I’ve received quite a few emails from managers asking about the Pareto Principle, and the ways that it can be applied to their restaurant. I’ve touched on it before with regards to where profits come from on your menu, but I’ll give a quick refresher. Here we go….
THE PARETO PRINCIPLE
The Pareto principle is named after an Italian economist named Vilfredo Pareto. Way back in 1906, he discovered that 80% of Italy’s land was only owned by 20% of the population. Soon after, he observed that 20% of the pea pods in his garden were producing 80% of his peas. After conducting surveys of several other countries, he found that his 80/20 observation actually held up.
This concept has since gone on to show itself applicable to all manner of situations (and was named after Pareto after the fact).
Wikipedia defines it like this: for many events, roughly 80% of the effects come from 20% of the causes.
Which works well enough for me. Another name for this idea is “the law of the vital few and trivial many.” Which sounds terrible when you realize that it’s often being applied to actual human beings, however economist do like to deal with numbers more than people.
Now there’s a few applications here for your restaurant. The first is that roughly 80% of your business comes from 20% of your customers. I have discussed the importance of converting your customers into raving fans. The second is that roughly 80% of your headaches will come from roughly 20% of your customers or staff. The third is that roughly 20% of your time and effort are responsible for 80% of your results.
A restaurant-specific way of looking at it is that a smaller percentage of your menu items are responsible for the majority of your sales.
While it’s not necessarily as easy to use this principle in a restaurant as it is to something like, sales, the idea that 20% of causes are responsible for 80% of results can still hold some insights to the savvy operator.
Here are a few takeaways:
- As far as customers go, you want to identify the 20% who are making you money and the 20% who are bumming you out. You want to nurture and grow the good 20% and ruthlessly weed out the bad 20%. Okay, maybe not ruthlessly, but you get the idea.
- The majority of problems originating from your staff are likely to stem from a core group of people. You need to get rid of those people.
- To varying degrees, a big chunk of your menu is dead weight. I’ve talked about menu engineering, menu innovation and the life cycle of menu items before. Constantly evaluate your menu’s performance and periodically review it of non-performers.
Finally, while not related to the Pareto principle at all, Vilfredo Pareto also famously noted that human behavior is driven far more by sentiment than logic. Which, it turns out, is also totally true. With that in mind — and knowing how much “stuff” you are dealing with in your day-to-day life — it’s important to be smart about allocating your time, energy and resources to the aspects of your restaurant that are actually going to perform.
Wasting 80% of your energy on something that is more trivial as far as the bigger picture is concerned is, well, a waste. I see it all the time with owners doing tasks that they should delegate out to others. Do you really need to write the schedule if you are an owner with 2-3 competent managers? That would be a NO.
WORK ON WEAKNESS
You hear this all the time…work on your weakness. It is a common idea in business that one needs to focus a lot of time and energy identifying and correcting weaknesses. More time and energy is often spent mitigating flaws than it is spent on developing and leveraging strengths.
By employing this strategy (which, to be fair, seems to be pretty common sense), people don’t realize that they’re actually creating a glass ceiling for themselves. When you spend too much time minimizing flaws, you just cannot spend enough time on the things that can make you great. As a result, you’re limiting your growth in awesomeness. And let’s be honest with ourselves here: most people don’t do business with an organization because they’re pretty good in a number of areas. They do business with them because they’re great in one.
So the idea here is that you spend 80% of your energy on the things that you do well, and20% of your energy on everything else.
This ensures that you continue to grow your strengths and, subsequently, your unique brand identity that sets you apart from your competitors. Marcus Buckingham, author of GO Put Your Strengths To Work is a world recognized thought leader on playing to your strengths. I personally have applied those principles when working with restaurant teams with amazing success.
DO WHAT YOU ARE GOOD AT
Everyone knows (or, at least, should know) that they’re good at somethings and not so great at others. Which is why it’s amazing to me that some people spend so much time seemingly banging their head against the wall doing things that they’re terrible at.
Example: not everyone is cut out to keep the books. I know I’m not. While as an operator you should understand the books, if you’re terrible at keeping them, you need to outsource it. That could mean hiring someone in specifically to do that for you, finding better computer software to help maintain them or contracting a third-party to take care of it for you. Repeatedly banging your head against the wall only distracts you from more productive uses of your time, and will both burn you out and hold you back in the long run.
One of the best ways I can think of for using the 80/20 principle is on your menu. In a lot of restaurants, there seems to be a a very wide net being cast. That is, the menu is sort of all over the place (or what I call The Mega Menu). I’ve talked about the idea of less being more with your menu items before, and it still stands.
80% of your menu innovation energy should be spent identifying, developing and leveraging your menu’s strengths, not trying to account for what you think someone might like.
Restaurant Coach Key Point: you cannot be all things to all people. You can be onething to some people, though, and having a cohesive menu identity helps you focus on your strengths. Which, in turns, puts your best foot forward with customers and helps divert attention from shortcomings.
TUNE IN TO YOUR STRENGTHS
The moral of the story here is to not limit yourself, your restaurant and your brand by overly focusing on correcting your flaws; most of your attention should be focused on leveraging your strengths, because those are what set you apart and what your customers will respond to. That is how you become great!