The U.S. Senate and House of Representatives have introduced a new A bipartisan bill called the Credit Card Competition Act of 2023 (CCCA). This bill aims to reduce credit card processing fees for businesses like restaurants, which currently rank as their third-highest cost. The bill seeks to foster competition among credit card processors, specifically targeting the dominant networks of MasterCard and Visa, which are used in about 80% of credit card transactions in the U.S. With the average restaurant paying between $20,000 and $50,000 each year in credit processing fees, this can be the gateway to significant financial relief.

CCCA would mandate the largest banks in the country (those with assets exceeding $100 billion) to issue credit cards with a minimum of two separate networks not affiliated with each other. This mandate would allow restaurant owners with the authority to opt for the most efficient and secure network for processing their credit card transactions.

 

If approved, this law would reduce swipe charges, enhance credit card security and performance, and provide annual savings of around $15 billion for businesses and consumers. Additionally, removing the obligation for operators to cover these inflated swipe fees would enable organizations like restaurants to invest in their staff, carry out essential enhancements to their establishments, and transfer the cost savings to customers.

CCCA is supported by organizations including the National Restaurant Association, International Franchise Association, National Association of Convenience Stores, National Grocers Association, Hispanic Leadership Fund, NATSO, and over 200 state and regional business associations.

Read more about the proposed legislation here.

 

Sources:

gazettenet.com
restaurantbusinessonline.com
restaurantnewsresource.com
restaurant.org
Lofgren.house.gov
Openai.com

Operating a restaurant is an exciting business venture. Whether an existing or new restaurant, owners must determine an operating budget based on projected sales, fixed and variable costs, and expected profits. Many restaurants fail, however, due to a lack of funding. There are many expenses to be considered, including food, inventory, marketing and advertising, maintenance and janitorial service, and payroll. In addition, there are costs for rent or lease, license fees, insurance and property taxes. Covering all these expenses can be a challenge, which makes our industry more difficult than most. Fortunately, there is help through funding. Funding is likely needed for restaurant sustainability. Restaurant grants are more favorable than loans because they are money that does not need to be repaid. Below are grants extended to restaurants and other small businesses in 2022 to offset pandemic setbacks and support economic viability.

 

 

Restaurant Revitalization Fund

(RRF) – The Restaurant Revitalization Fund provides funding to restaurants equal to their pandemic-related revenue loss. It can be as much as $10 million per business but no more than $5 million per location. If funds are used for eligible expenses no later than March 11, 2023, the money given does not need to be repaid.  Restaurant Revitalization Fund application approvals extend through 6/30/2022.

 

Restaurant Resiliency Program

(RRP) – Restaurants that participate in this program partner with New York’s food banks to provide prepared meals to families in need. Participants must follow program rules and food safety standards. Applications opened on October 4, 2021, and are ongoing. For further information, contact: RestaurantResiliency.Information@agriculture.ny.gov

 

Further Grants for Restaurants

Restaurants Care – Offers $3,000 grants to independent restaurants in California. This grant is awarded to restaurants for kitchen equipment or retention bonuses, focusing on kitchens and crews. This grant also provides one year’s access to experts, discounts, and training. Applications open April 15-30, 2022.

Downtown Outdoor Dining Grant Program – Maximum award is $1500 to help businesses implement outdoor dining areas. It is available to the downtown Baton Rouge business community and includes 50% reimbursement for furniture, Sidewalk Café application, and a first year permit. This grant is open to all business owners operating an establishment located within the Downtown Development District boundaries. Contact rbenton@brla.gov with questions.

Illinois Restaurant Employment and Stabilization Grant Program – On April 9, 2022, the Illinois General Assembly approved this grant program. The state will award a one-time grant in an amount of up to $50,000 to each eligible restaurant. Additionally, the applicant must have not received financial aid from the federal Restaurant Revitalization Fund Program; the Illinois Back to Business Grant Program or the Business Interruption Grant program; or any other local or state program providing more than $10,000 in grants or forgiven loans since April 1, 2020. Those wishing to submit an application should visit the Illinois Restaurant Association for the latest information on this program.

Merchant Maverick Opportunity Grants – This grant is offered to Asian and Pacific Islander (AAPI) American citizens who own a restaurant or other foodservice business. Ten Opportunity Grants of $10,000 each will be awarded to ten different AAPI-owned restaurants. Applications opened on January 3, 2022.

Other Small Business Grants

Although the deadline has passed for many available small business grants in 2022, there is hope for more funding soon. The Relief for Restaurants and other Hard Hit Small Businesses Act of 2022 passed in the House on 04/07/2022, promises $13 billion to the most compromised small businesses and restaurants. Under this bill, the Hard Hit Industries Award Program offers amounts capped at $1 million to restaurants that suffered revenue losses of 40% or more due to the pandemic. Priority will be given to applicants that suffered 60% – 80% in revenue losses. Funds may be used for mortgage, rent, utility payments, and payroll expenses. Currently, this bill has been shelved in the Senate. Many are hopeful approval is impending. This bill extends to March 11, 2023.

Additionally, there are many grants on the federal and state level for small business assistance.

Grants.gov – the go-to source for restaurateurs and small business owners seeking federal grants. There, you can search through thousands of grants using powerful filters to find funds that are tailored to your situation.

Small Business Administration (SBA) Grants – This is a resource mainly for helping small businesses procure conventional sources of funds, such as investment capital or a loan. However, they do sponsor a few grant programs that target businesses involved with research or exporting – like the Small Business Innovation Research (SBIR) program, the Small Business Technology Transfer Program (SSTR), and the State Trade Expansion Program (STEP).

U.S. Department of Agriculture (USDA) Grants – If you have a restaurant or small business in the agriculture industry, you may be a perfect candidate for a small-business aid package or loan from the USDA. A number of their programs are focused on business in rural areas. Although, many are not as limited in their application. Some of the prominent grants include: 

• Community Connect Grants
• Rural Business Development Grants
• Rural Energy for America Program Renewable Energy Systems & Energy Efficiency Improvement Loans & Grants
• Socially-Disadvantaged Groups Grant
• Value-Added Producer Grants

While federal and local governments are wonderful places to start when looking for a small business grant, corporations and non-governmental organizations also step in to provide assistance.

FedEx Small Business Grant Contest – yearly competition that has awarded more than $1.5 million in cash and prizes to over 100 small business since 2012. While the competition is fierce, it is worth the shot to make your elevator pitch – especially if your business  positively impacts the community or environment and you can demonstrate the actual need for the cash infusion. The winner receives a $25,000 prize; 2nd place receives $15,000; the eight third place finishers receive $7,500.

The Amber Grants – funded by WomensNet, these grants are awarded on a monthly and yearly basis to women-owned businesses. Every month, their judges review the applications and data to select 5 finalists. One is the $10,000 Amber Grant winner, while the other four receive $1,000 each. In addition, there is a monthly Business Category Grant that awards $10,000 to the winner as well (Food & Beverage is one of the categories). At the end of the year, two $25,000 prizes are given out to one of that year’s Amber Grant winners and one of that year’s Business Category Grant winners. Voting factors heavily into the selection process so having a strong social network is key to gaining traction in these contests.

The Military Entrepreneur Challenge – hosted by The Second Service Foundation (formerly the StreetShares Foundation), this program provides financial support support to veterans who are looking to build a startup or grow their small business. They have educated over 10,000 veteran entrepreneurs. According to their website, their grant recipients experience an average increase of 277% in annual gross revenue. Individual winners have received up to $15,000. To be eligible, you will need to create a video pitch and submit an online application.

Last November, a report found that annual inflation of menu prices was higher than ever since 1982. Full-service restaurant prices rose 6 percent, and even limited-service restaurant prices rose a whopping 7.9 percent. This unprecedented case of inflation has been attributed to COVID and subsequent supply chain issues. In 2022, due to Russia’s invasion of Ukraine, oil and food prices are predicted to soar to new heights in the coming months. This is leaving restaurant owners asking: What gives?

The Dilemma

Restaurant owners can feel powerless in the face of inflation. It seems like a lose-lose scenario. Cutting corners or reducing quality is not an option when your restaurant known for providing great food and terrific service. Raising menu prices on customers who are already facing increased costs of gas and many other products seems less than ideal.  And laying off staff–when turnover is already too high–is the last thing a restaurant owner wants to do. Luckily, there are still a few outside-of-the-box solutions.

 

Consider a Rebrand

Customers may be willing to pay more for food that they associate with a positive, healthy way of living. Chipotle made this commitment and rebranded itself as a “lifestyle” brand by touting higher-quality ingredients, encouraging sustainable farming practices, and offering vegan options. Chipotle has raised its prices many times in the past decade, and they openly plan to do it again this year. Since their customer base associates the brand with a lifestyle rather than the product itself, they will likely continue to thrive in the face of inflation.

 

Along with your rebrand, a powerful new logo can help emphasize your pivot. Consider McDonald’s groundbreaking rebrand in 2016. This turned their packaging into an understated advertisement in itself. Doing so, might have convinced customers to take them more seriously than they did when their packaging was bright red with a cheesy yellow “M” on it. Perhaps changes to your logo and menu could change how the community sees your restaurant, therefore changing what they are willing to pay for it.

 

Quality vs. Quantity

Switching to lower-quality products isn’t a great idea. However, studies have shown that lowering quantity (for example, giving five hush puppies instead of six) tends to bother customers less. If you find it necessary to cut corners in some way, this is the way to go, as long as it isn’t too drastic or noticeable.

 

Unlock Customer Loyalty with Monthly or Subscription Pricing

Changing your overall price structure is an excellent way to change a customer’s mindset about spending. If it makes sense for your business, you may want to consider different pricing tiers, as a monthly subscription. For example, Sweetgreen launched their Sweetpass at the top of this year to appeal to resolution-seekers. For $10, customers could get $3 off a salad every day. Is it worth it? That depends on how much a customer would typically go to Sweetgreen. Either way, it has customers seeing themselves as “members” of an exclusive club.

 

Furthermore, Panera’s Unlimited Sip Club has been hailed as “industry-disrupting”–for $8.99 a month, customers can get a free hot coffee, iced coffee, or hot tea everyday. The not-so-subtle result is that loyal Panera customers are now less likely than ever to stop into Starbucks or any other competitor for a full-price coffee. Even Circle K has a similar beverage subscription available for $5.99.

 

Additionally, this can work on a much more local level. Think of a local brewery with a mug club. Customers buy a mug for a high price point (often between 50 and 100 dollars) and then get cheap refills of that mug “for life.” This promotion encourages repeat visits, making customers feel they get a better return on their “investment.” While they’re in your establishment, they will buy food or perhaps even invite friends to join them. Even if you barely make a profit on the beer, you reap the benefits of customer loyalty in so many other ways.

 

Restaurant owners are nothing if not resilient. You have risen to the occasion in so many ways in the past two years. With some creativity, you can find ways to survive the inflation levels we are all facing.

By Daniel Bendas – Managing Partner

 

Many years ago, we worked with an iconic consultant, Mr. Joseph Baum, who created, among other things, Windows On The World in New York.  He taught us a budget preparation process that developed a thoughtful strategy of positive change and a road map for the upcoming year, in addition to putting numbers to paper. It helped us manage expectations, create accountabilities, and develop goals to meet our budgetary guidelines and needs.

There are three stages to the process, with an approval, ‘go-no go’ step in between to be sure everyone involved is on the same page, and there is ‘buy-in’ among all team members.

Assumptions & Criteria

Essentially, ask yourself, without restriction, if there is anything I can do to improve the operation, what would it be?  This exercise aims to allow for creative thinking about your business, thinking differently about your business, and brainstorming any ideas without limitation.  This process should take the form of:  “If I could to ‘X’ – the result would be ‘Y’.  For example:

Suppose I implement an impactful, engaging, organized online training platform. In that case, I will increase my sales by 5%, reduce turnover by 10%, or five employees per year, and overall controllables by .25% due to fewer office supplies, lost uniforms, etc. 

After creating a series of these assumptions, they go through an approval process, with a final list ready for the next phase. This process is the first step toward focused, goal-oriented budgeting for the new year.

 

Business Plan

The business plan maps the approved assumptions into a road map for pre-planning, implementation, and the date when the objective(s) will be met. Using the example above:

January

• Develop a list of KPI’s (Key Performance Indicators) needing to be satisfied to accomplish the stated goals.
• Research eLearning training platform providers to determine capabilities, costs, and support – make a selection.

February

• Prepare all needed systems, processes, and procedures needed to get ready for team training.
• Develop all needed training materials and get ready to load onto the eLearning training platform.
• Develop a ‘roll-out’ strategy/calendar.
• Identify costs associated with this phase of the plan.
• Create a timeline that reflects when stated results will be achieved after implementation and ‘shakedown’ of the program.

March

• Organize training sessions for all team members (management, staff, etc.), per the roll-out strategy.
• Begin roll-out of the plan, with checkpoints to monitor progress, make adjustments and ensure the effectiveness of the training.
• Continue to follow up to ensure that the plan is in place and working, with the stated improvement objectives being realized.

 

Restaurant Budget Creation

 

Once the business plan has been completed for each assumption, the plan will be reviewed and approved.  This plan, along with any other budgeting tools (previous history, upcoming events, changes to the trade area, new competition, capital expense requests, etc.), now becomes the basis for putting numbers to paper to finalize a budget.

Following the approved timeline established in the Business Plan, this process now provides an action and accountability structure for the entire year, keeping the team focused, engaged and attentive to milestones and improvements in all business areas. We have also found that by using this process, there is an excitement generated by a sense of purpose, goal completion, and the rewarding feeling of success!

By Clyde Gilfillan – Consultant

The best sports team not only keeps score, but they continue to measure themselves and their performance with data – after all, it is an “analytics” era in professional sports of all kinds. In the restaurant industry, having financial data to assist you in making good decisions is sound business acumen. Without this financial data, you are “flying blind,” so to speak. Consequently, assembling and using the proper financial reports and data are imperatives in today’s business environment.

 

 

Here at Synergy Restaurant Consultants, we are consistently advising our clients to create, analyze, and implement data from the following three most important financial documents:

1. Cash Flow Projection – it is one thing to know how much cash on hand you have every day in the bank, but it is much more vital for you to understand where that cash position will be 4 to 6 weeks out from the present week. Understanding how cash flows in and out of a business and seeing where that cash position might be in the future will assist the operator/owner in “firewalling” his bank account position.  Predominantly, it is understanding how much cash you will have on hand a month from now which will assist you in planning any capital expense and/or pumping the brakes on operational expenses.  Either way, projecting out your cash flow is the only true way to understand what the future might hold for your business.
2. Income Statement – as an indicator of performance, the Income Statement lets you know how you did in any given previous period. It measures past performance and is not an indicator of where you are going.  As such, it is essential to obtain an Income Statement from your accountant within seven days of the close of any period; otherwise, the information becomes obsolete for analytics.  Additionally, an operator/owner should use Income Statements for what they are – past data points. It is also important to put together an industry-standard P&L using daily sales reports, taking physical inventories, costing out all hourly labor schedules, and using the declining checkbook method for operational expenses.  In this way, you have accurate information to perform timely corrective measures and actions.
3. Budgets – it is important to put budgets in their proper place as subordinate data to the above. Not to be confused with a Cash Flow Projection, the budget is used mainly for boards, ownership groups, banks, and other institutions to get a sense of where your business might be heading in the next 6-12 months.  Moreover, and perhaps more importantly, they are a good way to set up goals, metrics, KPIs and other performance measurables, albeit in reasonable time measurements.  Budgets in and of themselves do not give much information beyond a reasonable guess of future performance, but they can be very useful for incentivizing management and setting objectives.  One smart way for operators to use the budget system is to set weekly labor costs and food/beverage purchase targets for management to achieve.

The active use of financial reports, resources, and data are highly correlated to successful restaurant businesses. Accurate, timely, and cogent, financial information can pave the way for better decision-making.  Better decisions = Better profits.

With so many restaurants taking massive hits to the bottom line in the current crisis, there are a number of financial tactics to put in place now to help control costs, get a handle on inventory, and establish an accurate P&L Sheet. In addition, once dine-in business makes a come-back, you’ll want to take additional steps to be prepared for new business. It’s time to set yourself up for future success and plan for cost adjustments to maximize financial success.

What to Do Today

• Take a full inventory and place a value on that inventory
• Track all lost product and assign a cost based on inventory
• List and calculate all Accounts Payable
• List and calculate all tax liabilities, including sales, payroll, and property taxes; pay these on time to avoid incurring penalties
• List and calculate ongoing payroll costs (salaried managers, etc.)
• List and calculate all Fixed Costs
• List all short- and long-term debt; product balance sheet
• Project cash flow through 7/1/2020
• Review general liability insurance for business interruption provision and determine what is the deductible amount
• Stop all non-essential services
• Professionally shut down all non-essential refrigeration
• Keep all utilities set for 65/78 degrees to conserve costs
• Ask landlord for rent deferment
• Ask all vendors for payment delays
• Curtail all marketing services

What to Do Before You Re-Open

• Take a full inventory
• Calculate COGS loss
• Call all vendors to find out:
  • What is owed
  • What they have on-hand
  • When can they restart services and distribution?
  • What are the new terms, if any?
• Zero out POS
• Call landlord to discuss rent situation
• Project cash flow 60 days out, including taxes, rent, distributor costs, and utilities
• Call all essential vendors to determine status on HVAC, refrigeration, and plumbing
• Cost out all new schedules; trim where necessary and start with fresh staffing levels. Now is the time to make the changes you wanted to make.
• Start with new and/or limited menu; ramp up over a 60-day period