10 Advanced strategies for restaurant owners to increase profits

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For restaurant owners, keeping costs low is a key strategy to improve profitability. Last week, we talked about 16 strategies that any restaurant owner – big or small – can use to save money and increase profits. Today, I am sharing 10 advanced strategies. These advanced strategies can be used by bigger restaurant owners. They can also serve as best practices for restaurant owners who are getting ready to scale their businesses.

1. Track shrink and waste on fish and meat to increase profits

When you are preparing dishes, you have shrinkage, waste and trim. If you do not control this well, or if you do not train your staff how to cut and clean to maximise yield, this can seriously affect your profit.

If you cut your own steaks, seafood or poultry, or sell dishes like prime rib, spare ribs, roast beef or pulled pork, then the fact is that the actual cost per pound of finished product will be much higher than the original purchase price.

Do you want to know how much yield you can get from various food products? Check out this website for more information: www.restaurantowner.com/Yieldcalculator. Note: only paying members can download the Excel tool. Maybe you can consider becoming a member for one month to see what tools and online courses they offer to restaurant owners and staff.

2. Use quick-reference guides for some recipes

For the recipes that are less important, meaning the recipes that everybody already knows, consider having a quick reference guide in the kitchen. Some products use similar ingredients and stress – or lack of training – may cause your cook(s) to make mistakes that negatively impact the taste or quality of the food.

A quick reference guide can be a laminated sheet of paper with the names and pictures of these recipes plus the main ingredients and measurements. Or, a laminated sheet containing only the dishes that people easily mix up + their main ingredients and measurements.

Using a quick reference guide, especially when you have a larger size restaurant, is one key way to deliver consistent quality. No matter how many people you serve.

3. Keep liquor, beer and wine behind lock and key

If your restaurant sells liquor, beer or wine, you know that these items have a high purchase price. You will also know that it can be tempting for people to steal these products. Either by taking it themselves, or by not recording the sale.

If you are experiencing theft, there is a proven way to reduce it. Keep backup inventory in a locked room and established fixed amounts of all beverages that should be stocked in the bar. This will depend on your estimated sales per day or night.

At the end of each shift, bartenders should present all the empty bottles to the manager. Ever allow bartenders to throw empty bottles away! Replace the same number of bottles and do spot checks to ensure that the total number of beverages equals the number you have established for the bar.

Note: only management should resupply stock and no other employee should have access to the liquor room key. Make sure to also keep good inventory records of all items that have been issued as well as deliveries from suppliers. If you maintain it well, your inventory record will always match the physical (counted) inventory.

4. Calculate the cost of each menu item

To be profitable, a restaurant has to achieve specific sales objectives and cost targets. But if you do not know what your target should be, then how can you expect to reach it?

The first step to determining your cost target is to create a master inventory list and price list of every single ingredient that you buy. Once you have this master inventory list, you can calculate the cost of every recipe and menu item. You can then use this to compare with the selling price of the menu item.

There is an Excel tool that you can use to help you do this calculation. It is available at www.restaurantowner.com/MenuCost. Note: only paying members can download the Excel tool.

5. Calculate your plate cost to increase profits

Your plate cost is the price of the salt, pepper and spices you have on each table, or the bread and butter you serve while customers are waiting to order, or the frying oil you use to prepare your fried dishes. Plate cost is also called surround cost.

It is hard for any restaurant to calculate the exact price of these items. But if you do not take it into consideration, the price of your menu will not be correct. Meaning that you need to calculate how much you use and then allocate part of that amount to each recipe or menu item.

There is an Excel tool that you can use to help you do this calculation. It is available at www.restaurantowner.com/SurroundCost. Note: only paying members can download the Excel tool.

6. Do good staff schedule planning

Are you able to estimate how many employees you will need to work in the restaurant each day? If yes, you have a good strategy in place to avoid being stressed because you do not have enough people. Or wasting money because there are too many people who do not have enough work to do.

If no, then this is an area where you may be able to save some money. Use the following approach to check.

Calculate your sales forecast. If you keep good records – either on paper or digitally – you will be able to determine your weekly or even daily sales of each menu item. If you do not keep these records, start recording them so you can use it to improve your business operations.

Secondly, calculate your daily labour budget. For each employee, multiply the number of hours they work each day times their hourly rate. Or, their monthly salary divided by the total number of hours they are supposed to work each month.

If your sales are lower than your labour costs, you will need to take action to reduce your labour cost. Or find ways to increase your sales. If possible, compare your labour costs and sales on a daily basis. After several months, you will start to recognise the patterns in your sales. This will help you determine how many people need to be working in the restaurant at any particular time.

7. Make sure your staff can carry out multiple tasks

Many restaurant owners rely on specific people to carry out specific tasks. For example: you have a great cook but he or she is not able to also work as a server. Or, you have a great server but he or she does not know how to be a great bartender.

It makes sense to have staff that are able to handle multiple tasks well. First of all, it reduces your risk. If that one employee leaves your business, you will have a replacement. Secondly, it helps you to run a more efficient business. If business is slow, your staff can work where they are needed instead of sitting down and waiting for customers to ask for their specific skills. And finally, most people enjoy having some variation in their work so this can also result in employees who are more satisfied and less likely to leave.

8. Use part-time contracts to save costs

Restaurants depend on flexible labour to manage peak periods like lunch time rush hour or happy hour. Having staff on flexible contracts also means that when business is slow, you are not paying people to sit down and do nothing. But what ratio of flexible contracts should you have in your business?

Studies in the US indicate that having at least one-third of your staff on part-time contracts is a good ratio. This will allow you to quickly scale up without reducing the quality of your services. It will also give you more flexibility when business is slow.

9. Reconcile cash at the end of every shift

How well do you manage your cash on hand?

Every restaurant has to keep cash on hand so that they can change money or pay for petty cash expenditures. There is additional money coming in from customers leaving tips. Because of this, it can be hard to track cash. And it can be hard to see if you are losing money.

Restaurantowner.com offers 3 strategies to gain more control of the cash in your restaurant.

  • One, never mix cash money from sales and your cash-on-hand fund.
  • Two, at the end of every shift, reconcile your cash-on-hand fund, your change fund and your petty cash fund. The supervisor responsible for the shift should sign the reconciliation to confirm that it was done correctly.
  • Three, never allow more than one person to access cash. If multiple people are accessing cash and money is going missing, it will be hard to determine what exactly is happening. If possible, invest in cash registers for every staff member that requires access to cash.

10. Carry out spot checks

When I talk to business owners who have employees handling cash, I always ask them if they do spot checks on their finances. Most of the time, they will tell me yes. But then I am surprised to find out that many of them have set a certain date and time to do these spot checks.

If somebody is stealing from you and they know when you are doing your spot check, will they not make sure that the money is correct on that day? Carry out your spot checks as a surprise. Your staff should not know when they will happen.

If your business uses cash registers, your spot checks can be done as follows. From time to time, remove the cash drawer while your employee is working and replace it with a new one so they can continue working. Count the amount of cash in the drawer and compare this amount to the sales amount on the cash register.

Is money missing? Your cashier may be stealing from you. Or, they may not know how to do their job well. Is there more money in the cash drawer as compared to the sales amount on the cash registry? Your cashier may also be stealing from you. In this case, the theft strategy being used is to not record all the sales on the cash registry. So you have less sales, but more actual cash. Take action as needed.

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Key message

The 26 strategies that I shared last week and today are very useful for any restaurant that is looking for ways to reduce costs, save money and increase profits. Some of these strategies are very easy to carry out and should be done as quickly as possible. Other strategies will require more effort, so it is up to you to decide if you are able and willing to invest the time that is needed. But it does not matter whether you choose the easy strategies or whether you try the advanced strategies. The important thing is to implement as many of these strategies as possible so that your restaurant can start making more profits.

How may I help?

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