Restaurant Tips

5 Tips For Making Your Restaurant More Profitable

1.       When does your labor week start?

Many restaurant companies begin their labor week on Monday and when asked why they do this the answer is usually, “because that’s what we have always done”. Restaurants who have moved to a Wednesday or Thursday as the first day of their “business week” often see a large drop in overtime and a reduction in the stress of running payroll for several reasons:

  1. OT always happens at the end of the week, if the end of the week is Friday/Saturday/Sunday it can be very hard to cut employee hours during what is typically the busiest part of the week
  2. Ending the pay cycle mid-week gives you a couple of days to handle weekend payroll related issues before your payroll is due.

 

2.       What does GOOD food cost look like to you?

Setting a realistic food and beverage cost usually means looking back at the historical averages and trying to meet or beat them. But what if your food cost has always been high?  Using the past as a guide isn’t always the best way to try and see into the future. Modern inventory systems allow an operator to see what their ideal food cost is from day to day and set goals based on the salesmix in their restaurant using the current cost of their ingredients. This gives you an accurate way to set goals and measure performance.

3.       Credit where credit is due.

Take advantage of available tax credits. The government has tax credit programs that can benefit you. These can easily add up to tens of thousands of dollars a year taken off your tax liability. Click on the links below for two examples of government tax reduction programs that restaurants should take advantage of.

Tip Credits

WOTC Credits

4.       Year over year doesn’t mean month to month.

Many of us run our personal finances with a month over month mindset. This works when you are getting two paychecks a month, but the sales in your restaurant don’t really conform to this same system. Consider setting up your fiscal reporting around 13 – 4 week periods. The benefits of this are:

  1. Your year over year numbers always include the same number of weekend/week days
  2. Period length is consistent from period to period
  3. Inventory counts can be done on the same day every week/period
  4. Bi-weekly payrolls can be set to coincide with your periods to reduce the need for complicated payroll accruals in your accounting system

 

5.       Bonus on multiple metrics.

Bonusing your managers on only a single metric often incentivizes them to turn on blinders to any other problems. Running a successful and profitable restaurant means juggling several items all at once. Keep your mangers focused on the entire business by bonusing them in several areas. Consider these options:

  1. Cash Flow – Putting money to the bottom line is important. If you’re not making money how can you afford to bonus your management team?
  2. Food Cost – With food cost running at roughly a third of your cost of doing business. This is a huge place to lose money if you’re not paying attention. Is your team shopping for the best prices and controlling their waste?
  3. Actual vs Theoretical Food Cost Variance – An inventory control system will let you measure each store against its ideal food cost. Two stores might have different sales mixes so their ideals won’t match. Measure each team against its own unique circumstances.
  4. Employee Turn Over – Training staff is EXPENSIVE. Keeping your turn over low reduces waste and labor costs and usually ties directly to guest satisfaction. Happy employees = happy customers.
  5. Labor Cost Variance to Budget – Labor isn’t cheap. Using a labor tool that allows you to see the variance between your scheduled labor and what is actually happening lets your managers react quickly to changes in guest flow. It also lets you hold them accountable to hitting their labor goals.