What Full-Service Operators Can Learn From Fast-Casual Restaurants

Kevin Garry is the owner and managing partner of L’Artusi, L’Artusi Supper Club, b’artusi, and Via Porta in New York City.

Before I get into what’s promised in this article, it’s probably useful to understand my professional background and why I’m at all qualified to share fast-casual or full-service lessons.

I started in the restaurant industry at 14 years old, working for my uncle in his chef-driven, owner-occupied restaurant in upstate New York. When I went to college and eventually moved to NYC, those were the types of places that I worked at and gravitated towards. I was mesmerized by the talented chefs and beverage professionals who opened my eyes to all the wonderful pleasures that the best food and drink in the world could offer. Particularly when I landed a waiter gig at Gramercy Tavern, I was acutely aware that I was working shoulder to shoulder with the most talented and creative people in our industry. 

Eventually, I was promoted into management, and for the first time I was privy to the P&L and the business side of how restaurants work. Gramercy Tavern had always been a terrific business given that there was essentially unlimited demand to dine there, but I was struck by the absence of discussion on how to capitalize on that demand in order to make the P&L even stronger. The focus was always to create the best hospitality and serve the best products while sparing no expense, which is why that restaurant has stood the test of time. 

After over five years at Gramercy Tavern, I was ready for a new challenge that combined business and hospitality. I became the opening GM at a West Village Italian restaurant called L’Artusi. It was the perfect fit for what I was looking for: my boss’ background was in business and I was eager to learn from him. And learn I did! I think I heard the term “labor cost” more in the first month than I had in my entire career previously. We had detailed conversations about every line item on the P&L. The goal was to have a solid business from a financial perspective, which is something I really wanted to learn and implement. For over six years, as the GM and eventually director of operations for what became a small restaurant group, we continued to have these financial discussions. Looking back at all those meetings now, we all had the desire but we didn’t have the experience or playbook on how to do it. 

All of us had only worked in the same types of places: full-service, mom-and-pop spots where there is often a palpable sense of not becoming one those “those” restaurants (corporate, chain, a “sell out”). Us fine dining, full-service folks had better taste. We were “above” the chain restaurants of the world. We all looked down our noses at restaurants like that. Those operators weren’t good enough to cut it in our world. Or so I thought.

Around this time, a former colleague at Union Square Hospitality Group was the CEO of a very small NYC fast-casual restaurant called Shake Shack. He had been recruiting me to come join the team for quite some time but I couldn’t bring myself to give up my fancy suits and $200 Barolo to ask if someone wanted fries with their burger. In my mind, I would be selling out. But after a lot of convincing, I eventually left my role to take a job as NYC area director for Shake Shack. I told myself I was doing it because I wanted to learn our industry through a different lens and I was comforted by the fact it was Danny Meyer–owned. (You can’t be selling out by returning to a Danny Meyer spot, right?) 

I spent six years working at Shake Shack eventually overseeing 12 locations, including the first one (Madison Square Park), the busiest one (Theater District), the licensed airport ones (JFK), the ‘burbs (Long Island), the uber-seasonal one (DUMBO), and I opened Cleveland, Ohio of all places. For the first time in my career, I felt that I was responsible for running a business. It was also the first time in my career that speaking about strong financials — and, more importantly, constantly looking for ways to improve the financials — was openly discussed among the team and not just in meetings with ownership. Just as I was mesmerized early in my career by the creative people I worked with, I was equally intrigued by the very smart business people I now found myself surrounded by.  More importantly, they didn’t just have the desire to improve, they also had the gameplan and the know-how. 

I eventually returned to L’Artusi in mid 2019 as the owner and managing partner. (Yes, I’m the idiot who put his entire life savings into buying a restaurant group right before a global pandemic.) I walked back into an 11-year-old, successful, mature restaurant that had most of the same systems that I implemented when we opened. It was a business that was doing very well, with yearly top-line growth and quarterly profit distributions. But within a week of being back, I had a list of 100 things that needed to change immediately — and all of it was from my experience working at Shake Shack, from knowing how to run a smarter business that was taught to me in the fast-casual, chain world.   

Here are my biggest learnings from that time, that have not only made me a better restaurant operator, but a savvier business owner. 

If You’re Working Too Much In Your Business, Who Is Working On Your Business?

We all know a shift can easily get away from you in a restaurant. The toilet breaks, someone calls out sick, your food delivery doesn’t show up. All of those are “911 drop everything you’re working on to deal with” issues that occur daily. But there needs to be someone in your organization that is above all of that and working on pulling all the various sales and expense levers. Someone needs to deal with insurance, legal issues, permits, financial analysis, vendor relationships, succession planning, bookkeeping, and a million other things. If you are a chef that is in the kitchen all day or an owner that thinks the most important thing is to be at the front door to greet all your guests, most of these other important things will fall through the cracks. 

It is also very common to see an operator partner with someone they perceive to be a smart business person to play this role. This is a great idea, but it’s essential that this person has true operational experience in restaurants. Just because someone is successful in another career does not mean they will know the levers that need to be pulled in our industry.  

Fast-casuals have experts in every department — accounting, marketing, financial analysis, supply chain, etc. —  who feed data, insights, and strategy to the operators. Most of the rest of us just have people in operations. If you don’t have someone focused on all the non-operational areas, you are making a huge mistake. 

Understand Your Own Leverage

One of the most impressive people I ever worked with was the purchaser for Shake Shack. She held all of the vendors accountable in a way I have never seen before. She also went out of her way to make their lives easier when she could. She could be your largest advocate or your worst enemy; she was both feared and respected inside and outside of the company. 

I can’t tell you the amount of times that she said to a vendor, “We are a billion dollar company that is growing like crazy, do you want our business or not?” At the same time, if she found out an operator would purchase something from Amazon instead of through one of the approved vendors, she would lose her mind. “If we don’t live up to the agreements we have with our vendors, then we lose all leverage to get them to offer us better prices and service.” 

Upon my return to L’Artusi, I realized we weren’t a billion dollar company, but I also knew we had leverage with our vendors. We were busier than most restaurants and therefore bought a lot of product. We also always paid on time. Both of those equaled leverage. So I called meetings with all of our main vendors in an attempt to attack food costs. I sat with all of them and told them we would be putting our business out for bid and they were getting first crack to keep it. Every single vendor gave us something in order to keep us as a customer. Some lowered prices right away. Some gave us discounts if we adjusted to 15-day terms from 30-day terms. Some told us we could pay on a credit card (that gave us 3 percent cash back) without charging us a fee. Some asked us to add more items to what we bought from them in exchange for better pricing. All in, we lowered food costs by 4-5 percent just by having these meetings. No menu prices were raised and we didn’t change the quality of the products we were buying.  We now repeat this process every few years. 

Keep in mind that it took me about two full weeks in front of a computer to gather the necessary data to have these meetings. This is what working on your business instead of working in your business means. 

Challenge Your Old Ways of Thinking (While Finding Sales Outside the Four Walls) 

Believe it or not, Shake Shack was one of the last groups to participate in the world of food delivery (pre-pandemic). We always believed fries and milkshakes didn’t travel well and prided ourselves on the in-store experience. We actively avoided delivery until it became clear that we simply couldn’t ignore it any longer. 

I was on the team that launched delivery for Shake Shack in 2016-2017. We met with all the big players at the time (DoorDash, Postmates, GrubHub) and it was fascinating to see how those business models worked and how it would fit into our world. Once delivery was launched, it quickly became the biggest thing we spoke about, and as the years went by, sales from people not even being in the restaurant outpaced in-store sales.

One of the only things we said “no” to at L’Artusi over the years was take-out or to-go food. We made our pasta fresh and we all thought (incorrectly!) it would never be as good at home. Upon my return, we were only open for dinner, yet we had a whole prep team that was there during lunch hours. I convinced the team that we should test delivery at lunch. Even if we only did a couple orders, we wouldn’t need to add any labor and the extra sales were always welcome. Chef pretty quickly realized that if we oversauce those fresh pastas a bit, they actually do travel well. Also, to our huge surprise, our very popular roasted chicken was actually better on delivery (the steam in the box kept it extra juicy). 

We challenged our own thought process and realized that we were wrong. The delivery demand we saw during the pandemic and for years after was a key indicator for us of our overall demand and gave us the confidence to expand. One of those expansions was actually to build our own ghost kitchen so that delivery could be viable once indoor dining came back 100 percent. 

COGS & Labor: The Importance of Check and Balances

Mom-and-pop restaurants don’t typically have the resources that fast-casual chains do, but that doesn’t mean you can’t learn from them. Shake Shack had the best process I’ve ever seen for reviewing COGS and labor, as well as the philosophy that if you manage these two things well, you don’t need to worry about the rest. 

Shake Shack created a system where each location got a “score” the morning after each shift that let them know if that day was going to help or hurt their monthly COGS and labor. As a multi-unit operator, I could scan the reports from my 12 locations and know in less than five minutes if we were on track to hit targets. It was the most valuable report I’ve ever seen in our industry.

It's certainly not groundbreaking to say that COGS and labor need to be paid attention to. But what was important was the depth at which we looked at both. We spent over a year trying to figure out the right system, the right inputs, and stress-tested it to ensure it was accurate. We got so deep into it, in fact, that we were able to determine that for every 34 menu items sold, we needed one hour of labor. No mom-and-pop restaurant is doing that level of digging, nor do they have the resources to do so, but the important takeaway is that in order to be profitable, you have to figure out your own system and what works for your business and, importantly, be open to a different way of looking at it. Simply talking about these line items without a specific, stress-tested plan will not be sufficient. Hope is not a strategy!