April 25, 2017

How to Stay in the Black if Profits Decline

New Year News— 2016 was a terrible year for the restaurant industry!

Here’s the low-down from TDn2K (Turning Data into Knowledge), a restaurant-industry supplier of statistics and analytics: The last month of 2016 was the weakest for sales growth in the past three years and the 4.3 percent decline in sales for December brought down the entire quarter, resulting in fourth quarter sales being the worst in five years.

These findings, based on weekly sales reports from 26,000 restaurants representing over 130 brands, revealed that 2016 was the worst year for restaurants since the recession. Victor Fernandez, executive director of Insights and Knowledge for TDn2K, says, “The last time the industry experienced a year with all negative quarters was 2009, when the economy was suffering the effects of the great recession.”

Why are sales off?

TDn2K cites several reasons for the current decline in restaurant sales.

  1. Shopping malls reported a decrease in customers. Shoppers opted to join the ranks of online purchasers rather than visit traditional brick and mortar stores. Consequently, food courts (and external eateries around these shopping areas) also saw a decline in traffic.
  2. Restaurants experienced a drop in their average guest check amounts.
  3. Family restaurants and casual dining establishments, especially the “bar and grill” segment, were particularly challenged to show profits despite increasing sales reported at quick service restaurants and fine dining places.

Protecting profits for 2017

These factors – less consumer traffic, sluggish check growth, and disparate segment viability –  will, of course, be the focus for many newly-developed marketing plans in the coming year.

But the new year’s forecast is not all doom and gloom and restaurants can work to develop plans to protect their profits by focusing on areas other than sales.

Make 2017 a better year!

Here are some keys to sustaining profits during a declining sales period.

  1. Retain employees and keep them happy!

Turnover for all levels of employees, from hourly workers to upper management, is continuing its upward trend. Analysis of TDn2K data “links higher restaurant management turnover with lower sales and traffic growth.” So now may be the right time to beef up employee training or institute orientation sessions that can enhance employee morale, or find new ways to build loyalty among employees. Unnecessary labor costs can eat into company profits. Minimizing workers’ compensation claims can also help protect profits and decrease employee turnover.

  1. Know the laws, old and new!

Being familiar with all legislation regarding minimum wage and overtime regulations can prevent citations, fines, and unnecessary work and money to defend an action, etc. Completely understanding OSHA laws and how they affect employees and the company is imperative. Compliance in all areas will eliminate fines and prevent obstacles to continued business success.

  1. Increase security!

Enhancing current security measures may cost a little, but could save a lot. Easy-to-implement things like training employees how to safely handle money, make secure deposits, or be vigilant with cash drawers, doesn’t cost much, but missing or stolen money can make a difference in bottom line profits. Other actions, such as hiring additional security personnel, upgrading computer protection networks, or installing intricate safety systems can save money and prevent future losses.

  1. Ensure customer and employee safety!

Insisting that everyone follows all safety precautions from external and internal lighting to door and freezer locks can prevent labor and product loss due to negligence or ignorance. It might be prudent to update all relevant safety rules, initiate additional safety training sessions, or educate employees about mandatory safety standards. Maybe it’s time for those initiatives that have been put on the back burner, such as implementing the “buddy system” for night closings or installing parking lot cameras.

  1. Train security teams!

Ensuring that loss investigations for both employee and customer theft are identified, investigated and resolved promptly will take on greater significance as money gets tight. Training in these investigative and interrogative areas is available and can be well worth the money spent.

Future news can be good!

TDn2K’s Chairman Wallace Doolin says the new year will be “one of winners and losers that are not necessarily determined by the segment, nor the age or size of the brand.” Increasing sales, capturing more market share, outperforming the competition, and operating a successful business will be important profit indicators in 2017. The future “winners” will also be those companies that work harder to capitalize on what they already do well to achieve peak, profitable performance …they just have to do it better.

For more restaurant resources, #JoinRLPSA in Las Vegas for our 38th Annual Conference and Expo! Register here.

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