In Denver, we’ve recently enjoyed some time in the spotlight. From the announcement that Top Chef chose the Mile High City for its 15 season, to the New York Times feature that singled out Denver as the best place for Amazon’s second headquarters (by the way, no thanks for that).
Suffice it to say that our 15 minutes of fame has put the restaurant industry in the Denver Metro area into hyper speed. From ballooning rents (to the tune of 30-40% increases) to higher labor costs and new sugar taxes, the razor-thin margin familiar to restaurateurs is about to get even smaller.
So how can new and existing restaurants tackle increased competition, higher costs and altered dining patterns?
Kicking off this discussion was a panel session during Denver Startup Week titled “Resilient Restaurateurs: Growing a Restaurant Group from the Ground Up.” Led by foodservice industry leaders, panelists shared their insights into both the successes and failures they’ve experienced. Whether you feel like things are just picking up, or the bubble is about the burst, here are three environmental changes affecting the industry and advice on how best to tackle them.
1. Increased Competition
In 2016, more than 220 new restaurants opened up in the Denver area (around 90 or so closed). Overall state statistics from the Colorado Restaurant Association indicate approximately 11,526 eating and drinking locations exist within Colorado, all competing for the same pool of customers, purveyors, locations and much more. Figuring out your value proposition is more important than ever—what is it that you bring to the table?
For Lachlan Mackinnon-Patterson, one half of the successful duo behind James Beard Award winning fine dining restaurant Frasca, creating fast casual concept Pizzeria Locale meant applying the same level of service and quality of food that one would find in a fine dining restaurant, “Traditionally, fast food is conceptually driven by guys in suits, not chefs,” says Mackinnon-Patterson, “We want to treat a ‘fast food’ restaurant like a real restaurant.” From ensuring consistency and quality in the food, to emulating the warm hospitality often found lacking in a quick service setting, Mackinnon-Patterson is shaping Pizzeria Locale to be much more than just a pizza joint.
Further echoing warm hospitality and exceptional service is Beth Gruitch, co-founder of Crafted Concepts. Acknowledging the rigors of the foodservice industry, Gruitch imparts that to survive in this business you have to do what you love, and love what you do, “There are no bad days [in the service industry].”
Still, while providing exceptional service in the form of patience, love and tolerance, Gruitch points to a larger daily hurdle, “The biggest challenge out there is to stay relevant.” In response, Gruitch and team recently hired a new Director of Operations to help Crafted Concepts keep on the pulse of new trends and industry patterns. Acquiring someone who shared the same vision and goals but thought differently was key to taking the brand to the next step, “The best thing for me was hiring someone so much younger than me,” Gruitch admits. Seeing great success in the power of social media, Crafted Concepts now has budget funds allocated to support a robust social media strategy.
Whenever possible, use and analyze any form of data you can get your hands on! Data collection is clear to keeping in tune with your audience. As Mackinnon-Patterson suggests, leverage data collection resources like reservations systems and social media to better understand, and serve, your audience.
2. Raising Costs
Let’s talk about the real elephant in the room—rent. It’s getting increasingly more expensive to live and eat in this town, and there’s no signs of it getting better. Whether it’s rent for the restaurant itself, or the neighborhood has just become too expensive for your employees to live, rent is a very real problem impacting thousands in the region. So much so, that it doesn’t even matter if you have an award-winning team, concept or connection—some locations just won’t work, “It’s just too cost prohibitive to do a restaurant in downtown,” says Mackinnon-Patterson. Prepare for these costs, and don’t overspend in the build out—start modestly, suggests Mackinnon-Patterson.
The next elephant? Labor costs. Not only is minimum wage increasing within the state of Colorado, but many restaurants are also facing fierce competition with the recreational marijuana industry. The cost of turnover is high, which is why many restaurants are shifting their focus on retention. For Peter Newlin, President of popular Denver-based Park Burger, employees were a little less than interested in the traditional “work your way up” mentality often found within the industry. Eager to rise in the ranks and carve a career path more quickly, Newlin and his team had to approach staff in another way, “A lot of things we’re coaching right now is patience.”
But even if you’re successful in dialing in your rent and labor costs, the next step is examining your food cost.
For many restaurateurs, maintaining a high standard for fresh, natural food doesn’t come without its challenges. Take Newlin’s newest venture, Birdcall, a rapidly growing casual chicken-sandwich joint that doesn’t want to compromise quality for low prices, “In the past your choice would be to increase prices or decrease quality,” says Newlin, “So we asked ourselves, ‘How do we make all-natural food more accessible and affordable?’” The answer, as it turned out, was technology.
Leveraging a custom-built software platform to support kiosk orders, Birdcall relies on the new ordering system for accurate orders and better efficiency, “We let the computer handle the ordering so we can focus on the people,” says Newlin. The new system minimizes the risk of ordering mistakes and reduces the amount of staff required to manage the front-of-house—effectively killing two birds with one stone. (See what I did there?)
3. Less Foot Traffic
There’s an ebb and flow to neighborhoods and cities. Your restaurant might be experiencing guest fatigue, which describes natural changes in guest patterns. Maybe there’s a baby boom in your area and less guests are eating out, or maybe you’re priced too high for a younger generation that makes up the majority of the demographic.
In addition to guest fatigue, there’s also something else that’s new—online delivery. Since the advent of the smartphone, more and more users are utilizing their mobile device to do everything from make calls to pay their bills, buy merchandise and now—order take out and groceries. While the convenience can’t be beat, some restaurateurs are dismayed by the lack of social interaction—eating alone can be quite isolating! Still, love it or hate it, many restaurants are turning towards online ordering and delivery platforms to incrementally increase sales.
Finally, don’t forego tried-and-true marketing opportunities. Many restaurants in the Denver metro area coordinate with local PTAs to coordinating fundraising nights when a portion of sales benefit the school. Also consider hosting cooking or technique classes to bring traffic in during traditionally slow periods, such as the “Dough From Scratch” classes led by Mackinnon-Patterson that lets customers get hands-on dough-making lessons from the award-winning chef himself.
In today’s dining scene, making good food alone isn’t enough to cut it in a competitive landscape. Now it’s much more about creating an overall experience, where everything from food, to service, décor, location, brand and voice all work harmoniously to please and entice guests to come in the door. Your restaurant is only good as its team, so take the time to hire the right people who believe in your vision and want to be there. As Mackinnon-Patterson learned during his time with legendary Thomas Keller at the famed French Laundry, “Treat it like it’s your own and some day it will be,” says Mackinnon-Patterson.