How We Saved a Restaurant More Than $100,000 a Year
While owning a restaurant can be a dream come true for entrepreneurs, there can also be costly pitfalls that can lead to failure. Here are three simple steps to set you up for success.
Opinions expressed by Entrepreneur contributors are their own.
For restaurant owners, basic steps like reeling in costs can lead to success, while simple mistakes such as poor menu choices may lead to failure.
For example, one restaurant my consulting agency rescued was spending an extra $2,500 a week on unnecessary food expenses. That is a lot of money for any business, especially for a new, 35-seat restaurant just trying to get off the ground. Fortunately, we were able to turn this around.
By employing a simple, common sense food budgetary approach, we helped this restaurant get its financial house in order. By doing so, we were able to get the expenses under control, saving the company approximately $130,000 a year.
Here is how we did it:
Set a budget. By tying each week's food purchases into a function of gross weekly sales we established a maximum allowable food cost model to help control overspending on food purchases.
Related: 3 Ingredients to a Kick-Ass Restaurant
As a newer restaurant in a tough market, gross sales were coming in around $15,000 per week, with food purchases were hovering north of $5,500 per week (ideally food costs should be at a maximum 33 percent of sales). When costs are that high, all the hard work, long hours and efforts are being wasted, since any ability to generate a profit is doomed from the start.
When we learned of this, we insisted on taking a step back and implementing a budget to get spending under control. We eliminated using the expensive "boutique" vendors and also reached out to various purveyors to try to lock in lower prices.
Re-evaluated the menu. While setting a food budget, we realized the menu needed an overhaul. First, it had to become "right sized" based on the revenue volume, meaning we had to reduce the amount of offerings and the inclusion of high-end proteins to streamline purchasing and preparation. For example, we eliminated the porterhouse steak, as it was not only costly but didn't generate much revenue due to high cost.
Another simple adjustment we made was to replace the bread and butter service with house-made cornbread and jam. That move alone saved hundreds of dollars each week.
Furthermore, as gradual changes occurred, we began tracking sales. This helped us get the menu to where it needed to help attain greater financial stability.
Related: How Bacon in Your Ice Cream and Peanut Butter on Your Pizza Can Mean Money in Your Pocket
Lastly, focusing on incorporating specials to try out new dishes before they became a mainstay on the menu was also an important step toward simplifying and making measured changes.
Identified waste. Once these new methods were employed to rein in spending and refine the menu, waste was next on the list.
By noticing how much food came back to the kitchen and how much food left in doggie bags, helped us establish consistent and appropriate portioning levels.
Moreover, labor was viewed through this lens and greater concern was applied to completing inventory counts from shift to shift. All of this tallying allowed the chef and management to gain a new perspective on sales.
To ensure the best results, we incorporated the Harbortouch point-of-sale system, which allowed for a computerized sales system with numerous additional solutions to help empower restaurant owners and their management to take control of the bottom line.
Regardless as to whether this technology is leveraged to help achieve goals, the underlying effort of counting, recounting inventory, tracking sales and evaluating processes can help propel any restaurant to become a profitable business.