The Fifteen Group’s David Hopkins has clear advice for restaurant operators during the challenge of the changing seasons.
By Tom Nightingale
In what feels like just the latest twist in the unprecedented year that is 2020, the goalposts are moving again. Summer’s end has arrived in tandem with a spike in COVID-19 activity, particularly in high-population areas like southern Ontario. Just as it felt like restaurant operators and the hospitality industry may be starting to get a handle on coping with a pandemic, the challenge has intensified again.
The onset of fall and the winter that will follow bring numerous tests for restaurateurs. Extended patio programs across Canada may be remaining in place but it’s reasonable to think that the colder weather will limit their appeal for some patrons.
David Hopkins, president of hospitality consulting firm The Fifteen Group, notes that the availability of outdoor space over a warm summer was a huge boost for the industry. But he’s wary of what happens when that warmth disappears.
“I fear that some restaurants are going to be challenged,” he told RestoBiz this week. “If it’s 4 degrees C and I’m sitting on a patio with my heavy jacket on and the patio heater’s not near me or not doing the trick and my food’s getting cold, I just fear that I’m going to leave there thinking it’s not a great experience. Nothing the restaurant did wrong, just because of circumstance, it’s just not ideal. So I’m fearful that some restaurants will really try to push the envelope.”
Hopkins notes that outdoor patios have rarely, if ever, had to run this late into the year and that trying to find patio heaters right now, as you might expect, is far from easy. Couple summer’s end with provinces and municipalities doubling down on capacity restrictions to try to temper the “second wave,” and it could be a trying time across the industry.
So what does Hopkins, a veteran of the industry who works with myriad restaurants across North America, recommend restaurant operators should do to weather the storm over the coming months? In short, he advises cautiously raising prices, capitalizing on government subsidies, and keeping that wheel of innovation spinning.
Strategically increase pricing
With capacity restrictions in place in an industry that already sees tight margins, revenues need to come from somewhere. Hopkins urges restaurant operators not to be afraid of implementing strategic price increases.
“It’s interesting that people think that if their capacity’s cut by 40 or 50 per cent then they have to double their prices to make that up. That’s not the case because price increases, unlike capacity revenue, fall straight to the bottom line,” Hopkins says. He notes that if revenues decline by 40 per cent because of capacity restrictions, operators actually only need to raise prices by about 17 per cent to offset that. So bumping prices by, say, 7 to 14 per cent is certainly warranted, he suggests, and patrons should be accepting of that.
Consumers understand the challenges that businesses are facing right now, and Hopkins has seen surveys which suggest the driving impetus for people to go to restaurants right now is to support local, small business, rather than other factors. “We have a number of clients who have done price increases with no negative impacts, no dissenting guest comments or whatever. I’m not talking about doubling menu prices, just strategic price increases where warranted.”
Capitalize on subsidies to boost guest experience
One plus point of what’s happening in 2020 is the willingness of government – be it at the federal, provincial, or municipal level – to work with the industry to mitigate the perils of a pandemic. At the moment, hardest-hit restaurants can be eligible for a significant wage subsidy and the help is being extended, in some form at least, until the summer of 2021. Hopkins is imploring restaurants to take full advantage to boost their customer experience.
“We see it as a huge benefit in that it allows you to potentially do things that you’ve never done before because now you’re able to make money out of it,” he explains. “It’s a huge opportunity for restaurants to completely elevate their experience, take them from maybe an 8/10 to a 10/10 which a) is great for customer experience and b) also warrants you to put your prices up as you’re providing a better experience.”
Hopkins cites certain clients of The Fifteen Group who have been able to branch out their service as a result of the subsidies. Things that may not have been affordable pre-COVID can now be budgeted for if operators are only paying a fraction of wages, ultimately increasing potential revenue centres if used creatively and effectively.
Innovate offerings to improve profit margins
That feeds into the third piece of advice Hopkins has: operators need to keep their thinking hats on and find new ways to appeal in the new landscape. He gives the example of some clients who have begun offering online takeout and third-party delivery, or the direct sale of wine to homes, things he says would likely never have been on the table for some businesses before COVID-19.
“Creative things like that are key, pivoting your model to be more takeout- and delivery-friendly,” Hopkins stresses. “This is a new world, a new reality we’re in, so not just opening your doors and saying ‘we’re gonna do what we did before and that’s the way we do it.’ Pivoting your model to what makes sense, whether it’s a short-term thing or a long-term thing.”
The potential for permanence
Some of these changes could indeed stick around in the long-term, Hopkins cautiously predicts. He notes that the industry was already seeing a definitive trend of moving more towards takeout and third-party delivery and that has only been accelerated in 2020. Other things, too, could stay in place. In B.C., wholesale liquor pricing was a move that had long been touted in some corners. It’s now finally in place, giving operators in the province a discount on their liquor purchases that they never got before. Hopkins hopes that’s an example of an on-the-fly pivot that may become permanent, describing it as “a huge win” for restaurants.
Patios, too, are a different ballgame now, with lots of the red tape for expansion cleared up. “Pre-COVID, if you had a patio that was 30 seats and you wanted to expand it to 60, the amount of red tape – applications, approvals, even changes to your washroom sizes – was phenomenal. So hopefully this lasts and they’ve learned that maybe they don’t need to do so much in terms of approvals and red tape because there’s no doubt it’s a huge plus.”
The biggest change that Hopkins foresees, though, is in terms of communication with guests. While restaurants have naturally always been pretty sanitary establishments, such are the requirements of foodservice, 2020 has seen a real shift in how the message is conveyed. “You used to do all kinds of sanitary things but never communicate that to guests, whereas now it’s more of a marketed presence where you want to make sure your guests know everything you’re doing to keep them safe,” says Hopkins.
“We used to take cleanliness for granted. Now, we’re being conditioned to always think about what we’ve touched or what we’re encountering, so I think we’re going to be a much cleaner society, at least for the next while.”
Winter is coming, that’s an inevitability. But with some tough front-of-house decisions, governmental assistance, a strong creative spirit, and clear communication, the terrain can be navigated. Perhaps Hopkin’s advice to restaurant operators can be best summed up in one succinct phrase: don’t be afraid of where we are, or where we’re going.