It’s not time to hunker down, it’s time to get strategic
Inflation is everywhere, all while a recession looms over all our heads.
What comes next? No one knows. No economist, no politician, no stock trader knows anything for sure. Everyone just has ideas. A Macroeconomics Degree will not matter to the bottom line of your pizzeria. Getting angry at the TV over what comes next will do you no good. What will matter and get you through this situation is a deep understanding of your customer and honing in on their needs as they shift. That’s always been the case, but their needs will be very different this time around. It’s not going to be like 1987’s Black Monday or the housing crisis of 2008. This financial snafu is different, and you’re going to need to think differently as well.
So, let’s be clear: Inflation occurred because of a litany of reasons — government checks, disposable income, policies, trade mishaps, microchips, etc. That caused the market instability and commodities to go all over the place. But here’s the rub that makes this different than other financial crises. A lot of people who lived life metaphorically flying in coach moved up to first class practices. If not full first class, at least comfort plus in their post-pandemic lives. Whether it was more pay, more incentives, more leisure, or less grind, they’re not just willy-nilly going back to that world as if nothing happened. They still want to feel special even while spending less. They still want online ordering, delivery to their homes and self-actualizing their life.
That means we can’t “Hunker Down” on this one. The term “Hunker Down” means to bend your legs, crouch and let the storm pass over you. That’s a hard no for this. You will need to announce yourself, your brand and your business more than ever. Instead of previous recessions where you would switch to more coupons and call it a day, this situation will require more finesse.
The grand goal is to make your restaurant and pizza recession-proof. There is a way to do that. There absolutely is. Look at your income brackets. You probably have a white-collar customer and a blue-collar customer—someone who’s living paycheck to paycheck vs. one who still has more disposable money—a customer base that is price conscious and a customer base that is more experience conscious. You don’t need to choose between the two customer bases, but you do need to be smart about how you tap into both simultaneously to not disenfranchise one of them.
Price Aware Blue-Collar Base
The blue-collar customer has always wanted a deal. They’re going to continue to want a deal, but a bigger one. That doesn’t mean a deeper discount necessarily, just more wow factor. Don’t give away the store; instead, take low food cost items and add them in for free as added value items when people reach a specific price point. This tactic yields a higher ticket average while giving more value to the customer. Make deals like this super obvious in all your online and printed branding to be very transparent and open about the deal. That can get price-sensitive customers over the innate fear that your brand is “too pricey” or “fancy” for their wallet. If your brand typically doesn’t discount, great, neither do I; added value is always a win. It doesn’t cheapen your brand and can make you palatable to newer customers. In the 2020 pandemic, people were fully glued to their phones; they’re still addicted but not to the same level. A solid mailer can get traction if appropriately done and with a lot of intent and purpose to show what separates you and your pizzeria from the pack. Also, any mailer needs proper income targeting and repeat hitting on the same zip code to create a response, but the ROI is real.
Experience Driven Disposable Income Customer
Your white-collar customers are hit by the financial times as well, just differently. This customer will dine out less or fewer times at fancy restaurants. A high-end pizza experience might be their new normal. Curating your dining experience to the high-end customer who is “slumming it” with pizza can be very profitable. They want to buy nicer wine and beers and will oblige an upsell. If they’re not tended to by their typical maître d’, they’ll happily take a solid manager who remembers their name and pulls the chair for them. You can cater to that customer for zero additional dollars, just effort.
How you play this will vary based upon the population density you have for each income bracket. It will vary if you are in a city, a suburb, a rural area or a college town. However, I can guarantee that wherever you are, there are income variations, and it’s time to tap into all of them. Absolutely all of them. Even from a catering standpoint, create more deals for them in the fourth quarter, and go all in on white glove experience catering. They might be ditching the country club’s kitchen for yours, so act the part.
COVID was unique in that it seemed like it was going to be the worst thing ever to hit the pizza industry. We now know it wasn’t, at least from a financial perspective. Massive tax credits, surplus payments and a captive audience favored the pizza industry more than most. Let’s be real about the next year, there is no bailout coming for today’s problems. A potential recession has the potential to do way more damage than COVID did if inflation, commodities and customer price sensitivity don’t stabilize.
Again, you can’t do anything about macroeconomics. But you can fight, which means being able to move on a dime, think quickly, adjust or remove high food cost items and find better ways to gear your menu.
Menu and Labor
Focus on low-cost varieties to mitigate inflation—try to make things that don’t take as much labor to create or create from scratch what is killing your food cost if it’s cheaper. Use labor smarter and have dedicated prep workers to ensure you are ready for speedy success on your line. Remove items that take too much time to create. Be willing to remove items that are too laborious and costly because they defeat your purpose, which is to run a healthy business. If you keep something that takes a lot of time and money, it better yield many people in the door. Don’t cut your nose to spite your face, but trim some fat from your offerings. Bold statement here, but if you don’t change up your menu and pricing at least three times this year, you’re not doing it enough. Along with pricing changes, you can reduce portions, or add packaging fees to pass on to your customer. That can be a touchy subject, so if that’s not for you, maybe increase your third-party pricing on their apps but keep yours the same as in house to advertise purchasing direct from you as “Best Value Pricing.” These are tactics you need to debate rationally to maintain profit and stay healthy.
From a marketing perspective, you might not have a ton of money in your coffers to spend on marketing, but you want to make sure whatever marketing you do is paying for itself three to five times and that you can verify it. If it’s more exploratory or unverifiable marketing, it might be time to pull back on that and lean into what you know works or what you believe is such a non-cliche that it has a solid chance of generating quick ROI.
Keep your books tight on the back end of things. Verify everything and look for ways to cut costs in terms of contracts. Start with your payroll vendor. They don’t sell a tangible product affected by commodities, and the increased labor costs have only made them more profitable. They’ll play ball on negotiating way faster than a food vendor right now. Same for ISP and phone providers. After that, start cutting stuff that is not necessary. Take tasks on if they’re costly, and you can handle them in-house. But again, if you take away things that add hours to your week and you end up working in your business and not on your business, it will be a dumb move. Roll up your sleeves and get smart. Do not take a recession as a reason to roll up your sleeves and become a glorified employee.
MIKE BAUSCH is the owner of Andolini’s Pizzeria in Tulsa, Oklahoma. Instagram: @mikeybausch