In a restaurant, the journey from thought to finished dish is a deep maze of many complex systems.
There is a chef, and his team who orders and prepares it, a waiter who brings it to you, a busser who cleans up, and these are just the major touchpoints. Dive further, and there is much more.
The items in your food that your waiter bought came from miles away, and from planning the dish to ordering the ingredients to receive the delivery is another giant set of systems. Point being? Running a restaurant is expensive and complicated. Rent and utilities are high and relatively fixed. While these expenses are constant, the capacity is not. The capacity determines the profit turning potential.
Therefore, to keep the doors open, the backend of your restaurant needs to be highly optimized. In this read, we will go through some strategies to streamline operations.
To keep footing the bills even when the orders are streaming in, follow, and customize these strategies to help improve your restaurant’s bottom line.
Table of Contents
Strategies to Help Us Brace for the Unknown
The idea is to create a
When you run your business for months, you can try and identify a pattern. It could look something like this: Wednesday nights, you have a lot of office groups, Monday nights are slow, Sunday mornings are slow early and pick up around lunchtime.
Building on these patterns, you could create a system to adjust your working staff. For instance, when Monday nights are slow, you only need 50% of your team both for the front and back of house. The floor manager also serves as the food runner.
Having this flexible
Inventory and Menu Adjustments
Before we dive into this point, think about your menu. Remind yourself of your best sellers, your strength, the reason your customers choose you over home-cooked meals, or all the other restaurants they drive by to reach you. So, when you go ahead and make menu or inventory adjustments, do not compromise on your main dishes or revenue drivers.
During tough times, you should revisit your restaurant menu, the same for the good times. Now this updating could look different from one business to another. It could be a change of source for ingredients.
For instance, if you always got imported Italian Truffles, then you can substitute it for some cheaper US ones. I am not condoning lowering quality, simply suggesting finding a solution that both serves your customer’s discerning palette and your lean wallet.
It could be cutting off items that are not profitable or have high costs. I am not just referring to the ingredient cost, but a high labor cost associated with their production (think prepping for days).
For instance, if you have 15 desserts, that could be adjusted down to your top 5. It could be in terms of the efforts required for the dish. If you need two full-time employees to create those 15 desserts weekly, but only one part-time employee to make five desserts, it’s a no brainer. The key is balancing the customer’s expectations and needs with your own financial goals.
Designing your menu to adapt to the new economic situations can have a significant impact on your cost savings and bottom lines.
Menu adjustment is directly related to your inventory. Now, when you source from local suppliers instead of your national ones, the need to carry more inventory is redacted. Meaning you need less stock on hand, less money sitting on the shelf, and more dollars in your pocket. Having an on-demand inventory is lean and helps you track new changes in the consumption patterns.
So, when you make your menu adjustment, you also optimize your inventory in lines with the cost cuttings and increase efficiency.
Go Modern and High Tech
Many restaurant businesses are still run traditionally. When the times are good, I always recommend taking that opportunity to invest in the future. Investing in technology and modernizing processes can go a long way in helping your restaurant survive during tough times.
There is a whole portfolio of restaurant-specific and general software on the market that can help you with this—for instance, having trouble managing your purchases and inventory? Well, there is software for that both for your kitchen and bar business.
Are you having difficulty managing that influx of delivery orders? There are systems to help with that, too, streamlining the whole process. All these software all have a similar goal, to help you run your business better. Implementing them can save you thousands of dollars and drive top-line revenue.
Diversify Audience and Revenue Streams
When you open your restaurant, you target a specific kind of audience even though it is open for anyone. Let’s say, you are a vegan ice-cream shop. You lean towards the millennial crowd who are more health and environment conscious. This demographic is also willing to spend extra for the plant-based milk and non-processed sugar.
Looking at other audiences and not relying on one specific audience helps you diversify, not put all your eggs in one basket as it were.
Carrying the example forward, let’s expand our target demographic. You could try and target mothers with toddlers who are trying to develop healthier habits in their children. This approach’s goal is to diversify the audience. Marketing and rewards programs designed for these segments will drive traffic.
Don’t stop there; think about expanding your business with different profit centers. You could also reach out to local retailers and offer a business to business wholesale pricing and service to stock up on your vegan ice-creams.
This is you diversifying your revenue streams and not just relying on foot traffic in your shop.
Negotiate Supplier Concessions
If you are already monitoring all your expenses and have started cutting costs, then moving on to supplier negotiation would be your next step. This negotiation is a process that begins with you building good relationships with your suppliers.
There are many steps you can take to win over your suppliers. When your business is thriving, you can commit to your suppliers for a specific volume for a set period. Perhaps you already have large volumes with them, leverage this in your negotiation! Ensure on-time payment and clear communication of your orders and expectations. When the times get tough, many suppliers become flexible about payment schedules, discounts, and so on to keep your business.
Additionally, your suppliers could also be an untapped resource full of valuable business advice. For instance, they are aware of the products and their trends and market price fluctuations.
They also have valuable intel on your competition; perhaps you should buy your rep a beer the next time he or she visits? Building a relationship with them, having a regular coffee with them could also give a platform to brainstorm your business issues and challenges.
Streamline Your Processes
McDonald’s grew into the empire we see today because of its lean cooking processes. This one development has a significant impact on many aspects of your restaurant business, from faster decisions to cost-cutting, to better resource allocation, and much more.
Want to level up your business? Make a conscious effort to work towards streamlining your restaurant business processes.
Consolidate your business. Departmentalize your team based on functions and projects—set-up processes based on the principle of lean management. Develop meeting structures that help avoid meaningless discussions and redundant extra work. There are endless ways to do this for your business.
Streamlining processes during peak times allows your restaurant to pivot when times get more challenging.
Craft Value-Based Promotions
Promoting discounts and benefits is one of the oldest tricks in the book. Even if your restaurant is fine dining and your customers are more elite, it is a trick you can rely on without harming your image. For instance, instead of saying, “Two for one,” you could go for “Desserts are Compliments of the chef this evening.”
I have personally experienced this at a few high-end NYC restaurants, where the Chef is trying out something new and would like the guests to try it. Yes, he or she may very well be trying out a new dish, but much more likely, the restaurant is trying to increase its perceived value through an alternative form of discounting.
Ensure that your promotions are enticing enough for customers to spend money even when things get tough. Do not just rely on refills, side dishes, and other strategies that you had in place anyway. Provide real value in your promotions. Like free entrees or cocktails when they order a certain amount or make a set number of visits.
Starbucks generated over a billion dollars in working capital by building a robust loyalty program.
You can also partner with other local businesses—for instance, a partnership with a local hotel. When the customers stay in the hotel, he gets discounts for your restaurant. This type of arrangement works great at vacation destinations.
Adjust Your Expenses
This is a no-brainer that you need to cut down your expenses even when times are good. When you are already working with a lean and flexible system, finding new avenues to cut down costs becomes tough. When the times are good, invest in cost-cutting technologies.
Some of these technologies are low-flow water faucets, energy-efficient bulbs, food-cost monitoring software, continuous repair, and replacements of old kitchen equipment are good places to start. During the downtimes, you can move to more essential reductions.
We already discussed
Most Importantly, Stay Prepared
In addition to being expensive and complex, restaurants are a dynamic business. One new entrant in the neighborhood can have such a big impact on the business and takes time to pivot and make combat strategy. Hence, preparedness and an optimized operation is of utmost importance.
My motto, always be improving your restaurant business! So follow this logic and stay ahead of the competitive curve.