When it comes to restaurants, the failure rate is quite high. Restaurants are not easy business to handle and the high labour cost, rent and the perishable food make it quite difficult to survive.
However to effectively succeed in the restaurant business, it comes down to managing the small stuff.
You all know that the simple recipe for profit is Revenue – Expenses.
So in this article, let’s explore ways to improve revenue and reduce expenses and succeed with restaurant
Good food: At the base of the pyramid is your ability to cook good food. If you are in the restaurant business, ask yourself this question – Will my customer drive 10 km on a rainy day to come eat what ever I am serving.
If the answer is no, make sure you first focus on your menu offering. Plan the menu, train your team to make the dish as per the standard recipes and plating guide.
Awareness: Next is the process of letting the world know that you exist. Social media and various platforms have made it easier to create awareness among your target market. Local advertising and brand building should be part of the program to create awareness.
Another form of creating awareness is to be listed in review sites, like Tripadvisor or Zomato where you can encourage your diners to leave a review. Positive reviews create awareness for future guest to consider your restaurant.
Generate Interest: Your target market, heard about you, and you have good food. However they have still not tried you out. An exciting offer can help guest try you out for the first time. In the competitive restaurant business, any offer you give out will likely be copied very quickly.
However if you have created great food and awareness about the food, that alone becomes a barrier to other restaurants.
A good offer should generate enough interest in the mind of people so that they will at least try the restaurant out once.
Enroll in the course 5 steps to market your restaurant
Repeat customers: Repeat customers are the life blood of any restaurant business. Build a database, track guest, send special offers to them and ensure that they come back.
Identify a parameter for your repeat guest – Dines at least once a month in your restaurant – and track that metric.
Target to improve this metric month on month till you hit a high number.
To retain your repeat guest, continue to offer great food, offer special events, recognise the guest on their special days, pamper them and do all the things you do to make sure your guest are happy.
Food cost: Food is the most perishable commodity. If your menu has salmon, that has not sold, you are incurring cost. To understand food cost and how to save on food cost, read more articles here
Food cost needs to be controlled and kept under 25% to effectively manage your profit. Be ruthless when reviewing your menu for items that does not move. Menu engineering is an effective way.
Wages: Wages can be a big cost of your restaurant. While the concept to hourly wages has still not caught on in India, it is very common internationally. Hourly wages help you bring in people on demand to help you with busy periods.
Target to keep the wages around 15% of your revenue or target to improve your revenue to reach that number
HLP and Repairs and Maintenance: Utility bills and repairs can cost you quite a bit. Watch this cost very closely. Control cost by switching off unwanted utilities. Invest in solar or other renewable sources if you can to reduce operational cost.
Taxes and Fees: While you have little control over taxes, fees and other government related expense, you must ensure these are paid on time so that there is no penalty incurred on the same. Government penalty and interest tend to be quite high, so ensure you are not getting yourself in additional burden. Calculate your taxes and pay them on time.
Rent: Rent can be reduced and controlled by carefully choosing your space. While there is a trend of smaller dark kitchens and cloud kitchens, the rent is just replaced by distribution cost of aggregators. So be very mindful of what you pay as rent.
Negotiate the rent and keep it low to improve your profit.
You can succeed with restaurant if you follow these advice. It is as simple as improving revenue and reducing expense.
When in doubt on what to focus on, take steps to increase revenue.