$1.8 billion. That’s the typical sales for the entire restaurant industry on any given day in 2013. That sounds like a lot of money doesn’t it. But as a restaurant owner or manager, you know the truth – restaurants are high-expense businesses. Full-service restaurants typically pull in margins of only 2-5 percent. According to the 2010 Operations Report by the National Restaurant Association and Deloitte LLP, a little over 1/3 of revenues goes towards the purchase of food and beverages. Another 33 percent pays staff salaries and wages. Occupancy costs take upwards to 6 percent, Then there’s maintenance, utilities, marketing, legal, insurances, taxes and other expenses. With expenses in the 95 – 97 percent range, it’s no wonder you may be looking for a way to reduce costs.
But cutting costs is a balancing act. If you go too far, or cut the wrong expenses, customers will notice, they will spread the word, they will come less frequently, or at all, and business will suffer. If you are looking to put some expenses on the chopping block, then here are three costs that you will want to manage on your things-to-cut list.
At 32 percent of costs, this seems like a good place to start. But lowering the quality of the food served is a dangerous gamble. While it’s a hefty chuck of your costs, it’s a hefty chuck of your success, and it’s largely what defines your brand. A top reason for people to frequent a restaurant is because of the food – and they will notice when they are served wilted salads, watery tomatoes, broken and mushy fries, or if there are missing ingredients. A menu revamp might be a better way to manage costs. Reduce the number of dishes on the menu – removing unpopular, low return items. Take a look at what ingredients can be used in multiple dishes, which would enable bulk purchases. Introduce limited time dishes – to take advantage of vendor specials.
Staff and Service
There is no point to having good food quality if it means hot dishes are going to be served cold, due to overworked wait staff. While a reservation system like OpenTable or Ureserv helps, you can’t predict the number of patrons that come in every month. Take a look at how you open tables. Sections near the kitchen make the back and forth trips a lot quicker for wait staff than tables in the restaurant perimeter. Also take a look at duties and see where cross-training can help reduce staff, without reducing service where it makes sense.
Upkeep and Cleanliness
Reducing staff can also affect cleanliness. No one wants to eat at a nice restaurant only to be haunted by the dirty bathroom – no toilet paper, wet counters and floors, “spills” and more. Fix broken toilets and leaky sinks. Not only are they an eyesore, they may be upping your water bills. There’s an adage that customers should judge a restaurant by its bathrooms – don’t let mess and disrepair chase off customers. If you have large facilities, consider closing some of the stalls to reduce cleaning requirements. Maintenance can also affect food quality – replace that fryer oil, get the hood systems cleaned when needed. Make sure tables are stable. A shift in placement of an elbow, forearm or hand on the table shouldn’t send food and beverages sliding. Replace burnt out lighting. People want to see and appreciate what they’re eating.
If cash flow is tight, remember you have financing options such as a merchant cash advance to help you manage ebbs and flows in revenue streams.