surviving 2020 and continue to be drivers for the sector. More than a year on from the first lockdown now and we’ve strolled back to cafes and restaurants, although not in the numbers previously seen. So what is the future for casual dining? According to analyst firm IBISWorld, the restaurant sector is set to grow, picking itself up from the falling revenues suffered last year. A March 2021 survey, which we reported on in the last issue of Inside Franchise Business, confirmed that sit-down restaurants and cafes were among the sectors hardest hit, with cafes forming the majority of the business closures in the first calendar 2021 quarter. The good news is that cafes and restaurants are among the most optimistic businesses when it comes to future trading, according to the Australian Franchise Pulse Check March 2021 survey conducted by FRANData. As government restrictions ease and discretionary income recovers from the impacts of Covid, IBISWorld predicts the restaurant industry can expect an annualised 2.1 per cent rise through to 2026, to lift the sector’s value from $18 billion to $20.6 billion. The revenue rise is good news as operating costs remain a challenge for cafe and restaurant owners. The casual dining space is an open market, with no one chain claiming more than 5 per cent of dining out business. With growth predicted for the casual dining sector, three businesses discuss future changes and challenges. TGI Fridays James Sinclair is CEO and managing director of Signature Hospitality Group, which operates The Sporting Globe and TGI Fridays. How do you expect casual dining to change over the next 12–24 months? Digital and online food delivery platforms were already gaining momentum pre-Covid; the last 12 months projected a trend that was probably going to happen over a couple of years in just months. Delivery will keep growing as this service evolves and consumers continue to value convenience. We’ve been working on some exciting, different delivery initiatives designed to enhance customer experience even further, which we’ll look to roll out over the next year across both TGI Fridays and Sporting Globe. With Covid-19 and social distancing changing consumer behaviour, premiumisation will occur with consumers willing to pay for better experiences across casual dining. I believe there’ll be greater appreciation for exceptional customer service and higher spend as people reward themselves when celebrating and connecting with friends and family.  How do you differentiate yourself in the market? We’re still strong believers that having well-trained, highly engaged people is the foundation to standing out.  From running limited time offers, constantly trialling new food and beverage items to looking at new technologies to support our offering, we’re constantly refining the vision for our “fitout of the future”. How are digital and delivery affecting your business? Digital ordering has offered a positive option for guests to order ahead for pick-up or dine in. It provides convenience to order when they want and to transact easily. It also provides incredible insights for us to better understand what people want and when, so we can plan our offerings. Delivery continues to grow and we’ve been working for some years to ensure a quality delivery offering, and our future restaurants are designed with this in mind. Presently, the cost of delivery platforms is high when benchmarked internationally, but we’re seeing direct delivery options such as DoorDash Drive coming to market, creating a more viable model. What’s happening in your business regarding locations and rent? Brands are looking for sites outside shopping centres on the high street post-Covid, in part because centres have not yet created strong delivery access. We plan to have both centre sites and high street sites across Australia.  Rental levels for new sites in the market are holding rather than growing or declining. Post- Covid the pressure is on landlords to lower annual rent increases to reflect lower inflation. What are your expansion plans for 2022 and beyond? We have big plans to achieve 30 Sporting Globe and 30 TGI Fridays nationally by 2024 (20 per cent annual growth). Most of this will be defensively targeted towards NSW and Queensland. What is the biggest challenge facing your business as we head into FY22?   Our industry is facing a skills crisis with a dire lack of experienced hospitality talent due to last year, including many talented visa holders being forced to leave the country. We, along with industry bodies and industry friends, will continue to call on the government to quickly and safely bring back foreign workers to support our industry and economic recovery.  We have a strong recruitment drive underway to fill vacancies nationwide, from managerial and chef roles to casual and part-time host roles, and anticipate we’ll fill these as things progress and some sense of industry stability returns, particularly in Victoria, in the second half of the year.  As part of our recruitment efforts, we’re pleased to offer a warm, team-oriented culture with many tenured staff, clear career growth trajectories (with many of our team going on to own their own franchise business), training opportunities, sign-on bonuses for some roles, additional holiday as well as entry to a new industry with training and support for those looking to try out hospitality. When will unit revenue recover from the pandemic?  Ours has already recovered with the exception of Melbourne CBD, with sales up to 20 per cent higher than pre-Covid in some markets around Australia. What are you doing to increase profit margins? We have a strong procurement strategy benefitting from our network growth and good planning around products that experience pricing fluctuation. As we innovate and develop products, our guests are willing to pay for this, and we’ve successfully passed on any increases. Who is your customer and what do you see as the biggest competition for their discretionary dollar? At Sporting Globe, our core customers are 25 to 40-year-old middle to high income earners. They’ll spend more not being able to travel.  TGI Fridays has two key groups: families with toddler and school-aged children; and 25 to 35-year-olds. La Porchetta CEO Sam Nania heads up the Italian casual dining restaurant, famed for its pizza and pasta, which started out in 1985.  Sam says business is picking up after the hit from Covid lockdowns last year. “While we saw a significant shift in casual dining over the previous 12 months, we are now seeing growing consumer confidence reflected in increased in-house dining and we fully expect this to continue.” How do you differentiate yourself in the space?  We remain true to our promise to provide the eat live love Italian experience and we remain local and community focused. How are digital and delivery affecting your business?  Aggregators have an impact on our business and in the last 12 months this grew; however it’s important to acknowledge the opportunities they provide for increased sales. As a brand, we focus on our online ordering system to mitigate the impact of delivery and takeaway commissions. What’s new and exciting in the marketplace?  We’re launching a new loyalty program and app that allows us to maintain our brand values and provide increased value for our strong, loyal customer base. What’s happening in your business in regional Australia?  Our plan is to open more sites in regional Australia and we’re looking for suitable sites and quality people. While our regional restaurants experienced international tourism losses, local patronage has been exceptional and we are very well positioned for growth.  What are your expansion plans for 2022 and beyond?  Our current focus is on supporting our franchisees as we emerge from an exceptional year. At the same time, our plan for the next three years includes the rollout of a new, hybrid model. What is the biggest challenge facing your business as we head into 2022 FY?  The availability of labour is our biggest challenge right now and we know that’s an industry-wide issue. The hospitality and casual dining sector has been heavily impacted by a shortage of staff. When will unit revenue recover from the pandemic?  That depends on the units and whether or not they closed. In our situation, the majority of our restaurants continued to trade through delivery and takeaway models. Our menu and agility allowed us to bounce back quicker than most. We were fortunate in this regard and our thoughts are with those that couldn’t adapt and were required to close. What are you doing to increase profit margins?  We’re focusing on key areas such as operational efficiency and labour management to maximise efficiency. We continually strive to reduce our cost of goods and, most importantly, we focus on the customer and building increased retention and frequency. Who is your customer and what do you see as the biggest competition for their discretionary dollar?  We have a diverse customer base, however our primary customers are mum and dad in their mid to late 30s with their two children. Large format operators along with local pizza shops remain our strongest competition, however our focus on providing excellent service, a great customer experience and value has meant we continue to maintain and grow their loyalty.  Motto Motto A fledgling franchise, this Japanese restaurant bridges the gap between casual dining and fine dining, according to Matt Fickling, chief operating officer. What are consumers looking for in the casual dining space post-Covid?  Customers are looking for more – safety, value and convenience. Our guests get more value with us: a premium Wagyu beef pork belly, salmon, king fish, prawn or sashimi tuna dish for around the price of a standard at their local burger joint. Our customers get the convenience of ordering at the table, on our rewards-based My Motto membership app and shortly through takeaway ordering kiosks to make things quick, convenient, contactless and safe. What are the main ways you differentiate the brand to customers? The concept of “more” – we give our customers higher quality and a bigger range than other casual dining brands. More premium Australian ingredients and a unique menu. In what ways are your operations different now to pre-2020? There’s a renewed focus on our customer touch points: the ability to “order to table”, quick and easy online ordering and our revamped My Motto membership. We’ve completely reinvigorated our membership platform and how it connects into our service ecosystem in our restaurants and online to create value for our customers. We’ve grown our membership base to about 5000 members per restaurant.  What innovations/tech developments are coming up in the next year? My Motto membership will be tailored for each member instead of the traditional QSR “one size fits all” approach. We’ll add takeaway ordering kiosks into certain restaurants, with the ability to take away and use external seating or order quickly and skip the queue. We’re  implementing brand new inventory software and a customised business intelligence system to drive performance and lower costs. What are your 12-month expansion plans? We’ve recently opened our 10th restaurant, in Marrickville. We’re now looking to expand further into NSW, then into Melbourne.  When will unit revenue recover from the pandemic?  Different locations have been impacted in different ways. We’ve met a few challenges in our Gold Coast restaurants, given the reliance on tourism and constant border closures. Our restaurants in suburbs across Brisbane and Sydney have been successful in recovering. Not having any restaurants in the hardest hit regions has been advantageous but our bounce back shows a clear indication of the brand’s strength, particularly given our locations in major shopping centres and without the advantages of drive-through or in high density locations for delivery sales.  What are you doing to increase profit margins?We’ve gone back to basics to grow revenue, coupled with a renewed data focus to drive sales, improve margins and give guests what they want. We have internal operational programs to save seconds and cents to make our business model fitter. We appointed a value zone lead, who reports to the COO and leads data analytics across all functions, including supply chain, marketing and restaurant operations. We’re designing and engineering custom equipment so we can reduce labour, increase efficiencies and reduce complexity. Our supply chain is constantly being reviewed, especially with our own manufacturing capability. Portioning and preparing ingredients are a few of the ways we reduce cost drivers around skilled labour, and this ensures our costs are pushed as low as possible. This article was published in Inside Franchise Business magazine