Between the Lines - Operational Challenges
That Can Make or Break Your Restaurant
Today’s restaurants face many challenges: intense competition; rising cost of goods and real estate; and the slow U.S. economy - just to name a few. Restaurants average profit rates of 3-5% of sales* - thin margins by any measure. However, poor management can make those margins evaporate faster than a sauté pan of boiling water. It is no wonder that 60% of all restaurants fail within the first three years **
As a restaurant owner, you oversee all areas of your business. These can be separated into three basics: Finance, Sales and Marketing, and Operations. Yet with only so many hours in a day, many owners neglect the breadth of their responsibilities, and only watch their revenue. Sales and marketing is important in getting customers into your restaurant, and we covered this at length in Attracting Customers. However, it is what happens within your operation, between top-line sales and bottom-line profits, which makes or breaks your business.
Here are the 4 biggest challenges that can make or break your restaurant:
Poor Financial Controls – Owners often watch their sales daily, while not watching their costs and expenses as diligently. Common sense points out that if your profit margin is zero it will always be zero, regardless of sales level, unless you change something. Restaurants should measure costs in relation to sales on a weekly basis, as discussed in both Why a Weekly Food and Beverage Inventory is Crucial to your Small Business and Does your Restaurant Compile a Weekly P&L Statement. Reviewing weekly statements allows you to spot problems and make operational adjustments much sooner than waiting until the full P&L at month’s end: improper product ordering and handling, waste, cash management and employee theft can be significant drains on your business, every day.
As revealed in How Much of your Profits are Being Eaten by Employee Theft, many employees steal because they can get away with it, and few restaurants have the right controls in place to prevent it. Further, Measure by Measure and 4 Simple Ways Your Restaurant Employees Can Help You Be More Profitable showed how not controlling spoilage, waste and improper portioning can decimate your small margins.
Poor Staff Training – As we stated in our Blog: A Well Trained Staff is Your Secret Weapon, “People run your business and your business is only as good as your people. An effective training program is an owner’s key tool to ensure consistency in product and customer service, which is a basic tenet of running a restaurant.” This is true for all staff, at all levels.
With a properly trained staff you have less waste in your restaurant. A short list of why this is includes: Training mangers on proper inventory and ordering avoids excess product; stewards on proper product storage and handling avoids spoilage; cooks and bartenders on proper recipe execution and production levels maintains portion controls; and servers on proper use of the POS system minimizes incorrect orders, misfires and voids.
Poor Quality Control – Quality Control is all about consistency. In our experience, consistency is best achieved by adhering to standard operating procedures that are codified in writing. As outlined in 4 Reasons Why Your Restaurant Needs an Employee Handbook, recipe books, job-specific handbooks, and training manuals standardize tasks and clearly communicate to employees your expectations and the standard to which they will be held. These procedures should cover, in detail, every process in your establishment, from purchasing guidelines to how to deal with an unhappy customer. As boring and unsexy as it sounds, excellence comes from consistency, which can only come from diligence and attention to detail. If customers know what to expect every time they walk in your door, they will keep coming back.
Poor Leadership – Whether it is you, as the owner, or an outside hire running your restaurant, there is a big difference between being a manager and being a leader. As discussed at length in Follow the Leader, “In order to lead rather than just manage, which is vital in today’s diverse, fast-paced world, one must be able to be more than a day-to-day task master. While a manager deals with the technical dimension in an organization or the job content, a leader marshals resources, human and otherwise, for the best possible results.” Leaders communicate vision, build relationships and trust, train, coach and mentor, and encourage change and risk-taking.
Often, managers who come up through the ranks are not properly trained as managers and make common mistakes. In the Top 4 Mistakes Managers Make in Managing People, we discuss how “Managers are the front line representation of your business and must effectively work with a diverse group of people. They must live and breathe your company core values and practices.”
Restaurant success depends on many things, but it can all boil down to one question: Where does the money go? Having a handle on your operations is a key to answering this question. Have processes and procedures to reduce economic drains, train your staff to follow them, hold them accountable and have trustworthy leaders in your organization. Additionally, you must be vigilant that your standards are upheld, and make changes as needed. It doesn’t hurt to get an outside, objective opinion from time to time as a gut check whether it is a consultant or mystery shopper
Don’t know where to begin? 4Q Consulting can develop customized business and operational guidelines to help you start and run your business. Email us today for a free business consultation at www.4qconsult.com.
All original content copyright Noelle E. Ifshin, 2013-2014.
* 2005 Cornell Hotel and Administration Quarterly, http://cqx.sagepub.com/content/by/year
** NRA’s Restaurant Industry Operations Report 2013