Top 6 Tips to Recession-Proof Your Restaurant

Top 6 Tips to recession-proof your restaurant business:

1. Dial in your cost of goods sold, with regular inventory.

2. Adjust pricing to protect profit margins at least monthly.

3. Lean into your Loyalty Program.

4. Get a great accountant!

5. Don’t cut marketing, but dial in spending. 

6. Bundle, don't discount or coupon.

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1. Make inventory checks a weekly routine.‍

From proteins to produce, product pricing has skyrocketed. If you’re not tightly managing inventory, you’re not only going to swallow significant losses but also have trouble developing appropriate menu pricing. My number one piece of advice is get a handle on your cost of goods sold, and you simply can’t do accurate pricing that protects your profit margin if you don’t do regular inventory.

If weekly inventory management feels too overwhelming, it may be time to consider an inventory management solution. Tracking sales, managing orders and storage, optimizing supply, plus keeping track of all the corresponding invoices and data, is no doubt a cumbersome process. But existing technology solutions can make data management seamless and provide complete and real-time visibility on inventory levels. This kind of investment typically pays off in time-savings alone, but also drives informed decisions that can help you accurately meet consumer demand and minimize waste.

2. Adopt a menu style that allows for regular changes.

Given the highly volatile nature of the current supply chain, you can no longer wait for an entire season to go by before updating menu prices. In fact, like inventory checks, it may make sense to make pricing part of your weekly routine. And you should adopt a menu style that allows for it.

Everybody’s expecting prices to rise, but if you’re still blacking out and handwriting in pricing, that’s offensive to a customer – it slaps them in the face before they order. Take the time to print new menus or move to a menu style like a QR code that allows you to dynamically adjust your pricing. Watch the market, assess your margins, and adapt prices accordingly. 

3. Invest in an accountant.

Even if you do have cash for a rainy day fund, allocate some of that money towards a skilled accountant first. You’ll catch so many more pennies with a really good accountant and doing regular inventory. You'll probably catch some theft, you’re going to catch huge amounts of waste, and that’s sometimes up to two to three percent [of your margins].

Getting your books in line will help you identify financial trends and plan accordingly. For example, if July and August routinely show up as slow months, you know to prepare in advance. I don’t believe in shoving money aside for no purpose – it has to have intentionality, and to do that, you have to know the business.

4. Lean in on customer loyalty. 

A solid loyalty program helps retain customers – even in the worst of times. And it’s why it’s important to continuously strengthen your program. When customers are reducing frequency and spend, your loyal customers are the ones that are most elastic, so tap into your loyalty program, and don’t under-staff. Your team’s mission needs to be love-bombing on those top customers, because people still eat out [during recessions], but you’re fighting for their frequency.

Consider creating staff incentives, like a $25 gift card, for signing up X number of people for your loyalty program in a week. And if a recession does hit, communicate with your staff about the reality of the situation. It’s important to be transparent – ‘Here’s our plan, and here’s what you can expect. It’s going to be a little harder to upsell someone on dessert, and that’s OK, but make sure you thank them for coming and ask them when they’re coming back.

5. Don’t cut marketing, but dial in spending. 

Operators are prone to immediately slash their marketing budget when times start to get tough. And that’s often a mistake. In consumers’ minds, you always want to be top of mind, and the way you do that is through connecting to your loyal customers. Just be smarter about where you put the [marketing] spend, which could mean a mix towards your loyalty program and engaging with customers on social media.

Dial up your marketing to target your best customers, shifting your social media strategy away from attracting new visitors to focus on current patrons. Posts may emphasize customer appreciation or even marketing incentives to boost visits. Tell them to come in this week to receive a commemorative, limited-edition mug with purchase over $25, for example, and now you’re incentivizing your current customer base to spend over $25, and you’re also thanking them at the same time.

6. Focus on center-of-plate, and consider product bundles.

Desserts, drinks, and other extras often get cut when people reduce their dining budget. This makes it important to evaluate center-of-plate ingredients and ensure entrees are priced appropriately. You can also package some of those bonus products into bundles. Let’s say you sell a ton of an amazing breakfast sandwich, and it has a decent but not great margin. Now’s the time to bundle it with that breakfast cocktail. Bundles can change people’s perception so that the extra spend is no longer viewed as too indulgent and instead seen as a deal.