How to Survive 2019 as a Small Restaurant Chain
Unless you’re an industry leader like McDonalds or Starbucks, Bloomberg is predicting another difficult year for restaurants. Industry watchers and analysts are predicting that increasing food and labor costs will reduce profits for restaurants and hinder growth and development. As the smaller chains try to survive, they are increasingly turning to delivery services in hopes of acquiring new customers and increasing sales.
However, keep in mind that restaurants need to share their revenue with delivery services – typically between 20% and 30%. Once you consider that fast casual restaurants only have an average net profit margin of 6 percent, you can see that it can become a significant financial drain. This means that every time a customer purchases food through a third party delivery service that the restaurant loses money. What’s more, the third party delivery services typically don’t provide an easy way for restaurants to create a lasting relationship with these new customers. Without a proper delivery strategy, many restaurant owners end up with their fastest growing sales channel also being their most unprofitable.
So what can restaurants do to combat these high costs associated with food, labor and delivery charges?