What is Restaurant Consulting?
An Introduction to Restaurant Consulting
It has been noted that almost 60%* of the restaurants that open, are shut within their first year of operation, another 20%* within five years of operation only because of lack of professional knowledge and poor market study. Restaurant Consulting firms are external organizations hired by business owners to help them achieve a goal, for example to set up a restaurant or achieving a specific profit margin. They sell their time, credibility and their ability to gather and analyze information. These firms do market research on regular basis and up to date with the trends in the industry and have all the technical and analytical knowledge of the restaurant industry. They offer various services to achieve the goal.
A typical restaurant consulting firm performs various task depending on what the business owner wants to achieve. A few include:
Restaurant Feasibility study- A feasibility study is an analysis of the practicality of a project or an idea. It seeks to evaluate the necessary steps to bring an idea to fruition and determine if those steps and the desired outcome are collectively feasible. For a restaurant, running a feasibility study might involve answering the following questions:
Will the concept stand out in this market?
Will the concept appeal to the target audience?
Will the projected revenue exceed my costs?
Will the project hit its financial goals?
If all signs point to profitability and practicality, the project likely reached to a Go Decision and the project could feasibly work. If not, you’ve reached a No-Go Decision, and will have to go back to the drawing board and rethink your location, concept, pricing, and expenses.
Concept Development- Developing a concept for a restaurant involves planning details to many practical issues. Choosing whether a restaurant focuses on upscale, casual or fast food is important, but other critical issues in developing your concept include planning restaurant design, studying competitive challenges, researching market demographics, and developing a financing strategy. A strong concept exploits culinary trends, develops a branding strategy and identifies suppliers.
Menu Designing- A good restaurant menu design is key to any restaurant’s marketing plan. A well-designed menu should express the eatery’s personality, focuses overall operations, promotes profitability, establishes your budget, and keeps the brand fresh in the customer’s mind.
Restaurant Asset Management - Restaurant Asset Management caters to the entire spectrum of the restaurant business. The firm assists in every step of the operations and provides the restaurant owner with complete evidence-based support. The firm looks into all the processes and details to create cost-effective strategies in order to achieve the desired revenue growth and profits. A few of the aspects that are covered include:
Financial Modelling- Financial modelling for restaurants is based on several key assumptions such as the number of seats, the average turnover of seats, food bill per table, drink bill per table, and a combination of fixed and variable costs. The economics of a restaurant comes down to how many seats are turned over each day, the average bill size, the cost of food and beverages, labor, and rent. The model provides a framework to forecast the expected Income, Balance sheet and Cash Flow statement, as well as the valuation of the modelled restaurant business.
Hiring and Training of staff- The staff is the biggest asset to your restaurant business and hiring and training them is one of the most critical aspects of running a restaurant. There are several categories of personnel required in a restaurant business, such as managers, chefs, servers, hosts, and bartenders. Hiring an HR team for single standalone restaurant can be too much of a task and will cost you a lot. Most of the restaurant consulting firms help to set up the entire restaurant staff and train them as well.
Developing a food supply chain- When it comes to supply chain management, there is little room for trial and error. A simple mistake could cause serious problems in the supply chain that can result in lost revenue or wasted product, can more broadly hurt a brand or lose otherwise loyal customers. The firm tie-up the restaurants with trusted and reputed suppliers which improve the overall quality of the food simultaneously creating a positive effect on the food costs.
Portion Control- It is the procedure followed that defines the quantity to be utilized in preparing a dish and then serving it. Standard portions also mean consistency in the taste, quality, and quantity of food, which eventually results in customer satisfaction. Controlling portions becomes crucial for the success of any restaurant as it has a considerable impact on Food Costs.
Branding and Marketing- Restaurant branding communicates the restaurant's personality and identity. A restaurant brand expresses the values and mission of the eatery also influences the concept and ambiance. A well-thought-out brand creates an emotional connection with guests. The brand should be palpable upon entering the restaurant and should stay cohesive throughout the service style, type of food, and marketing efforts. Not only does quality restaurant branding increase loyalty, but it also attracts new guests who may be drawn to the brand through marketing.
Research, Audit and Reviews- Restaurant consulting firms can conduct market research to see where your concept fits into the existing restaurant landscape. They can analyze the popularity and need for the items you serve, the type of concept you have, and the market fit for the price point you offer. Consulting firms can also conduct research on your competitors to help you better understand how your restaurant is performing compared to them. After research or an audit, the best restaurant consultants provide the restaurant with an analysis of their findings – because data doesn’t mean anything without context and interpretation. Consultants provide insight into what the restaurant is doing well and what needs to be improved or changed. After the analysis of the data consultants provide strategies for operations and management of how the restaurant can make changes to the restaurant to help it achieve its desired business goals.
Few Metrics to Measure Success of a Restaurant
While the restaurant business is a very dynamic business and requires a lot more attention than other business, there are a few factors that one must keep in mind while measuring the success of any restaurant. This includes:
Break - Even point- The Break-even point is a key figure in operating your restaurant. While there are operating expenses and capital expenses involved, one must always ensure that the overall business is steadily paving its way towards the break even point of the initial investment made to commence the business.
Food Cost – Food cost is the cost that is incurred to create each item on the menu. While multiple concepts will incur a different food cost, it is always advisable to keep a constant check on the food cost and ensure they are not varying in different periods.
Labor cost percentage- It the percentage of revenue that pays the labor cost. Labor cost percentage is one of two key components of your prime costs (the other is the food cost).
Overhead expenses- They are the opposite of prime costs (Food Cost + Labor costs), restaurant can control prime costs, but they’re in constant flux. Overhead is not. Overhead includes fixed costs and operational expenses like rent, utilities, property taxes, licenses, bills, etc.
Yield percentage- Yield percentage refers to the amount of usable food produced after processing (trimming, cooking, etc) of the food item.
Table turnover- To calculate the table turnover rate divide the number of guests served by the number of tables. For example, if you have five tables in your restaurant and you serve 20 guests over the lunch hour, then your table turnover rate is 4 turns per table during the lunch hour. Table turnover rate is one of the most important and controllable metrics in your restaurant. Maintaining a table turnover rate that is long enough to allow guests to enjoy their dining experience, but short enough to ensure new guests won't wait long to be seated is the sweet spot.
Average Per Cover (APC)- Average per cover measures the average amount a single customer spends at your restaurant. While there are multiple factors that can affect the APC, it is advisable that one keeps a constant eye on their APC vis a vis their competition.
While we are all aware of the pandemic affecting almost every business across the globe, it is inevitable that it also has affected the restaurant industry. However, just as every factor always playing a positive role in the industry, this pandemic has also emerged as winners while the others now notice a road to recovery. A few takeaways that we can take from this pandemic are:
Growth of Cloud kitchens restaurants- Due to the pandemic, restaurant owners have found various ways to keep their restaurants working and one of the most successful one has been the sudden growth in the concept of a cloud kitchen. These kitchens have no walk-in traffic and they exist solely for fulfilling delivery and takeaway orders.
Drive-thru Restaurants- Drive-thru restaurants have been more or less a lost concept over time with the emergence of dine in restaurants. However, with increased social distancing norms and keeping safety and hygiene in mind, Drive thru could be on its way to revival and it would now not be bad to extend a drive thru concept to the existing restaurants.
Shift in Marketing Strategies from Offline Marketing to Online Focused Marketing - The marketing strategies will take a turn towards more digital and virtually rather than the traditional marketing, as most of the companies have instructed their employees to work from home which eventually means more use of internet and larger audience for marketing.
Written by, Arpit Mahajan