Revenue Management (RM) isn’t just a buzzword; it’s the art and science of ensuring every order at your fast food counter maximizes your revenue. By serving the right meal to the right customer, at the perfect moment, and at an optimal price, RM can turn a quick bite into a regular stop. Think of your RM strategies as a 3-shelf toolbox, each shelf filled with tactics tailored for specific scenarios.
In our previous discussion, we delved into the ‘cold’ shelf, strategies for those quieter mid-afternoon lulls. Now, let’s turn up the heat and dive into the ‘hot’ shelf. Imagine those lunchtime rushes when the drive-thru line wraps around the building, and every register is beeping non-stop. The challenge? How can RM ensure that during these peak times, every fryer and grill isn’t just busy, but also boosting your bottom line?
Let’s start off with a story. I vividly recall an email from a student with the intriguing subject line: “What is hot?” It was late at night, and she and her team were deep into their class project for my Restaurant Revenue Management (RRM) course, pondering the tools on their ‘hot’ shelf. Their dedication got me thinking about the broader implications of the ‘hot’ strategy for the fast food industry.
In the realm of RRM, “hot” signifies those times when demand surpasses supply. It’s like having a restaurant full of hungry customers but only so many burgers to serve. The challenge is to make the most of this high demand. Broadly, there are two ways to approach this:
- Cater to the highest value demand.
- Optimize your capacity to serve as many as possible.
1. Catering to High-Value Demand
Airlines and hotels have long used RM systems to prioritize high-value customers, especially during peak times. They restrict lower-priced options, ensuring that premium customers get priority. For quick-service restaurants, this strategy can be a game-changer.
Skip the Discounts: Busy times are not for promotions. Keep those for the quieter periods when you need to attract customers.
Leverage Loyalty Programs: Your regulars are gold. Use loyalty programs to send them exclusive offers or give them priority access during peak hours. For example, consider offering a secret menu to your highest-value guests.
Channel Management: While first-party orders are ideal, third-party platforms are a reality. Tools like ChowNow or Olo can help manage these channels effectively, ensuring you prioritize high-value orders.
2. Maximizing Capacity
To truly capitalize on ‘hot’ periods, every aspect of your operation needs to be streamlined:
Setup: A good start determines the finish. Your restaurant layout should facilitate smooth movement for both staff and guests. During peak hours, consider offering a limited, but profitable menu. Tools like DynamEat allow restaurants to focus on high-profit items that can be quickly prepared. Also, ensure you have the right mix of staff, especially during peak times. Labor scheduling software like that provided by Sling, 7Shifts, and Restaurant365 can help with this.
Ordering: In the fast-food world, speed is king. For online orders, a user-friendly interface is crucial. For walk-ins, consider introducing kiosks. They’re not just trendy; they’re efficient. Touch Bistro reports that kiosk ordering can be up to 40 percent faster. During “hot” times, every second counts. And don’t forget the drive-through—it’s a goldmine if managed well. For example, Chick-Fil-A gets its drive-thru customers faster than any other chain. Chains deploying AI can speed things up even more while at the same time reducing labor cost and increasing average check size.
Order Production: Your front-of-house might be running smoothly, but if there’s chaos in the kitchen, it’s a recipe for disaster. Organized stations, clear communication, and efficient technology integration can work wonders. Consider pre-prepping certain items or even off-premise production for items that require longer preparation times. Service Physics helps restaurants improve their efficiency. For example, one of their recent clients was able to decrease customer wait time by 33 percent, and increase the number of pizzas produced by from 38 to 54 pizzas per half hour. Think about the revenue impact of that.
Order Fulfillment: Once an order is ready, the handover should be seamless both for customers and delivery drivers. Whether it’s at the counter, the drive-through, or a pick-up point, ensure the process is quick and hassle-free. Toast has some very useful tips for this.
It’s essential to pause and assess. Are you meeting your targets? Key performance indicators like speed of service, order accuracy, profit margins, and customer feedback can provide valuable insights.
Navigating the “hot” periods in the fast food industry can be challenging, but with the right strategies, it’s an opportunity in disguise. The essence of Restaurant Revenue Management is to maximize profit by making the most of available resources. Whether it’s the all-purpose tools of menu design and pricing or the specialized ‘hot’ and ‘cold’ shelf strategies, the goal remains the same: optimal profit.
So, the next time you find yourself in a “hot” period, remember the late-night ponderings of my dedicated student and her team. It’s not just about managing the rush; it’s about making the rush work for you.
As I wrap up this five-part series, remember the strategies and insights we’ve discussed. In the restaurant industry, every moment—whether it’s a rush or a lull—holds potential. Armed with the ‘all-purpose tools’ and specialized tactics we’ve explored, you’re set to maximize profits and growth consistently. Make every moment count.
Sherri Kimes is an Emeritus Professor at Hotel School at Cornell and specializes in pricing and revenue management. She has actively involved with teaching, conducting research and consulting in restaurant revenue management for the past 25 years. She is passionate about helping restaurants increase profitability. She can be reached at email@example.com.