5 Restaurant Challenges Restaurant Owners Can Overcome Quickly

Many passionate culinary entrepreneurs open restaurants and later discover that sustaining their thriving operation requires a business-minded approach in addition to fantastic food. Post-pandemic restaurant challenges have intensified.

Operators have seen increased competition for customers, while some struggle under the weight of debt taken on during the pandemic, which they must now repay with dollars that are losing value due to inflation. These and other challenges require a new level of creative response.

Read our guide to discover actionable insights for tackling five critical issues affecting your restaurant's profitability and longevity.

Rising Food Costs

As food and related goods costs continue to rise, you can attack this challenge on multiple fronts while maintaining the quality of the menu offerings you deliver to your customers.

The first step is to check your finances to see how flexible your business’ cash flow is. Review your bookkeeping records. Your goal is to get a positive cash flow at your restaurant so you can grow your bottom line.

Next, review your menu pricing methods and reassess the best pricing method for your business: Ideal Food Cost Percentage or Ideal Gross Profit Margin? Either of these will force you to decide whether you need to raise the price of a dish if the costs of their ingredients have gone up.

Additionally, you might choose to raise the price of a particularly popular dish that has a low food cost or to lower the price of a dish that is not selling well in order to increase demand.

Lastly, re-engineer your menu’s ingredients:

• Incorporate more grain into your recipes: Grain is a cheap ingredient, allowing it to retain a high-profit margin during a recession. Use pasta or rice as a base for dishes to bulk them out and reduce the amount of more expensive ingredients needed.

• Herbs and Spices: Substitute fresh herbs with dried herbs, as they are generally more cost-effective. The ratio is typically 1:3 fresh to dried. Use more affordable, locally available herbs and spices that have a similar flavor profile to more expensive, imported ones.

• Dairy Alternatives: Replace cream with milk and butter or a milk and cornstarch mixture to thicken sauces and soups. Use yogurt as a substitute for sour cream in various dishes.

• Frozen or Canned Produce: Utilize frozen or canned fruits and vegetables when they are out of season or more expensive. They often have similar nutritional value to fresh produce. Opt for store-brand or generic canned goods to save costs.

• Homemade Stock: Make your own stock using kitchen scraps like vegetable peelings, bones, and leftover herbs instead of buying pre-made stock.

• Bulk Up with Vegetables: Increase the quantity of vegetables in a dish to reduce the amount of more expensive ingredients like meat or seafood.

Pro tips:

1. Offer Specials: Create daily or weekly specials based on ingredients that are readily available or overstocked, allowing you to adjust the menu according to supply and demand.

2. Push your star meals: When you know which meals which you’ll want to push to your customers, revise your menu descriptions to highlight their captivating taste features. This will help your customers perceive value in your pricing aside from food quantity.

3. Increase prices at a snail’s pace: If you need to increase your prices (as a last resort), slowly increase your prices to achieve an acceptable profit for your menu offerings.

How to lower Operating costs

Restaurant operating costs have many drivers. Rent and utilities are often the largest culprits, accounting for at least 10% of operating costs, followed by labor and food costs.

Here are several practical strategies to reduce your restaurant’s operating costs:

• Negotiate your Lease: Review your commercial lease and periodically renegotiate your lease terms. Landlords might be willing to offer more favorable rates to retain a reliable tenant.

• Implement Inventory Control: Regularly monitor inventory levels to prevent overordering and waste. Use inventory management software in your Point of Sale System (P.O.S) to track usage and identify areas for cost savings.

• Optimize Table Turnover: Implement strategies to optimize table turnover by improving service efficiency. Train your staff to identify when customers have finished eating and when to approach to offer desert or the bill.

In peak times, it’s important to free up tables by politely and gently persuading finished customers to settle up and leave…but only during busy periods! Conversely, your staff should let finished customers continue their chat when table turnover is low, during quieter periods. Those customers are more likely to order drinks, coffee or desert.

An ongoing labor shortage in the restaurant industry has made finding and retaining good staff another challenge for many restaurants. For many, it has also meant constantly scheduling interviews to maintain a pipeline of potential candidates to keep up with increased turnover rates. Operating with a short staff makes providing proper training and flexible scheduling more difficult.

If you haven’t already read our guide on Hiring Restaurant Staff, jump to the sections on setting out a hiring process, determine the staff you need to hire, and sources on where to find them.

Once you’ve hired effective employees, here are some tips to entice them to stay:

1. Pay them a living wage. This may mean paying them more than what the legal minimum wage. Utilize online tools like the Living Wage Calculator provided by MIT or the Economic Policy Institute’s Family Budget Calculator to determine what constitutes a living wage in your specific location.

Regularly review and adjust wages based on changes in the cost of living and industry standards. Be transparent with employees about how wages are determined and any potential for wage increases.

2. Foster a Positive Work Culture: Most employees don’t quit because of money, but because they don’t get along with their managers. Train the people in positions of power to be fair, yet understanding to keep team members satisfied. Organize team-building activities and events to strengthen relationships among staff members.

3. Invest in Training and Development: Working in the hospitality industry is a career move which can open many doors for your staff in their future careers. Offer recognized training programs to help them develop new skills and advance in their careers. This may involve earning a recognized certificate to prove completion of the course.

Clearly outline opportunities for advancement and the criteria for promotion. Cross-train employees in different roles to promote versatility and teamwork. For example if you normally have waiters waiting tables and a barman at the bar, ensure they can both do eachother’s jobs. (Cooking is an exception; leave that for a qualified chef!).

4. Recognize and Reward Hard Work: Implement an “Employee of the Month” program with tangible rewards such as gift cards. Offer performance-based bonuses for reaching specific goals or milestones. Host appreciation events or dinners to celebrate staff achievements and milestones.

This might involve closing the restaurant a couple of hours only and receive the space to host an appreciation dinner where your staff and kick back and have fun. If timing is an issue, then at the very least, ensure this is done for Christmas parties or work anniversaries.

Your customers may not know your restaurant exists yet, but you can be damned sure their nose is glued to their smartphone! Ensure your restaurant’s name and directions appears in front of their eyes to get them through your doors.

Here is why going digital matters:

• 90% of customers research a restaurant before dining
• 77% of consumers are likely to check out a restaurant’s website before they decide to dine in or out takeout/delivery
• About one-third of diners read other guests’ reviews before choosing an eatery

Social Media

Many restaurants use social media to expand their reach to existing and new customers. If you haven’t read our guide on Five Restaurant Marketing Tips to Stand Out, jump to the section on Social Media to find out how you can leverage the four most effective platforms for restaurants: Instagram, FaceBook, Twitter (now “X”) and TikTok.

Email Marketing

If you have an Email Marketing platform set up, then leverage your email list to reach out to more customers with email marketing.

Search Engine Optimization (SEO)

Search Engine Optimization is the process of creating content that organically appears in search results when a customer searches for a specific keyword. If their keyword is your restaurant’s name or cuisine type, you’ll want to appear at the top of the search results. This starts with creating a website which includes a restaurant blog. If you prefer to create videos than write articles, then YouTube SEO is another source of organic traffic for the taking.

Online ordering platforms

If you can only grab the customer’s attention when they’re ready to buy, ensure your restaurant is listed on food delivery apps such as: Postmates, Uber Eats, Seamless, Doordash and Grubhub.

Restaurants face ongoing challenges with regulatory and safety standards. While this encompasses many areas, food safety and sanitation present particular challenges. If you fail an unexpected health and safety inspection at your restaurant, you could face closure, fines or a corrective action plan. This will not only damage your reputation (because word will spread via social media), but you’re business will suffer a severe loss in revenue.

Food safety and sanitation protocols

Consistent adherence to food safety and sanitation regulations involves following clear rules and being subject to inspections to verify compliance. That’s why you’ll want to tick-off all the items on this checklist to prepare for a restaurant inspection. The inspector will check, among other things, that you0ve implement these three guards to ensure food safety.

Pest control

If you haven’t seen our guide to restaurant pest control, jump to the 13 Expert Tips on Pest Control and tick off each one. This covers you for effective pest control for insects and rodents in your restaurant's interior and exterior areas.

Restaurant security

While smoke alarms and water sprinklers may be obligatory, security cameras may be optional. Find out what security measures you’re obligated to implement according to your state’s authorities. Even if the latter turns out to be optional, considering implementing as a means of damage control and restaurant theft prevention.

In our highly litigeous society, any of of your customers could make a claim against you for any harm they’ve suffered at your restaurant. The same goes for employees.

Instead of waiting for the worst to happen, you’ll want to implement risk management strategies. You’ll need to explain to an insurance agent how your restaurnt opeartes and what risks your business is exposed to. They may recommend you take out a Business Owners Policy for Restaurants, or some other form of cover.

Even when you have your Certificate of Insurance in hand, you’ll still want to continue implementing risks management strategies. For example, even if you have a Workers Compensation policy for your restaurant’s employees, there are still measures you can implement to avoid having to make a claim.

1. Managing rising costs with smart menu adjustments: Reduce portion sizes, discontinue less profitable items and gradually raise prices to maintain profitability without compromising quality.

2. Implement innovative cost-cutting: Create new dishes using fewer ingredients, and explore alternative business models to reduce operational expenses.

3. Approach staffing strategically: Prioritize soft skills when hiring, encourage employee referrals and implement mentorship programs to reduce turnover.

4. Streamline your administrative operations to rely less on staff: Use technology to automate tasks and improve scheduling, while offering competitive compensation and a positive work culture to retain employees.

5. Improve the customer experience with a more robust online presence: Establish a strong online presence, optimize menus and offer convenient online ordering and reservations.

6. Investigate ways to increase customer satisfaction: Gather feedback, provide promotions and deals and focus on maintaining quality for both dining in and ordering for delivery.

7. Adhere to regulatory requirements with proper food safety: Train employees in food safety and allergen awareness, and maintain strict sanitation practices.

8. Treat the environment responsibly: Implement responsible waste disposal and pest control to comply with regulatory standards.

9. Effectively market using menu innovations: Continually update the menu with trendy dishes, and embrace sustainabie practices to stay competitive.

10. Use tech-enhanced engagement: Utilize technology like QR code menus, online ordering and customer feedback tools to enhance the dining experience and stay visible to customers.

Implementing these strategies can help improve your restaurant's operations, boost profitability and ensure a satisfying experience for your customers. Remember that success in the restaurant business requires adaptability and dedication, so keep striving for excellence in your culinary venture.