#1 Under Capitalized
There are a lot of factors that can kill the hopes and dreams of your restaurant startup, but under capitalization could be the number one culprit.
Owners assume sales will carry them and can’t believe it when that first payroll comes in. Pretty soon the big vendors are gone and the owners are doing weekly runs to Restaurant Depot (buying the cheapest products.) Any extra cash flow ends up being used for marketing, couponing, bogos, mailers, etc. Maybe the location wasn’t the perfect spot. Food costs can soar as discounting continues. Hours increase for owners as labor is reduced. Quality and service go out the window. Another restaurant casualty hits the books.
#2 Tenuous Grasp on Food Spending
If you are on top of things, you can see your food spend costs directly compared to your profits. You can view how much you are spending each week on each item you have ordered. Suppliers’ prices are available, and you think you are doing the smart thing with regards to buying decisions by balancing cost and quality among the supplier options.
If this is a not description of you… then you’re probably not an expert on food spend and how it affects your prime cost and restaurant’s profits. Without a solid perspective of your food costs, you cannot price your menu appropriately. And that may be the make-it or break-it factor for your restaurant’s success.
One way to tackle and prevent this mistake is by tracking your food spend. Armed with this information, you can make better decisions about how to price dishes and whether to add or take away any menu items.
Don’t get screwed by suppliers. Know from week to week what you are paying each supplier in order to get the best deal. Technology is your friend there are are free invoicing and inventory apps you can use to get rid of Excel spreadsheets and paper invoices.
#3 Business Side Lacks Passion
Maybe you got into the restaurant industry because you were a talented chef or you have a passion for the hospitality of it. I would make a wild guess that you did not choose this career path, a managing one, because you were excited about managing minutiae of tiny details that comes, with running a profitable business. But if you don’t want your business to fail, then you must be able to transfer whatever passion you have into the restaurant industry- this translates into sales and profits.
You probably don’t want to spearhead the business and back-office side. We suggest hiring a qualified person who is dedicated to operating and managing your business expenses and accounting.
Someone needs to be watching over, like a hawk, food and labor costs, invoice management, credit tracking from suppliers and the reviewing of schedules. Or, if you can’t afford to hire someone in-house, there are specialized outsourced restaurant bookkeeping, front-of-house and back-of-house software technologies to help ease the stress of everyday operations.
#4 Ignoring Hospitality
Everyone is human… and mistakes will happen at your restaurant.
Dishes will the leave the kitchen under cooked, a hair may wind up on a plate or the bus boy may drop and break a glass.
For most critical business aspects, you should have a customer service agent, who can concentrate, respond and ponder the following:
- Address mishaps directly and immediately.
- Patrons easily turning dissatisfied to a lifelong evangelist for your restaurant if you take the time to acknowledge your weaknesses or failures and make it right.
it’s also in your best interests to create consistent customer service policies and procedures to uphold the hospitality part of your business.
#5 Addressing Poor Management
Successful restaurants like Danny Meyer’s Shake Shack is a good indicator and an example of a business running like a well-oiled machine. The front-of-house, back-of-house, chefs, managers… all act as a familiar support system for each other. Unfortunately, a lot of less established restaurants don’t have this team culture. Often you can end up pointing the finger, so to speak, at the lack of management skills in your team leaders.
“If the restaurant operator of location manager is not passionate about what they are doing, and doesn’t have the foresight ensure the restaurant hires hard-working and talented employees and isn’t dedicated to making sure the business thrives… then this person got into the restaurant industry for not the right reasons.” – Bobby Shapiro owner of Flex Mussels
Whether you are looking to hire a restaurant manager or become a great one yourself, it’s imperative to have the dedication to growing a healthy team and having that fire in your soul, for the food industry.
Studies have shown that there is a direct correlation between profits and how well your team and restaurant’s customer skills perform.
#6 Scheduling Skills Shortcomings
The restaurant industry is still not on par with traditional scheduling standards needed for the front and back of the house. After all, customer foot traffic and sales volume can fluctuate on a weekly basis. That is why schedules must be created each week based on those variables; you won’t want to waste money or your staff’s time.
If you’re costing out your schedule, you’ll be able to form a daily and weekly labor budget.
It is advised that you compare your weekly sales to your labor costs for the same period. This will give you insight into where you need to add or remove hours on the schedule.
#7 Absence of Online Marketing
How do you think most people decide where they are going out to eat?
Well in NYC, chances are they are going to use Google’s search engine or use a voice assistant such as Amazon’s Alexa. You can take advantage of these trends by prioritizing your online visibility. Today, the majority of online searches for food and beverage (a.k.a. Restaurants) start on a mobile device, and people are likely searching for “places to eat near me” as that term is growing twofold. Ensure the mobile experience is as fluid and frictionless as possible. Having a responsively designed site takes care of this. Potential guests should quickly be able to find the nearest location, directions, phone number, menu options as well as make a reservation or use call ahead seating.
Nothing is more compelling than great photos and video to make guests crave what you are offering. Invest in professional restaurant interior and food photography to dress up your restaurant’s website. Images are more powerful than words, so make sure your’s reflect the welcoming atmosphere of your restaurant and draw customers in. Hire a digital marketing agency to help your business get visibility online.
Content strategy, paid media advertising and search engine optimization marketing can assist when people search for the type of food you serve and the area you’re located.
Make sure your branding and marketing are in sync with menu development/R&D, purchasing, finance, distribution, operations, etc… Marketing can solve problems and capitalize on opportunities. When I was in the Marketing department at Darden Restaurants working on the Red Lobster brand, I learned this first-hand. For example, when operators were stuck with an excess inventory of a particular seafood, marketing would work with the chefs to develop a special plate that we would then merchandise in the menu to drive sales and work through the excess inventory at the restaurant level.
Review and social media are more and important than ever. Finally, ask patrons to recommend you or leave comments about your restaurant on OpenTable and Yelp so prospective customers who are searching on those sites can find you. People trust their peers more than advertising. You can try finding the right micro-influencers who have strong local followings on social, especially Instagram. Be critical of their content and their followers. If the type and quality does not match your brand, then don’t use them.
Be laser-focused on unique items or experiences that reflect your brand- your restaurant will stand out and drive interest and visits. Take a critical look at competitors and answer these questions:
- Are we different than them?
- Are we really standing apart from them?
- Do we need to up our game versus what they are doing?
That means producing food that is consistently phenomenal is a sure fire ingredient to developing a loyal customer base and having this called success. But the mistakes can happen when things get slow, so make sure the staff is always producing the quality dishes and level of service. We all know when it’s slow, more mistakes tend to happen.
Make sure, no matter how busy your restaurant is, the staff is producing the same quality of dishes.
The slow Tuesday night steak should be just as great as the busy Saturday night steak. This attention to detail and quality will separate your great restaurant from the “that was ok, meh”
Another important point is holding your suppliers accountable for the product they send you. Nothing is worse than anticipating a busy night and an incomplete delivery at the back door makes you have to 86 one of your most popular dishes. Track items received at the door against your order to give yourself time to react and get the product before serving. At a minimum, keep track of the credits owed to you due to supplier mistakes.Make sure suppliers make good on those I owe you’s.
A final thought is if your restaurant brand takes the position of “farm to table authentic French cuisine and experience” then menu development is focused on fresh, not frozen, local ingredients and genuine French recipes. Purchasing should be focused on local vendors who have ingredients used in French recipes. The brand promise doesn’t stop at the food; things like equipment, small wares, training and merchandising are all essentials that operations need consider as well.
Make Intelligent Business Decisions for Your Restaurant
Your business may not be guilty of all eight of these common mistakes restaurants make, but you’re probably suffering in at least a couple of these areas. Measure where your strengths and weaknesses are…if you’re well-versed in tv and digital marketing and your website is modern, move on to tracking invoices and food spend. If your food presentation and quality is always consistent, then focus on creating a top-notch team and inspiring them to work together. As you address each of your weaknesses and put processes and technology in place, you’ll see constant improvement in your operations that will lead to business success in the long term. Financial management and accounting are also crucial to growing restaurant business. Get a free consultation of how we can help your restaurant become more profitable.