By Jacob Mancini
With the arrival of fall, many restaurant owners are preparing for a familiar challenge: a decline in customer traffic. This year, however, that challenge feels even sharper, with economic pressures like increased interest rates, higher operating costs, and inflation compounding the typical seasonal decline. Traffic is slowing down across the board because of the seasonality, especially for restaurants outside urban centres, and many operators are finding it harder than ever to protect their margins during what is historically the toughest part of the year.
It’s important to remember that these challenges aren’t entirely new. The pandemic temporarily concealed some long-standing issues like reduced customer traffic and overexpansion. However, the pent-up demand (from the pandemic lockdowns) and shifting consumer behaviours drove people back into restaurants at higher rates, which masked the fact that there were too many restaurants to begin with. Now, as dining habits return to pre-pandemic ‘normal’ and are more restrictive due to consumer confidence, the strain of overexpansion and rising operating costs is becoming more obvious – especially as interest rates also begin to climb back to pre-pandemic levels. All of this means that a higher number of restaurants are now competing for a more crowded landscape and margins that continue to shrink.
RELATED: Thriving in an oversaturated restaurant industry
It begs the question: what’s the best way to navigate the coming months?
The real challenge isn’t just the decline in customers, it’s that margins have become unsustainable. Before the pandemic, restaurants could weather seasonal slowdowns and still manage to stay profitable. Now, rising labour costs, inflation, and a tighter labour market are putting serious pressure on profitability, making it much harder for businesses to get through the fall and winter months.
And the old go-to of raising menu prices? That’s not really a sustainable option. Your customers are already tapped out and feeling the pinch from higher living costs and inflation. Pushing prices up further risks driving them away. The solution lies in refining your operations and delivering consistent value to your customers, not taking on more debt.
Now is not the time for unnecessary expansions or dramatic menu overhauls, it’s about enhancing what’s already working and ensuring every dollar spent counts. The days of raising prices to offset challenges are gone; instead, the key is delivering consistent value and managing costs effectively while enhancing customer loyalty. Marketing efforts should be intentional, targeting what resonates with your audience without trying to reinvent the wheel. Whether through social media, email, or direct outreach, the focus should be on reinforcing the unique qualities in your restaurant that keep your customers coming back. And, as consumers grow more conscious of sustainability, aligning your operations with their values – whether that’s through sourcing local ingredients or reducing waste – will further strengthen that loyalty.
Not all restaurants face the fall slowdown in the same way. Upscale restaurants, for instance, may be better positioned to absorb the seasonal drop in traffic, largely because they rely more on special occasions and experiential dining. Diners and franchises, on the other hand, are often more reliant on volume, which makes them more vulnerable to consumer cutbacks and slower periods. For them, the key may be in maintaining consistency and refining day-to-day operations to keep margins stable.
Regardless of your restaurant type, staying agile and focused is key to navigating the upcoming fall and winter slowdown. Prioritize cash flow management, streamline operations, and create value-driven experiences to keep customers engaged. Careful planning and disciplined spending will help maintain margins and ensure you’re stronger on the other side. As the economy stabilizes, manage expectations. While lower interest rates are on the horizon, they’re unlikely to return to pre-pandemic levels, and costs of living and labour won’t decrease significantly. This is a new reality, and adapting early will better position you for long-term success, even in tough times.
As the colder months approach, restaurants that remain disciplined, prioritize customer experience, and adapt quickly to the shifting economy will have a clearer path to success.
As Assistant Vice President, Restaurant & Brewery Finance, at CWB Franchise Finance, Jacob Mancini oversees all aspects of the restaurant lending business, which provides financing for branded restaurant chains on both a corporate and franchisee level. Jacob specializes in portfolio and business development for both national and regional chains.
