PRLA Restaurant & Lodging Matters Fall 2020

18 •  PENNSYLVANIA RESTAURANT & LODGING matters  •  Fall 2020 8 Tighter Financial Management The reality of facing a dramatic drop in revenue with no clear end in sight has resulted in significant financial hardship for the industry. Operators have cut, reduced, and re-worked costs and pulled every revenue lever they can think of. But, during times of crisis, we are forced to dig deeper into the financials and make tough choices that we would not have otherwise made. From crisis comes trial, and from trial comes learning. Better ways to manage our finances are tested and operators that make it to the “other side,” will incorporate these learnings into better financial management. For many independents and small chains, cash flow is king. Although paying last month’s bills with this month’s revenue is not an ideal model, it has been the reality for many. This has left them with little room to maneuver during the crisis. Moving forward the approach to restaurant financial management will change. CFOs will take on an even greater role and expansion and investment plans will be postponed and reassessed until revenue, cash flow, and expenses are where they need to be. LOOKING FORWARD: Implications Labor adjustments. There will be a hard look at labor costs where excess layers of specialists will be eliminated, and staff will go back to wearing multiple hats. Productivity and efficiency will be paramount. We predict that doing more with less will be the new operations mantra, but in order to do that, operators will need to simplify their businesses. Changing footprints. We predict restaurant footprints will get smaller and greater space will be devoted to serving off-premise orders. Space costs money, and rent and renovations are not free. Restaurant designs will need to become adaptable. Change is inevitable. A burrito station today needs to be able to be transformed to an Asian station without disruption. Real estate. Good real estate has been difficult to attain, and brands have been overpaying. Moving forward there will be opportunities to pick-up restaurant locations that have closed and have quality buildouts. Rents on empty locations can be negotiated and therefore the financial model will become more favorable. More efficient floor plans. Part of the new financial model will be more efficient floor plans. One reason we have seen unit expansion plans curtailed is because of the need to rethink store designs and layouts. Floor plans need to consider new safety and queuing needs, expanded take- out, drive through and curbside pick-up space and less crowded dining rooms and do so in a more compact space. Retro-fitting existing locations. COVID has changed the game when it comes to self-serve stations, ordering systems and curb-side pick- up. This will be a monumental challenge for restaurants to address moving forward. The degree to which existing units will need to be modified and retrofitted is still unknown. Differentiation re-defined. Differentiation will remain critical to success, but it will not be through menu breadth. There is too much added cost in the supply chain and kitchen complexity. Instead, differentiation will be based on value, experience, exploration, convenience, and safety. Change is upon us and operators are responding, and with help from manufacturers, distributors, associations, and agencies the collective innovation, creativity, and reinvention will lead us to a new and exciting future. We are all looking forward to “coming out the other side” and embracing our new normal.• Tim Hand and Bruce Reinstein are partners with Kinetic12 Consulting, a Chicago-based Foodservice and general management consulting firm. The firm guides multiple best practice projects and forums, and works with leading Foodservice suppliers, operators and associations on strategic initiatives. Their previous leadership roles in restaurant chain operations and at Foodservice manufacturers provide a balanced industry perspective. The International Food Manufacturers Association (IFMA) works to improve industry practices and relationships while equipping every foodservice manufacturer with the tools to navigate their future with confidence. This article was originally published at FSRmagazine.com in April 2020.