The OpenTable team just got back from Chicago for the 2016 National Restaurant Association Show, the largest annual gathering of the restaurant, foodservice and hospitality industries. When we weren’t hanging out in our booth , chatting with OpenTable fans and customers, or drinking pour-over coffee by Chicago locals Bow Truss Coffee Roasters, we were attending one of the many education sessions that NRA offers over the course of the four-day show.
We were able to get a bird’s-eye view of the current state of the restaurant economy, thanks to the extensive research conducted by the National Restaurant Association over the past year. Some topline stats:
- Americans are projected to spend about $783 billion on dining out in 2016.
- 14.4 million Americans work in restaurants — one in every 10 Americans.
- The top two challenges restaurants are currently facing are labor cost (including minimum wage hikes) and recruiting talent.
- Over the past year, there has been a 4.9% increase in table-service restaurant openings.
- 45% of Americans are not eating at restaurants as often as they would like. There is huge opportunity for restaurants to take advantage of this desire.
Out of the many sessions we attended, there were a few in particular that gave valuable insight to the current state of the restaurant industry. Here are the highlights.
1. The no-tipping, “service-included” conversation is still alive and well.
The conversation around eliminating tips is a major topic of conversation amongst restaurateurs. Often, the main driver behind removing tipping is a desire to close the pay gap between the front and back of house. However, not everyone is on board with the change: front-of-house servers and guests included. We heard from a few leaders in the no-tip revolution, including Dan Rosenthal of Rosenthal Group Inc. and Brett Traussi of the Dinex Group.
Dan explained why he thinks the current model for the no-tip bill isn’t working: “Oftentimes the servers are not happy with the changes, and diners are not happy with the changes, but I think it’s because there is a need for more effective communication around why and whom this change is affecting. It’s a crucial element to communicate to our customers as to why we are adding the service charge.” He continued, “Customers don’t understand where their tip goes.”
In an effort to open up the conversation and communication with his diners, Dan is collecting current views and understandings of this new trend by surveying his customers — but not before giving them a free dessert. In the survey, he plans to ask them: Where do you think your added service charge is going, and where do you think it should go? According to Dan, allowing the diner to feel like they have a say in the service charge is key in reducing misunderstanding and acceptance.
Another possible solution? Add a secondary tip line that goes to the back of the house. This way diners are still the decision makers and can allocate gratuity as they see fit.
Regardless, restaurateurs and managers still want to make sure they are keeping everyone happy: “It’s a scary place to have to play Robin Hood at your own restaurant,” says Brett Traussi. “But we do our best.”
2. Strategically designing your menu can bring you more money.
Greg Rapp, a restaurant consultant who specializes in menu profitability, provided a few quick and easy tips for rearranging and optimizing menus for maximum revenue. Greg said, “The menu is the heart and soul of a restaurant — make sure you are optimizing the menu design to bring in more revenue.”
The biggest mistake restaurants make is putting periods that lead to the price on the right-hand side of your menu. This makes it easy for diners to look up and down the prices, compare, and choose a presumably cheaper item based on the prices listed. Also, remove the dollar signs and extra zeros to make prices look more approachable. For example, “28” versus “$28.00.”
The upper right-hand side is where diners’ eyes go first. Put your most expensive items there and watch your revenue grow an incremental 15%, Gregg advised.
Finally, don’t skimp on the description of each dish! The more appetizing your dishes sound to diners, the better.
3. Your restaurant’s brand and vision are your most important assets.
Robert Irvine of Restaurant: Impossible and Jon Taffer of Bar Rescue were two of the keynote presenters during the NRA Show. They shared some invaluable learnings that they have gathered over their time on the reality shows.
Robert said he understands that change doesn’t come easily to the restaurants that he consults with. Sometimes it takes an outsider to come in to identify the shortcomings that are contributing to their failure. In 36 hours, Robert comes in and not only revamps the appearance of the restaurants and the menus, but also implements marketing, social media, and training strategies to reinforce the longevity of the restaurants’ newfound success. In fact, in all of the restaurants Robert has transformed over the past five years have had a 70% success factor.
One of the biggest pitfalls that Robert sees when he is consulting with restaurants is a lack of leadership. There is a difference between management and leadership; in order for employees to be successful, they need to know what that looks like, and they need a good leader to get them there.
And don’t forget keep a close eye on your books: “About 70% of the restaurants we work with don’t have P&Ls and don’t know what their food cost is.” Ten percent of your weekly takes should go into an account for ‘what if’s’ — if the range breaks or if you need to buy new equipment.
Lastly, interaction and relationship building between servers and guests are imperative to frequency and success. Jon Taffer of Bar Rescue defines what success looks like to him: “We are in a business of human reactions. If the guest doesn’t react to it, the restaurant is stuck in mediocrity. We don’t serve food, we serve emotional reactions. That’s brand building. Our staff is a brand extension of the restaurant. You have to figure out what makes your team cohesive.”