NRF 2023 Wash-Up: What were our highlights?
NRF trend reports are everywhere this week, so we thought we’d do something different. Highlight the 5 things we actually enjoyed most about NRF.
Businesses are made or broken by their ability to measure performance accurately, and then quickly react accordingly. COVID-19 has made this both more accurate, and more difficult.
Enormous external disruption means there is everything to play for, but the goalposts keep shifting and once-reliable business metrics are now in a state of flux. Some fast-moving, data-driven quick-service restaurant businesses are already adapting and reaping the rewards.
They are asking themselves three fundamental questions:
Pre-COVID-19, KPIs were fairly standardized across the industry—CSAT, labor, speed of service, etc., but priorities have changed. Some KPIs have been up-weighted significantly (e.g. drive-thru speed of service), others need re-assessing (e.g. CSAT is now driven more by feeling safe, than by friendly interactions), and others are entirely new (e.g. PPE usage and social-distancing measures).
A major American steakhouse chain used to focus on the ratio of salad bar purchases to steak purchases as a key upselling metric. With its salad bars now entirely shut down due to contamination risks, it now measures the number of mains purchased instead of salads.
A Taco Bell franchisee needed to rethink its now critical speed of service KPI, given its non-delivery business has become 100 percent drive-thru instead of 40:60 drive-thru to dine in. Counter speed of service was stripped out and adjustments made to accommodate changes to how orders are collected, while measurement of speed of service on a per hour per day of week basis was introduced. Rapid realignment and revision of this KPI across the chain has helped it remain focused on the operational metrics that really matter. Moreover, as dine-in slowly starts to return, it will be able to remain nimble and adjust its speed of service measurement.
Customer experience is still just as crucial for building and maintaining brand loyalty, but it has a different guise now. Customers now care more about speed, safety, and hygiene, than engagement and interactions.
Restaurant teams need more support as they learn new processes without SOPs and juggle new staff rotas, while also coping with their own health and safety concerns. Smart restaurants are adding/up-weighting metrics to track staff morale and engagement and adjusting how this data is collected, with more Employee Engagement surveys making up for the decline in physical meetings.
In addition to realigning their KPIs, quick-service restaurants need to become laser-focused and give their already thinly-stretched teams just a few critical metrics to target exceptionally well.
Year over year (or even month over month) and targets are no longer of value and won’t be for the foreseeable future. Quick-thinking companies are turning to the concept of peer benchmarking to get a better read, week-to-week, on how their restaurants are performing, relative to one another.
Peer group benchmarking requires sophisticated analysis to ensure fair peer groups and appropriate normalization—much of which has had to be adjusted frequently during lockdown. For example, you can’t create a peer group that has restaurants from multiple states if there are different restrictions on public movement in those states. Equally, factors such as local car ownership penetration, or outlet vs highway location, have become more important than menu offerings as restaurants switch predominantly to drive-thru.
Figuring out what and how to measure is an enormous, yet imperative, challenge right now, but insight without coordinated, focused, and effective action is pointless.
Communication of these KPI changes and support in delivering them is paramount, while performance targets and bonuses also need to be realigned. Tools that simply instruct employees and demand compliance are causing dissonance and disengagement amongst an already fatigued and stretched workforce.
One quick-service core metric of drive-thru speed of service had been suffering across the board in March and April. The problem was that each restaurant’s operational capacity was only designed to support a split between dine-in and drive-thru, not 100 percent drive-thru. This led one restaurant to focus heavily on the operational processes behind this issue. Its newly adjusted KPIs quickly identified an improvement in business performance and the actions they had taken were shared and implemented across the chain.
For the Taco Bell franchisee, the constant shifts in customer demand patterns have made it much harder to accurately align staff schedules, even with correct forecasted hours. By looking at actual vs ideal labor hours at a granular level, it identified certain dayparts across all restaurants (e.g. Monday dinner) where the number of labor hours was up to 35 percent above the ideal level (based on footfall), and other dayparts where labor was too low. These restaurant-specific opportunities are now being actioned to improve labor forecasting and scheduling, and saved each restaurant an average of 12 percent on staff expenses in the month of May. Agility is essential—Taco Bell is not only measuring demand shifts and identifying labor alignment issues weekly, its staff rota is also dynamic enough to react to and resolve these issues, despite the added challenges of staff sickness and quarantine.
Delivering these types of operational efficiencies has become even more critical for businesses at a time when financial metrics, such as revenue, are so much harder to improve given the reduction in footfall.
As Peter Drucker, the father of modern management, famously said, “What gets measured, gets managed,” and in these unprecedented times quick-service restaurant businesses must shift to new metrics, and then ensure these are implemented. It’s remarkable just how quickly a whole organization can pivot, and there has never been a better time to do it than now.
Figure out what to measure. Measure it. Act on it. Deliver on it. Rapidly. Repeat. Succeed.