If there’s one thing you can count on in the restaurant industry, it’s change—especially these days. Even after the pandemic-fueled tumult of 2020, few would have predicted the extent to which the industry has been shaped in 2021 by such factors as a major labor shortage, supply-chain issues, and soaring inflation.
It is a particularly challenging time, to be sure, and the ever-shifting landscape demands agility of restaurant operators who must adapt to the changes in order to maintain their margins. The key is to make the right decisions around inventory and pricing at the right times—and having the right technology can make all the difference.
Even in the best of times, commodity prices change on a daily basis. Restaurant operators and franchisees are accustomed to this as a basic fact of life. Fluctuation is the norm, but the industry seems to be hit with shortages more regularly than ever before in recent memory. Some of these are temporary shortages attributable to transient factors—not too long ago, for example, pandemic-forced shutdowns of meat-processing plants caused a brief chicken-wing shortage.
More problematic, and longer-lasting, shortages could be on the horizon. Droughts might reduce the supply of potatoes, for example. How is a QSR operator whose income is dependent on burger-and-fries combos to respond? Let’s say the cost of such a combo was to jump from 10 cents to 20 cents. If cutting fries off the menu entirely isn’t a viable option, an operator might decide to raise prices—or might decide to ride it out and take smaller margins until the price of potatoes stabilizes, without passing the cost onto the customer.
Back-Office Tech Plays a Critical Role
The ability to make these critical decisions on the fly is where technology has a role to play, specifically a back-office software platform. Back-office technology centralizes, automates, and improves operating processes related to purchasing, accounts payable, inventory management, recipe and menu engineering, labor scheduling, and reporting. It can help restaurants avoid many issues associated with ingredient availability by allowing them to keep better tabs on the menu items they keep in stock.
Back-office inventory-tracking software uses item-level historical sales data and historical comparisons to forecast future sales. Armed with an accurate prediction of future usage, combined with on-hand inventory levels in the restaurant, a restaurant operator or franchisee can order accurate quantities from food suppliers. If the restaurant’s main suppliers are expecting shortages of a particular ingredient, operators can look for alternative suppliers or adjust the menu to promote different items and drive sales of items that aren’t in shortage.
Riding a Razor-Thin Margin
At a typical quick-service restaurant, a large percentage of revenue walks out of the front door in food costs, with a similarly large percentage walking out the back door as labor costs. Add in administrative and other costs, and the average QSR is not left with much margin. QSRs tend to make up for their slim margins in sheer volume.
QSR managers often find that their bonuses—and sometimes their jobs—depend on effectively managing those costs of food and labor. These managers can’t control things like surging inflation, supply-chain changes, or industry wage trends, all of which can have a major impact on already razor-thin margins. What technology can allow them to do, however, is stay on top of inventory and staff scheduling, so that if any of the aforementioned factors impinges on the profit margin, they can use this data to make key decisions so that they can make the best of a difficult situation.
Few in the hospitality industry are thrilled by headlines informing them that inflation rates in the U.S. are higher than they have been in decades. But if managed properly using the right tools and technologies, restaurants can get an accurate, real-time picture of where and how their costs are changing, and they can make informed, intentional decisions about raising prices, changing recipes, or discontinuing products.
The bottom line is that technology doesn’t change what restaurants do; it simply makes them better at what they do by supplying the decision-makers with the right data to make informed choices. Technology can help surface the trends and shine a bright light on them sooner, so that restaurant operators can fix problems as they arise before they are forced to either play catch-up or go out of business.