When you work with over 400 restaurants a year you see patterns of success and patterns of failure. Just based on observation I am pretty dead on accurate to the chance a restaurant has of making it. Other times it’s the Profit & Loss Statement (P&L) that confesses to me the real situation as to how bad things are. Looking at so many P&L statements and the numbers start to pop out at me like how Keanu Reeves’ character Neo in The Matrix could see the code embedded in everything.
Running restaurants is relatively easy. It’s the human element that makes things complicated. Some people have a hard time getting excited about numbers. Especially in the restaurant business which is for the most part comprised of extroverts. Now do not fret. If you are a people person and not a numbers person, have no fear because you can hire someone with the opposite strengths of yours.
You just need to be able to extract the data hidden in your restaurant reports and pull out the figures that can have a big impact on your bottom line.
The big key here is focusing in on the RIGHT data. Many restaurant owners are not very effective when it comes to using the data that is generated daily from their point of sales system. There is so much great information buried inside those reports. You can become very successful if you know just where to dig for data!
Product Mix Report/Menu Analysis
Your menu is your #1 marketing and profitability tool. Your product mix report is the golden challis of all reports because it will tell you exactly what customers are buying. When you can take this data in conjunction with knowing the individual cost of every plate on your menu you know have the basic information needed to conduct a proper menu analysis and stratify your menu into 4 classifications:
Stars: these items are very profitable and very popular. You love the stars.
Workhorses: these items are not as profitable yet your customers really like them. When faced with a workhorse you want to reexamine the plate and see if you can rework it to be more profitable.
Challenges: these are great profit, yet the customers just have not fallen in love with it. A few ways to increase the popularity of a dish is change the placement or position on the menu. Menu placement is a science in itself and getting someone skilled in menu engineering is well worth the investment.
Dogs: these are the items on your menu that do not make you any money and they do not sell well. Here is where you need to detract from “menu emotions” and understand that the dogs are not adding to your bottom line. They just need to come off.
Guest Check Average
Lest we forget that restaurants exist to make a profit. Keeping track of each server’s guest check average and using that figure to manage the team is the best thing I ever did as a restaurant owner.
Think of your dining room like prime real estate. You have good sections and you have great sections. I want my best salespeople (servers) in my best locations because they can sell more.
Guest check average also helps manage your team by making it a healthy competition. Many restaurant managers and owners do play favorites for scheduling staff (it’s a fact so deal with it). How you can help yourself get out from that paradigm with the service team is manage by performance. I would post the weekly server guest check average (GCA) on a list outside the office door. The person with the best GCA got their choice of schedule and section. It was a brilliant move that had the team pushing themselves for increased sales. Of course you will have those servers who will not rise to the challenge. Those are the low performers who are holding your restaurant sales down so do yourself a favor and set a baseline GCA that they have to maintain. You cannot afford to keep servers employed if they cannot produce.
Voids & Comps
Mistakes happen in the restaurant business. However, you need to keep track of those who keep making the same mistakes over and over. Voids and comps due to poor service cost you more than just the item. They damage your reputation and that can be very hard to recover from. With the internet today, word-of-mouth has become world-of-mouth. Unhappy guests will turn to social media to find the voice they feel they did not get in your establishment.
I find that if the team knows I am looking at the void and comp report and asking questions as to why they happened that there tends to be fewer.
You need to inspect what you expect. Hold the team accountable for mistakes and train to make sure they are reduced.
Restaurants love to sell food, especially chef driven restaurants. We forget that beverages are a great profit item and by not selling one really has an effect on overall sales.
Keeping track that every guest had a beverage is the key to this. Even if you offer water, you need a button on your point of sale system that tracks the number of guests who just had water. When I review the product mix report I make sure that if I had 873 guests that week then there are 873 beverages counted. Beverages are that one item that sometimes gets overlooked by the service team to ring into the sales system. Keep that internal bleeding of profits to a minimum by checking the beverage sales numbers.
The restaurant industry as a whole has a terrible reputation for high turnover. In the United States recent surveys put the restaurant turnover rate at around 66%.
Too many owners and operators just accept this and focus on hiring. If they also focused on retention they could see huge increases to the overall profitability of their business.
Let’s say a restaurant has 100 employees. The national restaurant turnover average is around 66%. The NRA says of all the restaurants in the U.S. that the average cost of turnover of an employee is $7000. Now in my experience that is high, so for discussion sake I’ll use 4,000. 100 X 66% = 66 people X $4000 = $264,000. You can learn to get that turnover rate down to 40% or $160,000. That puts $104,000 back to the bottom line. Now look at your restaurant. If you have you more than one restaurant. How would an extra $104,000 affect your P&L?
My question to you is, are you focused on the things that could have a bigger impact on your bottom line? There is real gold in your reports if you take the time to dig for the data and most importantly, apply it daily in how you manage your business.