The past few years have been far from plain sailing for the restaurant industry. With high inflation and soaring costs, food businesses around the world have been feeling the squeeze.
Although some recent forecasts have been more positive, the potential of a global recession still looms large. Survivors of the economic shocks of the 2008 Great Recession and the COVID-19 pandemic will look upon any risk of a further downturn with angst. So how should restaurant operators prepare now, and what lessons can be learned from previous experiences of economic depressions?
Although the catering industry will be severely impacted during economic downturns, the impact in Asia is expected to be less severe as it will be in the United States or Europe. The main reason is that eating out prices are not as expensive in Asia in comparison to Western countries, and going to a restaurant is still considered a necessity. In other words, demand for eating out still exists.
Under this premise, the biggest change restaurant operators need to make is to offer better value for money for their food products. This is because during economic downturns, customers’ income may decrease, and they will pay more attention to affordable dining options with good quality. Think of how the two-dish meals became popular during the COVID-19 pandemic – one of the main reasons for this is because they provided an economical option when pockets were squeezed.
Therefore, in the face of an objective economic downturn, restaurants can try to offer small portion sizes or time-limited set meals to attract consumers.
During the Great Depression, department stores popularized simple lunch counters for customers to dine more conveniently and affordably. Later, large retailers like Walmart decided to continue using this business model by having restaurants or coffee shops in their stores. This approach reduces costs and increases customer traffic by changing the dining venue and mode.
Today, this trend can be seen in the increasing number of takeaway restaurants in comparison to dine-ins. Operators have set up simple kitchens for takeaway-only food, as nowadays online channels provide the easiest way to reach customers and also allow businesses to cut costs.
Preparing only when the recession comes may be too late.
Clearly, all new dining models today revolve around technology and online platforms. Even though the pandemic is over, operators should still seize these digital mega-trends and actively expand online sales channels, either developing their own apps or seeking third-party partnerships with other platforms. Online takeaway and reservations will eventually be key to coping with the economic slowdown.
Notably, digitalization needs to start early, as traffic does not come in a day. Preparing only when the recession comes may be too late.
No matter the industry, a timely response to economic conditions and adjusting strategies accordingly is key to standing out in fierce market competition. This is especially true for the relatively low-margin restaurant industry, where strategic transformations are required.
Operators can simplify menus to reduce costs, strengthen staff training to improve productivity and optimize operations through various technological means. And technology here refers not only to cooking tools, but also using data to achieve accurate marketing and targeting customer groups.
The key is to leverage technology and dare to innovate.
Facing external economic changes, it is most important for operators to keep an open mindset and look for turning points. This is reflected in whether you dare to innovate under adversity, be it tastier dishes or more affordable dining experiences. As long as you survive the hard times, the changes you make while defending your business will surely bring you generous profits when times are smooth again.
The key is to leverage technology and dare to innovate. If operators can timely adjust their mindsets and strategies, they can find opportunities amid the crisis and eventually come out stronger.
Contributor Collective Member
Alexandra Leung is deeply passionate about the food and beverage industry. In the midst of the COVID-19 pandemic, she co-founded Monogic, a digital consultancy dedicated to showcasing Hong Kong’s burgeoning food and beverage businesses, with her partner Kieran Gibb. Alexandra is a leading social media expert, with more than six years of experience managing and strategizing social media accounts for businesses. She has worked with over 80 food and beverage brands and counting, from independent concepts to Michelin-starred restaurants, bringing to each authoritative and creative social media, content and PR strategies. For more information, go to https://monogic.co/