• Rick Z

What are the biggest challenges for DC-area restaurants?

Updated: Jun 11, 2019

As Washington, DC has come into its own and become a food destination, some restaurants have, unfortunately, been left behind. Many restaurants don't’ make it, closing after just a few months after opening. Other restaurants struggle for a long time. Restaurants make up some of the best characteristics of a neighborhood, yet they can find very little loyalty from those living and working around them. Here we are listing some of the biggest challenges that restaurants have.


Despite the fact that our services are offered nationally, we thought we'd start with observations about our own home turf, but that have universal relevance.


It could have been easy to focus on fickle customers, the transient demographic, and even construction. Restaurants won’t be able to change their customers or development initiatives in the DC area any time soon. Thus, I decided to focus on what restaurants can change, making the piece less “hyper-local” and more business-centric.


Sales-building


Why do restaurants close? Inevitably it almost always has to do with cash flow. Other factors include, yet are not limited to: relocation, construction and landlord-related issues. Some pin issues on the owners, others will blame the neighborhood or location. Regardless, restaurants can run into trouble quickly because sales are the lifeline of the business. Sales will provide the necessary cash needed to operations, pay vendors and employees.


Sales require a multi-front approach and strategy. When a restaurant opens, not only does it need a marketing plan, but also a strategic plan. How will the restaurant compete against other restaurants? How will the restaurant conduct its marketing? What about technology? Will the restaurant consider new technologies and who will make these decisions? Apps, social media sites, websites, point-of-sale (POS) systems, and Wi-Fi services are some examples. A restaurant can't bank on keeping the status quo for months or years after opening - some services, tools and programs will change or become available over time. Who will make these decisions and who will support them?


The biggest issue for restaurants largely results from the lack of not having a sustained marketing plan. Very few independent restaurants have a designated marketing person on a full-time basis. In fact, studies have shown that, restaurant marketing is a poorly-funded venture. But marketing is what helps “get the word out” and helps draw in customers with more frequency. One can be very strategic about marketing. Public relations (PR) for example, isn’t a comprehensive marketing plan. PR is just one of many marketing tools that restaurants need to have at their disposable (and in many cases, well worth it).


Email marketing, social media, marketing technology, reputation management, and loyalty programs are all tools and tactics that I see forgone by restaurants, either because of lack of resources or funding, or because restaurant owners are getting bad advice. Marketing is essential and imperative for getting more money will flow into the restaurant. I’ve heard restaurant managers complain about not finding the right “advertising” to bring people in, when in fact, their sales issues have been much more complex, and they have ignored tactics to draw more business from existing customers (loyalty/email).


Labor


Lower unemployment is good news for workers, but not necessarily for restaurant owners. Unemployment was 3.9 percent in April. With more opportunities for employment, restaurants need new thinking around hiring and retention. Restaurateurs who embrace a revolving-door mentality, paying workers the lowest amount they can, will find it difficult in an environment where labor is in short supply. However, some restaurant companies have made it into the news due to their positive, creative practices. In May, CNBC reported that Taco Bell has conducted 600 hiring parties around the country to reduce vacancies. Meanwhile, Chipotle improved retention with tuition assistance, and a large Dunkin Franchisee, The Wolak Group, did the same with a new, moe personalized, training program.


Same-day and next-day paychecks are becoming a thing, says Bloomberg. Checkers, Church’s and Pizza Hut are using variations of these services to get workers paid earlier. With many restaurant workers living on a paycheck-to-paycheck basis, early paychecks may boost workers’ incentive and loyalty. In a gig economy in which some can find work that pays them on the spot, this new initiative may become a very popular solution and give some restaurants an advantage. For now, chains are leading the charge, presumably because of the fees involved, which are borne by the employer. However, it’s likely to trickle down to multi-unit independents, and single-unit operators very soon. And there’s always a way that restaurants can find a way to pay restaurant workers earlier, either through better cash management or by accepting the cost of cash advances.


Messaging around restaurant work has been extremely poor in the restaurant industry for at least the last decade. While we’ve always been one of the largest employers in the country, we like to say “this is your best first job.” In other words, this is the job you’ll have for a bit, before you go find a real job.” This has been repeated by large restaurant chains and industry associations around the country. What we should be saying is “this is your best first and last job... We have so much opportunity. You can start out as a server or customer service rep, and then make it to manager or partner.” How will you tackle retention under circumstances in which there are very few “good, hospitable people” that will apply?


Technology: friend or foe?


I have noticed so much duplication of technology services as I’ve paid visits to various restaurants and so have our marketing partners. If you market to restaurants and go around prospecting, there’s a lot to take in and you make a lot of observations. Once, I saw a loyalty tablet behind a host counter that was no longer in use, for which the restaurant was probably still paying. A marketing partner nearly always finds restaurants paying for technology services that overlap others. In other words, restaurants frequently and obviously pay twice for the same service or program.


There’s always a new app, device, or technology program to be sold to restaurants. Restaurant owners are finding it hard to manage in the realm of so much evolving technology. Within restaurants, the management of technology has become a job in and of itself. You sign up for one service and realize that some of the features entirely remove the need to have another service. Some restaurant owners believe that if you “reveal all your cards to the sales person,” they might try to sell you something else. However, if you don’t, there’s a good chance you may be stuck with two technologies that do exactly the same thing.


Then there are third-party delivery services. I consulted for a restaurant that had three tablets and one smartphone behind the counter receiving orders during the busy lunch rush. Novel way to run third party, right? You might think this is the future, but it’s not. There are services that actually integrate order-taking from multiple sources. Some work better for chains and others work better in an independent restaurant environment. Cost, ease of use, and deployment times will vary. With technology changing so quickly, how are independent owners going to make time just to keep up with what is possible and what can make their lives easier?


Nevertheless, technology can be very useful after we learn how to manage it. For example, in one of our partner marketing programs, we work with a Wi-Fi provider that collects emails from guests receiving free Wi-Fi service after they provide such information. The emails are then used to create personalized offers and marketing promotions. The restaurant can then consolidate email marketing around the data from this program and send segmented and personalized offers to bring guests back. There are many other services, including analytics tools, apps and smart POS systems that can be used to create a better experience for guests and to build business. There is a lot out there, but managing it has consumer restaurateurs’ time and resources, That’s why it’s important for restaurants to have someone dedicated to this task. This person can be a business partner, consultant or manager.


Sales-building, labor and technology have emerged as top challenges for restaurants in 2019. Restaurant owners will need to finesse their strategies to overcome them. It’s not an insurmountable task, but it requires a lot of effort. Even the most well-run restaurants in DC have their challenges, and good restaurant companies are not always able to keep all their restaurants open. In such a competitive environment, and with so many transient and fickle customers, one thing is certain: Restaurants need to be well-supported, well-funded and at the top of their games so they can optimize the investment and resources made in their business.

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