How Restaurant Owners Can Stop Making the Same Mistakes

Sales are down, profits are almost nonexistent, you are getting bad reviews online, and you cannot keep good staff. What do you do? Sadly, most restauranteurs turn to the same reactionary solutions, but they never work.

Solution Number 1: Hire New Managers

Seems like a good idea. Bring in some new talent, but you soon discover this new manager is not the man on a white horse come to save you. Great Chefs can create great food, but they need clear direction for financial targets and menu guardrails. Successful General Managers can manage all aspects of the business, but they have little time to analyze your issues, determine solutions, and implement and install new systems when their time is consumed by running shifts. So disillusioned, you terminate them and keep trying to find the next person who can figure it out for you.

Solution Number 2: Introduce Software Solutions

A salesperson tells you their software can give you weekly reports that show the variance between actual and theoretical food costs. It can be your inventory tool, and it can even do your ordering for you; so, you buy it. Then you discover you must enter recipes, but that requires that you actually have written recipes with accurate yields which you do not. You have no idea how to convert a case of tomatoes into four cups of diced tomatoes, and the price of tomatoes changes weekly meaning you have to enter updates every week. The software salesperson said you could just scan your invoices and prices would update themselves, but he did not tell you it would take 3 months to get all ingredients scanned for the first time and coded to the right department and stored in the right purchase unit vs. usage unit. A simple software solution soon turns into a nightmare when you get past all the data entry only to find it does not interface with your POS system to grab item sales. It is an ugly cycle that never ends.

Solution Number 3:  Spend Money on Advertising and Marketing

It is easy to assume that the way to drive sales is to spread the word and offer a discount, so you hire marketing companies to target the zip codes around your restaurant. You mail out coupons and you give away free food for two weekends in a row, then sales drop back down to where you were. So next you hire a company to manage your social media and find out you need to hire a photographer as well, all the while trying to understand how this is going to drive sales. Desperate, you schedule a meeting with a company that promises to inject key words into your website narratives for search engine optimization, only to find out no one can explain how more clicks equals more sales for a restaurant.

Solution Number 4:  Change your menu

If people do not like your food that must mean a new menu is a good idea. If four people said they would come for lunch more often if you had a tuna melt on the menu, that must mean you need to add a tuna melt. If reviewers say your prices are too high, then surely you need to create a menu you can sell at lower prices. We have seen the results of this thinking multiple times when we find restaurants that are on their third chef and fifth menu in one year, sitting beside restaurants that opened with a solidly executed eighteen item menu that has now morphed into an inconsistently executed thirty item menu.

New managers, software solutions, marketing initiatives, and menu updates are not bad ideas. They just need to be approached with a well thought out purpose and a solid plan. To create solid growth and improvement plans for your restaurant, you must first start with a solid foundation to build from. Here are the mandatory pieces of that foundation:

A Well-Defined Brand with Guardrails for Decision Making

Defining your brand often means taking a few steps backwards to take steps forward. Start by asking yourself what is the purpose of your restaurant? Do you exist for a quick bite and a lot of take out or are you there for special occasions and leisurely weekend dining? Do you want to become a one-of-a-kind neighborhood gathering spot, or do you want to focus your attention on perfecting the model and building more? Your purpose can go in many directions and in most cases, it is not a singular one.

Once you understand what you are trying to do take the time and conduct the research to fully understand who you serve and what they want. This allows you to then decide if you want to deliver everything they want or only parts of it. For example, you may find that your targeted audience is missing breakfast Tex Mex, and sushi options. That does not mean you open a breakfast restaurant that serves sushi burritos. Pick one and do it well. If you are a restaurant that already exists, zero in on what made you successful in the beginning, determine if those things are still relevant, and use that knowledge to narrow or evolve your business. Put all those parameters into a narrative and use it to make all your future decisions.

A Clearly Articulated Chain of Command

Things get done when people understand who they report to, what is expected of them, and how they will be held accountable. Create an Org Chart for your restaurant starting with the owner and ending with the hourly employees, filling in the middle with all chefs and managers illustrating clearly who each person reports to. Then create an Areas of Responsibility document that assigns every responsibility in the restaurant to someone on that Org Chart. Not only should you assign the obvious things like food, beverage, and labor costs, but also the minutia like training materials, lightbulbs, dish machine chemicals, and office supplies. When something is not being taken care of, it then becomes very easy to go to the list and see who is responsible.

A Budget that Projects Monthly Sales and Costs

It is impossible to control costs and deliver profits if you do not know what your targets are. A budget gives you sales goals and makes it easier to evaluate where on the calendar your sales building initiatives should be placed. The budget also allots dollars to be spent monthly in each cost category. The budget can be created from historical data for your restaurant and then evaluated and adjusted to deliver desired profits. Once the budget is agreed to, your team need only follow it.

Armed with a brand definition, assigned areas of responsibility, and a budget, you can now accurately evaluate your business and make sound decisions. If you think your managers are the problem, you can weigh their performance against their assigned areas of responsibility and their financial targets. If you hire new chefs, the brand definition will give them direction and guardrails for menu changes along with how often they should be made, and the budget will give them food cost goals. If your managers are doing a good job but working way too many hours, you can investigate software solutions that will make their jobs easier and involve them in taking those solutions for a test drive before you purchase. And if you want to drive sales through marketing and social media, your budget will tell you how much money you can spend and which months to spend it in. Your brand definition will tell you what demographics to target and ensure that all advertising, mailers, and social media posts accurately articulate the brand and promote the key elements of your concept.

Using these foundational tools to make informed decisions will take your old mistakes and turn them into successes.

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