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The future restaurant is smaller but more profitable

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Industry Insights

The future restaurant is smaller but more profitable

By Nory - November 24, 2021

In this Snack we look at the next evolution of restaurant business models. In particular – how changing consumer tastes offer an opportunity for brands to optimise for productivity and profitability .

Prior to March 2020, RevPASH was THE labour productivity metric for much of the industry.

RevPASH is revenue per available seat or Total Revenue ÷ Seat Hours. (Seat Hours = Number of Seats x Hours Open)

A restaurant’s labour productivity is primarily focused on the ergonomics turning tables. Or in layman terms; how many bums can you get on seats each day?

Unfortunately over the last 20 months bums and seats have been forced apart (we won’t get into pandemic talk here). But in response to this we’ve also seen a huge spike in demand off-premise (delivery/takeout) dining globally. Meaning bums are on seats somewhere and they still want to eat!

Brands that have leaned into the principle that their food is best enjoyed wherever the hell their customers want, have better maintained and even grown their revenues over the last 20 months.

The majority of brands are reporting that off-premise dining as a % of revenue has maintained. Even as dining rooms have re-opened in 2021. Similar to the current hybrid work movement – diners want flexibility in how and where they enjoy their meals.

This trend isn’t going anywhere. If you are prepared to accept that, it opens up a whole new sea of opportunity and increased profitability .

I can already picture the dis-belief on your faces…but hear me out.

Let’s say pre-pandemic your restaurants were approx 250 sqm and 70 seaters on average. To hit your sales budgets each week those seats needed to be filled and turned at breakneck pace. Cue – the ever so gentle dance of delivering remarkable dining experiences with a stopwatch in hand ⌛.

To service 2/3 turns of 70 seats each evening you likely need 3-5 kitchen staff and 6-10 front of house staff on shift depending on the layout of your restaurant and service style.

Now imagine you can achieve the same revenue in a 80sqm unit with the same (or smaller) kitchen team and only 2-3 front of house staff? How? By re-designing your model to service an omni-channel experience (e.g. 35% Dine in – 40% Delivery – 25% Take out).

By setting up to cater better for flexible dining habits you are able to cut off 66% of your real estate costs and up to 50% of your labour costs.

Better yet, your labour can’t spiral out of control because the physical space doesn’t exist  – it forces operators to build out logistical spaces with ergonomics in mind. It equally forces restaurant teams to operate more efficiently .

For a real world application of this check out the guys in Oath Pizza.

Granted – this doesn’t fit every brand’s business model for sure. But as the saying goes; in every crisis there is opportunity. The industry is going through a digital transformation of mammoth proportions.

There is a unique opportunity right now to take stock of where the demand winds are blowing and how best you can shape your business model to service them. All the while still optimising for healthy bottom line profitability.