LFTL: So You Want to Start Brunch

At Lessons from the Line we focus on practical advice to allow operators to effectively manage the financial health of their business. What allows us to do that is that we are operators and many of our staff have extensive operational experience in restaurants. Unlike our competitors, we hire exclusively in the United States to ensure that we’re rooted in many different types of communities to understand what customers want and operators require.

Our team on the East Coast knows brunch is a vibe. In the industry “brunch” is often a four-letter word, despite having two extra letters. The early hours after the two biggest dinner services of the week, a perceived lack of creative options and rowdy patrons make brunch a singularly dreaded service but a sometimes necessary evil.

All those (valid) concerns aside, brunch has become a key revenue driver for restaurants across the hospitality landscape. In urban markets, a robust brunch service can be a key profit center and prop up sagging lunch sales. In a post-pandemic world as hybrid work-from-home models and ample third-party delivery options abound, adding two experiential services is critical to creating high quality revenue.

The first thing to consider is whether starting a brunch service is possible or appropriate for your business. As with any business decision it’s best to go look at any objectives you’ve set for yourself and your business and whether adding brunch service would be in furtherance of those objectives. Remember, while sound financial management is essential for success, it’s not the sole objective.

Since you’ll be adding two extra services, some important things to consider in this tight labor market are staffing availability (including manager coverage), possible effects on retention, fit with your concept, neighborhood demand, and the perceived profit vs. the extra investments of time and money and the impact on you and your team’s quality of life. Like all investments of capital in new lines of business, you should work with your Harmony advisor to do a pro-forma to see rates of return, possible impacts on revenue and profitability with an appropriate sensitivity analysis.

If you already have a brunch service or have decided to start one, let’s examine how to maximize the profit from the pain. 

The threshold question is how do you plan to market your offering? Word-of-mouth remains the most powerful restaurant marketing tool but we’ve seen too many good ideas fail because the client didn’t have a plan or the appropriate resources to reach their goals. The standard channels (using your existing CRM tools, attempting to get earned media, social media, SEO, influencer partnerships, brand partnerships) are a good place to start.

There are two dominant pricing models for brunch services: (1) standard a la carte pricing and (2) package deals ranging from “bottomless drinks” deal to all-you-can eat options.

A chief advantage of a well-designed brunch menu is that the staple ingredients that make up most brunch services are significantly cheaper than other services.  While plate costs might be in the 25% - 30% range during other services, plate costs can easily be in the 20% range during brunch.  A key wrinkle comes with packaged deals and estimating possible per customer consumption and building in a “zone of safety” to ensure acceptable cost-of-goods.

Customers view brunch as a leisurely and social affair, congregating in large groups or lingering over that last cup of coffee. A revenue capture strategy predicated on tight table turns can lead to lost revenue by  “campers” lingering at tables. Depending on the popularity of your service, it’s often worth investigating time limits on tables (even more so if using packaged pricing).

No matter what pricing model you choose to adopt, it’s incumbent to seek to maximize revenue and streamline service. For example, in an a la carte model, check average gains and table turns can be increased by something as simple as switching from drip-coffee to a French Press coffee. Beyond being a more attractive table presentation that requires less staff maintenance, a French Press subverts the customer expectation of bottomless coffee in a perceived value-added format. Similar improvements in costs/efficiency can be made through pre-batched brunch cocktails, larger share plate formats for desserts, and profit-maximizing menu engineering.

Figuring out a way to capture extra revenue on package deals becomes critical as your most essential and perishable revenue generating assets – seats in the dining room during peak hours – will be occupied for longer periods of time due to the unlimited nature of the offerings. Other industries understand that maximizing profit on perishable assets (hotel rooms/airline seats) is predicated by having value-add services or by charging high fees on necessary ancillary services.

Everyone hates the airlines and no one has to go brunch with the same urgency they have to get on a flight, so high fees outside of standard service charges are a non-starter.

The key is to have compelling value-added services to the package deals. For bottomless offerings, a deluxe sparkling wine option that maintains cost-of-goods margin and leads to larger revenue capture, offering premium purees and seasonals juices to make different mimosa options and build your own Bloody Mary bars are all things that can be considered or anything specific to your concept. As with all menu offerings, the more distinctive the offering and the more it fits with your concept, the better and easier sales will be.

Lastly, consider whether you will be utilizing third-party delivery channels during this service.  Effectively priced and managed this sales channel can represent supplemental revenue streams provided there is excess labor capacity to service these orders.

No one knows your restaurant better than you. At Harmony we’re here to help you surface the important financial metrics and performance indicators that will help you reach your goals. We hope you don’t hesitate to reach out.

Last Bites

February 2022

As the Cauli Crumbles

One of the most persistent trends in the restaurant industry has been the proliferation of vegetarian/vegan dishes in menus up and down the dining spectrum. This trend sits at the intersection of health and climate change and has taken many forms – increased focus on vegetable centric dishes, vegan alternatives to popular ingredients (Nut Milks, Soy-Based Soft Serve) and dishes that are meant to mimic eating meat. The fake meat trend seems to be slowing but chains are looking for ways to add more vegetables – including Chick Fil-A testing a fried cauliflower sandwich. Increasing plant based options can be attractive for operators as meats can have among the highest COGS on the menu.
 

The _____ is Still Too Damn High (Part #??)

The price for a restaurant meal is still outpacing overall inflation as operators keep increasing prices to make up for shrinking margins with price rising 8.2% over the past year. Jay Powell singled out the services sector as the biggest challenge in bringing down inflation. If slowing down wage growth is the goal, it is bound to be a challenge because the labor supply was decimated during COVID when many hospitality workers left the profession. Rising inflation has taken a bite out of the profits of major public restaurant chains and can be even more difficult for smaller independent restaurants who don’t have the pricing power on the supply and demand side that the large chains enjoy. An advantage of smaller businesses is their strong ties to the community and agility so don’t wait to try solutions!
 

New Restaurant Tax Introduced (But Likely Won't Pass)

Democratic Senators reintroduced the Restaurant Revitalization Tax Credit Act, a tax credit very similar to the Employee Retention Tax Credit geared at restaurants that were approved but didn't receive assistance from the Restaurant Revitalization Fund (RRF). Given that service sector inflation is driving inflation numbers (see above) we’re doubtful this bill will gain any traction but rest assured that we’re tracking all legislative changes that might be impactful for our clients.