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Cost balancing: Brand leaders disclose top tips

Spencer Rubin, founder and managing partner, Melt Shop; Carin Stutz, COO and executive vice president Red Robin; and Doug Hogrefe, a partner at 4 Top Hospitality, offered their secrets to conquering operational costs.

April 18, 2018 by Bradley Cooper — Editor, ATM Marketplace & Food Truck Operator

From legislative activism to increased prices, the many ways that restaurant operators keep those all-important "books" balanced can be key to surviving and thriving in a very crowded field of competitors. That's why a panel discussion of "tricks of the trade" featuring three restaurant leaders was so well attended at the Restaurant Franchising & Innovation Summit in Louisville last week. 

For an hour, executives from Melt Shop, Red Robin and multi-brand restaurant group, 4 Top Hospitality shared their biggest frustrations and best tips for staying afloat by the act of "nipping and tucking" at operations to keep on the plus side of brand profitability. Moderator and Gusto Marketing Vice President Paula Carren kept the conversation moving with three panelists, including: 

• Melt Shop founder and Managing Partner Spencer Rubin
• Red Robin Executive Vice President and COO Carin Stutz.
• 4 Top Hospitality Restaurant Group Partner Doug Hogrefe. 

The discussion started with that fact of restaurant life, commodity prices. The panelists expressed optimism for the current state of commodity prices, since prices are currently in a general downward trend. That, however, could change at a moment's notice, the panel noted.

Stutz, for example, pointed out that in 2017, there was a spike in beef and French fry prices. That's a problem at a restaurant brand known for "bottomless fries."

In order to handle these types of challenges, operators often must make trade-offs based on customer affordability. Red Robin, for example, prides itself on its $6.99 price point for a sandwich regardless of commodity costs. Also, raising prices even a few dollars can trigger a customer response.

Hogrefe pointed out that customers might balk at an increase from $15 for an entrée to $18. Nonetheless, the leaders allowed that there are times when prices simply must be increased. For instance, Melt Shop did a one-time price increase recently, although Rubin believed that the increase should have been done more slowly over time rather than at once.

Labor

Increasing labor costs were also a top concern for the panelists, who emphasized the importance of being efficient with process and scheduling.

"Right now, what we really need to do is improve process. We have completely broken down the schedule to utilize downtime," Rubin said.

Stutz argued that restaurants should work with legislatures to try to fight against various regulations, and Hogrefe spoke about how different locations can have different labor demands. In Nashville, for example, due to low unemployment, his company has to pay dishwashers $15 an hour just to keep them.

He also emphasized the need to follow the law and avoid more unethical practices such as not paying servers the minimum wage.

Technology

Technology moves at a rapid pace, which can make implementation difficult. The panelists, however, recommended taking a slow and steady approach.

"Start slow, make sure it works," Stutz said. She said restaurants need to make sure the technology simplifies and improves the overall customer experience.

"Patience is key," Rubin said. "Don't make the mistake of jumping in too early."

Hogrefe said restaurants need to avoid getting blinded by all the cool apps out because costs add up, especially if they are hard-to-use and keep managers too occupied to interact with guests. At the same time, however, if a tool boosts the overall experience, they shouldn't be scared away by the price point. He mentioned a company called Gather that provides an online catering tool that communicates very quickly and securely with guests.

Delivery

Delivery is a challenge for many restaurants, as there are a lot of moving parts to consider such as paying the driver, dealing with third- party companies and handling the ordering. While all three execs use third-party companies to handle delivery, they admitted that they don't come without challenges.

For example, Hogrefe said his company pays 20 percent to the delivery company in addition to the driver. Also, he finds it difficult to gain key insights into customer metrics with third-party companies.

If a restaurant decides to handle their own delivering, they must be able to "do it better than third parties," Stutz said.

Finally, Rubin recommended upgrading the user experience for online delivery if it makes sense financially. 

The bottom line

The bottom line when it comes to any cost issue, according to the panelists, was to always strive for more efficient processes and take all changes slowly. Hogrefe said that even when times are good, operators shouldn't "let your foot off the gas." They need to make sure managers are working to "exceed your goals," whether profits are down or up.

Wanna hear more? Join us at the Restaurant Franchising and Innovation Summit, July 16-18 in London. Registration is now open.

Image via Istock.com.

About Bradley Cooper

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Bradley Cooper is the editor of ATM Marketplace and Food Truck Operator. He was previously the editor of Digital Signage Today. His background is in information technology, advertising, and writing.

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