The past decade has seen unprecedented growth and investment in the restaurant space. Today, most of the industry is seeing top line revenue flatten while food and labor costs rise, putting a tight squeeze on profitability. As the credit markets continue to tighten, owners must find creative alternatives to increase earnings outside of revenue growth from new store expansion.

We’ll use a 50 location concept as an example with average unit volume of $1,200,000 and 8% earnings. This would put enterprise-wide earnings at $4,800,000. What are the options to increase earnings by 22%?

OPTION 1 – Growth Through Expansion

Target earnings increase: $1,050,000 (22%)

Number of new stores required to achieve: 11 = (Target Earnings)/(AUV*.08)

Cost to build 11 new stores: $9,350,000

Timeframe to deploy: 18 Months

OPTION 2 – Technology Investment to Improve Operations

Target Earnings Increase: $1,050,000 (22%)

175 Basis Point Operational Improvement Realized: $1,050,000 = (50*$1,200,000)*.0175

Cost of Investment: $327,100 (6 Camera System in all 50 locations)

Timeframe to deploy: 45 days

Even with flat revenue, an enterprise is able to demonstrate significant growth to the bottom line with minimal investment in technology when compared to an expansion strategy. The timeframe to deploy is of great significance as a technology deployment today would have positive impact on Q408 with full ROI by early Q109.