Navigating the Cost of Living Crisis: 7 Strategies to Increase Restaurant Profitability

Running an independent restaurant can be challenging, especially during times of economic uncertainty. Rising costs, such as soaring energy bills, has led to tight margins which means that restaurant General Managers need to think creatively to improve sales and profitability. In this article, we'll explore seven strategies that independent restaurants can use to achieve this.

1.Use Data Analytics to Drive Decisions

Data analytics can provide valuable insights into your customers' behaviour, preferences, and spending patterns. By collecting and analysing this data, you can make informed decisions about pricing, menu offerings, and marketing efforts. For example, you could identify which menu items are most popular and adjust your inventory and pricing accordingly.

For instance, if your data analytics show that your customers prefer vegetarian or vegan options, you could adjust your menu to include more of these dishes. Similarly, if your data shows that your customers are most likely to visit your restaurant during certain times of the day, you could offer promotions or happy hour specials during those times to increase sales. Some EPOS and booking systems offer this level of insight, it’s worth exploring and understanding the features on offer. Our customers are currently reaping the benefits of greater insight into staff performance on tasks (and soon quizzes too) because all staff have their own account allowing management to generate staff performance reports. This wouldn’t be possible if only signatures or initials were captured by their compliance app, so understand the systems you work with, the benefits and limitations of each.

2. Partner with Local Influencers

Partnering with local influencers, such as food bloggers or social media influencers, can help you promote your restaurant to a wider audience. These influencers have a strong following and can provide you with valuable exposure, reach new customers, and help build your brand. Micro-influencers (10k – 100k followers) could be affordable, specific to your location or target customers, and have a more engaged following than influencers with follower counts.

For example, you could invite a local food blogger to review your restaurant and share their experience on TikTok and Instagram. Employing multiple influencers that all speak to a slightly different segment of your target market will enable you to better understand both your core audience and best influencers to work with. Influencers can then offer special promotions or discounts to their followers, encouraging them to visit your restaurant. By doing this, you’ll be able to measure how successful each campaign has been and do further campaigns with the more successful influencers. 

3. Offer a Unique Dining Experience

Creating a unique dining experience that sets your restaurant apart from competitors can help you attract and retain customers. This could include offering a themed menu, hosting special events, or providing interactive experiences for customers.

A strategy used by some bigger chains is to incorporate sensory marketing. Sensory marketing is the use of sensory cues, such as sound, scent, and lighting, to create a memorable and engaging customer experience. For example, you could incorporate a scent marketing strategy by using a specific aroma in your restaurant to create a unique and memorable atmosphere. A study conducted by the University of Oxford found that the aroma of vanilla can have a positive effect on mood and can increase feelings of happiness and relaxation. By incorporating vanilla-scented candles or diffusers into your restaurant's design, you can create a welcoming and relaxing atmosphere for your customers.

Another example is the use of sound, which involves using music and sound effects to create a specific mood or atmosphere. Studies have shown that music can influence customer behaviour, with slower tempos and lower volumes leading to increased spending and longer dining times. By selecting the right music and sound effects for your restaurant's design, you can create a unique and engaging dining experience for your customers. This obviously depends on the type of atmosphere you aim to create and the one that customers expect when they visit your venue, however we’ve all been somewhere where the choice of music/volume has forced us to leave.

4. Create a Loyalty Program

Creating a loyalty program can encourage repeat visits and build customer loyalty. Offer rewards for frequent visits, such as discounts or free menu items, and promote the program through your website and social media channels.

For example, you could create a loyalty program that rewards customers with a free menu item after every 10 visits. Alternatively, you could offer a tiered rewards program that provides additional benefits, such as exclusive access to events and promotions, for customers who reach certain spending thresholds.

5. Negotiate with suppliers

In addition to negotiating on prices, you can also negotiate on the terms of your contracts with your suppliers. Many suppliers offer payment plans or financing options that can help you manage your cash flow and reduce your financial risk.

For example, you could negotiate with your food supplier to pay for your orders in instalments, rather than paying the full amount upfront. This could help you manage your cash flow more effectively and reduce the risk of running into financial difficulties if your sales are slower than expected.

Another strategy is to bolster your purchasing power to negotiate for exclusive deals with your suppliers. For instance, you could offer to feature your supplier's products prominently on your menu in exchange for a lower price or exclusive access to certain products. This can help you stand out from your competitors and help you attain more favourable terms.

6. Develop a Sustainable Menu

As customers become increasingly conscious about their environmental impact, creating a sustainable menu that features locally sourced ingredients and reduces waste can help you attract eco-conscious customers and build a positive reputation in your community.

For example, you could source your ingredients from local farmers or food cooperatives, reducing your carbon footprint and supporting local businesses. Additionally, you could implement a food waste reduction program that repurposes excess ingredients into new dishes or donates them to local charities.

7. Offer Meal Kits or Subscription Services

Meal kits and subscription services can provide an additional revenue stream for your restaurant while also offering convenience to your customers. Meal kits provide customers with pre-measured ingredients and instructions to create a restaurant-quality meal at home, while subscription services offer regular deliveries of food items or meals.

For example, you could offer a meal kit that features a popular dish from your menu, providing customers with the ingredients and instructions to create the meal at home. Alternatively, you could offer a subscription service that delivers a weekly or monthly supply of your homemade sauces or baked goods. Rudy’s ‘Bake At Home’ pizza is a great example of how they expanded their famous Neapolitan pizzas beyond the confines of their restaurants.

In conclusion, there are many strategies that independent restaurants can use to improve sales and profitability, even during times of economic uncertainty. By using data analytics to drive decisions, partnering with local influencers, offering a unique dining experience, creating a loyalty program, negotiating with suppliers, developing a sustainable menu, and offering meal kits or subscription services, you can attract and retain customers, build your brand, and increase revenue. By taking these steps, you can position your restaurant for success in a competitive industry.