Red Robin, Melt Shop execs share cost-cutting secrets
Restaurants have many operations that continually drain revenue such as labor, commodities, delivery and technology, including digital menu boards and mobile ordering. And during a Tuesday panel at the Restaurant Franchising and Innovation Summit, several restaurants execs offered their secrets to conquering those costs. They included:
- Spencer Rubin, founder and managing partner, Melt Shop
- Carin Stutz, COO and executive vice president, Red Robin.
- Doug Hogrefe, a partner at 4 Top Hospitality, a restaurant group that owns several bands.
- Paula Carren, vice president of marketing, Gusto.
The panelists expressed optimism for the current state of commodity prices, due to a current downward trend in prices but noted that this can change quickly. Stutz, for example, pointed out that in 2017, there was a spike in beef and French fry prices, which is quite impactful for a fast casual known for its "bottomless fries."
In order to handle this issue, restaurants also sometimes need to make tradeoffs based on customer affordability. Red Robin, for example, prides itself on its $6.99 price point for a sandwich regardless of commodity costs. Also, raising prices even a few dollars can trigger a customer response.
Hogrefe pointed out that customers might balk at an increase from $15 for an entrée to $18.
At times, price increases can become inevitable. Melt Shop did a one-time price increase recently, although Rubin believed that the increase should have been done more slowly over time rather than at once.
Increasing labor costs were also a top concern for the panelists, who emphasized the importance of being efficient with process and scheduling.
"Right now, what we really need to do is improve process. We have completely broken down the schedule to utilize downtime," Rubin said.
Stutz argued that restaurants should work with legislatures to try to fight against various regulations, and Hogrefe spoke about how different locations can have different labor demands. In Nashville, for example, due to low unemployment, his company has to pay dishwashers $15 an hour just to keep them.
He also emphasized the need to follow the law and avoid more unethical practices such as not paying servers the minimum wage.
Technology moves at a rapid pace, which can make implementation difficult. The panelists, however, recommended taking a slow and steady approach.
"Start slow, make sure it works," Stutz said. She said restaurants need to make sure the technology simplifies and improves the overall customer experience.
"Patience is key," Rubin said. "Don't make the mistake of jumping in too early."
Hogrefe said restaurants need to avoid getting blinded by all the cool apps out because costs add up, especially if they are hard-to-use and keep managers too occupied to interact with guests. At the same time, however, if a tool boosts the overall experience, they shouldn't be scared away by the price point. He mentioned a company called Gather that provides an online catering tool that communicates very quickly and securely with guests.
Delivery is a challenge for many restaurants, as there are a lot of moving parts to consider such as paying the driver, dealing with third- party companies and handling the ordering. While all three execs use third-party companies to handle delivery, they admitted that they don't come without challenges.
For example, Hogrefe said his company pays 20 percent to the delivery company in addition to the driver. Also, he finds it difficult to gain key insights into customer metrics with third-party companies.
If a restaurant decides to handle their own delivering, they must be able to "do it better than third parties," Stutz said.
Finally, Rubin recommended upgrading the user experience for online delivery if it makes sense financially.
The bottom line
The bottom line when it comes to any cost issue, according to the panelists, was to always strive for more efficient processes and take all changes slowly. Hogrefe said that even when times are good, operators shouldn't "let your foot off the gas." They need to make sure managers are working to "exceed your goals," whether profits are down or up.
Image via Istock.com.
Topics: Operations Management
Companies: Gusto POS
Bradley Cooper is a Technology Editor for DigitalSignageToday.com. His background is in information technology, advertising, and writing.www