6 Common Restaurant Profit Killers, and How to Fix Them

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Stephanie Graham
March 15, 2021

In a time where every dollar counts, and restauranteurs are being called to overcome challenges they have never experienced before, a leaky fiscal faucet simply will not suffice.

Restaurant margins are a challenges as is. With owners juggling food, operations and staff expenses, it's could be easy to drop a ball from time to time.
That means, for your restaurant’s bottom-line, every decision matters. In this article, we explore some common hidden profit killers you may not have considered, and how to fix them!

1 - Sneaky credit card processing fees.

On average, a transaction fee for a $100 charge can be around $2.50 to $3. It’s why a lot of businesses opt for “cash only” policies (but that policy doesn’t work for everyone). With more and more customers choosing cards over cash, these small spends can add up fast, so how can you remedy this? 

The solution: do the research, and switch it up.

There is no one perfect solution when it comes to optimizing your bottom line. That's why looking into multiple vendors instead of just one is key. Use your restaurant's metrics (total volume, average transaction size, etc.) and using that data - make some comparisons.

Choosing the best merchant service provider for your business model can minimize costs and save you money every swipe.

2 - Disorganized employee shift management.

One of the biggest costs to restaurants is the labor. On average, the payroll for restaurants is 25%-35% of gross sales!

With improper shift scheduling, you may have too many employees scheduled going into overtime, or being sent home and possibly being paid a daily minimum.

In that same breath, too few employees on shift can result in overtime expenses or missed sales opportunities, and too many can result in labor cost issues!

Is your head spinning yet? Every business owner knows the goal is to keep costs as low as possible, with sales as high as possible. It’s about finding the right balance. But without a magic wand or a mathematicians degree, you're going to need a hand.

The solution: schedule smart, and consider scheduling software.

First, how to schedule smart. Here are some low tech, high impact tips. Teach your management team to review the schedule and look for opportunities to make it better. When is the restaurant busiest? What are the common dead times? Track your customer flow and find patterns. Keep an eye on team members capacity and, when you can, send staff home early. Lastly, be familiar with overtime labor laws, both nationally and in your state.

The variables in the everyday operations are flexible, your scheduling should be too.

Next, you might also consider using software that helps you automate your schedules, this software is great because it can send warning messages when an employee is going to go into overtime, or if they have already been scheduled for too many shifts that week.

Using software helps you see things that the human eye could easily miss, for example shift swap requests are calculated to ensure employees aren't going to go into overtime if that shift is approved.

The most powerful thing about scheduling software, is that, depending on your system, it can integrate your POS system. That means it can pull your sales vs labor costs in real time. This can help you make decisions on the fly, and in the future. Isn't technology magic?

3 - Too much technology.

Ok, we know we were just talking tech up, but it's true, you can have too much of a good thing, and it's called being overwhelmed.

Technology can be helpful. It can simplify processes and make an experience modern. But too much tech can be smothering for your customers, your staff, and you.
Too much tech adds new procedures, and new procedures can slow processes down. Additionally, technology requires upkeep, updates, and upgrading. So what happens when you have a million systems, doing a million things? 

The solution: analyze and streamline your software.

Take an audit: differentiate what type of things you need and what you don’t. Evaluate systems based on your unique business needs.

Should you use an iPad POS or a cloud-based POS? Small business software vs. multi-location business software?

Sometimes what’s “the best option industry-wide” isn’t best for how your business works.

We recommend finding a software systems that can integrate with one another, eliminating the need for multiple solutions. For example - find an all in one back of house solution that can manage your payroll, hr, scheduling, time tracking and run reports.  

Make sure this software integrates with your POS system so that you can also gain sales data, and create labor forecasts.

This also allows you to run payroll in one click, automate your schedules, verify your employees clocked hours, and keep track of all important data all in one place -with ONE solution.

4 - Stagnant or inaccurate food vs labor cost.

With sales being the main profit driver and labor being the biggest cost, it’s important to monitor your food to labor cost ratio. You need the right menu, with the right margins.

Analyzing your current menu and making adjustments can help boost the sales to cost ratio for the entire business. It's all about profit margins in food service, here are some ways to leverage that.

The solution: raise the prices, or get creative.

Not every customer is price sensitive. People are willing to pay for the value of a great experience. Match their expectations and raise your price. One way to increase the value of the menu is seasonal menus. Buying local, fresh ingredients adds value with the current farm-to-table trend. You can also leverage social media to be transparent with customers about the processes behind your food to show them why it’s worth the cost.

Another solution is to get creative about what food items you feature to your customers, in our recent post, 10 Ways to Increase Restaurant Profit without Spending a Dime, we explore how to feature low cost dishes, and hot to upsell high margin items.

5 - Underestimating the value of great customer service.

Restaurants aren’t about the food, they are about the experience—the atmosphere, the company, and the customer service. Great service boosts tips. It can build trust, loyalty, and word-of-mouth. But bad customer service can have the opposite effect, sinking your sales (and your bottom line).

The solution: care about the customer.

Training shouldn’t stop after a new hire’s first week. To help your staff deliver the best service possible, you need to educate them on the menu and remind them to prioritize the customer. One way to do this is through weekly team meetings, where your staff can ask managers questions, try new dishes, and boost team building (happier staff, means happier customers).

There are so many ways to make your customers feel special, like learning their names, habits, favourite dishes, or routines! And the best part is it's free to do.

6- Underutilizing your staff.

Your staff have power: they’re the direct line from you to the customer. It’s important that they not only prioritize the customer, but also the profit of the restaurant.

The solution: empower your staff

A little financial transparency with your staff is smart. Educating your staff on the food with the highest margin (or with the lowest shelf time), allows them to strategically promote dishes. Cross selling and upselling can help add to your profit (and their tip).

In conclusion.

In the end it's the little things that can all add up to land your business in the red or the black.
We want you to avoid restauranteurs profit killers - so you can continue to create food fare and atmospheres that bring joy to everyone they engage with.
By following these 6 tips, we hope you walk away with ways to make that happen again and again.

Restaurant Profit Killers

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