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January 2019

How to Survive 2019 as a Small Restaurant Chain

by Incentivio

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?

Increasing Margins by Increasing Check Size 
Web and mobile ordering have allowed some restaurants to increase their margins. Incentivio’s partner Copper Branch has seen a 64% higher digital check size compared to in-store or phone in orders. Our data shows that in addition to a modern ordering platform, great photography and accurate and well-written menu item descriptions have a significant effect on ordering behavior.
 
Decrease Labor Costs by Maximizing Digital Orders
With integrated digital ordering, labor costs will decrease because the customer is entering the order directly and the orders go directly into your Point of Sale. If you have three employees taking phone-in and in-store orders during lunch and you transitioned a third of your orders to an integrated digital ordering platform like Incentivio, you could reduce an entire shift
 
Own your customers and use your data
Having a plan to convert all those third party delivery customers into loyal, frequent customers is the key to succeeding in the on-demand economy. Bag stuffers with limited time offers are one of many ways to encourage customers to sign up for your loyalty program and thereby allow you to communicate directly with them.
 
In summary, while 2019 may turn out to be a tough year for restaurants, being smart about your digital and delivery strategy will allow you to beat your competition!
 
Talk to us today to find out how Incentivio can help your restaurant brand navigate 2019!
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