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The Golden Opportunity That Restaurant Leaders Overlook

by Sean Kashanchi

Running restaurants isn't for the risk-averse.

  • The market is demanding and wants both exciting new products and menus that never change.
  • Food prices and availability fluctuate quickly and are hard to predict.
  • Employee turnover is ridiculous -- 150% in quick-serve restaurants and 103% for hourly staff in full-service brands -- with customer-facing employees often having the least work experience.

And if one bad review goes viral, everyone in the restaurant chain feels the hit.

All of these issues have huge consequences for labor hours and put local managers -- trying to staff to meet the demands of the business and their customers -- between a rock and a hard place. Clearly, running a restaurant is not for the foolhardy, but for the brave.

Making a profit is a science, and the best food service leaders are masters at it. This has, oddly enough, created an industry-wide problem.

Because so many people are good at restaurant strategy, the industry is at a stalemate. Competition is ferocious, and the market is saturated with contenders. There's very little low-hanging fruit left to pick.

So what's a brave, smart restaurant leader to do?

Industry execs are leaning on product differentiation and foreign expansion -- in fact, McDonald's and Yum! brands make about 60% of their profit outside of the U.S. But overseas profits don't do U.S.-based investments much good.

Another strategy is introducing new food items. But that brings a host of new problems -- particularly with equipment and training -- and often falls flat (remember Burger King's "Satisfries"?). Neither expansion nor innovation fixes lingering labor, food cost and customer attrition problems.

But there is a way to get ahead of your competition that most restaurant leaders overlook -- a strategy that reduces your risk.

I call it "The Golden Thread."

A New Competitive Advantage for Your Restaurant

Every point on The Golden Thread is a profit-or-loss nexus of labor, food costs and customers.

And each point addresses cultural problems and offers cultural solutions. Why? Because there is tremendous value for food service leaders who fix their culture and people problems. Thinking about the people in your business is key to optimizing it.

Unfortunately, restaurant leaders aren't looking at these six points holistically and optimizing each of them based on their specific current needs. You have to make sure that you are connecting all of these dots. That's how you will beat the market.

Developing the 6 Points on The Golden Thread

As decades of Gallup research shows, effective, productive and profitable culture change is the result of a multipronged approach. The next six articles in this series will explain that approach for each point on The Golden Thread.

Understanding The Golden Thread won't make running a restaurant risk-free, and many execs wouldn't want it to be. The industry's ever-changing challenges attract a certain type of leader. Luckily for them, restaurants will always require leaders who enjoy a good problem.

But shrinking margins, high turnover rates and customer attrition are business-killing problems, and no restaurant leader should have to endure them.

And they won't if they follow The Golden Thread.

Do you want to know more about how to engage restaurant customers and improve your leadership?

Jennifer Robison contributed to this article.

Sean Kashanchi is a Senior Managing Consultant at Gallup.

Gallup


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