This month we look at: onion prices, the pros and cons of venture capital funding, how to respond to bad reviews, inflation and national restaurant sales trends from February.
I hope you all had a very busy weekend with St. Paddy's Day. Mine was spent building leprechaun traps, slow-cooking corned beef and upping my braised cabbage recipe from my usual method of just throwing quartered chunks into the crock pot at the end, and letting them steam in what my friend refers to as "the beef sweat." The secret is butter, always butter.
We're coming to you a little late this month thanks to MarginEdge's live, in-person All Hands meeting last week. It was great spending time together and left me feeling hopped up fresh off the MarginEdge Kool-Aid. I am very excited for 2024 and even more excited about the very big plans we have in motion to better support our clients. Never underestimate the impact team bonding has on increasing productivity.
Inspired in part by some of the learning sessions I attended at All Hands, this month's Board ventures into the world of venture capital and (everyone's favorite) more digital marketing tips. If there's ever a topic you want to learn more about and think we should explore, shoot me a message! I'm all eyes and ears.
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- Rachel & the MarginEdge team
MONTHLY SALES METRICS & UPDATE
Fast Casual ended the month with +3% growth compared to February 2023's numbers and Full Service ended with -1%. Valentine's Day sales, or more accurately the weekend following Valentine's Day sales, resulted in an almost 4% bump for Full Service restaurants.
The average food category costs as a percentage of sales decreased slightly from last month for MarginEdge customers, with food costs averaging 29% of sales.
Dig into the full report.
Onions
No, our eyes aren't watering from cutting onions this month - just from their prices. White onion prices have shot up recently thanks to (you guessed it) that hurricane in Mexico late last year. Median prices over the last three months are nearly a whole dollar higher per pound compared to yellow onions. As import supply has decreased, the US has been relying on more expensive domestic onions to meet continued high demand.
Nearby onion-growing countries, like Mexico and Peru, are also relying in part on American stock, driving prices up even higher and these trends may continue until August.
L'Opossum | Richmond, VA
ASK [me] ANYTHING
What are the pros and cons of using venture capital/private equity funds for growing or starting my restaurant business?
According to
a survey of more than 350 restaurant operators, it can take anywhere from $175k to $750k to open a new restaurant. Location, type of restaurant and square footage are just a few of the
factors that roll into your total costs. At some point begging your friends and family for the funds might not be enough and thankfully there are
other options.
Private equity and venture capital are viable ways to access the cash you need to get the ball rolling. These investments in our industry
have redefined the table stakes for owners, infusing a potent mix of capital, industry expertise, and brand amplification, while setting the stage for rapid expansion and market dominance. But what are the pros and cons, and how do you know if it's the right path for your goals? Here's a round-up of the essentials to consider:
Pros:
- Accelerated Growth and Market Penetration: The restaurant industry is an intensely competitive landscape, and with solid backing, you can open multiple locations, solidify brand presence and pioneer offerings that resonate with the target markets. Basically, if you built it, they will come.
- Access to Expertise and Resources: Beyond money, venture capitalists introduce seasoned business savvy into your operation. This can introduce you to industry veterans, helping you refine your offerings and operational excellence.
- Validation in the Eyes of Consumers and Competitors: Earning the venture capital stamp of approval raises the perceived value of a restaurant. It differentiates your business from competitors in the market and signals that you're a force to be reckoned with.
Cons:
- Pressure for Growth: Invested capital comes with expectations, often weighted towards rapid, sometimes seemingly unachievable growth. This pace can lead to operational stress, dilution of brand quality and a hastened expansion that outstrips consumer demand.
- Loss of Control and Culinary Autonomy: Having more cooks in your business' kitchen metaphorically can mean - you guessed it - more chefs in the kitchen literally. With investors comes external input, and to varying degrees, your once-sacred recipes can be subject to compromise in the pursuit of shareholder value.
- Drain on Profits and Ownership Position: Money doesn't grow on trees and firms that invest in your business are doing just that - investing. To make it worthwhile there needs to be a return on that investment and the trade-off for funding can entail dilution of the original owners' stake and sometimes steep equity costs.
No two investment deals are the same, so it's incredibly important to first, know what you care most about when it comes to your business, and second, negotiate for those things before signing any contracts. This
article by OpenTable gives a great overview of what to look for in an investor for a positive (both emotionally and profitably) partnership.
💬 Ask [me] anything!
Really. Each month we’ll take a look at the questions we get and answer one here. Have a question about our product, accounting, or restaurant operations in general? 💌 Email me or message us on our social media channels.
Fountainhead Pub | Vancouver, BC
THE ECONOMY
Order Inflation Up (but less for food!)
Last month's inflation report is out and we have some good news for food categories. Food away from home came in at 0.1% change from January, and overall food inflation stayed exactly the same at 0%. This slowdown brought the index for food away from home to just 4.5% overall compared to 12 months ago, which is another decrease from January's YOY.
When looking at segments, Limited Service meals have increased 5.2% while Full Service meals have increased 3.8% over the last 12 months. Both of these percentages are another drop from January.
Year over year, the overall index sits at 3.2%, a slight increase from January. Last month's increase was mostly driven by shelter and gasoline which shouldn't surprise anyone who's been to the pump lately. The Fed is still dangling that interest rate cut carrot, but like coming home with a few too many B's on our inflation report card, the numbers just aren't good enough yet to warrant that reward.
Tl;dr - the cost of food overall didn't increase last month, and food inflation is still up from 2023 but trending down year over year.
Oak and Ola | Tampa, FL
'TIS THE SEASON
Acceptance speeches (aka responding to online reviews)
Who doesn't love watching the Oscars? It's a star-studded, glamorous affair full of booze, botox and that perfect moment when someone's acceptance speech runs on a bit too long and is promptly cut off by a crescendoing orchestra, auditorially giving them the hook. To some, winning the award is the key indicator of success for the night (or even just being nominated #JusticeForGreta). To others, it's the acceptance speech that really tells you about the winner's character and if they're deserving or not. In a lot of ways, the same goes for restaurants when it comes to responding to online reviews.
If we could create a way to prevent crazy people from leaving unnecessarily harsh and sometimes straight-up bogus reviews, we would. They can really hurt small businesses and ultimately don't give you as an operator the chance to make things better in the moment. So if we can't prevent them, here are a few best practices on how to handle them with style and grace:
- Take the reviewer's concerns seriously. Was a staff member rude? Did their food come out way too late? Try not to take the review personally and know that there may be a nugget of truth that can be used to constructively make your business better.
- Acknowledge their negative experience and explain how you would like to have handled the situation instead. Using specific examples helps you sound less like a robot and shows the reviewer their concerns are being heard.
- Propose a peace offering. If they were in your dining room, you would comp a plate or send them a free dessert. The same hospitality can apply digitally, so offering them a way to make it right is a great first step.
- Don't lash out or aggressively defend yourself. Try to have the reviewer contact you so that you can remedy their experience privately. Even if they're being unreasonable or lying, leaving a sassy or firey response could turn off other potential diners researching your restaurant.
Try to treat them the way you'd treat them in your restaurant. Hospitality doesn't have to stop at your front door. Want more help? This article has a template to get you started.
What's [me] into
😂 WHAT WE'RE LAUGHING AT
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- Mover and Shaker Co. St. Patrick's Day memes - The ultimate harbingers of relatable bartender content take on everyone's most beloved Irish holiday. My personal favorite is the expo ticket for "bayleaves" in an Irish Coffee.
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- bythebarcode - This one goes out to all the bartenders who have definitely experienced these situations but definitely weren't allowed to respond this way.
📖 WHAT WE'RE READING
🎧 PODCASTS WE'RE DIGGING
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Restaurant Punk - New Jersey-based Kara Restaurant Group brings us an industry vent sesh that's both entertaining and cathartic. This episode discusses guests playing the reservation game, charging for cancellations and how to handle it when parties no-call, no-show.
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Radio Cherry Bombe - With a successful indie magazine of the same name, founder and editor Kerry Diamond talks to entrepreneurs who are making magic in the food world. This episode looks at the Female Founders Fund, the current “funding freeze” businesses are experiencing in their search for capital, and why the wealth gap is as important as the wage gap.
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