The Pacific Northwest’s 2016-2017 winter was one for the meteorological history books. Heavy precipitation combined with cold temperatures overwhelmed the region with snowfall. One storm would begin as the remnants of another were dumped. Cities lost the everyday hustle and bustle of car and foot traffic. Brick and mortar stores had few if any customers.
In extreme seasonal patterns like this, retail stores can sometimes endure the slow down. Shoppers are likely to purchase an item after conditions improve. However, for restaurants it is a different story. A restaurant-goer moves on. After the weather improves, people are not likely to remember hankerings for a doughnut or Vietnamese cuisine. They filled their bellies in other ways. Those sales are lost.
An entire season of sales lost is also a difficult possibility. Food carts and trucks are truly at Mother Nature’s mercy. Without shelter most diners will choose to go elsewhere or stay in. A long harsh winter, makes this portion of the industry even more volatile to adverse weather. In many cases, this group must close permanently until better weather returns.
In particular, being a restaurateur in Portland, Oregon last winter was trying. Survival became the main objectives as patrons stayed home when the weather was relentless. Business owners publicly revealed to what the cost of these storms were to their businesses. Publications and social media became sources for full disclosure. Last winter, Eater.com-PDX reported, “The Eater inbox has been flooded the past two days with restaurants and food carts reporting significant financial losses as a result of this winter’s multiple, severe snowstorms.”
When both staff and patron cannot get to a location–signs must go up—closed. Beyond the lost revenue, costs such as spoiled inventory can mount in these situations. Food costs when reopening can be higher when ingredients must be sought from missed deliveries. Rent, lights, bookkeeping are continuous costs whether outdoor conditions are beautiful or dreadful. Without patrons those costs all fall on a restaurant owner(s) to come up with the monies needed to continue.
What can a restaurant do survive the financial hardships of winter weather?
Get Creative with Incentives
Driven to look at alternative methods to save their sinking sales, some restaurant owners have been creative. In the past, a Kansas City pizzeria, Spin!, utilized Crummy Weather Vouchers. These coupons enticed diners to come back in after the weather improved. Ultimately, they created an incentive to get people in the doors, which turned a profit after bad weather moved out. Reportedly, a Portland restaurant, Pip’s Original Doughnuts, struggled to make it through last season’s snow days. Pip’s began selling gift certificates online for future use to create needed income.
Use Social Media as a Customer Relationship Tool
A loyal following to a restaurant can offer dynamic help when the weather is relentless. Pip’s Original Doughnuts was honest with patrons about their struggles on social media this past winter. As a result, Pip’s gift certificates for future purchases were successful in part because of their social media presence. Building customer relationships prior to hard times is key. Through social media, a restaurant can offer secret menu items not found on their traditional menu. They can give birthday or thank you treats to their patrons. Staying in close contact with their online community allows a restaurant to stay relevant and to take care of any negative feedback they may receive. More importantly, actionable steps that give back to the community shows patrons a restaurant cares about the place they do business more than just making money. All these activities can be part of a restaurant’s social media strategy. Social media is a commitment. It requires time, focus, and a sustained presence–but it offers a platform to truly engage with customers. Customer loyalty can sustain a restaurant when something like the winter of 2016-2017 presents itself.
Purchase Weather Insurance for Big Revenue Days
The Pacific Northwest and other portions of the U.S. suffered through dismal weather in December 2016. Retail and hospitality industries were negatively affected by many bad weather days before Christmas. Private parties, corporate parties, and New Year’s Eve makes December a lucrative month for many restaurants. A snowstorm in the season of merriment can decrease overall seasonal sales.
There are several holidays that are big earning days in restaurants. One of those days is December 31st. Bad weather on New Year’s Eve can impact revenue dramatically. A restaurant will have already paid vendors for specialty items and champagne. These type of foods and drinks may not be on the regular menu. The kitchen and wait staff will need to be paid. As always, rent will be due. A weather insurance policy could be purchased to cover snowfall or ice during this day to financially protect a restaurant.
Weather insurance is a tailor-made insurance product and is written for specific weather risks. Rain, snow, heat and cold are common elements that can be insured. Policies can be written for hours, days, or even years. Limits of insurance are written for each business’ specific needs. (A business owner understands better than an agent what it takes to stay fiscally afloat.) When weather does not cooperate and conditions of a policy are met, payment is made. Weather insurance does not use claim adjusters. Instead National Weather Service stations or a third-party’s weather data is used to determine a claim. If the policy is triggered, payment is usually made within two-weeks. When used properly, weather insurance can become a revenue stabilizer.
The hope is that every night goes on without a hitch, and the weather cooperates. Adverse weather conditions on December 31st or any other “big day” could be a financial hardship if restaurant patrons are a no-show. Instead of sitting fingers-crossed, a business owner could simply purchase a weather insurance policy. This allows a restaurant can move forward despite the weather.
Weather can have devastating effects on a restaurant anytime during the year. Assumed loss for restaurants vary. Research from Blue Sky Local indicates that poor weather conditions cause more than a 20% loss in restaurant revenue each year. Additionally, in that research, 75% of restaurants said sales declined at least 10% from bad weather. During the Portland snowstorms, a restaurateur with two locations reported a single snow day can result in a loss of $3,000 to $6,000 (eater.com). Those kinds of losses sustained for multiple days can be too much in an industry that typically has very slim profit margins.
Planning and preparation are always key when dealing with the unpredictability of weather. Having plans for the “what-ifs” can be a proactive approach. Developing bad weather incentives, establishing a good rapport with patrons, and considering insurance for high-dollar days or events are all steps that can be taken to limit a restaurant’s exposure. Snow will fall—but that doesn’t mean your profits have to.