Post on 03-Apr-2018
7/28/2019 Covering the Gaps in the Restaurant Industry
1/31
2012
Brittco
Consulting
Group
COVERING THE GAPS INTHE RESTAURANT
INDUSTRY
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CONTENTS
Executive summary ................................................................................................................................................................ 4
Introduction ............................................................................................................................................................................... 5
Common mistakes made by restaurant owners ......................................................................................................... 9Food cost percentage concept is universal .............................................................................................................. 9
Good food and service is the key .................................................................................................................................. 9
Being the fall on guy ........................................................................................................................................................ 10
Major reasons why restaurants fail ............................................................................................................................... 11
Financial problems ........................................................................................................................................................... 11
Fixed cost ......................................................................................................................................................................... 11
Financial forecasting .................................................................................................................................................. 12
Poor record keeping: .................................................................................................................................................. 12
Financial solutions ........................................................................................................................................................... 13
Have spare funds .......................................................................................................................................................... 13
Allocate the initial funds ........................................................................................................................................... 13
Have a growth plan ..................................................................................................................................................... 14
Take into account every transaction.................................................................................................................... 14
Marketing problems ........................................................................................................................................................ 15
Overreliance on word of mouth ............................................................................................................................. 15
Failure to convert restaurant theme into right message ............................................................................. 15
Not enough attention on existing customers ................................................................................................... 16
Failure to utilize alternative methods of brand promotion ....................................................................... 16
Marketing solutions ......................................................................................................................................................... 17
Use stickers/magnets ................................................................................................................................................. 17
Create a restaurant club ............................................................................................................................................ 17
Use mobile apps and social media ........................................................................................................................ 18
Use public media .......................................................................................................................................................... 18
Managerial problems ...................................................................................................................................................... 19
Insufficient importance to training ...................................................................................................................... 19
Relying on experience rather than the data ...................................................................................................... 19
Delegation of tasks a little too early ..................................................................................................................... 20
Inability to create a system ...................................................................................................................................... 20
Managerial solutions ....................................................................................................................................................... 21
Gain controll of your inventory .............................................................................................................................. 21
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Negotiate, negotiate, negotiate ............................................................................................................................... 21
Reward your employees ........................................................................................................................................... 22
Lead by example ........................................................................................................................................................... 22
Raising your profitability ................................................................................................................................................... 23
Menu re-engineering ....................................................................................................................................................... 23
Increase confidence on small numbers ................................................................................................................... 24
Increase your margins with nominal lifts ............................................................................................................... 24
Go green ................................................................................................................................................................................ 25
Complexities of solutions ................................................................................................................................................... 26
Brittco Solution ...................................................................................................................................................................... 27
Conclusion ................................................................................................................................................................................ 28
Bibliography ............................................................................................................................................................................ 29
Disclaimer ................................................................................................................................................................................. 30About brittco ........................................................................................................................................................................... 31
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EXECUTIVE SUMMARY
Statement 1: Sales of restaurant industry have been rising by 4% in the past year.
Statement 2: The number of restaurants has declined by 2%.
When these two statements are looked in unison, the most obvious thing that comes to mind is that one ofthe statements is false. However, they are both true. The missing piece of this puzzle lies in the operating
expenses, which have risen faster than the sales, thereby eating into any profits that the restaurants could
have made from the rise in sales. All in all,
RaisingProfit
marginsthrough
Menu Re-engineering
Workingwith smallincrements
on menuitems
NominalLifts in
customersand cheque
value
Sales rise
by 4%
Rise in
operating
ex enses
Declining
Profits
Smart restaurant
owners however have
found ways to utilize
the rise in sales by
increasing their profit
margins despite the
rise in operating
expenses. Some of
the things that have
come up are
Running a restaurant
means that the owner
puts in more than 60
hours of work per week,
which requires passionfor the job. These
entrepreneurs have more
often than not, a
background in restaurant
industry, where they
have worked as a chef,
manager, or any other
rule and have seen the
game first hand.
Unfortunately, what
they miss when
dealing with their
own restaurant is that
running a restaurant
is more than the halland the kitchen.
Three things where
they are found
wanting are
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INTRODUCTION
Restaurant industry experienced growth, but have you felt it?
A quick look at the graph below gives an overview of the growth in the restaurant industry in Canada, and
by the first look it seems the industry is reviving.
While the picture seems encouraging, lets also consider the GDP of Canada, and see if the rise is in line
with the nations economy.
While the disposable income of an average consumer has increased by 3.6%, Canadians have still not
matched their spending habit levels which they had prior to the economic slowdown. Add the moderate
employment creation in the past few months; it seems that the disposable income will be used to
encounter previous debts first.
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While the above stated facts apply to the whole of Canada, changing legislation in states and variation in
taxes will mean that not everyone is experiencing the same growth. This is illustrated by the graph below.
The biggest problem that goes unseen and is really pinching the restaurant owners across Canada is while
the sales have gone up, so has the operating expenses. With the already conventionally thin margins in the
restaurant industry, the rise in sales has not transformed to a similar rise in profits.
A quick look at the figure below explains the new profit margins for the industry.
The two major factors affecting the margins are Cost of Sales and Labor costs (salaries and wages). Cost
of sales has risen from 33.5% in 2001 to 36% today. This is primarily because of the rise in costs of
inputs such as flour, meat, vegetables, tea, coffee, and eggs. Similarly rise in minimum wages has
increased the labor cost from 30.8% of the operating revenue to 33.9%. Other costs which have also
added on to the rising cost table are rental and leasing costs which have risen from 5.4% to 7.6% of
operating expenses.
Depreciation
3.1%Advertising and
Promotion
2.8%
Utilities
2.8%
Repair &
Maintenance
2.6%Other
6.7%
Rental and Leasing
7.6%Labor Cost
33.9%
Cost of Sales
36.0%
Pre tax Profit
4%
Operating Expenses Breakup
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The thinning margins are not the only problem in a restaurant industry. Several changes in consumer
behavior have also forced restaurants to shut down who have been unable to cope with the changing
consumer preferences.
While there are many changes in consumer preferences which affect the restaurant industry, we will
discuss one which has really made a dent. Take a look at the declining number of drinking places in
Canada over the past few years.
Is the above graph an indication that people have actually reduced their drinking habits so drastically soas to bring down the number of drinking establishments to a mere 5,724 in 2011 from 8,882 in 2003.
Seems unlikely, considering as per Euromontiors report the sales of liquor have increased to 154 million
liters in 2011.
However the fact remains that sales at drinking places have seen a total loss of $204 million in the past
decade, while 38% growth is observed in the rest of the industry. With decreasing sales and increasing
operating costs, the profitability of a drinking place has been dipping and therefore no longer a sensible
business for many.
0%10%
20%
30%
40%
Cost of SalesLabor Costs
Rental and Leasing
Costs
33.5%30.8%
5.4%
36.0%33.9%
7.6%
PercentageGrowth
Major Components of Operating Income
2001
2010
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The change is also in consumer habits; people have started demanding more food options in these places.
The original ratio of 30:70 of liquor to food has started moving in the opposite direction. Many bars now
allow people to bring in their own food and use the grill at the establishment. Some have increased the
number of choices on their food menu.
While this is just one example, there are many observations similar to the above which are happening in
the market, such as increasing importance of coffee in restaurants, the rise in snack category of meals andthe increase in number of mocktails, lemonades and other innovative options.
The number of commercial restaurants in Canada has actually decline by 2% in 2011 as compared to
2010. The ones most affected were the independent restaurants which saw a loss of 1,261 units (3%).
While the restaurant fails due to many reasons, the factors of failure can be broadly categorized into
1. Financial Implications 2. Managerial Implications 3. Marketing implicationsMost restaurant owners work put in 70-90 hours per week provide excellent food and service, but they
still fail to survive the restaurant business. The report addresses two very important aspect of the
restaurant business, which allow not just survival but also ensure you make healthy profits even in theconventional razor cut margin levels in restaurant business.
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COMMON MISTAKES MADE BY RESTAURANT OWNERS
You know all there is to know about food, all about good service and you have a unique theme for your
restaurant. Yet, most restaurants with good food, service and theme are almost as prone to failure as any
other ordinary restaurant. Listed are some of the most common mistakes people make in the restaurant
business.
FOOD COST PERCENTAGE CONCEPT IS UNIVERSAL
GOOD FOOD AND SERVICE IS THE KEY
These three will be discussed in detail in the later section.
While controlling food cost percentage is a critical, most
restaurant owners feel by bringing it down they will be able
to make more profits. This concept fails in times of slow
business. You have to remember that when number of
customers goes down, the food cost percentage may come
down, but other expenses such as your labor costs, the
rental and lease costs, insurance costs etc. stay the same.
Therefore, reduced no. of customers can not be countered
by low food cost percentage.
While good food and quality service are
important, their importance is not even
close to being called the key. On a
restaurants success map, that is only a
quarter of the whole territory of success.
There are several other elements that go
into making a restaurant successful.
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BEING THE FALL ON GUY
Restaurant is a business that requires a lot of hours, andis therefore taken up by people who are passionate about
a restaurant. These people are mostly ones who have
been in the business in one role or other and have
watched closely how the business is run. They open the
business and put in more than 80 hours per week, they
work sometimes as the chef, sometimes as the line
Problem occurs that they end up being an employee in their
own business rather than the owner. They need to look at therestaurant from an investors perspective, and focus on creating
a system for business and employees, rather than being in the
system. They need the observers perspective but they stay
stuck where they get only the participants perspective. This is
where the game is lost, because you stop taking other factors
into consideration which also affect your business directly or
indirectly.
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MAJOR REASONS WHY RESTAURANTS FAIL
While many micro and macro factors play a role in the success or failure of a restaurant, most can
be broadly categorized into these categories:
FINANCIAL PROBLEMS
A restaurant business encounters much financial instability in the initial and later part. Some of these are
FIXED COST
Sometimes a restaurant owner can get
so absorbed in their vision of the
restaurant, that they fail to address
other important factors such asmarketing efforts. Best example of
this would be the investment made by
two entrepreneurs in Columbus, Ohio,
where they spent a major part of their
cash in restructuring an old bank
building into a Greek theme
restaurant with pillars and high
ceilings. At the end they were not left
with enough money to make their
prospective consumers aware of their
creation and any substantial
marketing efforts. This is also
popularly known as Taj Mahal
Syndrome, where every penny is
spent on realizing a dream, and the
restaurant never flourishes as a
business.
Another example of spending too much on the fixed
cost is when people start looking for a prime
location. The cost of lease/rent goes so high, that
other factors have to suffer. It has been proved over
and over again that the location does not hold as
much value as the quality of the restaurant, and
while good restaurants can overcome a bad
location, a badly run restaurant cannot be overcome
by a good location.
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FINANCIAL FORECASTING
POOR RECORD KEEPING:
Most independent restaurants will have the owner
working out the financials. Unfortunately, the financial
statements are very sensitive, and the whole picture
can change by one wrong entry. For example, when
discounts and coupons are not accounted for, this
would show you excess credit than what you have.
When cash is not paid to the suppliers, but the entry is
made, one needs to understand that there are still
liabilities to be paid off, which will affect your
financial outlook. Posting entries on the wrong side of
P&L statement can be fatal when making plans with the money in hand. Because of the wrong picture,
you can either underestimate and overestimate your cash flow and thereby make wrong decisions.
As soon as you restaurant is up and running, thecosts are further up and running. But the same does
not happen to you revenues. One of the biggest
mistakes in financial planning people make is that
they would start making money from the first day.
Based on various factors such as location,
consumer demographics, local competition etc.
one needs to have a base period. This period is
where you will not start making profits but will
incur expenses in marketing efforts, operating
expenses and similar, and this can extend from 3 to
6 months or more. Good financial forecasting is
required here, and that would mean you will have
enough capital that would cover your costs for the
base period. Most restaurants that fail due to low
capital are victims of misjudging he base period
and therefore do not have sufficient capital to back
them.
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FINANCIAL SOLUTIONS
While expertise is required to read and record the financial statements correctly, few quick steps can help
you save from the unexpected financial blows.
HAVE SPARE FUNDS
ALLOCATE THE INITIAL FUNDS
Most successful restaurant
owners will have back up
reserves of capital. This not only serves to address the unexpected section, it also means that in case your
base period elongates, you dont have to look for emergency funds. This is the last scenario that a
restaurant owner would want to see himself in especially after having been through the torment of theinitial phase, and just when your restaurant is picking up.
Most successful restaurant owners will have back up reserves
of capital. This not only serves to address the unexpected
section, it also means that in case yourbase period elongates,
you dont have to look for emergency funds. This is the last
scenario that a restaurant owner would want to see himself in
especially after having been through the torment of the initial
phase, and just when your restaurant is picking up.
Costs can be categorized and allocated certain percentages.
For example, your prime costs should not exceed 60% of totalcosts under any circumstances. Prime costs include cost of
food and labor costs. Similarly, no matter how lucrative a
location may be, do not spend more than 6%-7% of total costs
on rental and leasing. Most studies have revealed that poor
location can be overcome by good food and service, but bad
food and service cannot be overcome by a good location.
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HAVE A GROWTH PLAN
TAKE INTO ACCOUNT EVERY TRANSACTION
Even though your restaurant may
not pick up very early, its alwaysa good idea to plan the financial
budget, when you decide to grow.
Evolution is the requirement of
the day, with new items on the
menu, new promotional programs
to cater to the changing consumer
preferences; you need to allocate
some money for future. You
cannot depend on the earnings of
your restaurant for future growth
in the initial stages. After all, you
dont want to go bankrupt just
when your restaurant picks up.
Biggest mistake in
financial terms that
restaurant owners make is
they stop taking into
account small expenses,
such as discounts, flyers or
other promotional items,
stationary, food spent on
friends and family, and
many other which are
considered negligible.
Know this, with the thinmargins in restaurant
industry, every cent counts.
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MARKETING PROBLEMS
You have great food and excellent service, you have managed to keep your finances under check, and the
concept is unique and brilliant. Three months down the line, you are closing down because somehow you
did not generate enough revenue to keep the restaurant running.
THE BIG QUESTION IS WHY?? Why when all was well, did you go down? The piece of puzzle thatyou missed on was Brand Promotion.
Some of the major problems faced by the restaurant owners are given below:
OVERRELIANCE ON WORD OF MOUTH
Agreed, word of mouth is the best
promotion that you can get. What
you need to understand that it is
also the slowest process when in
initial phase. Also, the flip side isthat there is also negative word of
mouth, and one negative word is
enough to destroy the positive
feedback of ten. In the previously
discussed base period, you do
not have enough customers in the
first three to six months to depend
on their positive feedback.
FAILURE TO CONVERT RESTAURANT THEME INTO RIGHT MESSAGE
You know what your restaurant theme is. You created it, you will understand it. The problem occurs
when the restaurant owners make an advertisement/promotion plan as per their understanding. You have
to remember that your prospective customers
understanding your message is more important than you
understanding it. Most times, owners would come up
with an advertising gimmick that
they think is very appealing since
they understand all of it, but if you
ask a guy from the street, can he
easily understand the message onthe banner when he looks at it.
Secondly, you only have a fraction
of a second or at most a second to
grab the attention of your customer.
Check if the advertisement requires
people to think, before they
understand it.
WHAT IS
THAT
THING??
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NOT ENOUGH ATTENTION ON EXISTING CUSTOMERS
.
FAILURE TO UTILIZE ALTERNATIVE METHODS OF BRAND PROMOTION
If you think newspaper ads, big banners
and flyers are the only way to successful,
think again. With the technology upgrading
every day, there are many new ways
around to not only gain new customers butalso retains loyalty of old ones even when
they are not in the restaurant. Use social
media, create a webpage, and organize
activities that would involve your regulars,
create a club of your own. The list is
endless, if you put the innovative part of
your mind to it.
Most restaurant owners think if their
promotional tactics have people comingin, the job is done. What one needs to
keep in mind is that getting people to
your restaurant is only half the job, may
be even less. You also need to promote
your restaurant within the restaurant, to
make sure that you have gained your
customers loyalty. A repeat customer
will not only mean revenue, but free
advertisement when he tells his friends
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MARKETING SOLUTIONS
When there are problems, there are always solutions and same applies to all your marketing problems.
Some of the solutions are illustrated below.
USE STICKERS/MAGNETS
CREATE A RESTAURANT CLUB
One of the best ways to use the word of
mouth without the words is to distribute
souvenirs. When giving out the bill, or a
takeaway put magnets, stickers etc. with
them. Once your customer puts it on his
refrigerator, wall or anywhere in his house,
you have already created a full time
advertisement. Not only is he reminded ofyour place every time he looks at it, when
his friends/relatives look at it, they get an
automatic reference to your restaurant.
Once you have a loyal customer, you need
to fuel that loyalty. This will not only keep
him or her, but will also attract their peers.
Create special discounts for loyal
customers; create a club with special
privileges for customers who have come in
more than a few times. Creating T-
shirts/cuff links/mugs, whatever suits thetheme of your restaurant best should be
given to the regulars, all the time keeping
in mind the above principle of free
advertisement.
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USE MOBILE APPS AND SOCIAL MEDIA
In this age, any news on internet spreads like wildfire. With the social media and mobile apps merging in,
it would be a good idea to make use of this technology. Create a facebook fan page, start a tweet up and
get people talking about your restaurant.
Organize a party, and post the invitations
online.
USE PUBLIC MEDIA
Events, combined with social media and
mobile technology will be the cheapest and
fastest form of publicity. However, this is
very similar to the word of mouth
publicity, so one should be aware of the
potential risks of negative publicity.
While most people think it to be an
extreme, when your restaurant gets talked
about in media or gets written about, it
captures the attention of many prospectivecustomers. Remember the first part, you
may have the best deal, but people wont
come in until they know about it. This is
one of the better ways to get to new
prospective customers especially at the
start of the business. Hiring a PR manager
may seem going overboard, but can you
deny the attention that it creates for your
restaurant.
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MANAGERIAL PROBLEMS
The biggest reason this problem exists is because people deny having it. Turning your face away is not
going to take care of the problem. You have to understand that managing a restaurant is like managing
any other business, where you cannot solve the problem until you take an unbiased fact based idea.
Passion will only drive you so far, good management practices will bring multiple benefits.
Some of the most common managerial problems in the restaurant industry are
INSUFFICIENT IMPORTANCE TO TRAINING
RELYING ON EXPERIENCE RATHER THAN THE DATA
.
This could be a fatal mistake because as
has been pointed out earlier, your
concept is unique; thereby you will have
The biggest asset that a restaurant has is
Goodwill; the fastest way to lose it is
through incompetent staff. Remember,
your concept is unique (without a
uniqueness quotient you wouldnt survive
anyway), however experienced and
qualified your staff may be, until they grab
the concept, they wont be able to deliver
the service that you had imagined for your
customer. With bad service, you will lose
your all important asset, the Goodwill, and
thereby the restaurant.
Your restaurant functions every day, every day loads of
information is generated which when put together even
if monthly if not weekly can provide you valuable
insights to how things are working out in your
restaurant. However, most owners tend to ignore thisdata, mainly for two reasons,
a.) Collecting and analyzing data is a tedious task.
b.) It negates the emotional judgment based on
experience, knowledge and instinct.
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new and different problems to take care of than your experience and knowledge. Using the information at
hand, will allow you to make decisions based on facts and figures rather than thin air
DELEGATION OF TASKS A LITTLE TOO EARLY
INABILITY TO CREATE A SYSTEM
As a restaurant owner, creating a system around your concept should be of paramount importance, over
and above creating better employees, better service or better food. This may seem like an awkward thing
to demote the priority of employees, service and food, but if you can work out the perfect system that
works for your restaurant, you will not have to worry about retaining best employees, or improving on the
existing offers and services, managing customers or even marketing campaigns. The system will do it foryou; all you have to do is standardize methods and practices. This will also help create a culture within a
restaurant with which your employees and customers will identify and further promote the uniqueness of
your concept.
Failure to do so will mean that you will always be running short on time for most things, and careful
evaluation before a decision is made will become increasingly difficult.
As discussed earlier, the restaurant owner should not
become so involved in the restaurants day to day
activity, that he stops being the owner and starts
acting like an employee. Restaurants are started by
people who have a passion for it, putting in more than
60 hours in a week, and soon they take on every role,
from being the accountant to the chef to the janitor.
They need to look at the restaurant business from an
investors point of view.
Having said that, one of the mistakes most often done
is delegation of responsibilities to the employees.
You need to get your evaluation exactly right, and be
very sure of delegating the right responsibility to the
right person. Delegation seems like an attractive
option because it clears the table for you and gives
you the room to think, which is necessary, but not at
the cost of putting the responsibility on incapable
shoulders.
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MANAGERIAL SOLUTIONS
The best ways to address the above stated problem is to counter them doing exactly the opposite of the
mistakes, such as training your employees, creating a system, timing the delegation of responsibilities and
working as an owner rather than the all round employee. While making a complete manager through few
tips and methods is as far off as making a meal through bread and butter, some of the things which can
further help are listed below.
GAIN CONTROLL OF YOUR INVENTORY
NEGOTIATE, NEGOTIATE, NEGOTIATE
Keeping too large an inventory will only result in
waste. Most restaurant owners are afraid that a low
inventory will cause some of the menu items to run
out when required, it is better that way. Not only you
have saved money on the waste, when a menu itemruns out, it can add to the popularity of it, by
displaying the large demand for it.
Another system that you need to follow is the FIFO
method of inventory. Items which come in first will
need to be disposed off first, before getting on to the
other item. Serving the most fresh item is a
temptation, but remember most items will stay fresh
for certain period of time, so use them within that
time and you will still be serving fresh items.
Famous CEO Jack Welch believed that there is
always a new idea out there in the market, get it, and
when you have it, get the next one. Same applies to
the deal that you have worked out with your supplier,
there is always a better deal out there, sometimes withthe same supplier that caters to you. Find out that
deal, look at what others have to offer and then
negotiate with existing dealer. Never stop thinking
that you have the best deal, because there is always
someone out there, who is getting a better deal than
you for his supplies.
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REWARD YOUR EMPLOYEES
LEAD BY EXAMPLE
Rewarding your employeesshould not be a rare occasion.
Remember even the smallest
of appreciation can work in
further strengthening the
employees loyalty. It need
not be monetary but through
various recognition programs,
through offering extra day off
and various other ways. Better
yet, create your own unique
awards most suited to the
culture that your concept hascreated.
One of the oldest, but still the
most effective management
strategy. While this does not
mean that you keep showing
them how to do things, what
they would take on from you
is the energy that you create,
the commitment that you
display and the values that
you work on. If a restaurant
owner is continuously striving
to achieve customer
satisfaction, improving all theminutes, it will be reflected on
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RAISING YOUR PROFITABILITY
While the above stated strategies can help you thrive your business, a few nudges here and there can help
you raise your profit margins as well. Below are some of the ways where a simple tweak can result in
substantial increase in your margins and thereby the profitability.
MENU RE-ENGINEERING
Your menu is the key to your margins. Here are a few steps to follow to re-engineer your menu items for
their utmost utilization.
1. Categorize all your menu items into the four categorieso Stars: These are the items which have a high
demand and also deliver the highest margins. These are the
items which you should focus on selling the most
o Cash Cows: These are the items which have ahigh demand and low margins. These are the ones which are
stocking up on the inventory, but are getting customers in.
They are to be watched though, because when they lose
popularity, they would become the dogs.
o ???? : These are the items which are low indemand, but offer high margins. These are the items which
need the most push. They can be the next stars on your menu.
o Dogs: These are the items which have lowdemand and low margins. They need to get out of your menu
as soon as possible, because they are stocking up on the
inventory and have a very low ROI.
Once you have done the categorization, start serving the ????
as add-ons.
For example,
French fries
are a greatadd-on to the
meals, even if
offered at
slightly discounted price; it will still carry great margins.
Keep trying and offering
novelty items, and try to make
them from the same inventory.
See which items are left most
on the shelves, and ask the
chefs to come up with
innovative ideas. This will
keep your chefs engaged and
happy, and when you offer
these as add-ons or housespecials for loyal guests, you
might find your new stars of
the menu. Novelty beverages
are a good way to go. First
they do not need special
ingredients and skill, second
they carry high margins.
Looking at how beverages are
driving the industry right now,
it will be a good idea to start
on it right now. Decrease the size of your menu. A very large
menu not only creates a large inventory, butalso confuses your customer. A large menu
will mean a customer will take longer to
decide, and will most probably have a hard
time remembering what he ate last time when
he returns. Loyal customers come back not
just for ambience and service, but also their
favorite food. A large menu is reducing those
chances.
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INCREASE CONFIDENCE ON SMALL NUMBERS
Instead of cutting down on the quality or quantity of your servings, increase the price. The trick is to
increase the price very marginally in cents, nickels and dimes. Look at the bigger picture, if you were to
increase even 10 cents on a meal with four items, difference would come out to be $120 for a day, and in
a year it becomes$43,200. Imagine what you could do with this money at the end of the year.
INCREASE YOUR MARGINS WITH NOMINAL LIFTS
Why aim for an increase in profits of 50% when you can achieve almost 75% through few increments.
Make the following your goals.
1. Increase your new customers by 20%
2. Increase the repeat visits of your existing customers by 20%
3. Increasing the sales per guest by 20%
The above table summarizes how it works. All we have done is taken an average of 300 customers, who
visit 5 times, with an average bill size of $20. When everything increases by only 20%, your net profit
increases by 73%, this is taken considering the industry average of 60% operating expenses and 68%
gross profit. You can switch the values and see the best that you can do.
Particulars Amount New Amount Difference % Difference
Current Customers 300$ 360$ 60$ 20%
No. of Visit per Custo 5$ 6$ 1$ 20%
Avg. Bill 20$ 24$ 4$ 20%
Revenue 30,000$ 51,840$ 21,840$ 73%
Gross Profit 20,400$ 35,251$ 14,851$ 73%
Gross Operating Marg 18,000$ 31,104$ 13,104$ 73%
Net Profit 2,400$ 4,147$ 1,747$ 73%
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GO GREEN
Some of the ways that can help you conserve energy costs are given as follows:
Make sure the equipment is on only when in use, and is in good working order. The ventilationsystems, heating and lighting controls, various appliances used. Not only this cuts cost, it enhances
the working condition for employees and ambience for your customers. Consider this, by cutting
down one hour on the broiler each day; you could save as much as $450 annually. Look at it as profits
generated from $6000 worth of sales.
Replace the fluorescent bulbs with T8s, they are more energy efficient and since they generate lessheat, they also will make the kitchen staff more comfortable.
Use of response systems and variable speed motors can save you money by reducing the costs ofenergy and also putting fewer loads on the ventilator and heating systems thereby making them less
prone to regular maintenance and sudden breakdowns.
Use low flow faucets, pre rinse sprays and dual flush toilets. These are inexpensive and will greatlyreduce water wastage.
Conserve hot water through insulating pipes and equipment. Not only these are cheap, you are savingboth on energy used in heating water and waste of water once it becomes cold.
Recycle cooking oil, reduce use of disposable goods and donate surplus food. Not only you contributetowards the environment, its a good CSR. You can use this in your marketing promotion efforts and
add this as a feature of your brand promotion.
When people think environmental friendly
they think high initial costs. What restaurant
owners need to understand is that restaurants
energy consumption per square foot is 5 times
more than any other business and most of it is
used in the kitchen. It is estimated that by
reducing the cost of energy by 10%, you can
actually match a sales increase of 1.6%.
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COMPLEXITIES OF SOLUTIONS
While all the suggestions and tips & tricks will help your restaurant, there is still one problem that comes
with it.
YOUR RESTAURANT CONCEPT IS UNIQUE.
Anyone in the business of restaurant is aware that
without uniqueness a restaurant will fail. While
uniqueness is what is going to attract customers, it
also attracts its own set of problems.
You cannot anticipate problems based on problems
faced by other restaurants and your previous
experience, not completely at least. While most
your problems will fall in the three categories of
financial, marketing and managerial implications,
all three are vast areas to be explored. So lets jot
down the problems that will make it hard toimplement the solutions discussed in this paper.
All these factors together create a need for expert
advice and someone who can complete the little
pieces of puzzle, which is running a restaurant.
While paying someone to tell you what to do is
something most restaurant owners will avoid, it
needs to be understood that the role of expert is
more that of a partner, rather than of a teacher.
They help and guide you, but at the end decision is
yours, even of hiring expert help.
Developing a system for your restaurant is also
vital, and while you have the concept, how many
restaurant owners can safely say that they have the
perfect system to run it.
1. Solutions too generic: All the solutionsthat are provided can work as guides, but
not the perfect solutions. This is because;
every restaurant as said earlier is unique.
A unique concept will have its own
unique set of problems, which may lie in
the same categories, but will need a
customized approach to set it right.
2. Keeping Track of market changes istime consuming: This is no hidden secret
that running a restaurant is timeconsuming. When a restaurant owner puts
in 60 hours a week, he hardly has time to
look around the market, study changing
consumer preferences, look at new
competition and what the existing
competition is doing. When you are
making promotional efforts, so are your
competitors. While you are serving the
best food, the choice of meal is changing
among your customers, even the
demographics, your existing customers
are changing. Marketing needsinnovation, innovation need time, and
time is something restaurant owners will
always have in scarcity.
3. Lack of Experience: When saying lackof experience, we are not talking about
lack of experience in terms of running a
restaurant, rather lack of experience in the
external functioning of the restaurant
business. External factors are not limited
to customers, suppliers and competitors.There are many others which affect your
business such as regulations, changing
standards, threat of substitution for your
products. All these need to be taken into
account, when running any business, and
most times than other this is the
experience most restaurant owners lack.
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BRITTCO SOLUTION
Brittco Advisors provides high value consultingservices to the hospitality industry creatingmeasurable results in sales growth, customer
satisfaction, expense/operational management andbrand awareness.
With Brittco, you can fill in the missing gaps ofyour business. With experience of being in the
actual position where most restaurant owners findthemselves today, Brittco can offer expert advice onevery aspect of running your business.
This can include a re-interpretation of the companyidentity, advertising, printed collateral, packaging,social media strategy, and overall communication ofyour brand's values to the public.
Our goal for every client, every time is to get them their best store economics contributing to stable orenhanced net operating profits.
We will not take on a client if we cannot make a difference.
Some of the services provided by Brittco are:
Audits and Action Plans: We candevelop and train franchisors/area &master developers to implement auditsand actions plans that measureperformance in areas including servicestandards, product quality, food handling,recipe adherence, cleanliness, sanitation,office accounting, and Human Resourcepractices. These audits can be a guide tostore operators, franchisees on their dailymanagement of operations and the
business. Cost Management: We conduct reviews
of product purchasing and tender/negotiate/implement contracts with local,national, multi-national suppliers andmanufacturers.
Product Quality Improvement:Analysis of product ingredients oftenleads to opportunities to implement higherquality goods from larger suppliers atbetter pricing - resulting in a morepremium end product.
Brand Development: We believe thereare two areas of brand equity. First is theperception of the brand quality and theposition it enjoys in the investmentmarketplace, and second - the
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CONCLUSION
While running a restaurant is a dream for many, not all are able to accomplish it. There are various
reasons for failure and not all are monetary. Almost one third of failed restaurants were making profits.
The owner quitted because the time it demanded, which does not allow them a lot of social or even family
time.
Most failure in restaurant business occurs when you either get too innovative and forget the thumb of
rules such as not exceeding the 7% cost on rental and leasing or 60% on prime costs, or they try to serve
too many things thereby creating a large menu and losing focus. Having said that many restaurants have
also failed because they did not try new things, and stuck to what worked earlier, eventually leading to
their downfall.
While the sales have increased for the restaurant industry, so have the operation expenses along with
other such as rental and leasing, thereby eating in the profits of increased sales, and you are still where
you were earlier. With the thin margins that are available in the restaurant business today, one need to
come up with strategies all the time to raise their profitability. Little tricks here and there can always work
for you in the short term, but to survive longer and make it big, a good plan is required to get ahead in thegame.
Restaurant businesses unlike most businesses have their own complications and specific rewards, but like
most businesses they also have the same motive, Profit. If a restaurant does not make profits, it will fail
just like any other business. Like most businesses flexibility is of prime importance in todays digital
world where every decision is to be made in real time.
Taking expert help is no more a luxury but a necessity. One needs to admit, that no one knows all. So
when running a restaurant, a consultants help will only benefit you as it adds to the existing knowledge
base of yours and aids in running a successful restaurant. There are multiple aspects to a restaurant which
one needs to understand, so as to look at the big picture and see the future before it happens. Once you
have done that, you are immune to failure.
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BIBLIOGRAPHY
http://www.foodservicewarehouse.com/
http://www.foodservicewarehouse.com/http://www.foodservicewarehouse.com/http://www.foodservicewarehouse.com/7/28/2019 Covering the Gaps in the Restaurant Industry
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January 1, 2012 COVERING THE GAPS IN THE RESTAURANT INDUSTRY
DISCLAIMER
All the information presented in this paper, is a curated work comprised from data collected by variousorganizations working to create awareness about the corrosion problem across the world. We do not claimto have collected any data and the statistics based on which the charts of various types are made, are work
done by the organizations/institutions which have been quoted in the sources and the links from where theinformation was collected has been accounted for in the Bibliography.
We do not claim complete accuracy of data and deviations from the given are possible. Brittco has madethis paper for informational purposes and have tried to credit all the sources possible which could betraced back from the data. Any omission of the source is purely accidental and complete effort has beenmade to give recognition to every data source.
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ABOUT BRITTCO
Brittco Advisors provides high value consulting services to the hospitality industry creating
measurable results in sales growth, customer satisfaction, expense/operational management andbrand awareness.
We also help struggling restaurant franchise companies and chain restaurants to restructure theirfranchise frameworks at operational, managerial and financial levels and achieve a better turnaround, thereby restoring profitability. Our area of expertise extends to direct dealings with hoteland property management companies, equity fund lenders, restaurant designers and architects,bankers and licensing professionals.
Contact Information
Ken GoozPresidentsucceed@brittcoconsulting.comSkype Id - ken.gooz1Direct: 780 425 4108Suite #202 2520 Ellwood DriveEdmonton Alberta, Canada T6X 0A9
Consulting|succeed@brittcoconsulting.com
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