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How to Stay in the Black in the Restaurant Business

Owning and operating a restaurant is a business first and foremost. There is the exciting menu with its tongue-popping array of delicacies, the appealing decor, the smiling and friendly staff and the talented behind-the-scenes food whisperers. But underneath and beyond even all that there is the budget, with its tell-all balance sheet and monthly accounting reconciliation. With all of this to keep track of right from day one, it is no wonder so many new restaurants fail. 

In this post, learn what you need to know to stay in the black with your own new restaurant enterprise.

First, Set the Budget

Certainly this is not the most exciting part of owning a restaurant – not at first, anyway. But fail to set a budget and it could end up that the budget (or lack thereof) is all you think about nearer the end.

The goal of your budget is to ensure you make a profit each month. As such, as soon as you have a feel for your monthly average sales, it is time to do some food costs recalculating. Your goal is to ensure that what you spend on food expenses comprises no more than one-third of each month’s sales. Spend more and you will profit less – guaranteed.

Next, Draft the Menu

Here, you are evaluating everything from starters to afters and ingredients to portion sizes. Your goal is to match portion sizes with diner appetites (you will know you have met this goal when requests for “to go” bags decline). Also, if you plan to offer a freebie such as a bread basket, make sure it doesn’t break your bank, because it sure won’t be contributing to your profit.

As well, track orders for the priciest menu items very closely. If you see that some items aren’t moving, strike them and streamline. Keep going until you have a menu that is as effective on a spreadsheet as it is on the table.

Finally, Track Everything

Today’s restaurant business is far too complex for most entrepreneurs to use the old pencil-and-paper method with any realistic expectation of accuracy (or sanity). Instead, opt in for one of the new breed of sales software. This software, which functions similarly to how a customer relations management software package might in the sales industry, allows you to track every vendor and every supply and ingredient you order.

Perks include these (and many more):

  • You will no longer over-order “just to be on the safe side.”
  • You will be able to tell which shifts may not be pulling their weight profit-wise.
  • You will have more leverage renegotiating bulk order prices with vendors.
  • You will be able to make sure perishables get plated before they turn bad.
  • You will be able to analyze variables such as fixed overhead versus variable costs with profits.
  • You will be able to view in advance how well new limited-run specials are performing before choosing to add them to the full regular menu.

Setting a budget, monitoring your menu and tracking everything are the three biggest determinants of any restaurant’s initial ability to succeed. Of course, they are not the only determinants by a long shot, and even if you get each of these spot-on perfect, it will not guarantee your success.

But when you start out with a reasonable budget, a menu you can grow into and the ability to view in real-time what is going on behind the scenes in your own establishment, you can capitalize on your other strengths to succeed where others fail.

 

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