How to Turnaround a Struggling Restaurant
Within restaurants there are many parts that have to be functioning perfectly to make a healthy return on investment. Most turnaround experts will focus on increasing turnover or reducing costs to make a quick impact on the turnaround process in any business. In restaurants it is not very different. To turnaround a struggling restaurant, three elements in particular plays an important role and can make or break a business:
- Revenue
- Food costs
- Wage costs
Revenue or Turnover
As most restaurants will have a sales and marketing plan that details every element of how the business and its services are to be promoted, this should be reviewed and be adjusted immediately. The impact of a new marketing plan must also be assessed to ensure that the business delivers the expected level of food, drinks and service before the marketing plan is put in place. Every stakeholder should understand the goals and targets for the business and the sales & marketing strategy will be devised across all media avenues to execute all of the strategies.
Food Costs
Menu costings and regulars adjustments in light of the ever increasing cost of food items must be done regularly to ensure menu item profitability and financial contribution by all menu items. This goes hand in hand with portion control.
When a menu is designed, the cost and portion of each and every menu item must be calculated and taken into account. How much do the raw materials cost? What is the labour cost of the item? Can the dish be given a selling price that is going to make the correct amount of profit to cover all the other business costs? Does the dish represent value for money to the guest – is most of the questions that should be addressed regularly.
If the menu has been designed with cost and profit in mind, then the problems facing the business will be found elsewhere, but most issues start when chefs and members of the team start producing dishes and menu items that is not properly costed and portion control is not adhered to in the cooking process.
At most struggling restaurants we find that chefs are over portioning, throwing food away, allowing food to go off in fridges due to over ordering, allowing pilfering and so much more.
Food costs must be managed daily with precision and foodcost should be calculated regularly to assess the situation and not only at month end when it is normally too late to change anything by the time management accounts are produced.
Simply getting food costs right can turn a restaurant around without much more effort.
Wage Costs
Every hour counts! Ensuring you staff your operation effectively and efficiently can be a real challenge. Many operators leave the roster management to new managers or supervisors as it is such a boring, unexciting and tiresome part of running a food and beverage business.
However, the wage costs can easily get out of control if checks are not made on rosters and the volume of expected business is not forecasted correctly.
As with food costs, wage costs need to be managed effectively on a daily basis to ensure productivity and standards are maintained. Also ensuring that the right people are on salaries and others are on hourly wages is vital to the financial success of the business
We regard wage costs as a deal breaker in restaurant profitability and should be managed accordingly, especially as the minimum wage increases are enforced regularly. There are some steps that need to be taken to control wages:
- Forecast sales for a period and clearly understand how much you should be spending on wages per day.
- Employ a mix of hourly paid and salaried staff.
- Clearly define the pay structures in the business.
- Write rosters yourself or in the very least review them before they are published.
- Employ team members that can multi task.
- Ensure that the interview and selection process is robust so you get the best possible staff to complete the tasks you need them to.
- Constantly review the wage cost position.
If these three potential financial drains on a business can be controlled, then the business will most definitely have strong foundations in place from which to move forward with profits.