Last year the QSR industry had a tough time. Prices continue to rise and customers see fewer benefits from dining out. This means that for many QSRs, business is not growing and there is no easy solution to a consumer base subject to rising operating costs and constant sticker shock. But there are things QSR owners can do to alleviate these challenges. Here are the biggest obstacles to profitability for QSR owners and how they can navigate them.

Labor costs

Ask any restaurant owner the biggest challenge they face and they will discuss labor costs. The cost of hiring an hourly employee is significantly higher than before 2020, and for most restaurant owners, labor costs have risen faster than their prices. Increased minimum wage legislation in states like California is increasing union organizing, and labor competition with other industries is reducing QSRs’ already narrow margins. You need the employees you need and wages are determined by the market, but you can proactively reduce labor costs in several ways. Planning efficiently is a big job. You know when you’re busy, so hire more employees during peak hours and schedule fewer employees after hours. This seems obvious, but many QSR owners are not efficient planners.

Your staff should be trained to be jacks of all trades. Everyone should know how to do every job related to preparation and working on the line. This means you don’t need to hire extra people because everyone shares similar responsibilities. Remember, it’s better to hire fewer people who can do it all than to hire a bunch of employees who can only do one thing. Finally, good scheduling and payroll software should be implemented. This will help you streamline these processes and reduce administrative labor costs.

Labor cost is a challenge for QSRs that keeps them from profitability, but there are ways to be a proactive owner.

cost of goods

We all know that material costs have been out of control in the last three years. Everything is more expensive, from meat to produce, from packaging to napkins. If your QSR needs a good to operate, it is almost guaranteed that the price of the good will increase. The price elasticity rule states that there is a ceiling on the cost of any good. If your restaurant does burritos, you can only increase the cost of a burrito so much before customers start saying the price isn’t worth it. Increasing material costs have pushed many customers to this point. There is a lot of sticker shock on food and customers are choosing to eat at home. This is a difficult situation because restaurant owners are used to keeping food costs between 28 and 35 percent of their revenue, rather than 40 percent. You can try to increase customer volume to make up for the increased cost, but if customers are worried about cost, you’ll have to make food deals; which often doesn’t increase volume enough to offset the increased cost. It’s difficult to increase profit margins in this industry right now, and the best way for QSR owners to overcome their cost of goods is to spend some money and learn how to market their business effectively. An excellent way to combat rising commodity costs is to simplify your menu. It featured best-selling products or food options that required only simple, inexpensive, and easy-to-use ingredients. A simple cheeseburger is cheaper to make than a gourmet burger made with expensive ingredients. Identify high-margin food items and focus on selling them. Get rid of low margin items. Portion control is also very important. When your margins are razor-thin, you need to ensure that every customer gets the same amount of food when they order a particular menu item. Finally, continue to build relationships with suppliers. Prices may not be ideal, but we still live in a market where you can negotiate better pricing or volume discounts.

rough handling

Labor cost and cost of goods relative to QSR margins are two factors that contribute to the third reason QSRs face profitability issues: the inability to find and retain good employees. Once you find good employees, it’s hard to keep them because other industries with better margins may pay them more. Growth requires retaining good employees, so lack of retention inhibits growth. Workers are hesitant to apply for QSR jobs, and if they are hired, they will not stay for very long.

QSR owners should focus their efforts on retaining their best employees. It’s better to keep a few good guys than new employees who require training and often don’t stay. Retaining your best employees means providing employees with incentives and benefits. Even something as simple as a 401k plan can keep employees afloat in the long run. Offering a retirement plan puts you ahead of most small restaurant owners. You can also start a bonus pool. This pool will take a percentage of the profits your restaurant makes each month, quarter, or year and pay a bonus to all your resident employees. You can even go so far as to offer an onboarding program to your top managers. Good managers are more likely to stay in your restaurant if you give them credit.

Restaurant owners compete for talent with many successful industries. If business owners want to retain their employees, they’ll have to step up their benefits game.

QSR owners are dealing with a lot right now. The cost of goods, labor, and difficulties retaining employees make profitability difficult in our industry. However, restaurant owners can find success in the industry today. Market well, be creative and increase efficiency; You will overcome a challenging market.

Gary Pryor He co-founded notable restaurants in the Phoenix metro area, including Michaels at the Citadel/M Culinary Concepts, Zinc Bistro, and Taphouse Kitchen. Pryor also served as Director of New Products at Circle K Stores Inc., where he transformed Emily’s Market into a nationally recognized “Home Meal Replacement” concept. Pryor owned and operated two USDA food production companies, Chef Fresh and Festive Foods, in Wisconsin and Connecticut.