Restaurant margins are low. That means, for your restaurant’s bottom-line, every decision matters. So, here are some hidden profit killers and how you can make adjustments to maximize your bottom line.
1. 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.
Look into multiple vendors instead of just one. Use your restaurant's factors (total volume, average transaction size, etc.) to do some comparisons. Choosing the best merchant service provider for your 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. Too many people will require employees being sent home and possibly being paid a daily minimum. Too few people can result in overtime expenses. To keep the costs as low as possible, it’s about finding the right balance.
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.
3. Too Much Technology
Technology can be helpful. It can simplify processes and make an experience modern. But too much can be smothering, for your customers, your staff, and you. It adds new procedures, and new procedures can slow processes down. Additionally, technology requires upkeep, updates, and upgrading.
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.
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.
Raise the prices.
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.
5. Underestimating the Value of Great Customer Service
Restaurants aren’t about the food. It’s 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).
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).
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.
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).