Pop-Ups are the MVP for Restaurants of the Future
About a month ago, I attended a pop-up in downtown New York. A group of friends of mine experienced an accident in their restaurant which forced them to close temporarily. Less than 48 hours later, they had reserved a space, notified the guests of their new option for a reservation, transferred all ingredients, special equipment and staff to a new space and created a unique pop-up experience for over 100 guests. The whole experience got me thinking about the role that a pop-up plays in the lifecycle of a business.
In the sports world, the MVP is known as the Most Valuable Player. Despite the collective “win” as a team, the media likes to showcase the performance of a single member.
Who is the MVP for the restaurant pop-up?
Is it the guests, who courageously choose to dine in a completely new experience? Is it the Chef who assembles a new menu using the special ingredients his purveyors supply him with? Or is it the General Manager who contacts restaurant-ready spaces that are available and coordinates the service logistics for these experiences?
The sport of Hospitality really requires a team attitude. There really is NO room for highlighting one person’s achievement. So instead of thinking of the MVP as a who, I believe that the collective whole is the “MVP”.
MVP also stands for Minimum Viable Product. Taught as a theoretical concept in Lean Entrepreneurship, the MVP is the first version of a product or service that an entrepreneur is attempting to design, build and launch. In this case, the collective efforts of the team launching the pop-up are all part of the minimum viable product for a new restaurant experience.
Throughout history until about ten to twenty years ago, restauranteurs have been testing out their concepts with popups to see how the market reacts. Although each popup has its unique set of challenges, there are a couple of principles that are constant across them all:
- Vacant area of real estate provides a temporary location for a unique culinary experience
- There are significantly fewer expenses to execute and deliver a promise
- The variable costs are higher due to short lifespan (duration of popup)
- The volume of transactions (personal touches, financial expenses, and operational configurations) in such a short period is extremely high. Recording, analyzing, and synthesizing becomes increasingly difficult as there is no central repository to store all of the information.
What is a Pop-Up?
During real estate cycles businesses sometimes have to break their contracts and vacate their stores abruptly. This causes a temporary vacancy. In order to monetize on un-used assets, landlords sometimes make short-term deals with tenants who want to “pop up” in a space temporarily. Pop-up spaces are occupied for a duration as short as 24 hours, or can even span every evening for the entirety of a month.
Every popup has a different goal. Some are funded by corporations to serve as an advertising platform. Some are made up of the life savings of a husband and wife couple that want to debut their passion project to the neighborhood. Some are installations meant to penetrate the mind of consumers with a social message from an artist. And some could even be a group of pastry chefs creating said message in collaboration with a performance artist through a variety of sweet confectionaries (Yes, there is a company that does this. Check out Kreemart).
What happens at a Pop-Up? Before, During and After. Well, nothing too different from a general restaurant.
- Maitre D’s have to fill the books.
- Service Managers have to hire and train staff
- Sous Chefs have to source food and prepare it for service
- General Managers and Executive Chefs need to fill the house and coordinate the song and dance on a daily basis.
This is the simplified, one-bullet version. Alas, each bullet can break out into over 100 individual tasks required for the nightly performance to be executed flawlessly.
After many nights of boisterous services filled with many customer interactions, celebrity sightings, and visits from close friends and family, pop-ups close their doors and the team gets together for a celebratory champagne toast. Following the celebrations, (and assuming that the pop-up has intentions of opening a full-scale operation) leadership gets together and to analyze the performance.
- How much money did they make?
- How much money did they spend on staff?
- How much did the food cost?
- Did they waste anything?
- And on, and on and on…
These are some of the questions that are discussed among the bookkeeper, the owner, the chef and the general manager. Although finding the answers to these questions takes some time, (the bookkeeper has to review all invoices from the 10 different vendors, sales reports from the POS, and the logs that showed the waste), the team is able to answer some general profitability-level questions. However, when using this as a basis for the fully-scaled business, there would need to be additional expenses like rent, employee tax contributions, benefits, and all the fixed expenses that come with the opening of a new restaurant. By including all of these figures, a true cost structure is available for analysis.
Analyzing the Stats
What if all this information could be gathered in one place, to conduct a more rigorous analysis? Some of these key questions could be answered using decision support tools that consider known variable incomes and expenses. These tools can help us understand how some of the following situations can change things:
- What if the building rent went from $13,000/month to $20,000?
- What if square footage increased/decreased by 10%, leading to an increase/decrease in the number of seats by 5?
- How many more guests can be served if an additional server or cook is added to a shift? What is the marginal cost/benefit?
These questions require a rigorous analysis of the nitty gritty of service. As costs continue to rise with no signs of slowing down, restauranteurs will really need to drill down to this level of detail and understand how the money that they are pulling together to launch a full-scale operation, will be used in every single line-item of their P&L statement. Owners don’t have to be the ones doing the math, but they will definitely need to data analysts and bookkeepers to bring together all of this information.
Today, there is software that can gather, consolidate, and analyze information that would produce these kinds of insights. Even with Excel, although it would take quite some time to design and build the appropriate model, we can create a tool to analyze these specialized use cases. The software available is known as an Enterprise Resource Planning (or ERP) Tool.
The database inside an ERP contains all the restaurant information that is programmed into it from invoices, employee information, sales, operating expenses, etc… Every ERP can analyze correlation across different data sets and calculate future forecasts based on current sales (with general seasonal trends already programmed into the database). The ERP serves as the central repository of data and information for any business. If a restaurant desires to produce detailed reports that show the link between sales, inventory, and labor, the management team must change their data management to a consolidated approach with an ERP.
Another area of significance of a pop-up includes all digital marketing efforts. Multiple marketing channels can be reached from a centralized ERP. By linking all social media tools (Facebook, Instagram, Twitter, Snap Chat), location services (Google, Foursquare, etc…) and email marketing (MailChimp, ConstantContact), all in one place, it is easier to create a post, update a location, or blast a message one time and send out versus copying and pasting in each individual website tool. All reservations made from these messages can be tied to sales information from each guest. This digital interaction is the beginning of the relationship between the restaurant and its community.
Predicting the Future
Does your organization use an Enterprise Resource Planning Tool?
Implementation in a restaurant is one of the major hurdles owners face. One of the reasons is because there is a shortage of data analysts in the industry-well, any industry I guess. All industries desire people who specialize in creating digital representations of reality. The ERP contains all of the information of an organization. With an ERP, its almost possible to put on the gloves like Tom Cruise did in Minority Report, and “explore these digital representations.” Not really, but this ridiculous metaphor does contain some truths.
MBAs would call this “forecasting” or FP&A-Financial Planning & Analysis, which really is no different than what Chief John Anderton did-he just had superhuman insight and computational power to analyze it.
We have data collected from hundreds of invoices, recipes, and labor schedules. We just need to take the time and bring it all together in the same place. It is easier said than done, as one of the critical IT challenges organizations face is ensuring Data Integrity. However, the value of having the information readily available is limitless.
A Final Word on the MVP
Going back to the original question-Who was the MVP?
The MVP for the restaurant is always the team, their achievements, and the data extracted from the experience. Once all of the information is stored in a centralized location, it becomes easier for the business to analyze it all and navigate the path forward.
How can we put on some futuristic gloves to analyze the present and navigate through our own futures? Maybe it’s time to think about how using an Enterprise Resource Planning Tool can help your organization, during its “Pop Up” phase.
How do you manage all of the information collected during your pop ups?