There are plenty of things that cause restaurants to struggle including poor location, the wrong food for the wrong area, bad lighting, uncomfortable seats, smelly beer-soaked floors, difficult parking, or even embezzlement…. to name a few. Our list below, however, focuses on things that are not so obvious that we know to be critical to a restaurant’s success… and we see them over and over.
1. They fail to Cost Recipes – Toyota knows the price of a Camry down to the plastic dashboard “blank” that covers the electronic feature you didn’t opt for. Stouffer’s knows the exact price of that frozen lasagna in your grocer’s freezer section down to the grain of garlic powder. You need to know what each item on your menu costs…then you need to update those costs to reflect ever-changing ingredient prices (a 25 cent tomato today is not guaranteed to be 25 cents tomorrow). If recipe costs blow the target Margin (“Margin” and “Cost of Goods” are two sides of the same coin… Cost of Goods = Item Cost ÷ Item Sales Price… Margin = Item Gross Profit ÷ Item Sales Price) then no you will never deliver your targeted profit no matter how much you beat your chef or how high your sales volume is. A menu must be “engineered” to deliver profit.
2. Managers don’t understand Theoretical Food Cost – This is the relationship between item sales and item cost – or cost without waste or shrink. If your Short Ribs cost you $7 per plate (includes veggies, butter, etc…NOT labor) and you sell it for $21 then your food cost for that item is 33%. If your Corvina dish costs $4 per plate and you sell it for $19 then its food cost is 21.1%. Knowing this, what is your blended theoretical food cost for selling both Corvina and Short Ribs? 27.5%? NO….because you have not considered your “product mix” or how many of each item you sold and its impact on overall food cost. If you sell 20 Corvina and 2 Short Ribs then your theoretical cost is 24.7%. If you sell 20 short ribs and 2 Corvina then your theoretical cost is 32.3%… big difference. You don’t necessarily need to get rid of the Short Rib as much as you need to steer people toward the Corvina, luring the guy with the wallet.
3. They fail to Get Credit for cool ingredients – If you use Niman Ranch (a quality meat company that delivers humanely produced, hormone free, sustainable products) Pork Loin and your menu doesn’t say so, then your customers don’t know that you’re committed to using superior quality vendors. If you squeeze your own juices for your bar or you use “big ice” in your drinks…but you fail to tell your customers about it (through either print or service voice) then you’re missing an opportunity to draw customers who make decisions based on quality (ahem…a lot of people like quality).
4. No Sales Forecast – Forecasting sales is critical for determining how much you should spend on your ingredients to drive a certain sales volume and how much labor you should have.
5. No Labor Templates – When managers fail to program their labor to suit business volume they are not programming their labor through templates. The two highest cost lines on a restaurant’s income statement are Cost of Goods and Labor. Labor should be planned to deliver targeted labor cost for targeted sales volume.
6. No Labor Discipline – When schedule writers write schedules that don’t stick to the right labor template and they don’t manage labor overages by adjusting in-times to match scheduled in-times, then labor drifts quickly out of control. Labor will bleed you dry. If the plan is not right, then fix the plan but stick to the plan once you set it and all parties agree that the business can operate optimally at the prescribed level.
7. Poor Communication – Managers must communicate with each other or support each other as a united front through shift change, log books, and pre-shift “game planning”. Chefs and Service Managers should collaborate every shift to establish areas of responsibility and strategies for handling the day’s challenges. When managers try to be “the staff’s favorite” or when they allow the staff to play one manager against another, then there is dysfunction.
8. Poor Coaching – When employees receive important direction through impromptu sessions delivered while walking by an employee in a public space (we call this “drive by” management). When managers don’t make their direction important by planning their coaching session with employees, it sends several messages: the direction is not that important; the manager is unorganized; and the manager does not respect the employee enough to make sure that both parties have each other’s undivided attention. Resisting the temptation to blurt out direction through unscheduled discussions reduces “buy in”, commitment, and ultimately results. Whenever an employee knows what they are supposed to do and when they are supposed to do it…and that you care…they are more likely to deliver the desired results than if you are loose with your direction.
9. Managers Socialize with Employees – It is critical that managers protect their credibility and retain their authority to direct the staff in order to drive initiatives and execute business strategies. While it is good for managers and employees to like each other, it becomes very difficult for managers to discipline employees who violate the rules if the manager was drunk at the bar with that same employee last night, last week, or last year. Taking away the social opportunities takes away the likelihood that your managers will jeopardize their authority.
10. No one tastes the food – When a restaurant serves mediocre food, what’s the message? Customers make dining decisions for many reasons but the core requirement is that the food is good. In theory, recipes are not released to the production line unless someone decided it tasted good…but restaurateurs can get sidetracked into “managing the urgent and not the important” – forgoing regimented, daily food tastings to ensure recipe adherence. Once the staff senses that great tasting food is not important, they will struggle to uphold a standard that is not supported by management and great food turns mediocre.
If your coffee shop is on the “commute home” side of the street and you close at 4pm, or if you decide to substitute canola oil for the extra virgin olive oil on the bread dipping plate, then you have bigger problems. But if you can’t quite put your finger on your languishing profits and you feel you have a good concept, your problem might be one or more of the ten.
Ray Camillo – Founder & CEO, Blue Orbit Restaurant Consulting
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