Subscribe to Entrepreneur for $5
Subscribe

A Post-Pandemic Survival Guide for Restaurants

The pandemic hit restaurants hard, but there are smart ways for restaurateurs to come back.

By
Opinions expressed by Entrepreneur contributors are their own.

If the onset and subsequent fallout of the Covid-19 pandemic has taught us anything, it’s just how essential the restaurant industry is. During the pandemic’s height, only businesses in markets such as government entities and contractors, utilities, food production, childcare and transportation were deemed “essential,” allowing them to remain in operation as the Covid-19 virus spread its way across the nation and the world. Now, over a year since the virus has officially declared a pandemic, the damage left on the restaurant industry is becoming increasingly more clear.

According to data from the National Restaurant Association, more than 110,000 thousand eating and drinking establishments closed in 2020, whether temporarily or permanently, putting sales for the restaurant and foodservice industry some $240 billion below its pre-pandemic 2020 forecasts. 

As disparaging as these statistics may seem, this data also highlights the restaurant and foodservice industry’s track of rebuilding, wherever and however possible, in 2021.

Related: 7 Things Restaurant Entrepreneurs Must Do to Survive and Thrive During the Great Pandemic Depression

The value of local marketing in foodservice

Despite the hits suffered by this industry throughout the height of the Covid-19 pandemic, many restaurants and foodservice businesses were able to not only survive, but thrive. Traditionally, most smaller and family-owned restaurants and foodservice businesses have relied on smaller channels, such as local foot traffic and events like farmers’ markets and other hyper-local promotions to drive business through their doors. Covid threw these potentials for growth and additional sales out the window, severely limiting the potential for smaller, locally-owned restaurants to grow amidst the pandemic.

As a result, many of these restaurants and foodservice businesses pivoted to further integrate and leverage digital technologies and platforms to survive and grow during the pandemic. This allowed for these businesses to continue interacting with those in their local communities — an advantage most small businesses have over larger corporations in the industry, and one that has steadily been on the rise over the past 12-18 months.

According to one survey conducted by Mint Life of Intuit, more than two-thirds of Americans interviewed for the survey (approximately 70%) said they would rather support small and locally-owned businesses through either shopping online or through an online and in-store hybrid platform. Data from that same survey shows us that, of every $100 spent on local and small businesses, approximately $48 (or 48%) was put back into the local economy.

Besides factors such as putting a “face” to the brand and prioritizing the experience of customers, creating and integrating a local marketing strategy has shown to be one of the most vital aspects contributing to the growth and success of small businesses in the restaurant and foodservice industry, especially in these uncertain and unprecedented times. Along with this, however, is the consideration many restaurants and foodservice businesses have made throughout the Covid-19 pandemic to cut operating costs by lowering their overhead expenses.

Related: 4 Digital Strategies for Small Businesses Recovering Post-Pandemic

Lower overhead means more on-hand cash to grow

The lower internal operating costs are for a restaurant or foodservice business (or almost any business, for that matter), the less financial strain that is placed upon that business.

For example, consider the amount of overhead required to continue successfully operating an Olive Garden at a 7,700-8,500 square foot location compared to a digital-only restaurant brand operating out of a 500-2,000 square foot “ghost kitchen.” Both restaurants must possess enough overhead to pay for their monthly rent, utilities and food costs. However, the overhead needed for operating the 2,000 square foot “ghost kitchen” is significantly less than that of the larger Olive Garden restaurant.

Many restaurateurs and other business owners in the foodservice industry may recall the impact of the 2007 Great Recession on their business. During this time, a large portion of restaurants and foodservice businesses — especially larger chains — ended up filing for Chapter 11 bankruptcy, or pivoting to adopt the smaller ghost kitchen business model, as the drop in sales left a larger dent in their overhead expenses resulting from the Recession. For better or worse, the industry has experienced a similar surge in both as a result of the pandemic’s impact on the industry, as the number of restaurants and outfitted kitchens that have closed have subsequently allowed for other restaurants and foodservice businesses to acquire square footage space for smaller kitchens.

This, in turn, presents an opportunity for those remaining in the industry: With more spaces consisting of lower square footage available for restaurants to rent or mortgage as potential operations for ghost kitchens, coupled with effective digital marketing strategies targeting customers in their local communities, many restaurants and foodservice businesses have been able to not only survive the impact of the pandemic, but thrive in spite of it.

Related: Food For Thought: Restaurants Go Digital to Survive and Thrive

Strategize to survive

What the restaurant and foodservice industry is currently experiencing is a case of history, for the most part, repeating itself in regards to the impact of both the 2007 Recession and the 2020 Covid-19 pandemic. That being said, millions of restaurants and foodservice businesses have been able not only to successfully adapt to the impact of both events, but also continue to grow despite the setbacks either one has caused.

For restaurants and other foodservice businesses looking for ways to continue growing and generating more profitability during these uncertain times, possessing a winning marketing strategy focused on targeting local customers in their community is a must. The businesses that can formulate and implement such a strategy, while also brainstorming and implementing ways they can lower their overhead expenses and other operational costs, will be the ones who truly emerge from the ashes of the pandemic more victorious than before, especially as we continue moving forward in today’s hyper-digitalized consumer world.

Tim Murphy

Written By

Entrepreneur Leadership Network Contributor

Tim Murphy is CEO of APX dba Boomers Parks with eight family entertainment centers and water parks in Florida, New Jersey, and California for the owner of Cerberus private equity firm. He also is a board director with 150+ FECs and theme parks with the Carlyle Group private equity in Latin America.