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Survival of the Fittest Restaurants: Use These 10 Tips to Reduce Operating Costs During COVID-19

By October 23, 2020April 8th, 2022COVID-19 Response

Has your restaurant been impacted by COVID-19? The answer is likely an emphatic “Of course!!!” Indeed, the hospitality industry is suffering from the pandemic in many ways: expensive renovations to create a safe dine-in experience, decreased customer engagement, loss of clients, forced lay-offs, COVID-19 outbreaks among in-house staff, and even the temporary/permanent closure of businesses. Restaurant owners are actively looking for new ways to stay afloat: increase customer engagement, modify their business operations to avoid government-imposed closures. Overall, owners need to reduce operating costs during COVID-19. Balancing it all is a tall order, but knowing where to place your energy and resources can help.  


How important is it to reduce operating costs during COVID-19?


Should your business take a break and wait it out, or take action? Restaurant owners who decided to put their businesses on pause resulted in an alarming number of permanent closures. According to the latest Local Economic Impact Report, more than 60% of temporarily closed restaurants have shut down for good. 

What about the remaining 40%? These businesses are taking action to improve their situation by deploying strategies that will allow them to remain open no matter what. One of the most fruitful strategies is to reduce operating costs.

What are the most effective ways to reduce operating costs during COVID-19 without compromising your service offerings and staff? Below, we compiled a list of the 10 most effective and easy to implement ideas for business owners to reduce operating costs:

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1. Search for government benefits and relief programs 


Without an immediate federal response, many restaurants are bound to close their doors permanently. And with so many restaurants struggling to survive the pandemic, the government has been forced to come up with a plan for financial relief. Accessing restaurant funding and special relief programs is the best way to reduce operating costs without sacrifices on your side.

Now, the real challenge for restaurant owners is to figure out what help is being offered and how to get it. Since funding options are constantly changing and application requirements are being updated on a daily basis, staying up-to-date is no small feat. 

Official government websites are trustworthy and reliable sources of information, so start there. Apart from those, industry-focused groups and forums can be your second option, but be mindful of the ongoing competition for those available funds. To gain funding as soon as possible, search for a combination of relevant keywords: ‘hospitality industry’, ‘restaurants’, ‘business’, ‘small business owner’ + ‘loans’, ‘tax extensions’, ‘government grants’, ‘low-interest loans’, ‘relief grants’, ‘government assistance’, ‘COVID-19 government assistance’, etc. 


2. Cut down on labor costs with outsourcing


The loss of clients, temporary closures of businesses, and the urgent need to reduce operating costs during COVID-19 have triggered a series of layoffs. Having worked with reduced staff during quarantine, restaurant owners are still unsure about their future and are cautious about expanding or hiring more people. The dilemma is understandable: What if we have to shut down and let new hires go? What if things pick up quickly and I need more people? Outsourcing is a great way to play it safe!

For hire red sign

Outsourcing labor is your safe bet during COVID-19. The relationship with temp staff is non-committalyou’re only paying for the hours that staff work at your establishment. That’s why temp staffing is a great solution to mitigate the risks involved with business operations during the pandemic. Delegating tasks to independent contractors on a busy day will save you the money otherwise spent on keeping full-time employees on your roster and not using your resources in an optimal manner. Moreover, with so many people currently looking for extra work, there are plenty of excellent candidates to choose from.


3. Adopt a proactive approach to business operations 


It’s time to drill into the details of your business. Reevaluate your operations and be strict with yourself. Take a deep dive and identify your pain points in order to mitigate and eliminate them in the future. Don’t fall into the trap of pushing your optimization to-do list further down the road. Trust us, the road gets bumpier. When you take the time to visualize a framework of all the operations at work in your restaurant, it facilitates an “Aha! moment” that allows you to improve upon what you’ve already established.  

What makes this process even more helpful? Engaging your staff! Encourage your team to participate in brainstorming ideas by asking them to point out inefficiencies, give feedback, and suggest solutions. Hearing valuable feedback from your employees will allow you to see the full picture and ensure that you are not spending money where you shouldn’t be. A systematic approach will truly help you keep track of everything and, in turn, reduce operating costs. If you keep your systems updated, you’ll notice how adaptable and flexible your business can truly be.


4. Start systematically automating your business processes


According to Forbes, 89% of companies have either already adopted a digital-first business strategy or are working on one. At the same time, some business owners are still reluctant to embrace technology. If this sounds like you, consider the following findings from Forbes:   

  • The top benefits of digital transformation are improved operational efficiency (40%), faster time to market (36%), and the ability to meet customer expectations (35%);
  • 56% of CEOs say using technology has led to increased revenue; and,
  • Businesses that utilize technology in their operations are 23% more profitable than their brick-and-mortar counterparts.

Fortunately, there is no scarcity of software solutions that help businesses streamline their operations. Your task is to find a software solution that best fits your business and industry needs. As a restaurant owner, a software solution that includes payroll, internal communication, employee shift scheduling, time and attendance, and an employee database is most ideal.

By investing in technology, you will reap the benefits from saving 10+ hours on administrative tasks each week and eliminating costly human errors. Using a multi-functional all-in-one solution is cost-effective and highly efficient. For example, Hyre’s employee shift scheduling software automates scheduling tasks and syncs to your payroll software. You can schedule and pay your staff in the same interface. Our software serves as an employee database and an internal communication system across employees, teams, departments, and facilities. Choose a solution that covers most of your HR functions and you’ll notice the benefits immediately.


5. Reduce marketing expenses with customer engagement hacks


What if I told you you can engage your current clients and attract thousands of new customers without having to pay for ads? It’s entirely possible with the power of social media and online strategies. We call these smart methods of attracting customers at no cost to owners ‘customer engagement hacks’.

Social media names crossword puzzle

Start off by building a social media presence for your restaurant. If your restaurant already has a social media presence, great—you’re ahead of the curve! Now, begin creating viral content that would be helpful and entertaining to your followers. This could mean short video clips of recipes, aesthetic photographs of menu items, and tips for restaurant-quality plating. Being active online, live-streaming to showcase your cooking skills, or participating in an AMA (ask-me-anything) will keep you at the center of potential customers’ attention. Be sure to reply to comments on your posts in order to facilitate engaging conversations of those who may be planning to visit your restaurant in the future.

For more tips on how to improve customer engagement during COVID-19, check out part one of the Survival of the Fittest Restaurant series. 


6. Be stricter with finances


Managing finances has always been a key part of being a successful business owner. With the amount of financial uncertainty in the restaurant industry (especially now), this has never been more true.

Payroll breakdowns and bills

When taking a detailed look at your business’s finances, start by asking yourself the following questions: Do I have any late fees or penalties? Have I taken all of the necessary steps to extend my rent? Have I communicated with my suppliers regarding their prices? Do I have a detailed breakdown of my expenses? 

The next step is to understand how your costs are influencing your finances in order to optimize your bills. Some restaurants can save a lot of money by reducing operating hours, while others find success in optimizing their energy bill through consulting an expert and unplugging devices when not in use. 


7. Get rid of unprofitable services and menu items


Another tip in order to reduce operating costs during COVID-19 is to keep it simple. Make sure that you don’t have any ‘unnecessary’ items on your menu. By ‘unnecessary’, we mean items that are not ordered frequently by your customers. Having a wide variety of dishes is great, of course, but less so during a pandemic. With takeout and contactless delivery on the rise, customers will most likely choose a dish they already know and like. 

Two restaurant menusConsolidating your menu is also a great way to avoid being wasteful, get to know your customers better, and plan for future additions. Social media is a helpful tool for collecting customer feedback—try creating a public poll and have followers vote for the items that should stay on the menu or add options that they’d like to see in future. Record people’s impressions and integrate their opinions into an upgraded menu.


8. Save big projects for later


Refrain from acting on any plans that involve a lot of money or a large team. Instead, take this time as a perfect opportunity to think of small details and would make your next project impeccable. 

Consider putting together an online event such as a charity function. A project that can be executed online and involves your customers will help with engagement and can strengthen your brand’s presence. You can choose a day of the week to make special offers and discounts for essential workers, or pick a day to give all earnings to a charity of your choice. While it may not have an immediate effect, these events could benefit you in the long-run—when your community decides to return the favor by visiting your restaurant as soon as your business comes back full-force.


9. Work with cost-friendly suppliers 


As a restaurant owner, you have built relationships with different suppliers. The quality of business relationships and partnerships directly affects your business’ success, so make sure to choose the right people to work with. During COVID-19, it’s important to pinpoint whether you are working with cost-friendly suppliers. When choosing a supplier or considering to switch, create a list of the top 5 who provided you with cost breakdowns. Reach out to your current and potential suppliers and inform them of competitive costs to keep prices in check and decrease them as much as possible. 

Be mindful of credit terms. This is an ongoing issue that you could be struggling with, especially during COVID-19 when creditors are taking the unpredictable nature of the hospitality industry into account. Small restaurant owners will most likely have a hard time obtaining extended credit terms due to the higher risk of going out of business.


10. Reevaluate your business model


During the COVID-19 crisis, successful business owners have proven that adaptability is key to survival. Facing uncertainty is difficult but business owners who are modifying their business practices will no doubt come back stronger than ever. As a consequence of the pandemic, more and more restaurants are adopting contactless options for payment, delivery, and pick-up to adapt to the changing needs of their customers. 

Flexibility is paramount for restaurant owners right now, and being flexible with operating costs is a major component in this. Use the tips above to reevaluate and reduce your current costs, and let us know what you found most useful by commenting below!

It doesn’t end here! This is part two of the Survival of the Fittest Restaurant series about different ways how you can reduce operating costs during COVID-19. You can read more about how to increase customer engagement during COVID-19 in part one. Stay tuned for Part 3 of this series!

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