By Nick Ritts, Certified Volunteer Mentor, SCORE of Southeast Michigan
The outbreak of the novel Coronavirus has had devastating effects on the entire restaurant and hospitality industry, with small businesses taking an even harder hit. Back in 2004, when I opened Ritts Hospitality, I knew that there would be challenges ahead, but it’s hard to imagine something of this magnitude. I work with restaurant owners to help them through challenges. As I’ve navigated the uncharted territory recently for my own business and advised SCORE clients, I’ve compiled the best tactics for managing a restaurant amid COVID-19.
If you wait until a crisis occurs to figure out your plan of attack, you’re already too late. It’s imperative to have a plan in place that can be executed right away. SCORE National and our local Southeastern Michigan chapter have a bunch of helpful resources on putting crisis plans together on their websites.
Negotiate with Your Mortgage Company or Landlord
Develop and maintain a good relationship with your landlord or mortgage company so that, when you fall on hard times, they know you’re in it together and they’re more likely to work with you. Ask for three months of rent forgiveness as a short-term plan and always keep at least three months of rent in savings for emergencies, giving yourself six months without having to worry about rent money.
Right-Size Your Labor and Food Costs
Put together a realistic action plan based on anticipated volume. For labor, it’s important to maintain a 30% labor cost at all times regularly, and especially during a crisis.
Consider reducing your menu and not stocking certain items to reduce your food costs so they match demand. Don’t cut your popular items, and keep dishes that can be combined to make meal deals that appeal to families. Slowly phase items back in as the crisis subsides and you begin to go back to normal operations.
Sign Up for all Available Delivery Services or Create Your Own
DoorDash, UberEats and GrubHub are all great tools that will give consumers another way to find you and make ordering simple. While these services take a percentage of each sale, there are no fees if there are no sales, making it a low barrier to entry. These platforms also do extensive marketing, which you will benefit from second-hand. Keep your restaurant on these apps as operations return to normal too—it never hurts to be on delivery platforms.
However, if you’re finding it difficult to manage profit margins on delivery apps, create your own native delivery service to keep things in house, perhaps temporarily reassigning wait staff to fulfill delivery orders.
Advertise on Social Media
Social media advertising costs fluctuate regularly, but during this pandemic, they have been low. Facebook ads are a low-cost way to reach a very targeted audience—more bang for your buck. A good benchmark for advertising spend is roughly 5% of your sales. As your restaurant starts to reemerge, you may want to spend more to increase foot traffic.
Leverage Your Email and Text Subscriber Lists
If you don’t already have an email or text list, you should start a biweekly or monthly newsletter to stay in touch with your loyal customers. If you have subscriber lists, it’s more important than ever to stay in touch and give them updates about hours, offers, menu changes and more. It will also be useful to communicate early and often about changes to your operating model and moving from delivery and carryout to opening up your dining room again.
I know these times are tough, but making small adjustments will make all the difference in the end. For more tips on how to navigate your small business through the COVID-19 outbreak and beyond, reach out directly to a mentor who specializes in your specific challenge.
About the Author
Nick Ritts is CEO of Ritts Hospitality, where he has led his team to build customer retention databases with more than 150,000 social media followers, 15,000 text club members and 55,000 rewards members. Restaurants he has advised or owned include Tom's Oyster Bar, Ale Mary's, Terry's Terrace and more. Read our Mentor Q&A with Nick here.