How to Improve Your Restaurant or Cafe Business
I remember at school being told that 99% wasn’t good enough. We needed to give 100%. That the 1% is really important. And that’s an attitude!
Now working to help restaurateurs & cafe businesses to improve their performance I realise what an important lesson that was.
My course is called ‘The Restaurant Business’ because, however much ‘cheffing’ may be our passion, we are running a business where if we don’t make money we will fail. It’s as simple as that. And if we don’t understand all the building blocks of the business then we are operating well below our maximum potential. You wouldn’t ask chefs to work with one hand tied behind their back so why do so many restaurateurs do just that when they run their business?
On the Course we talk about the magical 30/30/30. Whilst every business is different the simple idea is that if we spend 30% of our net revenue on each of Cost of Goods (COGS), Labour and Overheads then it leaves us 10% profit! In Central London & other places where recruitment is challenging, labour costs might well exceed this so it means that we have to bear down on overheads and cost of goods even more. Every 1% above 30% means another cost has to go down by a similar amount.
You might well ask how accurate is my COGS percentage? My first piece of advice is to do an accurate stocktake once a week. If this is done with precision (which many are not) then you will establish your real Cost of Goods and GP %.
Of course most chefs will say that they know this figure for each dish but frankly I would take this with a pinch of salt. I could be more rude! Have they accurately taken into account wastage; did they count every single item that came into stock; have they taken into account staff food; did they do the stocktake itself properly; what about theft and breakages. So a verifiable & honest stocktake is Number One.
There are excellent companies out there who can help you with your stocktaking and many electronic point of sale systems have a stocktaking module attached. But remember that any stocktake is only as good as the person doing it. And that stocktaking requires training.
Through menu engineering you should be able to cut your COGS and this can make the difference between being an ongoing concern or a failed one! Remember more than 50% of restaurants fail.
Overheads are generally fixed and might offer little room for manoeuvre. Your rent & rates should be known to you and could well jointly account for 15% of your overheads. That’s why on starting out you need to convince your landlord through negotiation to give you a rent free period and keep these costs as low as possible. They hang around your neck like a noose if you can’t afford to pay them. And they always seem to go up not down at every renegotiation. You only have to look at all the empty shops on the High Street to see businesses whose rent & rates forced them out of business. And of course negotiate an assignable lease inside the Act! All things we cover on my Course.
Unfortunately rent & rates are just the start and there are an enormous number of additional overheads often forgotten. You’ll find a comprehensive list in our 80 page Course Workbook described as invaluable by the restaurateurs, cafe owners, live music venue people and street food and pop up operators who attended our first Course!
Finally labour. The minimum and London Living Wage clearly put pressure on the hospitality industry. And the fact that tips (the tronc) must go in its entirety to the staff. However technology has a major role to play in ensuring your people are there when you are busy and not at other times. And of course great training in terms of the customer and service journey can help build your top line and shave costs off your
It’s easy to talk about cutting costs to add 1% or more to your margins. But increasing revenue is clearly another way to get there too! And that’s the subject of my next blog.