How to ensure quick ROI when opening up a restaurant business amid crisis
How to ensure quick ROI when opening up a restaurant business amid crisis

A lot of discussions have been held when it comes to restaurant closures amid Covid-19. And, generally, talk of expansion and openings is framed against a post-pandemic backdrop, a world where big chains get bigger and well-capitalised brands flood the real estate left behind.

But what about present growth? One potential byproduct of pandemic conditions is that it stirs the entrepreneurial spirit. While certain signs reflected continued economic uncertainty, hopes are blooming in between the darkness where it is witnessed that young enthusiasts who lost their jobs or suffered major losses in other businesses are willing to start their long-awaited dream, to open up a restaurant.  

There’s a rising number of entrepreneurs opening up restaurants at this juncture in the crisis. The types of restaurants dotting the Covid-19 landscape have changed, however. There aren’t many elaborate fine-dining interiors popping up, but surely quick-service joints, or small bakeries or cafe or cloud kitchens are seeing more takers. 

Tough but not impossible!

So to the new budding restaurateurs out there, what should be the mantra for quick ROI. We asked the veterans. Mihir Mehta, Senior Vice President -Investment Banking at Ashika Group feels that in the current situation, running a restaurant business is definitely a tougher nut to crack. 

“Running a restaurant is always a tough business and this is because of high involvement of CAPEX, operations heavy nature of the deliverables, tight quality control etc. and. At this point in time, we are seeing that consumer confidence has definitely taken a hit and with the tightening restrictions, restaurants need to be acutely focused on cost controls, adoption of delivery led model and automating processes in order to ensure low man-power led operational procedures,” Mehta advised. 

In order to achieve break-even faster, Mehta suggested three elements that could be looked at. The focus should be on increasing yield per square foot of space and ensuring that rental cost is kept as minimal as possible. Engineering the menu will ensure that high-selling food products are focused upon. Lastly, bolstering owned digital sales channels like website, Whatsapp/social media, calls etc. will bring better conversion rates

Manage your marketing smartly

In a crisis situation, new restaurants must abide by the first rule of reaching their breakeven earlier than others. Keeping a strict check on stock and inventory management will become imperative. According to Aditya Bafna, MD at Seva Group new business owners should avoid running the business on a high credit bill. “This can be avoided if most payments are done in cash to prevent over-stocking,” he said. 

Even the existing restaurant groups, which could concentrate resources and staff at existing businesses, have decided to add other venues to their rosters. This might be backed by the reason of having low rentals and lease rate due to economic hit. WOW Momos and The Burger Singh are the testimony to the statement. However, without foot traffic, new business owners must rely (even more than usual) on social and digital media to spread the word about the opening.

Aman Arora, Co-Founder & Director of Keventers comments that the restaurant industry has to dig in and change the way they work and operate to accommodate lower staffing levels for the time being. “It is also important to optimize your spending on marketing and promotions as footfalls will take some amount of time to reach optimal levels,” He further suggested. 

For the new cloud kitchen players

Over the past year, the industry has seen models shift towards cloud kitchens, as the costs involved in a full-service restaurant are much higher. Since cloud kitchens are a technology first play, understanding the customer is even more important. Investing in a robust cloud kitchen management system thus is necessary to build a successful business.

Giving few tips to the new cloud kitchen owners, Ashish Tulsian, Co-Founder and CEO, POSist Technologies commented that one needs to understand the unit economics of the partnership with the delivery apps and the cost of procurement of menu items. One also needs to be aware of what customers like and don't like and what they are likely to order at different times during a day. 

“Another important factor in the success of the business is the customer ratings on different delivery platforms, which decide how many customers will order from you.  If you want to increase margins, you need to convert these customers to direct customers to save the commission charged by aggregators. For this, you need a direct-to-customer channel, such as a website,” Tulsian said. 

New business owners may be excited about big plans for the future, but for now, they too must adjust expectations.

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