Top 3 Challenges Impacting Restaurant Revenue and Growth
Top 3 Challenges Impacting Restaurant Revenue and Growth
There are three persistent and difficult challenges that restaurants, hotels and resorts must deal with in order to thrive over the coming years. These are rising costs, labor shortage and declining guest experience. Understanding these issues can help find operational solutions to offset these challenges and evolve the restaurant experience into a better, more guest-centric experience, much like we’re seeing in many other industries.
These challenges and the opportunities or solutions are not simple, so if you’d like a deeper dive, get our free whitepaper, Everything Restaurants Need to Know About Building Operational Resiliency.
1. Rising costs
Rising costs isn’t an issue that’s unique to restaurants, but it is a challenge that hits the industry hard especially when paired with the other challenges. In the US, a recent survey shows that only 19% of restaurants expect profits to increase in 2023 from 2022. The reason for the lack of optimism is pressure on margins as 9 in 10 respondents claim rising food and labor costs as significant challenges. It can really feel like operating a restaurant has suddenly become ALL about controlling costs which causes a domino effect on the guest and staff experience.
2. Finding and keeping staff
The labor shortage challenge is hitting the restaurant industry particularly hard. The fact is, however, that labor challenges with a shift in demographics have been building in the restaurant and service industry for a long time — the pandemic of 2020 only accelerated the issue. A recent survey found that over 60% of restaurants said they were understaffed. The problem doesn’t stop with simply not being able to find staff to work, retention is also a growing challenge. It’s a vicious cycle, without enough staff, the existing staff can easily become overworked and feel diminished job satisfaction. There’s an obvious connection with guest experience here as well, when customers are frustrated with wait times due to staffing shortages, they can take it out on the restaurant staff, which makes working in a restaurant much less enjoyable. It should be noted that high staff turnover can also contribute to diminished guest experience as new employees don’t have relationships with regular guests.
3. Deteriorating guest experience
It’s no secret that staff shortages and rising costs means guest wait times are up and quality of service is down. The guest experience is suffering because of these other challenges. And if it suffers too much, that can quickly mean the end of a restaurant. In terms of wait time, Touch Bistro’s 2022 Diner Trends Report suggests that 30 minutes is an important demarcation line. 42% of Gen Z, 50% of millennials, 54% of Gen X, and 63% of boomers consider a wait time of over 30 minutes to be a major deterrent. When it comes to reviews and guests sharing their perceived negative experiences, in a New Voice Media (now Vonage) survey, after one negative experience, 51% of customers will never do business with that company again. While this isn’t specific to the restaurant industry, we must take the power of guest satisfaction very seriously. If the expectations of guest service aren’t met, you may lose that customer, possibly forever.
The modern consumer is becoming increasingly used to getting what they want, when they want it. Think of shopping on Amazon from anywhere and getting the product the next day, or ordering a coffee through your phone and having it ready the moment you arrive. These are examples of closing the response gap — the ‘gap’ in time it takes for a customer to order or receive the service or product they want. Every industry is closing, and working on further closing, the response gap.
Meanwhile the response gap in the restaurant industry has been increasing largely due to labor shortages challenges. This means the guest experience is falling further and further behind customer expectations which are being met, and set, in other aspects of their lives.
Restaurants and hospitality must find a way to close the response gap even while having staff shortages and rising costs.
Opportunities and solutions
For rising costs
Unfortunately, the challenge of rising costs has limited direct solutions that can make the needed difference. It’s something that all industries are dealing with but is acutely felt in the restaurant industry. Plus, the most obvious solutions (raising prices, changing menus, cutting hours) could actually make the situation worse in the long term. What we can say, however, is that this challenge can be seen as an opportunity to get more creative in driving revenue to offset the costs. Depending on the type of restaurant, technology in the form of contactless order and pay solutions can be one way to help ease the burden on staff while increasing table turns and customer loyalty. This can help offset rising costs while, as we’ll see below, improving staff retention and the guest experience.
For hiring and retaining staff
There’s a number of things restaurants can do to help attract staff and keep them. The most important thing is to truly value the staff. This can be difficult given rising costs and other pressures, but it’s important to reward good work and make the staff feel appreciated. These can be monetary bonuses, and benefits programs, of course, but they can also be verbal recognition, promotions and even more team building exercises.
Order and Pay technology can also help improve staff (particularly the servers) job satisfaction. Technology can lighten the burden on servers, making their jobs more efficient and helping to close the response gap, keeping guests happier and the server guest relationship more positive.
For guest experience
Technology can have a big impact on not just getting the guest experience back to some idealized pre-pandemic state but can vastly improve the guest experience. Every other industry has adopted digital technology to improve customer experience. Here’s an old example from banking: Don’t want to wait for a teller? Just go to the ATM. Don’t want to go to an ATM? Use the banking app on your phone. Digital technology has revolutionized banking. More recently we’ve seen the same idea applied to grocery stores. There are now cashiers, self-serve checkouts, order online and pick up in store, and order online for delivery. That’s 4 different ways to get and pay for your groceries. The common denominator is to provide customers with choice. Digital order and pay solutions give customers a choice and modernizes restaurants.
Read our whitepaper
These topics are complex and nuanced. Check out our whitepaper to learn more about the challenges and potential solutions for restaurants and the hospitality industry.
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If you want to find out more about how Ready’s order & pay hospitality, entertainment and restaurant tech can help your brand increase revenue and improve customer experiences, please get in touch with our team today.
About Ready
Ready partners with innovative restaurant, foodservice, and hospitality brands to create frictionless order & pay experiences that WOW guests.
Our mobile-first flexible order & pay software platform empowers guests with more choice, boosts revenue, and connects brands directly with customers.
We are a company of food lovers whose goal is to make guests, servers, and operators say, "Why hasn't it always been like this?"
Our clients are Restaurants, Hotels, Stadiums, Venues, and anywhere food or drinks are served.
Ready to order. Ready to pay. Ready when you are.