Small changes that make a big difference

It seems that every day we read horror stories about closures on the high street: shops, restaurants, pubs, cafes… all struggling because of depressed demand and rising rents. What can you do to cope? This week in our series of how small changes can make a big difference to your business, we explore how you can adapt to current trends.

12. How to cope with rising rents & depressed demand

2019 has been a bad year for restaurant closures. The number of restaurants in Britain fell by 2.8% in the year to March 2019, according to the latest edition of the Market Growth Monitor from CGA and AlixPartners. High streets in the south of England, excluding London, were the worst affected. This figure equates to 15 net closures per week. There have been some high-profile closures such as Jamie’s Italian, but independents have been hardest hit.

Rising rents have been a major challenge. Not just the rents paid for the locations themselves, but the rents that staff have to pay. The minimum wage has increased significantly, but in many areas not enough to keep pace with rising living costs. What are employees supposed to do? Take on additional hours somewhere else, and they won’t be giving you their full attention. Move out of town to pay less on accommodation? Then they have to contend with high public transport costs and commuting time.

However, it is not all gloom and doom, and a closer look at the figures suggests some strategies that may help you to survive and prosper. However, before we get into our list, take a look where else you can cut down on labour costs for your business and save on money:

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1. Sit tight.

If you are in a popular high street location, it will probably pay to stay put if you can get through the next eighteen months to a year. The gold rush appears to be over. Fewer operators are moving into the high street and many are moving out. That means rents are likely to fall, or at least not rise so fast.

2. Branch out beyond the high street.

If you are looking to expand (or to move) try the suburbs rather than town centres. According to the CGA’s May 2019 Market Growth Monitor, there have been net openings of 1.8% out “in the sticks”.

3. Look at your offering.

While restaurant closures are up, the dramatic decline of pubs and bars has slowed and may be coming to an end. There is a trend towards consumers wanting premium drinks such as craft beers and a reduced interest in fancy food menus. That also means you will need fewer kitchen staff.

4. Sticking with food?

Differentiate with creative, high quality yet simple recipes. People might be eating out less, but they appreciate quality. For example: while PizzaExpress made a massive loss last year, Franco Manca was a major success story. Their recipe for success: giving customers a great taste experience by buying the best ingredients (capers, olives etc.) and differentiating with sourdough pizza crusts (see Financial Times).

5. Adapt your service.

Re-evaluate your business model around the difficult labour market conditions. Slow-paced table service is costly, whereas upscale counter service does not carry the stigma of “fast food”.  San Francisco’s foodie district has already had to deal with this issue.

6. Find a solution in technology.

Make the most of technological advances such as online reservations and delivery services (as well as Bizimply workforce management, obviously). These also help to contain labour costs.

7. Target the right people.

Re-evaluate your business around who has the most discretionary spend. And yes, it’s millennials. Look at any successful and busy restaurant or bar and that’s who’s splashing the cash. If you are still pulling in mainly the over-35s, i.e. people with mortgages to pay and children to feed, you will probably find the going tougher. It pays to give millennials what they want.

These are just a few top-line thoughts addressing the current situation today’s business environment – next week we’ll start looking at managing inventory and storage.

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