Financial strategies for staying afloat during the pandemic
When COVID-19 hit last March, many restaurants closed on-premises dining and increased takeout and delivery services. With the start of warmer weather two months later, and some flattening in the nation’s coronavirus curve, operations re-opened for on-site dining with limited indoor and added outdoor capacity.
This fall and winter, with a one-two punch, the industry is again seeing a surge in cases, and cold weather has set in in many parts of the country. In trying to navigate this roller coaster, operators are facing the toughest financial realities yet.
By the end of the year, 110,000 U.S. restaurants will have closed, and the restaurant industry is poised to lose $240 billion in 2020.
The National Restaurant Association recently partnered with accounting software provider Sage Intacct to connect with controllers at Los Angeles-based Tender Greens, and Laird Management, a franchise group for Burger King restaurants in Arizona. These financial experts shared lessons learned that have helped them make it through these hardest of times.
Prep for unexpected expenses. Operating under a “new normal” means there will be unexpected line items in your budget. To stay operational during the pandemic, businesses had to suddenly source, purchase and replenish personal protective equipment such as masks and face shields for all employees and buy items like barriers and digital thermometers for each unit.
There also was a sudden need for more signage to clarify new safety protocols; many operations had to make sure they had access to a more sophisticated printer.
These new expenses placed a greater onus on available cash flow as purchasing decisions were immediate and essential for staying open. These expenses will need to be included in the budget heading into 2021.
Continue to look for new revenue streams. The on-site dining shutdown wreaked havoc on profit and loss and the 50% capacity limits in many restaurants that could reopen did not provide enough business to balance the books (never mind achieve a profit).
Successful operations will continue to focus on new ways to generate revenue based on drastically different consumer needs.
Those efforts have included optimizing the restaurants’ supply chain to sell hard-to-get groceries (along with restaurant meals) and creating meal kits and family-style meal packages to cater to families who are homebound for three meals a day now.
“Within 36 hours of COVID-19 hitting, we were able to pivot and flip our entire supply chain on its head and create a grocery program through which we offered fresh produce as well as grocery and bakery items,” says Sean Skuro, Tender Greens’ controller. “It was a scary time and we did what we could do to help the community.”
Delivery and mobile-based ordering will become even more essential. Industry news is replete with articles covering the rise of virtual kitchens and stories about quick-service restaurant brands that are reimagining restaurants to favor drive-thrus over dining rooms. All these models depend on mobile ordering.
And as many states’ Alcohol Beverage Commissions authorize alcohol delivery for the first time, beer, wine and spirits have become a revenue stream restaurants can use to differentiate and upsell takeout options.
Lean on technology. Once the pandemic hit, it became apparent that operations already using integrated software-based solutions were better off than others thanks to real-time reporting.
- Quality systems streamline processes: COVID-19 led to furloughs and layoffs in many companies, making it necessary for teams do more with less and find efficiencies.
The right accounting systems automate information gathering, consolidating data from multiple units, generating robust performance reports, and enabling deep-dive analysis that equips decision makers with the information they need to quickly adjust operations, menus, suppliers, labor, and more.
Now more than ever it’s critical that you can closely and accurately monitor operational and performance metrics, as well as cash flow. Being able to access this information quickly as well as customize reporting to evolving needs is crucial to the insightful decision-making needed to navigate challenging times.
- They deliver financial visibility, especially into new business models and the effects of operational adjustments. Financial managers get a good handle on what’s working and what isn’t across the enterprise. This “dashboard” of information is more important than ever, as restaurants need to make data-driven decisions quickly to survive.
“We really benefited from the ability to create COVID-19 reporting in the moment and get that visibility for the restaurants that remained open,” says Skuro. Those with inventory management systems were able to quickly strike items when supply chain issues occurred.
- Cloud-based systems provide work flexibility. More people are working from home, so restaurant companies need one central place for data that can be accessed securely from anywhere.
“We were lucky that our payroll software is online and so we were able to make sure we were continuing to deliver everyone's paychecks on their normal schedule,” says Pam Bakker, Controller and Director of Human Resources at Laird Management. “All our reporting is also online. Had we not moved systems to the cloud, our office would not have been able to work remotely.”
- Stay agile. Looking back, controllers say the pandemic and associated hardships forced them to step outside the traditional ways did their jobs.
Today, they wear new hats and find new ways to do more with less, navigating uncertainty. It’s not comfortable, but successful teams are realizing that they’re versatile, fast acting and can tap incredible creativity and strength as they work to reimagine operations and execute changes, some of which will be game changers in the future.
This article brought to you from our sponsor Sage Intacct. Learn more about Sage Intacct.