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The Case for Diverse Revenue Streams for Restaurants

Posted by Concannon Miller on Thu, Jun 9, 2022

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The Case for Diverse Revenue Streams for RestaurantsA patron speaks with the restaurant host, either to confirm a reservation or ask if there’s a table available. Ideally, the host calls upon a server who then leads the patron to a table and takes their order.

It’s a system that worked since the dawn of the U.S. restaurant industry — accounting for 90% of most restaurants’ revenue pre-pandemic — until it didn’t. The single revenue stream model was derailed by COVID-19 related closures, capacity restrictions and transmission concerns.

Restaurants were forced to get creative and many attribute their survival to diversifying their revenue streams. They launched ghost kitchens, scheduled deliveries and assembled meal kits. Though sit-down dining is once again a possibility, many restaurants continue to engage customers, compensate for staff shortages and increase agility by maintaining multiple revenue streams.

Multiple streams bring myriad benefits

Like same-day delivery and remote work, the adoption of multiple revenue streams is a tactic that helped businesses make it through the pandemic and is becoming a permanent fixture on their path forward. Revenue stream diversification is helping restaurants achieve the following:

Satisfy customers

The past two years have seen Americans spend more time at home, where they developed eating habits they are likely to maintain for years to come. Despite high COVID-19 vaccination rates and a widespread loosening of restrictions, a 2021 survey conducted by Buyer’s Edge Platform found that 42.3% of respondents prefer to order food for takeout or delivery and dine at home rather than eat on-premises at an establishment. Restaurants are offering takeout options and partnering with third-party delivery services to accommodate customer preferences.

Time at home inspired many to try their hand at cooking. A 2021 Rouxbe study revealed 69% of Americans cook at home four or more nights a week, up from 56% in 2019. Instead of viewing trends like these as a deterrent, restaurants found a way to acclimate. Many now offer meal kits that provide customers with the ingredients to make their favorite menu items at home. Others have expanded their selections to include items like canned goods and freshly baked bread that customers can take home to serve alongside their own creations.

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Address labor shortages

Restaurants continue to be disproportionately impacted by mass labor shortages that originated in 2020. A 2022 Bureau of Labor Statistics report revealed that the number of workers who have left the accommodation and food service industry climbed from 4.8% to 6.9% in the last year, a larger increase than any other industry.

Affected restaurants might compensate for limited waitstaff by offering patrons a takeout option. They might also consider introducing meal kits, as assembly requires less staff than preparing a meal in-house. In these ways, adding revenue streams can help restaurants operate amid persistent labor shortages.

READ MORE: Restaurant Staffing in the Wake of COVID-19: How Much Has Changed?

Prepare to pivot

Many restaurants stayed afloat on diverse revenue streams through the worst of the pandemic. What might have originated as an emergency attempt to survive shutdowns, lockdowns and other restrictions has morphed into a long-term competitive advantage.

In addition to helping restaurants keep pace with shifting customer preferences and compensate for staff shortages, diverse revenue streams can help improve overall resiliency. Multiple revenue streams can serve as a safety net in the event of additional unforeseen events.

Today’s special is tomorrow’s standard

Recent years have seen old business models crumble across all industries. Food services is no exception. Providing a way to engage customers, circumvent labor shortages and promote agility, restaurants that adopt and maintain multiple streams of revenue are well-equipped to meet this moment and those to come.

Written by Adam Berebitsky, Lisa Haffer and Carrie Shagat. Copyright © 2022 BDO USA, LLP. All rights reserved. www.bdo.com

Concannon Miller is an independent member of the BDO Alliance USA, a nationwide association of independently owned local and regional accounting, consulting and service firms with similar client service goals. Learn more here.

Topics: Restaurants

Concannon Miller’s unique, holistic and intimate approach to financial health sets us apart from smaller CPA firms with more limited resources as well as mega firms where mid-sized clients struggle for attention. Contact us here to talk about improving your business.

This communication is designed to provide accurate and authoritative information in regard to the subject matter covered at the time it was published. However, the general information herein is not intended to be nor should it be treated as tax, legal, or accounting advice. Additional issues could exist that would affect the tax treatment of a specific transaction and, therefore, taxpayers should seek advice from an independent tax advisor based on their particular circumstances before acting on any information presented. This information is not intended to be nor can it be used by any taxpayer for the purposes of avoiding tax penalties.

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