Is Modifying Hours of Operation Right for Your Restaurant?
  • Analyzing hours of operation is an opportunity to increase restaurant margins
  • Modifying operating hours on a store-by-store basis requires quantitative, evidence-based restaurant data
  • Restaurant brands can help their franchisees by supporting modified hours of operations

For fast casual and quick-service restaurants (QSRs) looking for a financial and competitive edge, finding ways to boost restaurant sales and profitability is a top priority. While taking price may seem like the obvious choice, restaurant owners should precede with caution as frequent or drastic changes could backfire. Menu engineering can help, but what else can be done?

As the restaurant industry confronts challenges such as staffing shortages and declining foot traffic, Revenue Management Solutions (RMS) suggests evaluating hours of operations for each location to increase restaurant sales.

Analyzing opening hours can be an effective strategy for restaurant pricing and increasing profitability, says Sebastian Fernandez, Chief Research & Development Officer at RMS. “Large restaurant chains often struggle to figure out the best operating hours — especially on a per-store basis” says Fernandez.

How to Evaluate Your Hours of Operations

Clients often ask RMS “Is modifying our restaurant hours the right thing to do?” This is a question the restaurant industry has struggled with for some time. Should one location close at midnight while another owned by the same franchisee stays open until 1 am?

The answer isn’t straightforward. The pandemic shook up operations, leading to closures and reduced hours due to staffing shortages even after restrictions eased and vaccinations rolled out. Then, in 2022, many brands reverted to regular hours but had to scale back again due to ongoing staffing challenges. “It’s very much a case-by-case basis,” says Fernandez.

By analyzing market data, demographics and location, restaurant franchisees decide if varying hours makes sense for their stores. For instance, a store in a college town might extend hours, but for one located in an office park, hours might stay as are. “We rarely recommend reducing hours,” says Fernandez. “We typically work with restaurant brands to identify ways to return to their original store hours.”

Tailored Operating Hours Based on Data-Driven Insights

Any hours of operation strategy must rely on quantitative, data-driven insights specific to each restaurant. While a a one-size-fits-all approach may seem tempting, it’s not practical, says Fernandez. RMS assesses consumer demand around each restaurant individually to precisely predict the effects of extending operating hours.

Fernandez adds, “We analyze whether there’s enough demand in the area. If there is, we estimate the impact on restaurant sales and compare it to a minimum threshold needed to cover costs. If the sales impact exceeds this threshold, we recommend extending operating hours.”

Creating a Profit-Driven Strategy to Balance Demand

Streamlining restaurant operations for increased profitability isn’t just about adjusting hours. “These approaches are not mutually exclusive,” says Fernandez. According to Fernandez, it’s crucial for brands to balance meeting demand and devising strategies to stimulate it. These approaches can work hand in hand. For instance, while some restaurants may benefit from extending hours during peak times, others may thrive by focusing on meeting existing demand.

However, this is not a blanket recommendation a brand can make for all restaurants systemwide. It’s important to recognize that not every recommendation will suit every restaurant location. Market-specific solutions are key, with only 15% – 25% of restaurants likely to see positive outcomes from each specific suggestion.

Ultimately, brands want to encourage franchisees to evaluate the profitability of expanding operating hours and see the evidence behind those profitability estimates. To aid in this decision-making process, RMS offers custom reports detailing opportunities for each restaurant, potential additional profits, and the rationale behind the estimates.

All brands are looking for ways to increase restaurant sales. While hours of operations is one way to drive same-store sales, marketing plays an equally vital role. There are a number of steps corporate can take to support franchisees, such as the following examples of expanding late-night hours:

  • Rethinking late-night menu offerings (for example, Taco Bell Fourth Meal, Jack in the Box Munchie Meals)
  • Targeting late-night customers with:
    • Market-level marketing such as late-night media campaigns, signage and promotions late-night with third-party providers and delivery partners
    • Restaurant-level strategies such as restaurant signage, drive-thru menu board signage and point-of-purchase signage
  • Testing late-night hours in a specific market
  • Expanding national media coverage and digital promotions as more franchisees adopt late-night operations
  • Ensuring the website, app and delivery platforms have the updated hours of operations for each location

Increasing Profitability With RMS

Analyzing hours of operation for franchised restaurant brands at both the store and market level isn’t a novel concept. For decades, RMS has been at the forefront, helping brands achieve perfect timing using their individual market data. Leveraging RMS’ patented analysis of POS data combined with market research, we identify what your customers want in each location, region and time of day. Armed with these insights, you can fine-tune your hours of operation to maximize labor efficiency and drive profitability — tailored to each store. Ready to unlock the potential of perfect timing? Schedule your free consultation today!

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