The Rush by Toast - September 13

By: Isabelle Hahn and Chelsea Verstegen

7 Minute Read

Sep 13, 2019

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Welcome to the seventh edition of The Rush, where we cover notable happenings in the restaurant industry. This week's coverage includes how restaurants are dealing with rising rent costs, retaining employees, and using new marketing tactics to bring in diners.

⏳ Here's what you need to know this week in 10 seconds or less:

  • Rising rent costs threaten restaurant survival by significantly increasing operating costs.

  • Restaurants are strategizing to keep employees using forward-thinking tactics like retraining and employee assistance programs.

  • Social media and experiential marketing have piqued diners' interest and brought in traffic. 

⏰ If you have more time:

How Restaurateurs are Dealing with Rising Rent Costs 🏠

  • Real estate pressures and a staff shortage are forcing restaurateurs to find creative operation cost-saving solutions.

Rent prices continue to rise in the United States as the housing crisis reaches a new high. HuffPost reported that, as of 2016, nearly half of renters are spending 30% of their income on housing and are “cost-burdened” by it.

Rising rent prices don’t exclusively impact residential properties either. Commercial properties and business owners have to add rent to their operation costs, and this is becoming an increasingly important issue in large cities. Even high-grossing chains aren’t immune to rent spikes. Wahoo’s popular Manhattan Beach, California location closed its doors due to the unsustainable increase to their operational overhead costs. 

Restaurant Dive reported that rising rent not only impacts restaurant owners but staff as well. Many employees are priced out of city centers with viable restaurant jobs because the cost of living is so high. There are some solutions emerging that are only quick fixes to an increasingly problematic issue: chefs serving diners themselves to eliminate wait service, restaurants paying for employees' commuter costs, and more.

These tactics also underline the growing trend of ghost kitchens, which completely remove labor from the equation and significantly cuts rent costs as owners are able to open smaller locations. 

Improvements in the Work Environment for Hospitality Workers 

  • Restaurant turnover is the highest of any industry, which directly impacts restaurant labor costs. 

  • Restaurant owners are choosing to fight for their workers rather than spend thousands of dollars to train staff that walk through the proverbial rotating door.

Starbucks already has above-average healthcare benefits for all employees, but the coffee giant has just announced that an enhanced Employee Assistance Program will be part of a long-term initiative to “take a stand, help break the stigma around mental health, and get even more partners and their loved ones the support they need,” said CEO Kevin Johnson in a letter to Starbucks partners. According to a Restaurant Dive brief, additional changes will include mental health training for store managers, subscriptions to the wellness app Headspace, and partnerships with multiple mental health foundations. 

Amanda Cohen, owner of Dirty Candy, recently wrote a piece for Eater detailing her decision to pay her employees more than the $15/hour New York minimum wage requirement. With her staff making anywhere from $17-$30 an hour, she’s not only keeping her employees, but also keeping her employees happy. “Why would I expect my employees to give me their best if I’m giving them the minimum?” wrote Cohen. In order to keep up with this amount of pay for a 25-person staff, Cohen has raised her menu prices and eliminated tipping. She says her business hasn't suffered, and she hasn't lost customers. 

Some restaurants, like Panera Bread and Dunkin' Donuts, are taking the route of retraining current staff on operational execution to lower turnover rates. Popular chain Jersey Mike’s hosted an all-hands training session for its 1,600 locations and 20,000 employees, known as “Brand Promise Day,” to restore brand consistency. The training, which occurred over the weekend, covered everything from slicing meat and cheese to comply with brand standards, to how to engage customers while focusing on speed and precision. 

Modern Restaurant Marketing is Changing 📱

  • Social media is the most common form of restaurant marketing, followed by online listings, customer reviews, and local SEO, according to Modern Restaurant Management.

  • Following the launch of its viral chicken sandwich, Popeyes daily traffic peaked on Aug. 23 at 218.2% higher than average daily traffic for July.

  • Other restaurant brands are using experiential marketing and gamification to get the attention of younger diners. 

Restaurants, like any other business, need to keep up on marketing trends to fill seats and sell meals. In a recent article by Modern Restaurant Mangement, social media was cited as the most common form of restaurant marketing, with online listings, customer reviews, and local SEO not far behind. 

We’re witnessing a perfect case study of the power of social media with Popeye’s viral chicken sandwich selling out. Not only did social media help the chain to boost foot traffic by 218.2%, according to a report, but the brand is releasing videos on social media joking about the chicken shortage, continuing to engage conversation. 

Along with social media, this also played into millennial interest in the experience economy, where consumers prioritize experiences over products. Social media is a catalyst for this experience economy, with everyone having the tools to snap a photo of an innovative plate presentation or interact with a viral chicken sandwich sensation. 

While there are tried and true ways of engaging customers, other restaurants have ventured down a more unique marketing path to draw attention from the younger generation, as well as appeal to the experience economy. KFC is a corporation best known for its buckets of fried chicken. Recently, the brand has launched some... inventive marketing campaigns — Google CGI hipster influencer Colonel Sanders or Chickendales Mother’s Day for your viewing pleasure. The company's latest campaign involves a dating simulation game featuring a young Colonel, with the intention of propelling KFC’s brand further into the lifestyle category.

Other food and beverage brands are utilizing gaming as a marketing technique as well. Coca-Cola has created scannable cans that activate augmented reality stories — each of which ends with the featured characters sharing a coke. Sublimotion, an upscale restaurant in Spain, has incorporated virtual reality into each and every meal. Using VR headsets accompanied by real food, this restaurant has created a “culinary performance” that diners will not soon forget.

To see other innovative creative marketing campaigns, check out Burger King’s Democratic burger, or Popeye’s suggestion to bring your own bun to their restaurants. 

How These Trends May Impact Your Restaurant

  • Thinking Ahead about Operational Overhead Costs: In order for restaurant owners to protect their business, it’s important to focus on hiring the best staff and changing your operations strategy so you can attract customers to a less-expensive brick and mortar location. Additionally, investing in labor-saving tech can be a lifesaver when dramatically lowering operational overhead. Read our ultimate guide to hiring, training, and retaining restaurant staff.
  • Retention Bonus: The turnover rate for restaurants is at an all-time high of 75%. That’s a tough number to combat, but offering your staff incentives — like ongoing training, a comprehensive benefits plan, or more pay — to stay at your restaurant is a good place to start. Here are some other ways to reduce employee turnover.
  • Marketing Trends: While there’s no such thing as one-size-fits-all when it comes to marketing your restaurant, social media is a good place to start when you want to get creative. Our 2020 Restaurant Marketing Plan has customizable templates and information on what you need to know about the different marketing channels. Check it out.

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