Operations

With costs and guest expectations rising, operators are forced to do more with less

Smarter sourcing, menu and labor management, coupled with tech advancements, are working to improve front- and back-of-house efficiencies and the customer experience.
Art by Nico Heins

During the pandemic, Chris Smith blew up his business model, let it shatter and picked up the pieces. The result: He reconfigured Zunzi’s, a South African-inspired fast-casual sandwich shop that he co-founded, into two separate concepts.

With catering and foot traffic both taking a nosedive during Covid, Zunzi’s switched its focus to takeout and delivery with smaller-footprint stores—implementing the best aspects of fast casual and QSR, said Smith—while Zunzibar is an experiential casual restaurant with 250 seats, a vibrant bar scene, limited menu and live music.

“To increase sales and margins, you have to go hard in one space and hard in the other, but not marry them,” said Smith, CEO of the Savannah, Ga.-based dual concepts. “Zunzi’s does great takeout first and Zunzibar is a great bar first.”

Both concepts make more extensive use of technology to increase productivity, better allocate labor, manage the supply chain and inventory and even elevate the experience.

Like Smith, all restaurant operators have had to learn to be more efficient and flexible to meet sourcing, food cost increases and labor challenges, and tech is making it possible.

While kiosks and mobile ordering were in place before the pandemic, many operators increased their investment and started paying more attention to back-of-house technology as inflation mounted, according to a survey by the National Restaurant Association and Sage Intacct, which provides accounting software.

To quote Hudson Riehle, SVP of research and knowledge for the association, “this is really a long-term important development strategically, particularly in these higher-cost operating environments … to make the basic American restaurant experience much more efficient.”

Balancing efficiency and experience

At Zunzibar, Smith implanted a fast-casual kitchen into a bar model, using technology as a bridge to create a flexible but rewarding experience, he said. “After Covid, guests want to dine on their own terms … sit where they want, order how they want. We have multiple ways to do that, through our POS system,” Smith added.

If a customer wants food, they can order at a kiosk and it can be picked up at a window. Once they sit down, a server takes their drink order with a tablet whether they are eating or not. Or they can sit at a table and order food and drinks using a QR code, or order just drinks and listen to music.

“The tech lets us operate with three or four servers instead of the six or eight we would normally need for a 250-seat restaurant and allows us to adjust to any labor shortages,” said Smith.

As a primarily off-premise concept, Zunzi’s operates with two makelines, one dedicated to in-store orders and one for delivery. The two locations, about 2,000-square feet each, are now in Savannah, with one having moved there from Atlanta during the pandemic.  

It’s not about the resources, it’s about resourcefulness.

During Covid, catering, which previously accounted for 40% of sales in Atlanta, went south, so Smith transitioned the store to a smaller footprint once it moved to Savannah. Eventually, he wants to expand Zunzi’s by building even smaller satellite catering/to-go hubs, but right now, catering is done out of the two Savannah locations.

Both Zunzi’s and Zunzibar have a limited menu, featuring about seven unique sandwiches dressed up with signature sauces, all priced at $12.99 at Zunzi’s and $15 at Zunzibar. Zunzi’s also offers a few bowls and wraps and Zunzibar has shareable bar food items like wings and nachos plus an extensive list of cocktails, beers, ciders and hot drinks.

“With the new Zunzibar model, our total revenue went from $1.6 million to $3.7 million in the first year. It’s a more efficient business model with better margins. It's even significantly better for our team as they benefit from a tip pool, pushing our average wage over $20 [an hour] after tips,” said Smith.

Tech upgrades have also made it possible to adjust for supply chain challenges, especially at Zunzi’s.  “We can turn off catering if products are unavailable,” said Smith.

Managing the fickle supply chain

Smith believes the supply chain will never get back to where it was pre-pandemic. “We now have to carry double inventory to make sure we’re well stocked and our dry goods are stored offsite,” he said. “And we sometimes have to order from three vendors to get the brand we want in the quantity we need.”

Using multiple vendors has turned into the mandatory way for most multiconcept restaurants to do business post-Covid. “We used to have a sole supplier but we’ve broadened our search for vendors and have a contingency plan in place,” said Harold Ikard, director of supply chain for Lexington, Ky.-based Fazoli’s.

He admits that shorts are less common than they were a year ago, but “we’re still battling food costs. Plus, suppliers are looking for customers. “We now have the opportunity to send out RFPs to new suppliers and leverage old ones,” Ikard said.

Dallas-based Cowboy Chicken changed up its supply strategy about two years ago, said Sean Kennedy, president and CEO of the 17-unit fast casual. “We partnered with a supply chain company that allows us [through a software program] to see competitive pricing from various vendors and easily make substitutions,” he said.

Investing in software upgrades that integrate theoretical vs. actual cost of good with POS data can have the biggest impact on inflation, said James Kahler, COO of Full Course, a restaurant investment and development group for emerging fast casual brands.

“The back end of POS ordering software provides data components of every item, weight and cost for it to be made, calculating in theory what it would cost to make that menu item or the ‘theoretical cost,’” he said. “Once the team inputs the beginning inventory, purchases, etc. into the calculation, you get ‘actual cost’ and you can compare the two. The variance in numbers provides an understanding of potential food waste, theft, inefficiencies, improper ordering and a host of other insights.” It also eliminates labor waste, freeing workers from compiling and entering redundant data, he added.

Cowboy Chicken upgraded its inventory management technology, allowing the chain to drill down to compare the theoretical cost of goods to the actual cost and identify areas of opportunity in each store. “We can evaluate if we’re doing everything to make the most profit,” said Kennedy. “Over the last two months, we’re showing some real results.”  

As my colleague Joe Guszkowski wrote, “inventory management systems can automate processes formerly done by hand and ensure that restaurants are purchasing the right amount of goods. That can help keep costs down.

Kennedy is also exploring more co-packed items, partnering with suppliers to produce some of the labor-intensive components of a menu item to make the back-of-house workforce more efficient and cut down on SKUs.

Fazoli’s is also leveraging tech to increase efficiencies. “We evaluate sales and traffic throughout the day and prep the right amount of food at the right times to make labor most efficient and reduce waste,” said Ikard.

Maximizing the menu, minimizing costs

Menu streamlining gained popularity during the pandemic, when off-premise and digital orders skyrocketed and the supply chain snagged. Now Fazoli’s is taking the opportunity to expand its menu, with a focus on limited-time offers. Many are variations on current items so ingredients can be cross-utilized and only one or two new SKUs added. Or if an ingredient is used only once on the menu, an LTO may be built around it.

“I study the commodity outlook to determine when is a good point in time to add an ingredient,” he said. He cites mozzarella cheese as an example. “If we want to offer a new pasta bake topped with mozzarella, I’ll suggest we run the LTO at a time when that cheese is a better buy and lock in the price,” said Ikard.

While Fazoli’s LTOs have always been subjected to rigorous testing, operator feedback has become more of a focal point. “With labor challenges, we make sure to address the complexities and figure out a better way to do it or eliminate anything that prevents us from executing at a high level,” said Ikard.

Wood-fired rotisserie chicken is the secret sauce behind the menu at Cowboy Chicken, and while many orders are for bone-in parts or family meals, the meat is also cross-utilized extensively in items like enchiladas, sandwiches, salads and bowls.  

The brand is also known for its homemade sides, but “most LTOs are built around entrees,” said Kennedy. In the last year, the chain added brisket—a new protein—“because we wanted to give guests more opportunity to come into the restaurants,” he said.

Brisket Tacos were rolled out recently as an LTO and Cowboy Chicken is planning more limited-time offers around the protein.

Preserving the experience

Even with rising food costs, operators agree that skimping on portion sizes is not the way to go. “We raised menu prices similar to the industry standard, but we didn’t decrease portions,” said Kennedy. “Guests would rather we take an honest approach to price.”

But there are nontraditional cost-saving ways to adjust portions without decreasing their size, said Kahler. Looking at the recent pricing and supply chain issues surrounding large, bone-in chicken wings, he said “using a medium-size wing but adding an extra wing or two to the order without changing the menu price is an option”—and a way to preserve the guest experience.

And although more Cowboy Chicken customers are looking for omnichannel ordering, “we will only use tech to enhance the guest experience. We don’t ever want to lose hospitality,” Kennedy said.

Smith of Zunzibar concurs. “We compete on experience, not on price,” he said. “We don’t cut corners and we promise that customers will have a good time.” Tech fosters that promise—not hinders it.

Since the first case of Covid-19 was identified in the U.S three years ago, “there’s an expedited sense of urgency to effectively do more with less on all fronts of restaurant operations and marketing. The thought of improved efficiency, better product quality offerings, understanding guests needs, IT integrations and collaborations, social media/influencer marketing vs. traditional marking, and so much more, has led to a lot of cutting-edge upgrades that companies are bringing to market in mass quantities … offerings for the little restaurant all the way up to enterprise level,” said Kahler. “Small improvements can make a big impact on guest experience, quality of life and overall expense reductions.” 

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