The ROI of Remodeling Your Restaurant

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How Do You Know When It’s the Right Time to Remodel Your Restaurant?

It’s always a tough call when every penny and meal service really matters. How do you know that you’ll get back what you put into making changes? And what changes will actually have the best return on investment? Although traditional remodels are often overlooked as being merely aesthetic in nature, both functional and visual renovations can have significant long-term effects on your bottom line.

Ambiance Matters: People Don’t Just Eat Out for the Food or Different Cuisine

When asked, nearly half of restaurateurs surveyed by Rewards Network insisted that the quality of their food is the number one driver of repeat business, but our own data shows quite a different reality. Overall experience is one of two key drivers — along with rewards offered — dictating how likely it is that a guest will make a return visit. In a survey of more than 99,000 diners nationwide, Rewards Network found that even if guests rate food higher than overall experience, their likelihood of a return visit drops by 20 percent if the difference between the scores is one point, and 38 percent if that difference is two points.

And the key to a positive experience is that nebulous thing called ambiance or atmosphere. What factors into ambiance? Cleanliness certainly does, although perceived cleanliness is also part of that. A slightly worn environment can be cleaned thoroughly and still not leave the same impression as a room with un-nicked walls, still-spry carpeting, and modern fixtures. And as the price point in the restaurant market increases, so too does consumer expectation. Studies have shown that for half of the consumer market — particularly among millennials — updated decor and appropriate music choices consciously factor into their decision-making. And that proportion skyrockets (to almost 90 percent overall) when you factor in descriptions like “comfortable” and “welcoming.”

The overall satisfaction of a dining experience does seem to have strong correlative ties to good ratings on music selection, a welcoming and comfortable atmosphere, and decor. A whopping 98 percent of survey responders who gave high marks for those factors also ranked their overall visit satisfaction highly. Tracking these perceptions before and after a remodel can help a restaurant clarify how much ambiance is a decisive factor for its clientele, and provide hard numbers for the effects even small changes can bring.

Where Are You Leaving Money on the Table?

man wearing white dress shirt
Image Source: Michael Browning

The expectation in any remodel is that it has a long-term financial effect, so part of determining what improvements to make involves finding holes in your current offerings where more revenue could be made. Does your location receive great summer foot traffic, but you don’t have a patio or outdoor seating? Do you frequently get seating requests for large groups and have to reconfigure tables, rather than booking them into a private party room? Or, conversely, do you frequently seat two guests at a time, but all of your table sets are for four? The right mix of seating for your clientele is crucial to getting the most efficient table turns and maximum revenue flow through your dining room.

But lost profit is not all about the front of the house. Consider areas where you might be losing efficiency in the back of the house, as well. Do you have work areas that are in constant jams during busy times? Is everything in your kitchen arranged in an order and flow that makes sense for your service? A prep area that requires five employees to staff because of its placement and equipment may only need three per shift if properly reconfigured, rebuilt, or updated with newer technology. Something as simple as a freezer drawer or chopping station in an awkward location could be costing you work hours and benefits that could be redirected toward achieving higher output.

Making the Right Choice for You: Don’t Blindly Follow Market Trends

Ultimately, when considering a remodel for your restaurant, it’s important to make choices that align with who you are and with your overall brand. Adding a cocktail fountain to your family restaurant may seem like a cool idea, but it might not play with your regular guests — and may even alienate them. If you’re going to go after a fad, you have to make sure it makes sense for your clientele. Think, too, about your environment in the process of remodeling. Restaurants that rely heavily on a small group of frequent diners may find closing for even a short time for wholesale construction prohibitive. On the other hand, putting a highly discerning or finicky dining crowd through progressive remodeling while open could cause problems, as well.

Whether you complete a remodel in one fell swoop or over a longer period of time, there are financial implications — but there are also concerns that will never appear on a contractor’s quote. Are you really equipped for what the addition will entail? Do you have the staff to back it up once complete? If not, keep in mind that even smaller changes can make a big difference. For example, nothing is worse than getting a chef’s beautifully prepared meal presented to you on a substandard plate. And something as minor as investing in stemless wine glasses lowers breakage, saving you money over the long term.

But if small changes aren’t going to register with your diner, no matter how regularly they frequent your establishment, you may have to go big to make an impression. In all of these cases, the financial opportunity available with a merchant cash advance can help you get started on a remodel that is not only visually appealing but profitable, as well. Merchant cash advances have a faster approval process than traditional small business loans, and payment is based exclusively on the ebb and flow of your monthly credit card business. And because of the unique marketing services Rewards Network offers its merchant cash advance clients, you’ll have measurable amounts of new dining traffic being driven to your restaurant to enjoy (and pay for) your restaurant’s expansion or remodel.

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