The Dog Days of Summer
How to Manage During a
Downturn in Business
Summer in
the NY Metro Region is often a slow period for area restaurants – as the
temperature and humidity rise while kids are out of school, customers escape
the heat to take vacations and many leave for weekends. Being able to nimbly anticipate these slow
weeks and make changes to your operation will allow you to survive the dog days
of summer without taking a financial hit.
As we discussed in our last blog, The Value of A Good Business Plan, a restaurant is a living
breathing entity that requires constant reevaluation. Now restaurateurs must
understand the value of being flexible when the thermostat rises and business
levels fall off as people escape the heat.
Here are
four key things to help manage your restaurant in a short downturn:
Adjust Your Cash Flow Management – Many restaurants fail not
because they are unprofitable, but because they ultimately become insolvent. The
single most important step for survival of your restaurant when business slows
is to rigorously manage your cash. Calculate what your cash flow needs will be
based on both your estimated fixed and variable expenses. Know what your
break-even point is, as sometimes a viable cash management strategy is to close
the business for the slowest portion of the slower season. And lastly, adjust the way you operate to
further reduce your variable expenses.
Adjust Your Variable Expenses – Variable
expenses are those expenses that change based on your level of business – the
largest controllable categories being food and labor costs. From Where Oh Where Has My Margin Gone?, we know that labor is a restaurant’s
largest variable expense and is only becoming more costly. Planning for this fall-off in business is key
in being able to scale back schedules in advance, rotate out vacations among
the staff and utilize staff that has been cross-trained – increasing
productivity per work hour. If you have staff standing around staring at
the walls, you have too much staff on hand.
Lowering total payroll also lowers payroll taxes and payroll processing
fees. Other controllable variable
expenses can include paper goods, any merchandise, some utilities and
maintenance.
Adjust Your Menu Offerings – Changing your menu can also impact food, beverage and labor
costs. Consider replacing some menu offerings with less expensive items using
seasonal and local ingredients. Consider lightening your menu to offer more
salads and refreshing cold options. You
don’t want potential customers not to consider coming to your restaurant on a
hot, sticky day because your menu is too heavy.
Furthermore, less labor-intensive preparations allow you to work with
less staff. Guests, by nature, tend to
eat less and lighter fare when the thermostat rises. Cooking with what is locally in season is
always less costly than using out-of-season imported items.
Adjust Your Purchasing and Inventory Management – When items are not flying out of your walk-in or your stock
room, you should look at what you are buying and how you are buying it. Intelligently reducing the overall number of
offerings on your menu can increase your product cross-utilization allowing you
to carry a smaller inventory – both in number of inventory items and quantity
of each item you stock. Analyze what is
selling, at the best profit margin, and either remove the non-selling items or
find creative ways to reinvent them. By
sitting on non-moving inventory, especially alcoholic beverages, you are just
tying up your cash flow.
Being aware and flexible about managing your business
in the Dog Days of Summer can help keep your bottom line from melting away.
Email us today for a free business consultation at www.4qconsult.com. We help
restaurants be profitable, from Start-ups to existing restaurants looking for a
fresh set of eyes. 4Q Consulting, LLC can develop customized plans and operational
guidelines to survive a
slow period of business!
All
original content copyright Noelle E. Ifshin, 2016-2017.
Noelle E. Ifshin, President, 4Q Consulting, LLC
noelle@4qconsult.com
www.4qconsult.com
244 5th Avenue, Suite 1430, NY, NY 10001
(212) 340-1137
