anyone else and you need to not get off that. And you need to tell people over and over what it is you stand for. What do you do better than anyone else? Here's a perfect example. So I run something again. I talk about this a lot. The P3 mastermind. It is the best way I know to help restaurant owners increase the profitability of their restaurants. I've been in this industry for over 25 years. I've run my own business for 10 years. The first five years I spent consulting. The last five years I have spent coaching. I can say definitively that I'm able to make a bigger impact when people coach with me rather than when they hire me to consult with them. I know that because when I go in as a consultant and I tell them all the things that are wrong and I point out all the things they should do to make it right and I walk away. They don't necessarily do it. I get in there and I'm doing it. But when I coach them to do it, they take a sense of ownership over that task that I cannot replace any other way. Way. Right? So when somebody says, oh, I don't really like a group coaching format, I don't want to be with a bunch of restaurant owners. I really want one on one. I have to be willing to put my money where my mouth is and say, I understand and there are plenty of people that do that and you should go find them. But I just don't believe that's the most cost effective use of your budget. Right. Because we do group coaching so we can charge less. We do group coaching so we can charge less than we would for one on one. Because one on one is very expensive. The coaches who work with me are in demand and they could easily get work, you know, tons of places. But it is 10, 15, 20 times more expensive to work one on one with somebody who's really worth it. So either you're getting somebody who's not really good, not really worth it, or if you want to work with the best of the best, this group coaching format is a better way of getting the information out, giving you access to community and allowing you to have budget left over to spend in other areas of your business. It's why I firmly believe, wholeheartedly believe in the power of the mastermind format. It's why I launched this five years ago. It's why I've grown it from 10 people in one group to four unique groups with over 120 people in the program. It hasn't grown like that because it doesn't work. It has grown like that because it does work. But every once in a while I get someone who doesn't believe what I believe believe who want something that I just can't do, I can't give. And I have to be willing to say thanks, but no thanks. Oh, I wish you all the best. I just, that's not what we do. And I know it seems weird, it seems like I should try to capture as much business as I possibly can, but I know that's not what is in the best interest of the members that we work with. It's not in the best interest of me, my business and the coaches who work with me. So it's a small example, but it's the exact same example. You have to know what you stand for, what you believe that other people don't believe and you've got to do it better than anyone else. Those are the four ways you recession proof your restaurant. Number one, you focus in and you get rigid about profitability. Number two, you focus deeply on making a memorable experience so that you stay top of mind with people when it comes time for them to decide where they want to go out out. Number three, you focus on making meaningful connections. People don't support companies, they support people. They support people who run companies. If you show, if you show them love, if you make a better connection with them, they will support you over and over and over. That's the third thing. And the fourth thing is taking this less is more approach again. I understand the pain that so many of you guys are feeling. This is so much the advice we Give in the P3 mastermind. If you are interested in the community we run, in being a part of something bigger than yourself, yourself having access to the network and the insights that come from a variety of points of view and perspectives. Then the link is in the show notes. It's RSProphit.com you'll go learn more about the program we run. Sign up for a call. You'll chat with me or someone from my team, really, you'll see. We just ask each other a bunch of questions and see if you're a good fit. If you're a good fit, we'll talk about next steps. If you're not, no hard feelings. You will not, you will not hurt our feelings. Feelings. We understand this program is not for everyone and that if that tends to be the if that ends up being the case, then I get it. In fact, it tends to be the case. I'd say three out of five calls, they just go, oh, this is not what I thought it was. And this is not what I want. Just like I told you a minute ago. And that's totally fine. I could try to convince them of the merits of it, but some people, I'm just not going to change their mind. And that's fine. They have a specific thing that they want and they want to get after, then they should go after after it again. Rsphit.com the link is in the show notes. Appreciate you guys making this show a part of your week. I will see you on the next one.