No one ever said it would be easy. Operating a quick service restaurant in today’s business environment is a challenge that requires a great deal of work and a lot of skill. A successful QSR operator (and we’ll include fast casual restaurant operators as well) must be an expert in management, food preparation and customer service – all while understanding the complex nature of running a small business. In short, a QSR operator needs all the help that he or she can get…and that’s where energy efficiency comes in.
“Hold on”, we can hear you say, “why should I be concerned about energy efficiency? I’ve got too many other things to worry about in running my restaurant – labor costs, rent, insurance, taxes, food prices – to spend my time figuring out ways to save energy. Besides, I’m no tree hugger!”
Well, the good news is that you don’t have to be a tree hugger to embrace (no pun intended) energy efficiency. You can enjoy the benefits of energy efficiency for any reason you choose – and as a QSR operator, the best reason of all is that it will significantly reduce your operating costs and improve your bottom line. If energy efficiency also makes you a good environmental citizen, so much the better!
Earlier, we mentioned some of the challenges that keep QSR operators awake at night: labor costs, rent, taxes, insurance and food prices. Those items have one important thing in common: They’re all beyond your control. Let’s look at labor costs as an example. On January 1, 2019, the minimum wage increased in 20 states as a result of legislative action. Since many QSR employees fall into the minimum wage category, restaurant owners in those 20 states started the new year with an immediate hike in their labor costs. Add into that equation the ever-increasing expense of providing healthcare coverage and other employee benefits, along with legislative initiatives in a number of states to mandate sick time and/or paid family leave, and it becomes apparent that the surge in labor-related costs is putting a huge dent in the profit margins of small businesses.
It would seem like only way to avoid these higher labor costs is to decrease the number of employees; but that’s going to have a negative impact on customer service: Fewer employees mean longer lines at the order window and increased wait times for food to be prepared and served. The logical answer to dealing with costs you can’t control is to offset them by dealing with the costs you can control. And of all the cost areas involved in operating a restaurant, energy is the one over which you can exercise the most control by improving the way you use it.
How critical is saving energy for a QSR operator looking to trim their operating expenses and maximize profits? According to a recent report from the Edison Electric Institute, a 10% reduction in a restaurant’s energy costs can boost its net profit margins by 4%. Considering that most restaurants run on the thinnest of profit margins, those numbers are hard to ignore…especially since a 10% reduction in energy costs can easily be achieved with just a few upgrades.
Lighting the Path Forward
Studies conducted over the past few years by utilities, government agencies and industry organizations generally show that energy costs account for 6 to 8 percent of a restaurant’s total operating expenses. Breaking those costs down further, lighting accounts for 10 to 15 percent of the total energy bill. That number may not seem significant when compared against the energy consumed by a restaurant’s refrigeration, cooking, air conditioning or water heating systems, but a lighting upgrade is the most cost-effective energy efficiency measure you can install and often provides the quickest payback.
Since QSRs generally have indoor and outdoor lighting, illuminated signage and parking lots that require lighting for safety and security, upgrading to LEDs offers great value. LEDs use 30% less electricity than fluorescents and last up to five times longer. If you’re still using neon in your outdoor signage, the savings are even larger: LEDs use 70% less electricity than neon lights and have lower maintenance costs because they don’t have to be periodically refilled with gas. Those savings can be magnified if your business is subject to a demand charge on your electric bill (a charge that reflects the moment in time during a billing cycle when your electric use is the highest), since reducing your electric demand for lighting at times when you need to operate other equipment – like air conditioning, refrigeration or cooking – will help to lower your demand charge as well.
Speaking of those other types of equipment, reducing their energy consumption through efficiency upgrades can harvest the cash you need to keep up with the rising costs you can’t control. Just look at refrigeration: Over the life of a typical piece of commercial refrigeration equipment, the cost of the electricity needed to run it can be up to six times as much as the price of the equipment itself. That’s a pretty good argument for choosing the most efficient equipment when it’s time for an upgrade. Today’s high-efficiency commercial refrigeration will not only offset labor costs through energy savings, but also through features that allow QSR operators to remotely monitor and control the equipment. These features provide real-time reports and alerts that allow you to manage the integrity of your food supply from anywhere – eliminating the need to pay employees to be physically present.
High efficiency cooking equipment is designed to meet a QSR operator’s need for speed and consistency in food preparation. It can reduce cooking times, making employees more productive by allowing them to prepare more meals per shift. Also, the self-cleaning features of high-efficiency cooking equipment means fewer staff hours spent on cleaning. Upgrading your heating, ventilating and air conditioning – or HVAC – system also makes sense from an energy savings standpoint. As an additional benefit, the automated temperature and de-humidification controls that are built in to today’s high-efficiency HVAC energy management systems mean greater and more consistent comfort for both customers and employees.
Utility and government-sponsored energy efficiency programs can bring down the capital cost of these upgrades through rebates and financing plans. Your Ecology Action energy efficiency expert can provide you with specific program details for all your QSR locations.
More than just the money
Energy efficiency can benefit your restaurant in ways that go beyond reducing your electric bill. Customer loyalty is critical to any business, and the ability to attract new customers and keep existing ones is essential to your restaurant’s success. Today’s consumers are environmentally conscious and tend to patronize businesses that share their values. Nowhere is this consciousness more apparent than with millennials, who also are the largest customer segment for QSRs. A recent survey showed that two-thirds of all adults prefer doing business with companies that are environmentally responsible – but that figure rises to nearly 90% when it comes to millennials. Demonstrating your shared commitment to the planet by reducing your restaurant’s carbon footprint through energy efficiency can be a very effective marketing tool. And since millennials love to share information through social media, your reputation as an environmentally conscious business will get even wider exposure. In other words, energy efficiency may save you money on advertising as well as your electric bill.
If you are a franchisee of any of the major QSR chains, chances are excellent that your parent company has a Corporate Social Responsibility strategy – or CSR – that includes energy efficiency among its sustainability goals. Corporations whose stock is traded publicly are also rated on their Environmental, Social and Governance standards – ESG, for short – that socially conscious individual and institutional investors use to rate companies on their sustainability and ethics practices. Incorporating energy efficiency into your operations will more closely align your restaurant into its parent company’s commitment to social responsibility.
In short, energy efficiency can improve your bottom line in several ways. Not only can it lower your utility bills to free up cash for meeting operating expenses beyond your control, but it can increase employee productivity, improve the customer experience and enhance your reputation among environmentally-conscious consumers and corporate managers. Think about that the next time you walk past a tree. And, oh, feel free to give it a hug.