Operational Observations for Restaurateurs

I had the opportunity to travel throughout the States in November and December. I visited a lot of restaurants, seeing not only good things and good people but also operational issues that result in leaving dollars on the table. These are things that slice revenues and generate more expenses for a business.I have seen these issues frequently in 2010 and 2011.

None of the suggestions I am going to provide below is new. I have been speaking and working on these issues for some time. These execution challenges exist and plague many restaurants and hotels to the extent that they can sometimes be the magical tippiing point of same-store-sales gain or even a gain of pennies per share in earnings for brands. In my observations below, I am going to name names for operators or restaurant segment sub-sets where appropriate.

Lack of suggestive upselling or actual down selling (QSR): It is a rare occasion where I have been upsold in a quick service (QSR) or fast casual restaurant. In some situations, the sale was actually downsold, e.g., “Will that be the sandwich?” That was asked even by store managers. My hope in 2012 is that a habit is developed of asking every customer to be upsold, at least once and face to face. In QSRs, there must be training for hourly staff to ask of a comeback situation in which the customer replies, “no combo”. What should be the default response by the order taker?

Overkill with POS displays (QSR): I counted the range of the number of printed in store visual communications pointed at the customer via a recent QSR survey. The high was 87 distinctive signs in a Carl's Jr. and the low was seven at Pizza Hut, with nearly all prices merchandized yet only two related product groups displayed.  Some drive thru windows and chutes were a veritable forest of signs. Assuming 45 seconds at the drive thru chute and panel, how much can be seen? Two many displays seem to be counterproductive and split the product mix.

Dessert size, portions and price prohibitive (Casual dining): I must confess that I have a taste for chocolate. But even I have often been blown over by the serving size, calories and price point ($6-8) for a post meal dessert item at casual diners. To my memory, both Chili’s and PF Chang’s (PFCB) have worked with smaller bite sized “tastes”, but have not reported on menu mix hit rates for these items. That might be illustrative for the industry. 

Staffing standards (casual dining) in general are too heavily staffed from 11:00 a.m. to 12:00 noon, and from 5:00 to 6:00 p.m., especially in the Darden concepts (DRI) and at Chili’s (EAT), but understaffed after 9:00 p.m. (DINE-Applebee’s), especially among wait staff. The perfect matching of labor hours, customers and restaurant needs will never be possible, and hourly employees do want more hours, of course. Since the average check should go up in later hours, better labor hour, sales per man-hour standards and calculations are required.

Closely related to this point is the labor staffing for new unit openings (QSR and casual dining). When a new unit opens, owners are justifiably proud of the business. They want the opening to go flawlessly and to use the occasion to train new employees. But the necessary staffing up period goes on too long after opening, making it then unrealistic for both guests and employees, for when the eventual, sharp ramp back down to where a standard staffing level is sufficient. I suggest that the ramp up and ramp down period be more graduated and less sharp. 

Out of whack air conditioning (QSR and casual dining) from restaurants that are too cold are unnecessarily costly, particularly after sundown, when temperatures cool off. This could take CAPEX to fix if not separate units for the FOH/BOH. Starbucks and coffee houses are a strategic exception to this rule because colder environments can spark  consumers to drink more hot beverages being served. In generall, I see cooling temperatures out of whack for warm climates.

Too much product pre-cooking (QSR): The goal is hot food hot and cold food cold. With the growth of big burgers, more complex menus and 24 hour breakfast operations, the back of house is more challenging. Product is warmest when first cooked, and has a finite holding time in bins. Jack in the Box (JACK) does a nice job of delivering hot product. But I have noticed the cooling off of burgers being served at McDonalds (MCD) in the last year.

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