History has demonstrated that people tend to have short memories. Even through the most challenging and tragic experiences, when the lessons are quite vivid – we quickly push aside the need to change in favor of a return to what is considered “normal”. Transitioning through this pandemic is one of those experiences, a life-changing time that offers a number of important lessons – but which of these lessons will result in real learning?
The restaurant industry continues to be devastated – not just as a result of the pandemic but because the pandemic brought underlying issues to the surface. The glory days of the restaurant industry have been laid to rest and they may never return to any semblance of normalcy. If the stakeholders in this important industry do not take the opportunity to learn from the lessons encountered, then a return to those exciting decades of growth and media glory will be difficult to envision.
So, what are the lessons offered and what should we learn:
FROM THE EMPLOYER’S PERSPECTIVE:
- We are not prepared: Other businesses, as part of their operational strategy, build in scenario planning that helps to develop action plans for the expected and unsuspected. “What if……happens? How will we react?” As good as restaurant people are at reacting to situations – they are not typically astute at planning for things to go wrong and designing actions that will get them through difficult times. The “new” strategy must be to plan more effectively.
- Our labor pool is very fragile: For decades – labor issues moved in waves. When the economy was weak then restaurants were in the driver’s seat – more applicants than jobs available led to a competent workforce that was underpaid and overworked. When the economy was strong and unemployment low – then restaurants struggled to find enough staff and the result was a less than perfect workforce that was paid more while expecting less.
The current labor shortage is different – restaurants have an opportunity to begin scaling up as the pandemic starts to come under control, but workers are less excited about returning to the same work environment. The lesson learned must be that our employees are the most important component of a successful restaurant. To attract and retain quality staff you must train well, treat them with respect, pay them a respectable wage, offer reasonable benefits, and provide them with the tools to be successful.
- Our business model requires too much labor: At the same time as we step back it becomes vividly apparent that our method of operation and the menus that we provide require too many hands. This creates a domino of challenges – labor dependance, the inability to pay reasonable wages, selling price ceilings that do not yield sufficient profit, etc. The lesson learned must be to re-build the model to reflect efficiency and less dependence on excessive labor requirements.
- Our menus are too large: The days when the way to customer satisfaction was through extensive variety are probably gone. Four-page menus do not reflect business common sense – inventories become unmanageable, waste is much more difficult to manage, the level of expertise required of employees grows exponentially, consistency and quality are challenging, and profit is hard to predict and realize. The lesson learned is that it’s not about quantity – it’s all about quality and execution. When menus are well researched and managed then a restaurant stands a chance of success.
- Our profit model doesn’t work: Every chef and restaurateur is well aware of the tight profit margins (5-6% if you do everything right) is problematic. These margins make it impossible for restaurants to build a nest egg, pay fair wages, and reach their financial goals. Without cash reserves the pandemic cause thousands of restaurant casualties. The lesson learned is that menu items must be more profitable – this may mean re-assessing the ingredients used, how they are managed for waste, and the selling price formula used. It also means that more significant time must be spent training service staff how to upsell and create enhanced customer value. The top line drives the bottom line and restaurant management must provide employees with the tools to drive sales upward.
- Brick and Mortar weighs us down: Requiring customers to travel to you puts the weight of participation on their shoulders and the responsibility for push and pull marketing in the hands of the operator. When a restaurant space is leased then further control over the burden of cost is determined by the lease arrangement and the landlord. In recent years landlords have leveraged their lease power to eventually drive restaurants out of business. The lesson here is that restaurants will need to evaluate how they approach physical space. Does your model work better as a mobile restaurant or strictly on-line through a ghost kitchen? When a brick-and-mortar operation is deemed essential then how can you build a mutually beneficial, long-term financial arrangement with a landlord?
- People can do without us (although they don’t want to): Previously loyal customers found ways to adapt when restaurants were shut down due to the pandemic. Americans quickly moved from spending 50% of their food budget in restaurants to spending none or a fraction through curbside pick-up and delivery. The lesson learned is that restaurant business is very fragile and not the necessity we were beginning to believe. What can restaurants do to diversify their revenue stream that allows adaptation when the environment of need changes?
- We need to create a take-out experience, not just a source of food: So, we shifted from in-restaurant dining to take out and delivery. Restaurants actually did adjust, but the real experience of dining is missing. The quality factors of temperature, texture, aroma, and visual plate presentation were quickly lost as restaurants moved to selling food rather than experiences. Expectations and real experiences were dramatically altered for customers changing the perception of even the most established operations. The lesson is that take out is a market that has previously been underestimated, one that has loads of room for improvement. Restaurants should invest heavily in finding ways to adopt significantly improved packaging, and associated components that attempt to match the experience of dining in. Technology can provide ways to fill in the gaps.
FROM THE EMPLOYEE’S PERSPECTIVE:
- Our jobs are even less secure than we thought: In order to stop the financial bleeding – restaurant owners were forced to furlough employees or risk ruin. Government subsidies helped to bridge the gap for some, but it was a band aid approach that created longer term issues. The lesson is to diversify revenue streams in restaurants and provide alternative job opportunities for employees if such a disaster strikes again. When there is a lack of trust in job security then employees will look elsewhere.
Another opportunity for employees is to build a skill set that is transferrable to other types of jobs that may be less impacted by an unforeseen disaster.
- Why do we put up with low wages: Wages have notoriously been below standard in the restaurant business and gratuity based sub-minimum wage for service staff has always been viewed as questionable? There have always been slower seasons or weeks when staff hours were reduced, or a few weeks of unemployment were dealt with by staff members. When positions were shut down indefinitely, then the weight of the problem became far more pronounced. If restaurants are intent on reopening and building a team then they must understand that employees will no longer tolerate the inequities. The challenge is that unless some of the other aforementioned issues are corrected then the ability to pay those wages will be impossible. Review, research, discuss, correct, and realign – now is the time.
- Why do we put up with horrible work/life balance: A fresh approach towards a new business model must include determining how to create a better environment for employees? Employees are leaving the business in droves – we have no choice but to address issues of more dependable schedules, stress reduction, reasonable work weeks, delegation of responsibilities, etc. Necessity is the mother of invention.
- The sizzle is almost gone: We rode the crest of the wave for 30 years as working in restaurants and becoming a chef or a restaurateur were viewed as exciting and fun. The sizzle is wearing off as those engaged in restaurants know how hard the work is physically, mentally, and emotionally. It’s time to tell the truth, highlight the positive, and correct much of the negative. Ask the question: “Why would anyone want to do this work?”
- Gratuities shouldn’t take the place of a fair wage: There are plusses and minuses to the tip-based environment of the front of the house. Gratuity (merit based) provides incentive linked to exceptional performance. Tip-based environments set the stage for enhanced customer service experiences which is beneficial to the server and the restaurant. On the other hand, tip-based employees are oftentimes more interested in individual performance than in teamwork – so it can create friction among staff. It’s time to have the big discussions- should gratuities go away? Is there any real justification for paying the lowest possible wage to the employee that has the greatest impact on the customer experience?
The challenges that we face in restaurants are not new, but the extenuating circumstances brought on by the pandemic has pushed everything to the forefront. There is too much to ignore and no time to hesitate. If we fail to act, we may find it impossible to bring this incredibly important industry back to where it was and should be.
PLAN BETTER – TRAIN HARDER
Harvest America Ventures, LLC
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