Restaurant Renovation & Return On Investment

Is it Worth it?

A restaurant renovation is a question you are likely to encounter as a restaurant owner. The restaurant industry is constantly challenged to keep up with generational trends, health inspections, and evolving food preferences. At some point, a restaurant renovation whether it is big or small, will be a necessity.

Rewards Network conducted a survey of 99,000 diners across the country about this very topic. The survey concluded that even if guests rated the food higher than the overall dining experience, their likelihood of returning drops by 38% if the experience rating differs from the food rating by 2 points.

Is Your Restaurant Infrastructure Efficient?

Kitchen. The ergonomics of cooking great food while efficiently delivering that meal to your guest is the heart of your restaurant. But, maybe the food plating station is on the opposite side of the kitchen as the warming station. Perhaps where the walk-in freezer door opens is in a high foot traffic area of the kitchen. What might have seemed like common sense when the kitchen was first built and organized now needs some fine tuning.

Dining Area. It’s difficult to always predict what size parties you will have on any given night, but you spend too much time setting up for large parties and once you do that, foot traffic is impeded for your guests and wait staff. Observe the flow of your restaurant or ask for feedback from your staff on what the best orientation would be. A little observation will help you determine the right size tables for you dining area. Another metric in the dining area is how quickly or rather efficiently are tables being turned over. There is more than likely a loss of revenue when your guests are forced to wait for more than 30 minutes.

Registers. As someone who dines out a lot, I find it frustrating in the fast casual restaurant environment when there’s 10+ people in line, but there is only 1 or 2 registers. Long lines are certainly a good sign that your food is good, but it really only focuses on the crowd that is patient and really intent on eating your great food. However, what is the return rate? Once that guest has tried your food, are they willing to go back knowing there will be a long wait.

Where to Find Great Renovation Ideas?

Reviews. What do you customers like about your restaurant? What have they said about the food and the dining experience? The transparency of your guests reviews can certainly be frustrating at times, but find the constructive criticism that is relevant. This is also a great lens to get a more specific view of your demographics. Are reviews coming from TripAdvisor, Yelp, Google, etc? If you’re getting more local reviews and your competitors are getting more tourists, study the competition’s reviews. Visit their restaurant as well to get a first row seat to what is and isn’t working.

Staff. There’s too many cooks in the kitchen. The servers are getting orders with mistakes or food that’s cold. What is your staff telling management or you the owner? Does your leadership style encourage an environment of open communication where your staff feels comfortable telling you what needs updating or improving. Being adverse to change might be logical when things are working, but sometimes the suggestions from you staff are the most compelling.

Customers. Yes, the reviews are a great place to start, but what are your customers telling you and your staff? Maybe they like the food, but you don’t serve alcohol. Or they don’t come to your restaurant on the weekends because you don’t have any TV’s with football on. Maybe there’s a menu item you were hoping would work, but your customer’s just don’t like it.

Establish your Restaurant’s Identity and Stick to It

If you’re a sports bar, be a sports bar. If you’re a fast casual restaurant, improve what you should, but keep your fast casual style. If you are a high end steakhouse, focus on renovations that are high-end and appeal to that kind of diner.

My favorite is the old fashioned style diner where you walk in and there is bar type seating and booth’s along the window. These are the places that are often staples of a community. You go there for your coffee, pie, and pancakes. At night, they have those perfect milkshakes and the best french fries.

Renovation also does not mean you make wholesale changes like turning your burger joint into a modern, vegan eatery with environmentally conscious furnishings. However, you might improve the customer experience at your burger joint by adding or upgrading your TV’s, expanding your bar to include cocktails instead of just beer and wine. Renovate the bathrooms. Add patio seating with fire pits and an outdoor bar with TV’s.

Plan your Renovation

Budget. Aside from how much the project will cost, will you have any downtime while the renovations are being completed? Add the monthly rent during that time, utilities, permits, and food vendor expenses. Also establish a budget for marketing you “new and improved” restaurant.

Financing. Restaurant renovation financing can either add to your budget or give you a better cash flow prospectus while the renovations are being completed. Maybe this gives you the extra money you need for add-ons like and air-conditioning unit and paying for a liquor license. We can help!

Timing. The best time to do a renovation is when your restaurant is thriving financially or at least stable. Stay ahead of your finances. A renovation aimed at saving your restaurant could be a disaster especially when your current concept is already sub-par.

Price Increases. A new and improved restaurant needs to paid for and you are a for profit business, so consider incremental price increases to your menu. A newly renovated, updated, clean restaurant with improved efficiency and service often outweighs a nominal increase in menu prices.

Ideas for Restaurant Renovations with ROI in Mind

Become Current. Good, bad or indifferent your guests will use their phones. Texting, games for kids, taking a sweet photo of your food for Instagram are all likely scenarios. The younger generations are becoming your guests. Offer FREE Wifi. It’s an easy and low cost upgrade. Yes this is a selling point. In that same vein, add mobile charging stations or USB outlets so folks can keep their phones and iPads juiced up. Add and/or upgrade TV’s with ultra-HD or even better 4K resolution. You don’t need to add 30 TV’s, just a couple strategically placed TV’s. For me personally, I like knowing that my local sushi restaurant will most likely have the game on in the background. They only have one large TV that everyone can see.

Bar. Invest in your bar area or add a bar area. Bar profit margins are between 70-80% while restaurant profit margins typically top out at 15%. Cater your bar to your demographic. Are you hearing a common request for a certain type of liquor or craft beer? Are you in a sports town, college town, political town? Your clientele will tell you what they like and prefer. A thriving bar is good for a restaurant.

Technology. Sometimes the best renovation you can make is your website. In one of our most recent articles we talked about having an online ordering platform. Click here to view the article. A current POS system that allows you track what items are selling and what menu items can be removed. Use geolocation marketing techniques offered by Google to get your menu in front of folks searching for places to eat. READ YOUR REVIEWS.

Bathrooms. They say kitchens and bathrooms are what sells homes. A clean, updated bathroom with good ventilation is important for any restaurant. What kind of perception does your restaurant have when you see an unkept, old bathroom with old fixtures, stains, and graffiti? Think about it, this is your guest. If they see a disgusting bathroom, what do they think your commercial kitchen looks like?

Children. I have been to a handful of restaurants with my family, that have play areas for children. If your demographic includes families, this is an excellent idea. A closed in play area with books, coloring, toys, and things to occupy their attention. Shockingly, small children cannot sit still at a table for too long. This is a thought to expand your customer base to families with small children. A new restaurant in San Marcos, CA called Landon’s Gourmet Kitchen actually offers on-site child care. That is innovative thinking.

Refresh. Similar to bathroom idea, your dining area should be clean, modern, and well kept. Fresh paint & updated flooring can instantly change the look of your restaurant. Updated upholstery in your booths and on your chairs an easy aesthetic upgrade as well.

Renovation Should Make Sense

If you’re a 5 star restaurant on Yelp, Google, and TripAdvisor with a line out your door then you’re probably doing just fine. But, talk with your customers, your kitchen staff, and your wait staff to keep up with what your guests are saying.

Changes don’t have to be made all at once either. And, they certainly don’t need to be paid for all at once. Simply put, all businesses, not just restaurants, need to refresh and update their space and their technology to be appealing.

Better Business Funding has ample experience with restaurant renovations. Please contact us with any questions and let us show you what business funding options exist to support you along your way.

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