Pivot for the Pandemic: A Case Study
How a restaurant navigated its way throughout the COVID-19 uncertainties
Pivot for the Pandemic
The COVID-19 Pandemic wreaked havoc across multiple sectors, not least is the restaurant and bar industry. Ever since the pandemic, restaurants and bars in a roller-coaster ride of opening and closing and capacities.. Many have shut down temporarily, others permanently. It has not been pleasant.
But with every challenge comes opportunity. One such story is that of Le Diplomate. I’d like to share some of the things done by a small local restaurant I’ve worked closely with. This is about how they pivoted from a dine-in restaurant to a take-out outfit.
How Things Were
Simply Yum restaurant, is doing fairly well. Their sales are good and their profits margins are at a healthy 32%. Successful restaurants typically run a profit margin between 15–25%. This is a well-liked restaurant that clearly has a well-run operation. But they had problems.
The dine-in experience is marred with old furniture and outdated decor
There is no database of customers or any information about them
Customers either called in for takeout or dined in. Online ordering or booking doesn’t exist
The locality is in a town with 2 large universities, representing about 30% of the customer-base (this is a rough estimate based on revenue figures during school breaks and otherwise)
When different localities issued stay-at-home orders and closures, it immediately meant the dine-in revenue just went to 0. It represented about 74% of Simply Yum’s total revenue.
Not every cuisine is associated with takeout. We often think of Chinese and pizza maybe. It’s not very often that people think of Greek food when they want to just order in. What I’m saying is, now that everyone has gone into takeout mode, there is a lot of customer behavioral changes that are also happening.
It’s almost like a leveling of the playing field. You can really, become whatever type of eatery you want. A massive reset button!
Without a website of note, or an updated menu, a lot of the work had to be done from the ground up. First an updated menu, then creative photography and a menu re-design. With the basic digital assets in place, it was time to add an online ordering component to the website.
The problem with this is that it costs money. Simply Yum can develop it yourself, or ask someone else to develop it for them. Or ask their POS provider to see what they can offer. But, regardless of what is decided, it was going to be a compromise between time and upfront cash. Procrastination here cost a lot of restaurants unnecessarily. Simply Yum went with one of the several online ordering providers like Otter or Bento. It required an upfront payment for the year.
The decision to spend more money, and for a whole year’s service up-front, during such a time is not the easiest to make. Do you hold your cash and wait-and-see what happens next, or double-down and invest? Simply Yum doubled-down and had it all set-up within 2 days.
Now customers can order online and payments are processed by credit card. The phone line is no longer a bottle-neck for orders. Remember, in a dine-in only setup, rarely do restaurants have more than one line or the capacity to take a lot of orders over the phone. Making an order takes time. With the phone lines busy, a lot of business would be lost.
Online Marketing and Advertising
Simply Yum didn’t have an active online presence. A Facebook page with 500+ followers. Interestingly, they had over 3k check-ins and significantly more photos posted by customers than other restaurants. This informs us that this is a restaurant that is very well liked and offers good food.
Facebook being a primary communications channel, was the first to see ad-spend. We’re talking $15/day budget only. Initially, Simply Yum stumbled to fine-tune their advertising strategy, but the focus was on growing the followers so it can later bring down the cost of organic reach.
This meant that along with advertising, Simply Yum needed new content (photos, FB posts) to give followers a reason to follow or even stay.
Such activities were not restricted to Facebbook, but also on Yelp, Google Business, Waze, etc. Wherever customers were, Simply Yum placed itself. Without the building that everyone can see driving by, Simply Yum was left with nothing but its digital footprint. This was all everyone had. Digital assets became everything.
Third Party Delivery Partners
If anything, the pandemic presented an opportunity to reach out to new customers. Customers who are, just recently, are actively looking for options. Third party delivery partners like Ubereats and Grubhub have often been shunned by restaurants for their exorbitant commissions and fees. They cut into profit margins too deeply, and restaurants owners view listing with them as desperate. Or that you’re a big chain. With over 30% cut in commission and other small-print-omg-wtf-is-this-made-up-crap fees, it does hurt.
However, the logistics that delivery partners take care of are a big deal. There are also other benefits often overlooked by restaurant owners. This is particularly true of Ubereats. These platforms provide, to some degree, a dashboard that allows for effective management of important KPI’s. They’re not perfect, but it’s light-years ahead of what most small restaurants have access to. The ability to get feedback on each item you sell should have a value. 30% is high, but it does pay off.
Not every delivery partner is good in every city. Postmates might be great in X city, whereas Grubhub is king in Y. Ubereats may dominate in Z but not in F. Point is, each locality has its big players and underdogs. With some partners, issues of availability, consistency and competence come into play. Simply Yum stuck with those who have proven to be consistent and reliable and stayed out of others. On purpose.
This was an important decision. Despite wanting to be on every available channel, control over the user experience was necessary to ensure consistency and further customer acquisition.
Customer acquisition wasn’t left to organic growth either. Aggressive promotions like $3 off/$15 orders were primarily responsible for a new entrant into a platform to quickly have enough ratings to grab the attention of newer customers. This was s snowball effect. The more customers, the more the ratings, the more the ratings, the more trusted the restaurant. But this isn’t possible without a consistently good product. Luckily, it was.
Restaurants that followed suits a month later were unable to dethrone Simply Yum in their category.
The chaos that ensued closure orders had a lot of people without a job. In a restaurant, HR turnover is high. The kitchen is a more critical part than the front of the house staff. Luckily, the kitchen staff are not affected by this, but Front of the House staff are. Re-purposing them to perform tasks like taking orders, packaging, etc was a way to keep as many employed as possible.
Today, Simply Yum’s sales increased by over 40% year-on-year comparison. It has successfully beat every record in revenue that it has ever had pre-COVID-19. June’s profit margins are as high as 40.5%. This is partly due to the restructuring of staffing and the reduced cost of takeout vs dine-in.
This all looks so obvious now, but it wasn’t at the time. If it were, restaurants wouldn’t be shutting down. The lesson here is that a successful pivot during a crisis depends on uncomfortable decisions early on. Risk aversion is more palatable during the good times than it is during the tough ones. I would even argue, it is precisely how it should be, because during a crisis, it really helps to have cash around that was kept because of risk aversion.
The cheapest customer acquisition will ever be, is during such a financial crisis. Being timid hurt a lot of businesses who later did everything that Simply Yum did. They just did it a month too late. Just a month. Some shut down because that was too long.
Personally, I’d rather lose trying than the certainty of slow death.