Tag Archives: Strategic management

Dealing With Disaster

Another Foodie Friday in the midst of a pandemic. We’ve all been affected and no business sector more than restaurants and bars. Many bars are still shut down and the places where bars have reopened have seen COVID cases rise dramatically, prompting some areas to shut them down again. Restaurants are gradually reopening but business is very different. I want to look at how and see if we can learn anything.

When you make a business plan, part of what you do is to project sales. In the restaurant business, you’d look at how many meals (covers) you’re serving each night, how often you’re turning tables, and how full that makes your restaurant. In most cases, any plan that indicated 50% capacity would be marginal and no plan would see 25% capacity as even a remotely feasible option.

If you’ve got a giant dining room (think Cheesecake Factory), 25% of capacity may still be a large enough number to make the business a small profit. Now throw in the need to keep your customers separated by six-feet, which may make the actual capacity below even the 25%. It’s impossible.

Restaurants area putting up plastic barriers to provide separation. My guess is that they’ll need to address their air filtering at some point as both customers and health officials find out more about how the virus spreads. Buffet? Bye-bye. Menus are being reduced, printed, and used once. More expenses, as are the costs of having staffers who do nothing but sanitize tables and everything else after parties have left. It’s a low-margin business to begin with and what we see happening now is just destroying the business completely.

A well-known celebrity chef moved here a year ago and opened a successful restaurant. He closed it the other day. Yes, he was doing takeout but as he said, that wasn’t what diners wanted from a restaurant known for its live experiences. Is the business experience the same in a closed-in booth? I’ve had very good takeout from several places during the last few months but even the best of it isn’t as good as the same food coming right out of the kitchen. Neither is the experience.

So what can we learn? I’m amazed at how the industry is adapting. Ghost kitchens, which I’ve written about, are going to be a part of the future. So is the takeout business, lesser experience or not. Even with restaurants reopening, the takeout business isn’t declining. Are there lessons for non-food businesses? I think so.

First, don’t be afraid to consider the most far-fetched things in your disaster planning (“oh come on – no one is going to shut down the entire economy…”). Second, that plan needs to focus on customers’ needs. The takeout business isn’t something the restaurateurs planned for but customer demand necessitated it. Third, don’t assume that the disaster plan will apply only to a temporary condition. I don’t think we’re ever getting back to anything but a new normal, do you? Think about change being permanent and plan accordingly. Make sense?

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Filed under Consulting, food, Reality checks

Fewer Oreos, More Profit

It’s always good that Foodie Friday follows my shopping day, which is Thursday (gotta get that senior discount – Thursday only!). If you aren’t the primary shopper in your house and you haven’t been to a grocery store lately, you probably haven’t noticed that the shelves are less-full than usual. It’s not just the meat case (you’ve probably heard about the issues with meatpacking plants during the pandemic) or the toilet paper aisles that are on the empty side either. I’ve noticed lots of gaps.

It turns out that while it’s due to the current crisis, it might not be for the reasons you think. As CNN reported:

It’s also because major food companies — the ones that make our cookies, chips, and canned soups — have been paring down their product offerings. When stay-at-home orders went into effect this spring, Mondelez, General Mills, PepsiCo, J.M. Smucker, Campbell, Coca-Cola, and others saw a massive spike in demand for some products. To help meet that increase, they sped up production lines on their most popular items -— and that meant cutting back on more fringe offerings. That translates to fewer varieties of Jif peanut butter, Oreo cookies, and Frito-Lay chips at the store.

In other words, they reverted to the Pareto Principle and focused on the items that brought them the most revenue and profits and didn’t worry much about line extensions or the varieties that filled the shelves but not the corporate pockets, at least not as much as the main lines do.

Restaurants are doing much the same thing. Many places have trimmed their menus way back to focus on the most popular and profitable items. For example, Dave & Buster’s reduced its 40-item menu to 15 offerings and McDonald’s has cut salads, bagels, yogurt parfaits, and all-day breakfast during the crisis. IHOP used to have a 12-page menu. Now it’s giving guests a 2-page, disposable menu. This should improve economies of scale, simplify ordering supplies, make it easier on the staff, etc. 

Less can be more and the exercise that these businesses have conducted to deal with a crisis is something that your business might consider as well. What services are you providing that are less attractive or less profitable? Is your product line overextended? Is it better to focus on the more profitable sectors even if it costs you a few customers? Something to think about this weekend!

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Filed under food, Helpful Hints

New Habits

This Foodie Friday, I’d like you to imagine that you went to bed after a lot of reveling this last New Year’s Eve and have just woken up. In any other year, you might be mildly surprised as to what’s gone on for the first 5 months of the year. 2020? You wouldn’t recognize it.

The pandemic has changed many things and people’s relationship with food is one of them. More than 80% of consumers say the coronavirus pandemic has changed their food habits, driving them to cook, eat, shop, and think about food differently, according to the annual Food & Health Survey from the International Food Information Council. Obviously, with most restaurants closed, many more people are cooking at home. About 60% of people, in fact. But 85% of people say they’re doing something differently, ranging from snacking more to washing produce more often.

They’re also changing what they’re eating. Generally, people are trying to eat more healthy although both KFC and Pizza Hut saw sales soar into the double-digits last month as consumers stayed home and ate more chicken and delivered pizza. Still, cooking more at home tends to be a little bit more healthy than the choices that we might make when eating out. That’s probably why the stuff we cook at home doesn’t taste as good as restaurant food! That said, three out of five people said they consider how healthy items are. And compared to 10 years ago, more than half said the healthiness of food makes more of a difference to them now.

Why am I bringing all of this up? I guess it’s just another reminder that the world we all knew has changed significantly but therein lies opportunity. The reason that we older folks tend not to be targeted by much marketing is that there’s an assumption that our buying habits are locked in stone. A lot more money is spent going after younger consumers whose shopping habits may be more malleable. I’d suggest to you that at this point everyone is rethinking not just how they buy food and eat but also how they spend their money on other things. People who used to travel a lot may find they’re not doing that now. Do those dollars go to home improvement or a shiny new entertainment center?

Habits are changing. You need to be changing with them if you want your business to continue to thrive. 

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Filed under Thinking Aloud, What's Going On