Good Restaurant Management Means Managing the Bottom Line!
By Stu Leventhal
Chefs, managers, shift managers, owners; don’t we all hate the subjects of accounting. Number crunching for people who proclaim themselves creative food and drink artisans is like receiving a cold, wake up, slap across our face! There are two areas that great restaurant key employees excel at; back of the house culinary wizardry and/or front of the house hospitality. Both jobs command a hands-on attitude with one’s personal presence being physically where the action is! People don’t go into the restaurant business because they envision themselves someday hanging out in their plush back office talking on the phone with their feet up on the desk. Restaurant management is a commitment to a life style where one is partially married to the restaurant. It is not a nine to five, 5 days a week, profession. You work over fifty hours on average, rarely take a weekend off or a holiday and key personnel are always on call!
Restaurant managers take pride in creating culinary delights and hosting pleasurable experiences for their guests. We aren’t bookkeepers! We judge our success by the smiles on our guests’ faces and the size of the line at the door waiting for a seat! If we wanted to crunch numbers we’d have gotten a job in a bank! Yes, I get all that but still, periodically you will have to answer to the numbers! Monthly numbers, quarterly numbers, yearly numbers… I’m afraid to mention, shift numbers, daily and weekly numbers too! And then we can break things down to departmental number! And individual staff member’s numbers…Ouch!….yuck!….Cough!
If you don’t keep track of how much money you’re restaurant is making, you have no idea whether your business is successful or not. You can’t tell how well your marketing is working. And I don’t just mean you should know the amount of your total sales or gross revenue. You need to know what your net profit is and exactly where in your restaurant it is coming from. If you don’t, there’s no way you can know how to increase it. Heck, you may have a problem with spoilage due to over ordering that can be solved simply by placing smaller orders to be delivered more frequently. You may be over staffing Wednesday nights and you aren’t aware of it because Wednesdays were much busier last year. But, this year the movie theater down the block has implemented an early bird half price movie special that is cutting down your normally high, dinner rush traffic. When you notice the gradual loss of customers on your reports, you can look into the cause immediately and start counter actions. Like, offering an after movie late night snack discount to take advantage of the audience restlessness once the movie lets out!
If you want your restaurant, catering or entertainment business to be successful, you need to make a financial plan, including a budget and check it against the facts on a monthly basis then take immediate action to correct any problems. That is the minimum!
This report covers the minimum basic steps you should take to start monitoring your bottom line NOW! Remember, how successful you are at managing your bottom line is the ultimate factor that will determine your salary potential. Even if you are the owner, you can’t take out more than the restaurant can afford to give you. The bottom line affects everyone’s salary. It determines if you can remodel, purchase new equipment or afford to higher that genius young Chef from Paris. If you are to have a long career in the restaurant business you need to get in the habit of reading your financial reports and managing accordingly. Upper management will at some point, also expect you to talk the talk, meaning when you present your brilliant ideas, you need to project numbers and state facts or the big wigs won’t pay you any attention.
It will show your professionalism and go a long way to building your authority and credibility once you get in the habit of backing up your vague statements at meetings with proof. For example “Well colleagues, sales are up on Thursday Nights, I contribute that to the new exotic drink menu we rolled out at the beginning of the month. Congratulations Shirl, it seems the customers love your new island rum flavored umbrella fruit drinks. I apologize for my skepticism when you first brought the idea up last meeting. You truly are a genius Mixologist and we’re all thankful to have you on board. On the bad side, Saturday’s breakfast business is declining. We need to focus on finding out why and then reversing this trend. We are going through too much salmon according to our reports on how many salmon dishes we sell. That may indicate we have a salmon loving thief but let’s not jump to conclusions yet. It’s all backed up in the reports I’ve laid in front of each of you. I’ll give you a moment to look over the reports then we’ll start our discussion on how we shall proceed to build up our bottom line this coming month.”
Good restaurant management decisions are not winged or based on gut feelings they are determined by facts and figures!
The first step to getting a handle on managing your restaurant’s bottom line is to create a comprehensive financial plan for your restaurant or catering operation. Estimate how much revenue you expect to bring in each month, and project what your expenses will be.
* Remember that lost profits can’t be recovered! Lots of well-meaning entrepreneurs compare their projections to reality and find earnings too low and/or expenses too high then shrug and conclude, “I’ll make it up later.” The problem is that you really can’t make it up later. Every month that your restaurant’s profits are too low is a month that is gone forever!
* The restaurant business is very competitive. You have to be able to make adjustments right away. If revenues are lower than expected, increase efforts in sales and marketing or look for ways to increase your rates or get better deals with lower prices on your purchases. If overhead costs are too high, find ways to cut back. There are other businesses like yours around, some in the restaurant business, and some not. Study other business models. Can you figure out what their secrets are for operating profitably?
* Think before you spend. When considering any new business expense, including marketing and sales activities, evaluate the increased earnings you expect to bring in against its cost before you proceed to make a purchase.
*Once you’ve mastered the basic restaurant’s overall financial plan, your next step will be to break things down further by each department. Follow a similar fashion to the larger, less specific financial plan of your whole restaurant which we just went over. Again, estimate how much revenue you expect each department to make and how much you expect each to have in expenses.
*Depending on the size of your restaurant, you may need to break each department down even more specifically. Follow the same format. The more you break it down, the more exact you will know what is making you money and what is costing you money. Now managing decisions become a piece of cake! A walk in the park! And as far from guess work as you can get!
RESTAURANT PROFIT S VERSES RESTAURANT REVENUE!
Always evaluate the success of your restaurant based on profit, not revenue. It doesn’t matter how many thousands of dollars you are bringing in each month if your expenses are almost as high, or higher. Many high-revenue restaurants have gone under for this very reason… Don’t be one of them!
As always if you need some restaurant related management advice leave a comment or question. I’ll get you an answer.
Don’t forget to check all the fine advice for building up your catering sales at:
Catering is a market share every restaurant should explore grabbing a piece of!
Need some website copy written that actually brings you customers:
PS. I know by your flattering comments that a lot of you have been itching to read another one of my fiction tales. I’m happy to announce, HIGH SEA by Stu Leventhal is now live at Amazon Kindle! Here’s a direct link! I don’t want to ruin the read for you so I’ll just leave you the links to the two entertaining Kindle Youtube book trailers:
I’m looking forward to hearing all your critiques. Do you like that cover?