Youngsters, Youths, Middle Aged, every group of people in our society find and talk about restaurants business in positive way. Quite often, we hear that there is huge profit and more often whenever we see good crowd in restaurant, we start imagining the profit the restaurant is making. Some of the people in the group even calculate & discuss the average spending they would make in a week or a month in restaurants & bars, discuss with likeminded people in the friend circle and start up a restaurant. There are some who are looking for opportunity to do something & meet the other one who is looking for a sponsor to start a restaurant. Some have idea & good knowledge and some feel that they have enough idea & knowledge. Everyone starts a restaurant and thinks it would be successful.
There are less people who really would think the pros and cons of the business; put effort to understand the inside story of the restaurant business; are well prepared to deal situations, unforeseen circumstance. That is the reason we find restaurants mushrooming and within a year or so many are either closed or sold to new management. By putting my views forward, I am not saying that there aren�t any restaurants which are not successful. I am just saying that good preparation, hard work, ample finance and time devotion is required to make the restaurant business a successful venture. A small external factor also may be enough to invite a disaster to your restaurant. Most restaurants don�t fail for just one problem. It usually is a combination of many that finally reaches a point and can�t be saved.
Here are some tips to make restaurant a successful venture.
Location:
A good location is one of the most important factors to consider in making or breaking a restaurant. Proper visibility, ample parking, good foot fall, are just a few of the considerations to be thought of.
Restaurant Owners should Work:�
Many think that hiring a good manager to run front of the house and hire a good chef to run heart of the house is enough to open and run a restaurant. In fact, owning a restaurant means working at the restaurant.�Forget that you could sit at the bar with friends and collect a paycheck.
Management:
You must know how to collect data and analyze business to make sure you have the necessary information to run a profitable business. Comparative study on the potential and actual revenue performance with proper reasoning & strategies to overcome the flaws is what is necessary.
Hiring Management Team or Personnel:
Some of the restaurant entrepreneurs think it will be great to have experienced general manager, or kitchen manager, or bar manager, since they have experience and excellent references. But, after few months down on the line they come to know that not only they cannot manage the restaurant, but also they alienate staff, drink away the profits and/or steal money. Hiring a management is fine- in some cases it is a necessity- but don�t ever trust anyone completely. Remember that no one is going to care about your business the way you do.
Keep Proper Book of Accounts & Pay Taxes:
Many of the restaurant entrepreneurs are ignorant about book keeping, auditing, and submitting annual report to government agencies. Further, some of the auditors, accountants even suggest to keep two types of book of accounts, one for internal use and one for tax purpose and that�s where you are making a huge mistake. This won�t save you anything. Delay in submitting your company updates in company registrar�s office, tax office�come with hefty penalties, fees and other assorted fines. It even can cause government authority to shut down the restaurant completely. So, be loyal in keeping book of records, paying taxes and submitting reports on timely basis.
Eye on Your Cash Flow:
It is vital that you keep a close eye on your cash flow. Make sure that you have enough cash to cover expenses, like supply orders, payroll, rent, etc along with all the other bills that come with a restaurant. It is always good to keep on checking account stats, get prepared with saving well before running into the red.
Negotiation Skills:
Restaurant owners should know what they should be paying for the services necessary to successfully operate a restaurant. You should know what others are paying for the same goods you are buying. You need to have the skill to make your supplier compete for your business from other. Or else, you aren�t getting the best price.
Spending less Money before Opening Day:
You may require some extra money to address any unforeseen expenses before the opening day, but not unavoidable expenses. Do not spend on new equipment & furniture until extremely necessary. Always consider the benefits of using what you have. Avoid putting anyone on payroll until as close to opening day as possible.
Keep Payroll Low:
Keeping payroll low does not mean that you pay less than what the workers deserve. It merely means to garner the optimum use of the available workers. The restaurant owners who work in the front of the house generally in the weekend, holidays & rush hours often easily cut a third of the staff & still be able to manage customer service.
Another common problem with a high payroll is paying any one employee more than their worth. Everyone has their price, and salaries depend largely on where you are located & how you are performing.
Good Customer Service:
This is an obvious reason for any restaurant to do good business. Customer service along with good food, is integral to staying open. Therefore, don�t shy away from getting customer�feedback in any form, record, analyze and share with the team. Remember that for every customer complaint you get, three more are left unsaid. If there are a lot of unhappy dining patrons out there who don�t bother to say anything then you slowly close to shutting down the restaurant without even knowing the actual reason.
Marketing & Advertising
A lot of excellent cooks are there who have original ideas and can prepare excellent food. It does not mean that they can run a restaurant well. As discussed earlier, it is not just about cooking and serving good food. Remember good food is served in competitor restaurants too, so they are not the only factor for success. The important aspect is to include marketing and managing restaurant that most restaurant owners overlook.
Marketing:
Many new restaurant owners think that they can market their new restaurant through �word of mouth�. Indeed it is one of the best ways of marketing for any service business. New customers are more likely to step in on the recommendation of a past customer than by an advertisement. That much is true. But, dependency on word of mouth marketing in the initial stage is planning to fail. So gear up to gather contact information from every person you are in touch and market to them. Marketing to regular customers represents better opportunity for increased sales than spending money trying to reach new customers. Obviously, your regular customers are a better source for new customers who have not been in your restaurant than any other marketing tools.
Advertising:
As more and more restaurant open advertising as another component of marketing would be important in establishing & maintaining restaurant�s reputation. Your own public relation, your own happy customer base, the quality of food & the quality of service are one part of keeping the restaurant but having your brands presence in the form of advertising is a must.
Understanding Food Cost, Operating Expenses & Menu Pricing:
Many of the chefs or the managers working in our restaurant industry can cook well, manage operation well but they fail to monitor the food cost & some even do not know the importance and methods of keeping them low. Knowing how to properly price the menu�is the first step toward making a profit. The very wrong practice of keeping the price similar to the price of the competitor without knowing how they manage such price would lead to restaurant�s failure. You need to understand method of menu pricing as the financial picture of your business is different than others.
One of the methods you can use is to use budgeted cost percentage to formulate prices that will yield that budgeted percentage when the sale of all your different items is taken into account. The major problem with this pricing method is that most operating expenses within a restaurant do not fluctuate as a percentage of sales. The rent of a restaurant is not always 5% of sales. If sales are down, the percentage goes up, if sales are up, the percentage goes down. Simply achieving a target food cost percentage does not guarantee that a restaurant will make the profit.
The common sense alternative to pricing by a target percentage is pricing according to the markup you need to cover the expense of doing business, leaving you with a profit you find acceptable. This method is called pricing by gross profit. The basic principle of this method states that you can assume, through calculation, how much every person that walks through your door will cost you to serve, and that with this number you can price your menu to yield an average gross profit greater than the cost necessary to serve every person who walks through your door, in addition to your needed profit. Adjusting these prices according to market price points yields a gross profit that will cover your operating costs, your product costs, and the profit that you decide you need to make for this venture to be worth your time.
Pricing by gross profit is the only method of pricing that takes into account every cost of operating a business, including profit.
Have Unique Selling Point:
Your customers need a reason to come to you instead of your competitor. If you think that your food is good that people will line up out the door to eat it, then you are wrong. Good food, good service are never unique selling point. If you want to offer something truly unique, you need to move past food and service they only meet the minimum expectations of your customers. What you need is something original to sell. Something for which customer should visit you other than the best food or the best service.
A truly unique selling point is an emotion you offer to people. People should feel nostalgic in your restaurant. People still remember the emotions long after they remember food and service. If you make a real, emotional connection with your customers, they will remember how you made them feel for decades to come, long after they forget what they ate and who waited on them.
Proper Menu Planning
It is important to remember that you cannot please everyone & elaborated menus come with several operational problems. Trying to offer everything (many things) your customers like does not give choices but confuse them. They will not be sure about your specialty, what you do well, what they should order. If menu is focused, more of your customers will convey your message in their circle well.
Lengthier menus take longer to order from. The more choices you have on your menu, the longer it takes each customer to peruse that menu, and the longer it takes for them to order. For every minute they are not ordering, you are not making money for the seat they are occupying. This is serious as 80% of revenue, 100% of profit is made during peak periods & anything that limits your ability to serve customers and collect money during your peak periods is limiting your potential for profit.
Further, when you have too many different dishes cooking at once and less multiple orders in the same pans, it means more time to produce whatever is being ordered. The longer it takes to serve each table, the lesser tables you can turn during peak periods.
Elaborated menus require more inventory items in the stock. The more items in the stock represent a possibility for loss. Items can be stolen, mishandled, or stored incorrectly and spoiled. The more items in inventory also mean more investment.
Elaborated menus require more space, more equipment and more personnel to produce. The more items you have on your menu, the less opportunity your staff has to cook multiple orders at once. Less multiple orders means more burners, grill space, fryer grease, and hands are required to produce the same number of dishes. All these additional tools cost money.
Restaurant business is not an easy task but also not the impossible one. Proper planning, execution and monitoring are the mantras for a successful restaurant venture. Passion along with the knowledge of this business too play key roles if you are planning to be a restaurateur.
Menu Reengineering
Sustainability of the restaurant business in long term requires reviewing the menu time and again and proposing innovative products as per the season and change in taste of your regular customers. Promotional Menu including dishes based on season, festival, trend, theme, etc would help you to create a ground to include new popular dishes in your regular menu and discard the low performing ones in due course of time. This will keep creating new taste bud in your regular customer and make them return to you quite often.
There are less people who really would think the pros and cons of the business; put effort to understand the inside story of the restaurant business; are well prepared to deal situations, unforeseen circumstance. That is the reason we find restaurants mushrooming and within a year or so many are either closed or sold to new management. By putting my views forward, I am not saying that there aren�t any restaurants which are not successful. I am just saying that good preparation, hard work, ample finance and time devotion is required to make the restaurant business a successful venture. A small external factor also may be enough to invite a disaster to your restaurant. Most restaurants don�t fail for just one problem. It usually is a combination of many that finally reaches a point and can�t be saved.
Here are some tips to make restaurant a successful venture.
Location:
A good location is one of the most important factors to consider in making or breaking a restaurant. Proper visibility, ample parking, good foot fall, are just a few of the considerations to be thought of.
Restaurant Owners should Work:�
Many think that hiring a good manager to run front of the house and hire a good chef to run heart of the house is enough to open and run a restaurant. In fact, owning a restaurant means working at the restaurant.�Forget that you could sit at the bar with friends and collect a paycheck.
Management:
You must know how to collect data and analyze business to make sure you have the necessary information to run a profitable business. Comparative study on the potential and actual revenue performance with proper reasoning & strategies to overcome the flaws is what is necessary.
Hiring Management Team or Personnel:
Some of the restaurant entrepreneurs think it will be great to have experienced general manager, or kitchen manager, or bar manager, since they have experience and excellent references. But, after few months down on the line they come to know that not only they cannot manage the restaurant, but also they alienate staff, drink away the profits and/or steal money. Hiring a management is fine- in some cases it is a necessity- but don�t ever trust anyone completely. Remember that no one is going to care about your business the way you do.
Keep Proper Book of Accounts & Pay Taxes:
Many of the restaurant entrepreneurs are ignorant about book keeping, auditing, and submitting annual report to government agencies. Further, some of the auditors, accountants even suggest to keep two types of book of accounts, one for internal use and one for tax purpose and that�s where you are making a huge mistake. This won�t save you anything. Delay in submitting your company updates in company registrar�s office, tax office�come with hefty penalties, fees and other assorted fines. It even can cause government authority to shut down the restaurant completely. So, be loyal in keeping book of records, paying taxes and submitting reports on timely basis.
Eye on Your Cash Flow:
It is vital that you keep a close eye on your cash flow. Make sure that you have enough cash to cover expenses, like supply orders, payroll, rent, etc along with all the other bills that come with a restaurant. It is always good to keep on checking account stats, get prepared with saving well before running into the red.
Negotiation Skills:
Restaurant owners should know what they should be paying for the services necessary to successfully operate a restaurant. You should know what others are paying for the same goods you are buying. You need to have the skill to make your supplier compete for your business from other. Or else, you aren�t getting the best price.
Spending less Money before Opening Day:
You may require some extra money to address any unforeseen expenses before the opening day, but not unavoidable expenses. Do not spend on new equipment & furniture until extremely necessary. Always consider the benefits of using what you have. Avoid putting anyone on payroll until as close to opening day as possible.
Keep Payroll Low:
Keeping payroll low does not mean that you pay less than what the workers deserve. It merely means to garner the optimum use of the available workers. The restaurant owners who work in the front of the house generally in the weekend, holidays & rush hours often easily cut a third of the staff & still be able to manage customer service.
Another common problem with a high payroll is paying any one employee more than their worth. Everyone has their price, and salaries depend largely on where you are located & how you are performing.
Good Customer Service:
This is an obvious reason for any restaurant to do good business. Customer service along with good food, is integral to staying open. Therefore, don�t shy away from getting customer�feedback in any form, record, analyze and share with the team. Remember that for every customer complaint you get, three more are left unsaid. If there are a lot of unhappy dining patrons out there who don�t bother to say anything then you slowly close to shutting down the restaurant without even knowing the actual reason.
Marketing & Advertising
A lot of excellent cooks are there who have original ideas and can prepare excellent food. It does not mean that they can run a restaurant well. As discussed earlier, it is not just about cooking and serving good food. Remember good food is served in competitor restaurants too, so they are not the only factor for success. The important aspect is to include marketing and managing restaurant that most restaurant owners overlook.
Marketing:
Many new restaurant owners think that they can market their new restaurant through �word of mouth�. Indeed it is one of the best ways of marketing for any service business. New customers are more likely to step in on the recommendation of a past customer than by an advertisement. That much is true. But, dependency on word of mouth marketing in the initial stage is planning to fail. So gear up to gather contact information from every person you are in touch and market to them. Marketing to regular customers represents better opportunity for increased sales than spending money trying to reach new customers. Obviously, your regular customers are a better source for new customers who have not been in your restaurant than any other marketing tools.
Advertising:
As more and more restaurant open advertising as another component of marketing would be important in establishing & maintaining restaurant�s reputation. Your own public relation, your own happy customer base, the quality of food & the quality of service are one part of keeping the restaurant but having your brands presence in the form of advertising is a must.
Understanding Food Cost, Operating Expenses & Menu Pricing:
Many of the chefs or the managers working in our restaurant industry can cook well, manage operation well but they fail to monitor the food cost & some even do not know the importance and methods of keeping them low. Knowing how to properly price the menu�is the first step toward making a profit. The very wrong practice of keeping the price similar to the price of the competitor without knowing how they manage such price would lead to restaurant�s failure. You need to understand method of menu pricing as the financial picture of your business is different than others.
One of the methods you can use is to use budgeted cost percentage to formulate prices that will yield that budgeted percentage when the sale of all your different items is taken into account. The major problem with this pricing method is that most operating expenses within a restaurant do not fluctuate as a percentage of sales. The rent of a restaurant is not always 5% of sales. If sales are down, the percentage goes up, if sales are up, the percentage goes down. Simply achieving a target food cost percentage does not guarantee that a restaurant will make the profit.
The common sense alternative to pricing by a target percentage is pricing according to the markup you need to cover the expense of doing business, leaving you with a profit you find acceptable. This method is called pricing by gross profit. The basic principle of this method states that you can assume, through calculation, how much every person that walks through your door will cost you to serve, and that with this number you can price your menu to yield an average gross profit greater than the cost necessary to serve every person who walks through your door, in addition to your needed profit. Adjusting these prices according to market price points yields a gross profit that will cover your operating costs, your product costs, and the profit that you decide you need to make for this venture to be worth your time.
Pricing by gross profit is the only method of pricing that takes into account every cost of operating a business, including profit.
Have Unique Selling Point:
Your customers need a reason to come to you instead of your competitor. If you think that your food is good that people will line up out the door to eat it, then you are wrong. Good food, good service are never unique selling point. If you want to offer something truly unique, you need to move past food and service they only meet the minimum expectations of your customers. What you need is something original to sell. Something for which customer should visit you other than the best food or the best service.
A truly unique selling point is an emotion you offer to people. People should feel nostalgic in your restaurant. People still remember the emotions long after they remember food and service. If you make a real, emotional connection with your customers, they will remember how you made them feel for decades to come, long after they forget what they ate and who waited on them.
Proper Menu Planning
It is important to remember that you cannot please everyone & elaborated menus come with several operational problems. Trying to offer everything (many things) your customers like does not give choices but confuse them. They will not be sure about your specialty, what you do well, what they should order. If menu is focused, more of your customers will convey your message in their circle well.
Lengthier menus take longer to order from. The more choices you have on your menu, the longer it takes each customer to peruse that menu, and the longer it takes for them to order. For every minute they are not ordering, you are not making money for the seat they are occupying. This is serious as 80% of revenue, 100% of profit is made during peak periods & anything that limits your ability to serve customers and collect money during your peak periods is limiting your potential for profit.
Further, when you have too many different dishes cooking at once and less multiple orders in the same pans, it means more time to produce whatever is being ordered. The longer it takes to serve each table, the lesser tables you can turn during peak periods.
Elaborated menus require more inventory items in the stock. The more items in the stock represent a possibility for loss. Items can be stolen, mishandled, or stored incorrectly and spoiled. The more items in inventory also mean more investment.
Elaborated menus require more space, more equipment and more personnel to produce. The more items you have on your menu, the less opportunity your staff has to cook multiple orders at once. Less multiple orders means more burners, grill space, fryer grease, and hands are required to produce the same number of dishes. All these additional tools cost money.
Restaurant business is not an easy task but also not the impossible one. Proper planning, execution and monitoring are the mantras for a successful restaurant venture. Passion along with the knowledge of this business too play key roles if you are planning to be a restaurateur.
Menu Reengineering
Sustainability of the restaurant business in long term requires reviewing the menu time and again and proposing innovative products as per the season and change in taste of your regular customers. Promotional Menu including dishes based on season, festival, trend, theme, etc would help you to create a ground to include new popular dishes in your regular menu and discard the low performing ones in due course of time. This will keep creating new taste bud in your regular customer and make them return to you quite often.
