Running a food establishment to turn a profit can be a tricky combination of creativity pitted against hard-nosed dollar smarts.
Positioning a business in a high visibility location with plenty of passing foot traffic, parking and a steady stream of customers, is still no guarantee of success if its outgoings and overheads are hemorrhaging money.
The process to regain control of spending must begin with an internal review. This is done to provide insights into excessive expenditure and poor processes whilst identifying crucial areas where strategies can be implemented to metaphorically and literally ‘trim the fat’.
By addressing the following key sectors, a business can turn around its turnover, rein in costs and boost profits.
Begin with the basics
Cafes, restaurants and hospitality businesses all survive on the income from food and drink. This means implementing optimum menu competitive costing calculations while providing an adequate profit margin is vital.
Menu pricing should be set based on a food cost percentage formula which takes into account:
- Stringent, detailed recipe costing
- Associated overheads of running a business including:
- Staffing
- Leases
- Utilities
Licensed premises should run a similar audit of their bar prices to ensure they are balancing affordability with healthy profit margins.
Reduce waste
A compelling study by the National Restaurant Association in the US found that restaurants lose approximately four to ten percent of food to wastage. The restaurant industry alone is responsible for trillions of dollars of waste each year.
This means that substantial savings can be made without affecting the quality of an establishment’s fare, through streamlined food preparation methods, effective storage systems and well managed procurement processes.
The good news according to researchers at Champions 12.3, is that for every dollar businesses spend in strategies to lower food waste, an average of $14 is saved in operating costs.
Begin with a kitchen audit:
- Install a rotation system to ensure the oldest food gets used first.
- Inspect food quality from suppliers to identify issues surrounding trimming and loss (e.g. high fat content of meat).
- Check expiration dates as food is delivered to ensure you are getting the freshest possible produce.
- Review food preparation techniques to identify strategies to reduce wastage.
- Review food storage temperaturesto increase shelf life of refrigerated produce.
- Clearly mark expiration dates so staff understand when to move dishes to the ‘specials board’.
- Predict peak demand periods to optimise procurement processes.
Preparation and Portion Control
Are diners regularly leaving large amounts of food on their plate? Identifying dishes where portion size is excessive, can substantially impact recipe costs. This is equally true for sides such as salads and chips. Making these an optional extra can have the double impact of saving on food waste and minimise ingredients expenditure.
Consider the off-cuts accumulated during food preparation. Could these be incorporated into other recipes to make full use of each cut of meat or serving of fish? Dishes which lend themselves to this type of economising are:
- Soups
- Stir fry
- Chowder
- Casserole
- Stew
Review the Menu
Making a conscious effort to save money requires staff awareness, involvement and commitment. Staff training needs to be instilled and regularly refreshed to:
- Create awareness and understanding regarding the vital role of economy in a food service environment
- Identify strategies to monitor storage and preparation methods to restrict food wastage
- Implement techniques to encourage faster table turnover
- Promote and upsell meals and extras
- Encourage practises which lower energy and utility usage
Table Turnover
Long delays in table turnover can be reduced by installing pay-at-the-table and pre-ordering technologies. These apps result in reduced demands on staff, a streamlined customer experience and increased table turnover rates.
Apps which promote themselves in this arena include:
- Hey You
- PayPal
- Groupee (enables menu splitting)
Faster table turnover is of particular importance in cafes where lower priced products mean you may be relying on higher turnover than a restaurant. Moving customers along can be an art and requires some tact by staff. To avoid confrontation, at busier times it may pay to install written policies.
These written signs needn’t be confrontational and can even carry some subtle humor. An example may read:
‘In a crazy bid to turn a profit, Management kindly request non-diners to give up their seats to the hungry, when seating demands are high.’
Before seating them, staff can politely ask customers whether they will be requiring a dining menu and if the answer is in the negative, direct them to the window stools. Alternatively, they can give a gentle reminder when directing them to a seat, that lunch dining begins at noon and their table may be required.
In the hospitality industry even small details can dramatically influence viability. Awareness, motivation and processes are the key factors to turning the fortunes of a food service business. If a single step such as reducing waste can result in significant savings, imagine the impact multiple cost-reduction strategies could make to your bottom line!
Should you need funding to implement any of the tips above helpful advice about growing your business and need financial help in realizing it, let us help! IOU Financial specializes in helping small business secure business loans of up to $300,000. Contact us today at www.ioufinancial.com to learn more.
Guest Post: About the Author
Danielle Ryans is a freelance writer based in Sydney, Australia. She loves that writing allows her to explore new topics and ideas, and is interested in business, travel, health, food and lifestyle. You can follow her on twitter here.