Most business models look for ways to diversify the revenue stream. Unfortunately, this is not always standard procedure in the restaurant business. In fact, too many restaurants never consider this business strategy. The fact is that many restaurants get bogged down trying to do what they do best for a market that is less receptive than anticipated.
It’s understandable. Perhaps an operator has a wealth of great gourmet comfort food recipes, or a beautiful, gleaming bar, or a beautiful family atmosphere. But the best-laid plans of a highly prepared operator guarantee nothing in this business. The fact is that adaptability and outside-the-box thinking usually equate to success in this industry. A restaurant operator’s life is constantly full of new days dawning. Things change quickly, and it’s important to stay a step ahead of the game, even when doing what you do best has always worked in the past.
Diversifying the revenue stream has many advantages, including:
- Hedging against slumps
- Keeping the business moving forward
- Keeping employees from growing comfortable/complacent
- Leading to new ideas/strategies
Having some great menu items and a popular concept may not be enough to sustain a long-term run, and it may not allow an operator to maximize profits. A few ideas to diversify the revenue stream might be in order.
Sure, most restaurants sell wine and liquor. But do they really sell wine and liquor? A great Happy Hour promotion and a few wine specials – combined with aggressive employee re-training and a company-wide re-focus – can overhaul wine and liquor sales. This is especially true in fine-dining restaurants, where alcohol sales are often part of a great guest experience.
Selling wine and liquor requires a great list of products, helpful vendors, and employees who know how to get the job done. It’s not easy to emphasize, which is why far too many restaurants undersell their potential. This is a mistake, and is part of the diverse revenue stream most business’s need for long-term success.
In most cases, a restaurant simply needs a closed-off or partitioned dining area, a limited menu package, and some staff training to offer banquet facilities. However, a little advertising and a track record of providing excellent party facilities can slowly create a completely new profit center.
Successful restaurants gain reputations within a community, either for food, service, or overall quality. Most great restaurants wind up cultivating a reputation for large party facilities that are comfortable, private, and well-executed. The combination of execution and advertisement is critical, but the reward can be substantial in the long run.
Very few restaurants take advantage of the opportunity to merchandise retail items. However, a well-placed display case in the lobby or near the hostess stand can provide a tertiary opportunity to generate revenue. This is especially helpful when the costs for retail are low, or when a nearby clothing store is willing to manufacture products at a low cost in exchange for credit at the store. Hats, shirts, and polos are also a great off-site marketing tool.
Nearly every upscale restaurant can benefit by hosting special events. They bring in new customers, strengthen community bonds, and provide that valuable sense of a real event taking place. There are many special event opportunities, but a few of the most common include:
- Charity auctions
- Ladies’ Nights
- Singles’ Nights
- Country Club dinners
- Sponsored Events
- Wine dinners
Upscale restaurants can benefit the most from a “special event”, but every restaurant wins by drawing new clientele. There’s a trial-and-error element to special events, but a positive result can help for years.
Catering off-site events is often more about getting outside the restaurant’s four walls than creating revenue. The upside is that it usually doesn’t take a great effort – just some portable equipment and enthusiastic employees for small to medium venues. Guests who’ve never visited can be won over with great food and friendly smiles. In a market that often needs multiple exposures to win guests over, catering can be the tipping point that drives newcomers through the doors.
Most restaurants thrive on corporate business. They can feature expense accounts, business dinners, and client programs. A rewards program that solicits corporate business and offers price breaks or discounts is a great way to generate new revenue. Many restaurants address advertising opportunities that specifically target corporate employees, especially for upscale concepts.