How to Make Money in a Restaurant

 

It is interesting to note that a series of minor changes in your approach to managing your restaurant can have a significant positive impact on your overall profitability and hence your way of life.

 

Even a restaurant (or coffee shop) that is only marginally profitable can be turned around to provide the owners with a great quality of life. Typically measures that have most impact on improving your restaurant’s profitability rely on the basics of business management. 

 

Consider the basic accounting profitability equation: Profit = Income less Expenses.  So to increase your profitability you can either increase your income or reduce your expenses. To start lets focus on how you can increase your income.

 

How to Increase Restaurant Sales

     Often the biggest determinant of success in a restaurant is the motivation and attitude of the owner. This impacts not only on the energy level and achievements of the owner but also the staff and it indirectly impacts significantly on the enjoyment level of your customers.  This motivation, enthusiasm and achievement is challenged most when it is needed most - when things need to improve.  A plan that the owner can feel confident in and a few small projects aimed at one section of the business is often all that is needed to get the ball rolling down the path of improved profitability.  With this in mind I have chosen to reduce the task of doubling your profitability into small bit sized tasks.  The intention is that success with one task buys the time, motivation and resources to attempt the next task.

 

 

 

There are three ways to increase sales in your restaurant

  • Increase the number of customers

  • Get your customers to come back more often

  • Increase your average sales size.

 

The cumulative effect of an increase in each one of these areas can build your sales, gross profit and most importantly profit in a significant way.  It is possible for an increase of 10% in each of these areas to result in a doubling of profitability.  See the Mathematics of doubling restaurant profitability for an example of how this works.  When this is combined with an improvement in gross profit margin and better expense control the results can have a significant positive impact on your long term wealth generation and quality of life.

 

 

How to increase your number of customers

While I imagine you are quite keen to launch into getting more customers coming through the door, let’s just pause for a moment and remind yourself of your value proposition - What is the reason that customers are coming to your restaurant?  Only after you have discovered this will you determine the benefits you provide.  And it is the benefits you need to communicate to the market place. The way you articulate these benefits is your value proposition. Your well presented benefits will be the basis of all your advertising - website, flyers, advertising, ezine, functions etc.  The  Restaurant Checklist will help you develop your “sure step” marketing plan.

 

How to increase your income per customer

To increase your income per customer you have two basic paths – increase the income on each item sold or increase the number of items you sell to each customer.

 

Increasing income on each item

One option to increasing the income on each item sold is to reassess your pricing.  Alternatively you can make available higher margin items for customer and provide an attractive path that leads to these higher margin items.  You will then support this with appropriate staff training.  The  Restaurant Checklist will  provide you with a number of practical steps to achieve this. 

 

Increasing number of items sold

MacDonald’s increased the profile of the add on sale -  “ would you life fries or xxx with that...". So what do you need to get the add on sale.  You need to have potential add on items available for sale, you need to ask for the sale and you need to make it easy for your customer to say yes.  Again you will support this with appropriate staff training.

 

Get your Diners to come back

There is an old cliché in business that a disgruntled customer will not tell you but they will tell everyone else.  Research indicates that for every complaint you get there are 24 people that don’t complain but just vow to take their business elsewhere.  So an obvious starting point is to provide magic customer service.  The issues that have already been addressed will play a significant role to upgrading your customer service.  More guidance is available in the customer service workbook and the Improve your dining room service ebook.

 

However customer service is only a small part of the success strategy.  You need to develop a database of your customers, especially your “A class” customers, and a warm and regular communication relationship.  Monthly or quarterly ezines are a good example of this.

 

In summary paying attention to your restaurant management skills can result in significantly increase in your income.  Your starting point is to set the goal that you will increase your income and then set aside time to get started.  You may be surprised that you already have the knowledge inside you to make the changes your need or you may need to tap into some external resources such as the Restaurant Checklist or the Profitability Increase Potential Index calculator.