The COVID-19 pandemic continues to impact the restaurant industry. Uncertainty looms with the on-going challenges of containing the virus. This uncertainty creates obstacles in business decision-making. With public health requirements and customer preferences changing as the graphs on infections and deaths rise and fall, restaurants have more hurdles than ever. These challenges mean that restaurants need to respond quickly to a constantly changing environment.
Our national partner, Sage Intacct, and the National Restaurant Association surveyed over two-hundred restaurant finance leaders. This survey revealed COVID-19’s impact on their business, their actions in response, and their lessons through the process. Here is what they have to share.
In Unprecedented Times, Restaurants Face Tough Decisions About Cash Flow
There is much at stake for restaurants during a pandemic, especially when opening and closing mandates exist out of restaurants’ control. The difference between surviving and closing the doors can come down to cash flow. Some restaurants are growing during the pandemic (more on them below); others have had to reduce outgoing cashflow. Of the restaurants surveyed:
- 54% furloughed employees and reduced overhead.
- 10% reported closed or closing soon
While there is so much at risk and unpredictability in these times, it is necessary to have a complete picture of your current cash status and forecast. This is essential so you can make informed, data-driven decisions. In some cases, you can negotiate updated terms with your vendors and partners and be more strategic in scheduling the timing of your payments. Cash management tools are available to help multi-location restaurants gain insights into all working capital. These tools help restaurants adjust to evolving requirements.
Sage Intacct offers a cash management tool with a forward-looking view of your financials rather than looking in the rearview mirror. You’ll gain greater transparency and the capacity to make more educated decisions on labor and maintenance needs in all your restaurant locations.
Your Restaurant Business Model Will Evolve Drastically During A Pandemic
Throughout COVID-19, restaurants have had to adapt to continue their businesses. While many restaurants failed, many others made some strategic but tough decisions that increased their revenue.
- 52% reviewed and reevaluated vendors and vendor pricing
- 41% made changes to food, menu, and delivery
Before the COVID-19 outbreak, 45% of those surveyed were already using a third party delivery service for food orders. After COVID-19, that percentage jumped to 58%. And, of that 58%, 68% increased their revenue.
The pandemic accelerated an increase in restaurants using food delivery services. Based on the above percentages, most surveyed restaurants increased revenue as a result. It is essential to continue the delivery service during and post-pandemic since your customer’s habits will likely continue in the future.
To increase success for delivery services, simplify your kitchen operation and menu items. Simplifying will reduce undue pressure on potentially strained workers. Preserve your margins and make sure to accommodate food travel time.
Most Restaurant Finance Leaders Believe the Worst Part of COVID’s Impact Is Over
Of restaurants surveyed, most are optimistically moving forward with caution. React, Adjust, Prep for Recovery, and Rebound are the four phases restaurants navigate during a crisis. 52% of restaurants surveyed are in the Prep for Recovery or Rebound phase.
Most restaurants expect long-term changes to their business models post-crisis.
- 8% had no change to their pre-COVID model
- 22% experienced a slight difference with increased marketing and communications to customers and different suppliers
- 56% experienced a moderate change – for example, off-premises/delivery will be a more vital part of their model going forward, and dining areas will change in configuration
- 15% experienced significant change; in some cases, some or all of their locations will not reopen
While many restaurant owners believe they are on the recovery track, they still understand that long-term operations will look different from the days before COVID-19.
In part two of this article, we share the remaining areas and conclude with solutions the survey revealed for restaurants to emerge stronger.
- In a crisis, light shines on operational areas needing improvement
- The top Action for a successful recovery plan
- Three areas of clarity that will serve your business well.