Facing the 2024 Economic Downturn: How Should Restaurant Operators Respond?

As we enter 2024, no matter how much hope we have for the future, we need to objectively recognise the situation in order to go further. Why do I say this? Because back in late 2023, many economists were already predicting that global economic growth would slow down in 2024, and even experience a new round of economic downturn.

This wave of predictions inevitably reminds people of the terrifying 2008 financial crisis. Many restaurant operators who have been in the industry for over a decade probably can't forget the shock that crisis brought. Taking the US as an example, restaurant revenue at that time fell by $24 billion, and over 110,000 restaurants closed down.

A crisis may recur this year. So how should restaurant operators prepare now? And how can past experiences of economic depressions guide us?

Demand for Eating Out Still Exists

Although the catering industry will be severely impacted during economic downturns, the impact locally is believed to be not as severe as in countries like the US or Europe. The main reason is that eating out prices are not as expensive here as in Western countries, so going to a restaurant is still considered a necessity. In other words, demand for eating out still exists.

Under this premise, the biggest change restaurant operators need to make is to offer better value for money for their food products. Because during economic downturns, customers' income may decrease, and they will pay more attention to affordable dining options with good quality. Or you can think of how the two-dish meals became popular during the pandemic - one of the main reasons was because they were economical.

Therefore, in the face of objective economic downturn, restaurants can try to offer small portion sizes or time-limited set meals to attract consumers.

Adjust Operating Models

During the Great Depression, department stores popularised simple lunch counters for customers to dine more conveniently and affordably. Later, large retailers like Walmart decided to continue using this business model by having restaurants or coffee shops in their stores. This approach reduces costs and increases customer traffic by changing the dining venue and mode.

In the 21st century today, this evolves into adjusting the ratio between dine-in and takeaway and setting up simple kitchens for takeaway. Because no dining space can reach customers as easily as online channels, which also helps cut costs.

Clearly, all new dining models today revolve around technology and online platforms. Even though the pandemic is over, operators should still seize these digital mega-trends and actively expand online sales channels - either developing their own apps or seeking third-party partnerships with other platforms. Online takeaway and reservations will eventually be key to coping with the economic slowdown.

Notably, digitalisation needs to start early, as traffic does not come in a day. Preparing only when the recession comes may be too late.

Leverage Technology, Dare to Innovate

No matter the industry, timely responding to economic conditions and adjusting strategies accordingly is key to standing out in fierce market competition. This is especially true for the relatively low-margin restaurant business, which needs to make precise strategic transformations. Operators can simplify menus to reduce costs, strengthen staff training to improve productivity, and optimise operations through various technological means. And technology here refers not only to cooking tools, but also using data to achieve accurate marketing and targeting customer groups.

Facing external economic changes, it is most important for operators to keep an open mindset and look for turning points. This is reflected in whether you dare to innovate under adversity - be it tastier dishes or more affordable dining experiences. As long as you survive the hard times, the changes you make while defending your business will surely bring you generous profits when times are smooth again.

The key is to leverage technology and dare to innovate. If operators can timely adjust their mindsets and strategies, they can find opportunities amidst the crisis and eventually come out stronger.