Monday, August 26, 2019
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Restaurant profit: Take Care of the Pennies

There is a saying in business that says, “Take care of the pennies, and the dollars will take care of themselves.”  This adage is especially true in the restaurant world.

Most restaurants that fail don’t go under because of some catastrophic financial disaster, they fail because the owners and managers don’t take care of the pennies.  It is the daily waste that may not seem like much when taken by itself, but when combined with other “little” money wasters on a daily basis, it eats away at the bottom line.

Back in my line-cook days I saw my fair share of wasteful practices.  It was the grill cook that always seemed to make one too many burgers every day (”I guess I’ll just have to eat that one.”), or the server that put a little extra whipped cream on the sundae, or the bartender that gave a little extra splash to the regulars, or the prep cook that over portioned the cheese on the salads.  Each one of these taken by themselves aren’t significant costs, but when you look at what each person in your operation is doing, and multiply that every day, it makes up a huge amount of money that your staff is giving away.

For most operations, reducing food cost by just 1% is not that difficult.  It just takes a little more diligence in watching for waste. While 1% may not seem like much, if you restaurant is doing $500,000 in sales, that 1% represents a $5,000 savings.  That’s pure profit. I don’t know about you, but I wouldn’t turn down an extra $5k every year.

Take care of your pennies.  They really do add up.

At it’s core, being successful in the Restaurant and Food Service Industry is very simple: Have income that is greater than your expenses.  If you aren’t making enough money, you need to either increase your income, decrease your expenses, or both.

Sounds simple, doesn’t it?  But like so many things in life, the devil is in the details.

Increase Your Income

Ideally, everything you are doing is moving you toward this goal.  The more money you have going into your cash register, the happier your business life will be.  Having a good cash flow makes keeping your business healthy so much easier. Everything from property upkeep and upgrades, to hiring a quality stall relies on your ability to have enough income.

There are basically two ways to increase your income: increase the number of guests to your restaurant, and increasing the amount that each guest spends.

Getting more customers requires you giving the guests a reason to come.  It’s marketing and advertising, and running specials that will get people through the doors.  It is also necessary to do the things that keep your existing customers coming back repeatedly.

Building check averages is about a lot more than just increasing prices. In fact, many times a price increase will result in a decrease in income because some of your customers will leave for less expensive options.  On easy way to increase your check averages is to teach your servers how to suggest appetizers and desserts to your customers.

Decrease Expenses

The two biggest areas of expense are food and labor.  Learn to control these expenses and you are almost guaranteed to succeed.

Controlling food costs requires keeping a close watch on your inventory to make sure your food is not being wasted, allowed to go out of date, or being stolen.  You also need to learn how to properly cost your recipes so you are sure to charge enough for your meals to be profitable.

Look for more information in the coming days as I start getting into the nuts and bolts of how to control you costs.

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