5 Reasons Restaurant Owners Should Not Be Worrying About Rising Food Cost: Reason 1

Reason One:  It’s a Losing Battle

FOOD PRICES 

Let’s face it. Costs never go down.

When you think about all the costs involved with operating a restaurant, there can be a lot of areas to worry about. Payroll and labor costs. Equipment costs. Utility costs. But right now, it’s escalating food costs that have restaurant owners most concerned.

According to the United States Department of Agriculture, (USDA), consumers will see food prices rise throughout 2014. After remaining relatively level at 1.4 percent in 2013, prices could jump 2.5-3.5 percent in the coming months.  Although this range is close to the historical norms, the effect on your bottom line is what really matters.  

Due to the sensitive nature of increasing pricing in your restaurant, passing the burden onto your customers by raising prices, is a slippery slope.  

It’s easy to focus on rising costs and the factors causing the rises, however, this is stressful and unproductive. It is not doing any good to focus solely on the things that are out of your control.  

Now, I’m not suggesting that you shouldn’t be concernedand keep an eye on your costs. All successful business operators must do so, but there must be a balance.  

I am suggesting that by taking charge of what you can control, your restaurant will attract more customers and keep more of them coming back time and time again.

Your time is much more valuable when you focus on what you can influence and control. 

Use your energy to focus your resources to make positive changes that will grow your topline business revenue.

Imagine the possibilities when you invest the majority of your attention on strategies that will help you to move forward.  

These are things you can control and influence.  I am talking about:

• Investing your efforts on creating happier customers, repeat customers and increasing revenue. 
• Focusing on the things in your restaurant that are costing you money and don’t have to be.  
• Using proven strategies that that will make your business more valuable today, tomorrow, and when you are ready to sell. 

You will read about these and more strategies later in this report.

To download full report on 5 Reasons Why Restaurant Owners Should Not Be Worrying About Rising Food Costs click here  Combating Rising Food Costs

Managing Finances

Financial mismanagement will quickly cause a restaurant to fail. Cutting corners is not the answer.  Following are a few concepts that every restaurant needs to know from the beginning.

Taking Average Profits

You’d be surprised to know that on average a restaurant makes 5 cents on every dollar spent. So if it made sales of $50 in an hour, it means the profit is just $2.50, now that doesn’t sound much does it? And if you add the daily minute mishaps to these calculations, the profits would drastically decrease. A broken salt shaker or pouring out the wrong drink or the most common glass breakage might seem insignificant, but let’s see it from a different perspective. To make up for the loss of a salt shaker worth $5, the restaurant needs to make sales worth $100. Isn’t so insignificant after all is it?

The Tale of Expenses, Sales and Profit

In the simplest terms, profit is what you make when you minus the expenses from the sales. And if for whatever reasons, the expenses are more than sales, there is only so long that a restaurant can stay in business.

Fixed and Variable Expenses

Insurance and rent are fixed expenses whereas the labor and raw materials are the variable expenses. So the sales a restaurant makes after investing in variables need to pay for the fixed costs before profits are extracted.

Your Inventory

Liquor and food stock is like cash too, a restaurant only need so much in hand. Ideally there should be a week’s supply of food and a couple of weeks of liquor in store. Any more than that and the restaurant owner is simply overstocking.

Concentrate on Boosting Sales rather than Cutting Costs

Cost cutting is very important to help make more profits, but boosting sales is far more profitable. Many restaurant owners spend so much time concentrating on cutting down costs that they don’t think much about growth.

Cents Make Dollars

Regardless of how you do your math, there will only remain 100 cents in a dollar. Take 100 coins and let the staff divide them for wages, rent and other expenses. You’d be surprised on how they make the assessments.

Staff Expenses

Staff is most commonly the biggest expense in restaurants and so it is important that they are productive enough to make it worth the investment. Any rise in wages should be matched with productivity.

Additional Costs of Staff

Uniforms, training, meals, leaves need so be added in to total staff costs. They also need to be adjusted into the accounts.

Profits Pay For Equipment

Any investments made in equipment cannot be adjusted in the restaurant’s expenses and need to be paid for from the profits, so owner’s need to make sure that they are well worth the money. A good idea to judge if the equipment is worth the investment is by seeing if it will have a fast return on investment by either cutting down on overall costs like ingredients or labor or by boosting sales.

The Costs of Small Things

By working out the exact costs of small things restaurateurs can better evaluate the profits and sales. They need to know how much each napkin, glass or even a tomato, cucumber or scoop of red chilies costs, then check how much of it is wasted every week and how much it truly costs.

Rebranding - Is it Time to Make a Change

There is nothing worse than getting stuck in a rut.  What may have worked when you first opened your restaurant just doesn’t seem to be cutting it anymore.  A few signs that some changes may be needed are as follows:

• Have you noticed that your business is not what it used to be?  
• The food doesn’t seem so special
• Your regulars seem to be visiting less and less
• Morale with the staff is low
• Staff turnover seems high
• You lack motivation
• You dread coming to work

Don’t worry, these things are normal but they are definite signs that you have got to get you and your restaurant out of the rut if you want to stay in business.   You may have to dig deep to get yourself motivated, but you did it years ago when you opened your restaurant and you can do it again now!  Here is how:

1. Create a new tagline.

Begin with refreshing your brand image.  Just like you did when you opened your restaurant, take some time to figure out what you want to deliver to your customers.  In other words, when a customer hears your restaurants name, what do you want to immediately come to their mind?  Form this idea into a new tagline attached to your restaurants name.  An example of this would be, “The Wharfside, any closer to the ocean and you would be swimming.”  Or “ Anthony’s Pizzeria, smile and say cheeeese.”   For more information about branding click here.

2. Find out how people see you now

The process of creating a new tagline has given you the opportunity to clearly see your vision of the new you. The next step is to accentuate the positive and eliminate the negative so you need to start asking questions.  You must ask your employees, your customers, and even people you meet in the grocery store.  Ask them what they know about your restaurant, what they think about your restaurant and things they may like to see added or changed.  This is going to give you the opportunity  to work on the perceptions that are currently out there that may not be what you want them to be.  It will also give you the opportunity to connect with the community by giving them what they are looking for.

3. Take a look at your competition

Go and visit your competitors.  Take notes on the things they are doing right and the things they are not.  Is there something that nobody else is doing that may be a unique selling opportunity for you? Explore different restaurant concepts to help you find new ideas.  Check out different price points and what is being offered.  Also go to review sites and see what customers are saying about you and your competition.  This information can give you great insight on where you need to be focusing.

4. Revamp your décor to fit your new brand

Don’t let this idea scare you.  You do not have to spend a lot of money to revitalize your space but it is essential that your customers will notice a difference.  New colors, textures, and lighting can make a tremendous difference.  Research other restaurants with the similar themes and get ideas for new color combinations and decorating ideas.  Think about how you may be able take your existing furniture and rearrange it to give the restaurant a new feel.  This is a great time to think about the traffic flow of your restaurant and work on ways to make service more efficient.   Places like Homegoods or even garage sales can have great inexpensive decorations to fill empty spaces and add a splash of interest.

5. Redesign your menu

A menu redesign will fill three important purposes.  The first is to promote your new brand and give your new image credibility.  The second is to make the food special again by adding exciting new items or specials.  The third and most important is to help bring in more money.   It is a fact that customers look at menus in a certain way.  Placement, highlighting, typeface, and descriptions all play a huge role in what your customers will buy.  You need to design your menu so that your customers order what you want them to order  (click here for detailed information regarding menu design).  Don’t forget your drink menu.  Be creative and come up with some great signature drink ideas that help enhance your brand.  

6. Get your staff to “buy in’

Your staff is your sales team.  Makes sure they fully understand what you are trying to accomplish with the rebranding and make sure you let them know how it will positively affect the money they make too.  Train your staff to encourage feedback from customers and encourage them to ask the customers to come back.  You cannot rebrand your restaurant without the support of your employees.  If they are unwilling or not excited about  what is happening it might be time to let them go.  

7. Get the word out.

Just because you work so hard to rebrand, don’t assume people know or care about what you are doing.  You need to build excitement and let everyone know what going on.  Since your staff is your sales team, encourage them to tell everyone what’s going on.  Try giving your staff $10 Gift Certificates to hand out to everyone they know or use social media channels to get the word out.  Post pictures of the changes and talk about the new menu; build excitement by having a ‘Look What We Have Done” party.   

8. Monitor reactions and financial results

It is important to know reactions to your changes.  Hopefully by the increase of revenue you will know that you have made a huge difference. However, don’t take anything for granted.  Once again consult your staff for any feedback, listen to them and ask questions, and use comment cards in the check holders to get feedback from your customers.

Now that your rebranding has brought new life to your business keep the momentum going and set one day every month to brainstorm new ideas to keep your restaurant from getting old.  Little tweaks make a big difference and keep you relevant to your customers.

If you need help finding motivation or figuring out where to begin, we can help.  Call us at 845-598-4760 or email us at info@TheRestaurantPlaybook.com and we’ll get you started.

One of the Main Reasons Restaurant Fail

Keeping Up Momentum

New restaurant owners many times fail to realize that no one "needs" a restaurant, in most cases restaurant purchases are discretionary in nature so getting it right from the beginning is so important.

Lack of clarity in the concept is a huge reason for failure, but most of all it’s the mistakes and poor decisions made during start up that cause businesses to go belly up too. The first months of getting a restaurant open is a minefield of leases, permits, licensing, certifications and approvals. Not knowing how to navigate the process can land up costing the new restaurant owner plenty besides time and money. It cost momentum, which many fail to realize is crucial in a new opening. A restaurateur can borrow money, hire and cultivate vision and talent, but its momentum—the energy of progress--that keeps a plan moving forward and into living restaurant. Without the "momentum," the money dries up, visions get foggy and talent moves on. What happens next is that each pause, every stall, affects the momentum of the project. These interruptions wear away at the interest of everyone, partners, investors, prospective hires and anticipated customers. The restaurant is in a bad situation before the first dollar ever hits the till. 

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