A QSR operator’s guide to managing costs while inflation soars

This article is the fourth in a series of five to promote Delaget’s 2021 QSR Operational Index – an annual report that shares stats and figures from over 6,000 QSR locations for sales, costs, employees, loss, and customer experience. 

Inflation’s grasp on franchisees is tighter than ever and it’s affecting every aspect of the business. According to QSR Magazine, the price of quick-service meals jumped 8 percent, while full-service menu items lifted 6.6 percent. Menu prices are just one symptom of inflation. The cost of food and paper goods is also rising (yet variable) and proving detrimental to the operator’s bottom lines.  

The crux of inflation and food costs is that it is entirely out of operators' and franchisors’ control. To manage costs while inflation continues to steadily rise, consider the following tips:

1. Add-on drive-thru drinks

With dining rooms seeing a decline in traffic and drive-throughs booming, you can squeeze even more margin out of that drink sale.  

How so? It’s no secret that soft drinks are a money-maker (with up to 90% margin!). Train your staff to up-sell soft drink sales in larger sizes. When customers are driving through and have no chance to re-fill, they’re more likely to buy a larger drink. Plus, they're not getting that refill like in-store customers. Less soda, more profit, higher margins. 

Pro-tip: Incentivize your teams to add on that drink sale and use your automated data reporting system to track the success of the program. Incentives could include gift cards, free meals, or even a simple (low-cost) treat! 

2. Hone-in on labor costs

While costs of goods are fully out of franchisees’ control, labor costs are less so. Focusing your efforts on driving employee retention and minimizing overtime costs are fantastic ways to lower your labor costs. Some places to start might include:  

• Accurate forecasting 
  Each week, leverage your operational data tool to look at last week’s (or last year’s - whichever is more appropriate) shifts and sales, evaluate the previous period’s labor % of sales, and use your findings to inform your scheduling. Adjust the number of people per shift accordingly. 
• Encourage Kiosk use
  If you have kiosks in your dining room, utilize them to replace someone working at the counter! Encourage customer kiosk use whenever possible to keep those labor costs low.
• Focus on retention 
  Consider offering earned wage access which is proven to reduce turnover by 72%. According to the Center for Hospitality Research and Cornell University, turnover costs operators an average of $5,864 per person. In addition to this added benefit, improvements to your organization’s culture, ongoing training, and using data to empower your team and their success can make a huge difference in employee retention.  

Use the retention rate tool using configurable reporting in Delaget Coach to hone in on your numbers: Find out what your retention rate is and keep an eye on it throughout the ups and downs of the labor market.

3. Mitigate the costs of inflation with operational data

Data is power—and in the QSR world, it can save operators and their stores thousands of dollars each year, mitigating the cost of inflation. This data can be used to make informed business decisions, identify and alert you to loss, and automate your delivery financial reporting to reduce added losses due to fees, missing items, refunds, and more.

• Loss 
  Automating loss prevention efforts is a fantastic way to minimize losses for organizations of any size. Whether you have 10 locations or 300+, Delaget Detect is fully configurable and allows leaders to set and receive automatic alerts when loss occurs. Detect users see an average of $75K lifetime savings, in addition to time savings. The tool allows leaders to search for instances of loss down to ticket-level detail and can also be integrated with your video surveillance provider.  
• Operational efficiency 
  Data is the key to well-informed, money-saving decisions from scheduling, to ordering, to increasing drive-thru times and VOC. Consider automating the consolidation of your system data and reap the benefits, including:  
  • • • Time savings of 2+ hours/day for area coaches and store leaders. 
      • Fully configurable, custom drag-and-drop reporting for full control over your data and reports. 
      • Clear, reliable lines of sight into opportunities to increase efficiencies and profits. 
      • Multi-unit transparency provides you with data for all your stores in one place, so leaders can see where and when to focus their energy and compare areas or stores in just seconds. 

Unfortunately, we cannot accurately predict what is next for the economy or inflation, or even the QSR industry. Luckily, there are tried and true tactics for operators looking to mitigate the rising costs of goods and inflation. Drive-thru drinks, robust restaurant data reporting software, and labor costs are all in your team’s control and are levers you can pull with confidence to continue succeeding in this unprecedented market.