In good times and not so good times, operating a profitable restaurant can be a daunting task. The high cost of rent, labor, and raw ingredients, often overlooked by guests seeking a fine dining experience at fast-food prices can make value perception and profitability difficult. Nonetheless, there are a few things every operator should be aware of, especially during tough economic times. Below I have listed six tips that when put into everyday practice, not only help save money and increase sales when times are lean but serve to maximize profits in better economic times.
Be Mindful Of Your Payroll
Payroll is the one thing in your operation that you have total control over. You determine it, and no one or anything else has a hand in the result. Knowing how to manage payroll is an essential element to success in the restaurant business.
Controlling labor during a slow business period can be tricky. If your businesses’ survival is dependent upon the need to terminate personnel, then managing the schedule of your hourly employees as well as your key people in a compassionate way must be your top priority. You’ll need to delicately balance the limiting of hours among your best employees. Whenever possible, spread the cutbacks out amongst as many team members as possible. That way you can lessen the impact to any one team member.
Be mindful that if you schedule less labor than you need, your restaurant may end up giving poor guest service. That will negatively impact the guest experience as well as your Social Media reviews. On the other hand, if you over-schedule your labor as a percentage of sales, then you’ll be out of line with acceptable budgets and typically lose money.
Look for trends in your sales—for example, busy days and hours versus slower times and days. For instance, if Tuesday afternoons are consistently slow, then consider cutting back on your hourly staff for that period. If you employ a salaried manager, have that person substitute in a station position. Labor is the most critical line item on your P&L. Oversee it, adjust it each day based on projected sales. Remember, unlike food inventory, which allows you to store it (in many cases) for another day, labor, once spent, is gone forever.
Engineer Your Menu To Reflect Current Goals
Sometimes bigger isn’t better. A smaller, more focused menu is often more profitable than the “be everything to everyone approach.” During a recession or slow season, use your menu to attract new customers as well as enticing your regular customers to visit more often. Adjust your menu by offering items that have more appeal in a budget-conscious climate. Understanding what guests want, what they can afford, and what you wish to sell them is a critical piece to menu engineering.
Also, position your lower food cost items in a prominent spot on your menu. That way, you can offer your guests lower-cost menu items and still make a profit.
And although it goes without saying, don’t forget to conduct a weekly inventory. Monitoring your food cost will help you manage cash flow most efficiently and accurately.
Stay In Front Of Your Customers
The saying “out of sight, out of mind” is never is more accurate than in a recession or slow period. You may not want to run your full Radio/TV or Print campaign. However, now is not the time to cut advertising to zero. Instead, increase your paid social media and your paid Google ads. Post photographs of guests in your restaurant, delicious-looking food items, and creative, fun graphics to entice and remind your guests how much they enjoy your restaurant and what you have to offer.
In addition, utilize the database you’ve collected of customer’s email addresses and mobile telephone numbers. You can use this data to send your customers special offers via email blasts and text messaging. Be proactive!
Promote Value, Not Price
During a recession or other tough times, offer your guests real value, not discounts. It is my opinion that you should never attach the price of the menu item to the item itself, for example, selling a hamburger for $1.00. Discounting your products creates a considerable problem for future sales of those items when you move them back to full price. Lowering the price of a menu item creates a product/price value perception, which may negatively impact the customer’s perception of value at a later date. Guests will connect the cost of the menu item to its overall value, now and in the future. Cutting prices for the sake of attracting customers or keeping up with a competitor is never the answer.
Instead, create reasons and additional “occasions to use” your restaurant in your guest’s mind. Then the guest will associate a discounted price with a particular promotion or event. For example, ladies’ night, or seniors day, or it could be the anniversary of the restaurant, and you’re rolling back prices, or National “whatever” Day. Whichever the case, offer real value by promoting events and Limited Time Offers (LTO’s) as a reason to create the “frequency of visit.” This method is also useful for attracting new guests or guests that haven’t visited your restaurant in a while.
Paying Attention To The Details Saves Money
Pennies add up! Keep a watchful eye on expenses. Monitor electricity and water usage, napkins, paper towels, cleaning supplies, and other items that often go unnoticed until you see the cost on your P&L. Be mindful and control those costs each day. Make your staff aware of things like shutting off lights, turning off water faucets, and how many paper towels they may be used to clean a counter. Get your team members “woke” to the idea and actual cost of everything in the restaurant.
One Final Note
Good times follow bad times, and bad times follow good times. Nothing is forever, so learn how to manage a restaurant through a rough patch you’ll be in a better position to maximize your profits when times are good.