Escaping Profitless Growth: How to Overcome Labor and Supply Chain Issues to Improve Profit Margins

By Clinton Anderson|Oct 6, 2023|5:09 pm CDT

I can’t think of many industries more resilient than restaurants.

It’s competitive and it’s burdened with tight margins, to say the least. And every industry executive I speak to says they are still in recovery mode from the pandemic.

Yet, it’s a fantastic industry to be in. Why? Because it continues to grow, grow, grow. Current FRED data shows sales are at a historical high.

If only growth and profits were synonymous.

Unfortunately, while most of our careers this data would support increased profits, this rise in sales is clashing with, for now, the “soft landing” of inflation. We’re experiencing an average of a:

15% increase in labor

17% increase in food costs, and

15% increase in rent

Our prime costs – labor, raw goods, and rent – are rising just as sales are. So where does that leave us?

Profitless growth.

At FSTec this year, I shared the stage with 3 amazing industry leaders and Fourth customers who shared how they’re optimizing their workforce and inventory management solutions to ensure their growth is tied to profits. Watch the video to hear all their insights and experiences this past year and to uncover where they plan to invest in 2024. Below is a preview of my favorite takeaways from each one.

Hal Lawlor, President and COO, Smokey Bones

Achieving alignment between finance and operations is a classic struggle.

So, Hal brought in a labor consultant to observe—observe their operations, understand how they were executing in that moment across all their locations, and to identify where they really needed support. Then he got to work.

His team took the consultant’s feedback and completely revamped their labor model, incorporating not just sales and labor, but a myriad of business drivers, inputting all this data into HotSchedules, Fourth’s workforce management platform.

And for the first time in his 30 plus year career, Hal said, finance and ops agreed they could hit their labor targets.

For the next 12 months, his number one priority was manager adoption and execution.

But how did he ensure his GMs took this new model from theory to practice? A lot of discipline. Watch the full replay to hear how he ensured all his GM’s committed to better forecasting and scheduling practices.

“It was about accurately deploying labor, which got managers off the line, which improved their work experience, and then delivered a better guest experience.”

Prashant Budhale, CTO, Modern Restaurant Concepts (Qdoba)

“It’s my hypothesis that 50 to 60% of what the GMs do today in a traditional restaurant can be automated, at least 50 to 60%,” Prashant shared.

There’s no shortage of technology for restaurants, that’s not the problem. The challenge is how quick leadership can make a business case, and the right business case.

Too often, we make decisions in the board room where the “why” behind the decisions is not properly communicated to our GMs. Then we bring in this “innovative” technology and they don’t understand why we invested millions of dollars in something that didn’t relieve them of any work.

We can’t forget to invest in solutions that automate the non-value work our GMs are stuck doing.

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Jerry Phillips, VP of Technology, Whataburger

Whataburger is undergoing a complete business transformation, and as Jerry likes to say, this transformation is being led by technology. Part of a 48-month long initiative, Jerry has identified one of his biggest challenges: data.

“Data is king. The problem we have in the restaurant industry is we love data, and we generate a lot of it, but we don’t use it very well,” he said.

Operations sends their view of the data. Finance sends out their view of the same data. HR sends the data through their lens. It’s the same data, but that doesn’t mean each department’s view is telling the same story.

The restaurant data we analyze and share needs to paint an accurate picture of the company’s unified objective for the current stage of their transformation. And everyone needs to be looking through the same lens.

“The [winning combination] is the right tool with the right data with the right support. Those are the three legs of the model,” Jerry said.

To find out how he identified the right model, enjoy the full video session above.

Fourth’s AI-powered forecasting analyzes millions of intrinsic and external data points including 7+ years of historical sales and labor data, events, holidays, and more to improve demand forecasting accuracy by 20%.  

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