Q: I’m unsure of what is happening to my business as overall guest traffic seems normal, while sales are down and product and labor cost it up. Are others having the same issues?

Many restaurateurs are having a difficult time pinpointing post-recession business issues. For example, during pre-recession times, happy hour business accounted for only 12% of evening sales at a large, upscale casual restaurant. During this post-recession period, however, that number has risen to 20%, indicating that more diners are ordering the bargain options instead of those profit-driving items from the dinner menu.

The culprit is a shift in the guest’s choice to dine more at happy hour and less at dinner. Happy hour is impacting many restaurants and turning perfectly good dinner guests into “blue plate special” chasers. Gallup research shows a shift in consumer behavior regarding restaurants. In the casual restaurant sector, 46% of Americans say they’re spending less than they were a year ago, and 35% say their spending less than they were a year ago, and 35% say their spending changes are permanent. In the featured example, happy hour sales shifted pre-recession from 12% to 20% post-recession of overall sales. The guest has been drifting in earlier to take advantage of less expensive pricing resulting in reduced sales margins and guest check average.

The restaurant’s “purpose” for happy hour was really because “everyone else is doing it.” There was no real plan or strategy for happy hour. The menu was simply a discounted version of the existing menu. Happy hour is a part of the business and should be treated more as a marketing opportunity than a sales generator. Most restaurants offer happy hour without consideration for what the program will do to the rest of the business. They build small plates that take as much or more time to prepare than regular plates, and the kitchen is stuck producing more food for less money. Labor skyrockets, forcing pressure on the front of the house to reduce labor where the guest is being served. As a result, the guest experience suffers. Missed opportunities fly right by. Drinks don’t get filled as rapidly, tickets don’t get closed out in a timely manner, the story of the restaurant isn’t told and guest satisfaction suffers. This eventually will destroy a restaurant.

To reverse the trend here are some actions the featured restaurant took:

  1. Uniquely positioned the happy hour menu to feature menu items different from those on the dinner menu. The original happy hour menu included steep discounts on existing menu items. To combat, the restaurant developed items specific to happy hour while using twists on the existing menu items, so product usage could be leveraged with the other day parts.
  2. Reworked the happy hour menu to eliminate time-consuming items to produce. The original happy hour menu featured more “small” plates that resulted in a higher food and kitchen labor costs, hence killing profitability. Take sliders as an example. Hamburger sliders take nearly as long as a hamburger to plate, and there are typically three of them! The hamburger slider was replaced with bbq pulled pork, chicken or shrimp for quick plating and service. They also added more sharable food appropriate to larger groups.
  3. Developed a progressive cocktail menu that was provocative, tasty and easy to execute. The intrigue surrounding this menu increased sales of full price items, rather than a discount, while improving the menu.
  4. Staffed up with servers and retrained the existing staff to serve the guest with the same fervor as the dining room. The staff kept an attentive eye to the guest to move food and refill drinks rapidly. The amount of items sold per server increased, as did table turns.
  5. Cross-marketed the other meal periods, featuring lunch and dinner menus via table tents with a scan for smart phones. The scanning planted the seed of coming back and involved guest activity. The server sequence also was changed to feature an invitation to return to the restaurant at lunch or dinner. Simple and effective.

The result was a strong happy hour and a thriving lunch and dinner service. While bar sales during happy hour increased, so did the sales in the dining room. The energy was contagious, and sales have increase nearly 20 percent, with increases at lunch and dinner. So what is the goal of happy hour? The goal is to move traffic, retain it and convert the guests to fully engaged, ecstatically happy guests in other day parts. The formula is simple; let the employees deliver a positive, memorable and engaging dining experience, and the guest will leave happier and more likely to return.

For more information on improving profitability and driving sales, contact AMP Services at rbraa@ampservices.com. Rick Braa is the founder of AMP Services, an accounting and consulting firm specializing in helping companies grow profitability.