Enough Already! 3 Things About Restaurant Profits You Need to Hear

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How are the profits in your restaurant? Great? Amazing? Is it your best year ever or are your profits on life support? Wherever you are now, it can be said that you want more. It’s human nature to want to climb to the top. 

The restaurant business can be very brutal on people at times especially when it comes to the area of making money. How do you beat the odds and maximize your profit potential? Here are 3 things that are getting in the way of you and your profits:

1. You Don’t Know Your Numbers

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Sure you have played around on excel and maybe you roughly know some of the costs associated with items on your menu. That’s what the average restaurant does. The problem with average is that it just sucks. Time to get in there and become a profit seeker by understanding your spreadsheets!

Is digging into the numbers fun? For some people yes, for the vast majority that would be a no. Here’s the thing that many forget if you don’t like the numbers side of the business then hire someone who does. You must know your numbers and you must know them every day because things change quickly. Sometimes very quickly! No one said you had to do it yourself. However, you do need to be aware of where the money goes.

Study the reports from your POS system religiously and consistently. Look at check averages. Is there something you could offer or train your team to prompt that might get your a few extra dollars added to increase check average? 

How much are you spending on paper goods? This can become a very costly line item if you have a big delivery and takeout business. How about linen costs? How about managing the overtime on the team? Little things make a big impact when looking for a few percentage points being added to the bottom line. Just imagine if you dropped your turnover rate 10%? That can be a game changer for some restaurants and it’s not very hard to do.

2. You Don’t Know Your Team

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Speaking of turnover, you’ve probably heard the line that people don’t leave restaurants they leave managers. Well, that is pretty accurate. People are motivated by many different reasons and the key is to understand what motivates each person on your team. Most managers assume that what inspires them to go to work is the same thing that drives others on their team. Sorry, that is a gross generalization and not accurate.

Getting to know your team and what is important to them will enrich your company culture. An amazing culture is like having the world's most powerful magnet. It attracts top talent and compels them to stay. If your turnover is high, you must take a hard look at your culture and ask why. You might not like the answer you find, however, you need to face the truth. If your culture is rotten then it will impact your profits. Turnover isn’t cheap (they say around $5,200 per hourly employee) and that revolving door of people coming and going is slowly bleeding the profits away. Get control by understanding what your current turnover rate is now and take action to reduce that number.

3. You Don’t Know Your Guests

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Lastly, if you do not have your finger on the pulse of your guests you are ignoring the most powerful way to increase your profits. Your guests tell you every day what they want by their buying habits. Once again, there is gold in your POS reports if you just take the time to examine them and ask yourself questions.

  • What item is the best seller?
  • What beverages are most popular?
  • What is the average table turn time?

Once you analyze the data, then you need to put your ego aside (yes, this is the hard part) and just give them more of what they want! Not exactly rocket science, yet it’s fundamental to marketing. Too many restaurant create their menus based on their egos and what they think the guests want. They might have a few good sellers, however, most of the menu just limps along sucking profits. Better to have a solid menus of hits that sells than one item that needs to carry the load because your too proud to take the other loser menu items off.

Being a smart restauranteur means doing what is best for the brand and that means giving the market what they want, not what you want. Restaurant brands do well when they find a need within a niche market and provide to fulfill that niche. Creating a niche and trying to find guests to come to your new concept requires a lot of marketing and sometimes good timing in the market.

Finding profits is not that hard if you are willing to swallow your pride a little and admit that you need to work at it. Make a commitment to nail down your numbers and know them like the back of your hand. Knowing your numbers help you make better decisions day-to-day and that allows you to make adjustments that can add more to your bottom line.

Talk to you team and open yourself up to get to know them. Know their families (kids names), birthday, and work anniversary them make a big deal out of it. Show your team you appreciate them by saying, “thank you”.

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Understand your guests by talking to them and seeing what the data tells you on how they spend their money in your restaurant. Recently an upscale restaurant was struggling with a depressed economy in their market as oil prices were hit hard. They decided to start a prixe fixe menu to ease the burden and show the locals that they understand and wanted to provide a way for people to still come in and enjoy their restaurant even during down times. The restaurant has seen a rise in sales due to this new menu and surprisingly an increase in wine sales as people had a little extra money to spend on wine since the menu was priced to support the local guests. 

If your profits are not where you want them all your need to do is change a few things and take new action to get new results. Insanity is doing the same thing you are doing now and expecting different results...stop that.