The Canadian food and beverage (F&B) industry has taken its lumps during the pandemic. And now, as dining restrictions are lifting, the next challenge begins. With expectations for in-person dining and delivery services on the rise, restaurateurs must balance customer appetites against their bottom lines.
No restaurant segment came away from the past 19 months unscathed. Owners across the board felt the sting of lockdowns and occupancy limits. Fast food outlets had more success pivoting to drive-thru or food delivery models than fine dining establishments, true, but few can say it's been a smooth ride.
As a result, all restaurateurs are focusing on their bottom line when it comes to key expenses, including:
- Procurement costs: The global food supply chain has been disrupted. It is increasingly difficult to source ingredients from cross-border suppliers. Lead times are longer, delays are more frequent, and it's more expensive to import the foods both restaurants and their customers have come to expect. The upside is that Canadians are increasingly demanding to eat locally sourced food, and restaurateurs are finding ways to fill their supply chain gaps with nearby suppliers. Those who continue to source locally stand to bring greater resiliency, efficiencies, and predictability to their supply chains.
- Staff costs: It's no secret that retail and hospitality staff are reluctant to come to work, while supply of foreign workers has dried up due to international travel restrictions. As a result, restaurant owners and managers are compelled to increase their investment in workplace health and safety, employee wellness, and recruiting.
- Delivery costs: Food delivery platforms have been a lifesaver for many restaurants, but they don't come cheap. In many cases, the price of serving customers through a digital delivery platform is nearly the same as their operating margin. But while reduced staff and in-person dining expenses may have offset these costs during the pandemic, a return to "normal" means restaurateurs are now funding both models of service. I think it'll be tempting to drop delivery altogether now that in-person dining is resurging, but I also think removing this option will result in lost customers and market share. A better way to think about food delivery platform costs is to view them as an advertising expense. They don't contribute to current profitability, but they expose your restaurant to a much broader customer base, which, in turn, should result in increased traffic at your restaurant when the opportunity presents itself.
In and out
Delivery platforms experienced a huge uptick in popularity during the pandemic. But they can be very expensive, relative to the bottom line, especially for smaller local-only establishments. Keeping these services viable moving forward will require restaurants to boost revenues generally. As such, one of the biggest post-pandemic priorities will be to get customers back into booths.
This shift won't be easy. It will mean offering a differentiated customer experience that gives people a reason to come back. Whether the solution is investing in a new look, live entertainment, games, or something else altogether, the idea is to get enough people through your doors to soften the impact of your delivery costs by providing a customer experience that cannot be matched at home.
After all, delivery isn't going away. Customers have grown accustomed to ordering their favourite foods with a few clicks of an app. I'm one of them. The problem is that many restaurants simply aren't equipped to handle the volume and consistency of both service models.
Restaurants are tackling this challenge in unique ways. Several new kitchen models are emerging to help restaurateurs balance their in-store and delivery business:
- Dark kitchens: Also known as "ghost kitchens," these are kitchens set up at a second (and less expensive) location for the sole purpose of managing delivery orders. With a dark kitchen, restaurants can maintain their levels of in-person service at their primary site while ensuring their delivery customers receive fresh orders in a timely fashion. This model also ensures delivery orders aren't overloading primary kitchens, thereby impacting the in-person dining experience.
- Cloud kitchens: Cloud kitchens are food-prep locations without a customer-facing component. They allow brands to deliver food within a given market and open a real restaurant when (or if) there is demand. This model has been growing in popularity in regions like Asia, Europe, and the UAE, where brands establish cloud kitchens to test markets or lessen their operational risks.
- Managed kitchens: This is the concept of hiring another kitchen to prepare and deliver food to your customers. In this scenario, restaurants share their recipes and food prep protocols, trusting that their outsourced kitchen will maintain the same quality and service. In this sense, managed kitchens can pose some risks. Still, they are an option worth considering for restaurants hoping to handle large volumes of both in-store and delivery customers.
- Multi-brand kitchens: Popular among fast-casual restaurants, this is the concept of bringing multiple restaurants together to open and maintain a "community kitchen" with a single staff that manages all food prep and delivery demands under one roof. This model comes with an opportunity to save on staffing and ingredient costs.
Back in business
The doors are reopening for the F&B industry. As they do, restaurateurs will be challenged to satisfy increased demands for delivery while returning to full in-store operations. It's a stressful proposition but also an opportunity to rethink kitchen models, explore delivery marketing campaigns, and bring new and old customers back to your tables.
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