The ROI on Longer Hours

Restaurants looking to grow sales may be tempted to extend operating hours, but the payoff is not always positive.

April 30, 2013

NEW YORK – As a weakened economy continues to squeezes sales at restaurants, many owners have extended their operating hours, an effort to generate more sales. But franchisees are learning that the extra effort does not always pay off, the Wall Street Journal reports.

The basic problem is one of ROI — it costs more money to keep the lights on longer, and customer traffic is modest at odd hours. In fact, many franchisees say some markets do not have enough night owls to make the concept work. 

Longer hours appeal mostly to "younger folks out and about, and they have cut back so much on restaurants," said Bonnie Riggs, restaurant-industry analyst at research firm NPD Group. "Maybe if you're in some big metropolitan or tourist areas it's worthwhile."

It isn’t just the night owls the extended hours are targeting. Many QSRs are trying to attract early diners. For instance, Taco Bell recently added a breakfast menu, and 825 stores across 14 states now open between 7 am and 9 am instead of the usual 10 am.

For many franchisees, extending hours can be appealing, as it allows them to generate more revenue while simplifying other parts of the workday: opening and closing the restaurant, for instance.

But others worry that the payoff is simply not substantial, and just finding people to work late shifts can be challenging.

"It is always difficult to get people [to work] overnight. It's just contrary to the body," said John A. Gordon, a restaurant consultant in San Diego. "When you get them, you work hard to keep them."

As for late-night sales, the numbers are often modest. According to NPD, traffic between 9 pm and midnight represent just 6% of total visits, while traffic between 1 am and 4 am is less than 1%. 

Whether expanding hours makes sense in your market requires some basic research, said Peter Riggs, vice president of brand promotion for Pita Pit USA Inc. For instance, he recommends surveying the neighborhood during the proposed period to see how busy it is and assess traffic at competitors. He also said polling existing customers with the idea can be helpful. 

Franchisees also urge patience when trying to build late-night sales, which often take months to develop.

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