Covering the Gaps in the Restaurant Industry

7/28/2019 Covering the Gaps in the Restaurant Industry

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2012

Brittco

Consulting

Group

COVERING THE GAPS INTHE RESTAURANT

INDUSTRY


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January 1, 2012 COVERING THE GAPS IN THE RESTAURANT INDUSTRY

CONTENTS

Executive summary ................................................................................................................................................................ 4

Introduction ............................................................................................................................................................................... 5

Common mistakes made by restaurant owners ......................................................................................................... 9Food cost percentage concept is universal .............................................................................................................. 9

Good food and service is the key .................................................................................................................................. 9

Being the fall on guy ........................................................................................................................................................ 10

Major reasons why restaurants fail ............................................................................................................................... 11

Financial problems ........................................................................................................................................................... 11

Fixed cost ......................................................................................................................................................................... 11

Financial forecasting .................................................................................................................................................. 12

Poor record keeping: .................................................................................................................................................. 12

Financial solutions ........................................................................................................................................................... 13

Have spare funds .......................................................................................................................................................... 13

Allocate the initial funds ........................................................................................................................................... 13

Have a growth plan ..................................................................................................................................................... 14

Take into account every transaction.................................................................................................................... 14

Marketing problems ........................................................................................................................................................ 15

Overreliance on word of mouth ............................................................................................................................. 15

Failure to convert restaurant theme into right message ............................................................................. 15

Not enough attention on existing customers ................................................................................................... 16

Failure to utilize alternative methods of brand promotion ....................................................................... 16

Marketing solutions ......................................................................................................................................................... 17

Use stickers/magnets ................................................................................................................................................. 17

Create a restaurant club ............................................................................................................................................ 17

Use mobile apps and social media ........................................................................................................................ 18

Use public media .......................................................................................................................................................... 18

Managerial problems ...................................................................................................................................................... 19

Insufficient importance to training ...................................................................................................................... 19

Relying on experience rather than the data ...................................................................................................... 19

Delegation of tasks a little too early ..................................................................................................................... 20

Inability to create a system ...................................................................................................................................... 20

Managerial solutions ....................................................................................................................................................... 21

Gain controll of your inventory .............................................................................................................................. 21


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Negotiate, negotiate, negotiate ............................................................................................................................... 21

Reward your employees ........................................................................................................................................... 22

Lead by example ........................................................................................................................................................... 22

Raising your profitability ................................................................................................................................................... 23

Menu re-engineering ....................................................................................................................................................... 23

Increase confidence on small numbers ................................................................................................................... 24

Increase your margins with nominal lifts ............................................................................................................... 24

Go green ................................................................................................................................................................................ 25

Complexities of solutions ................................................................................................................................................... 26

Brittco Solution ...................................................................................................................................................................... 27

Conclusion ................................................................................................................................................................................ 28

Bibliography ............................................................................................................................................................................ 29

Disclaimer ................................................................................................................................................................................. 30About brittco ........................................................................................................................................................................... 31


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EXECUTIVE SUMMARY

Statement 1: Sales of restaurant industry have been rising by 4% in the past year.

Statement 2: The number of restaurants has declined by 2%.

When these two statements are looked in unison, the most obvious thing that comes to mind is that one ofthe statements is false. However, they are both true. The missing piece of this puzzle lies in the operating

expenses, which have risen faster than the sales, thereby eating into any profits that the restaurants could

have made from the rise in sales. All in all,

RaisingProfit

marginsthrough

Menu Re-engineering

Workingwith smallincrements

on menuitems

NominalLifts in

customersand cheque

value

Sales rise

by 4%

Rise in

operating

ex enses

Declining

Profits

Smart restaurant

owners however have

found ways to utilize

the rise in sales by

increasing their profit

margins despite the

rise in operating

expenses. Some of

the things that have

come up are

Running a restaurant

means that the owner

puts in more than 60

hours of work per week,

which requires passionfor the job. These

entrepreneurs have more

often than not, a

background in restaurant

industry, where they

have worked as a chef,

manager, or any other

rule and have seen the

game first hand.

Unfortunately, what

they miss when

dealing with their

own restaurant is that

running a restaurant

is more than the halland the kitchen.

Three things where

they are found

wanting are


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INTRODUCTION

Restaurant industry experienced growth, but have you felt it?

A quick look at the graph below gives an overview of the growth in the restaurant industry in Canada, and

by the first look it seems the industry is reviving.

While the picture seems encouraging, lets also consider the GDP of Canada, and see if the rise is in line

with the nations economy.

While the disposable income of an average consumer has increased by 3.6%, Canadians have still not

matched their spending habit levels which they had prior to the economic slowdown. Add the moderate

employment creation in the past few months; it seems that the disposable income will be used to

encounter previous debts first.


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While the above stated facts apply to the whole of Canada, changing legislation in states and variation in

taxes will mean that not everyone is experiencing the same growth. This is illustrated by the graph below.

The biggest problem that goes unseen and is really pinching the restaurant owners across Canada is while

the sales have gone up, so has the operating expenses. With the already conventionally thin margins in the

restaurant industry, the rise in sales has not transformed to a similar rise in profits.

A quick look at the figure below explains the new profit margins for the industry.

The two major factors affecting the margins are Cost of Sales and Labor costs (salaries and wages). Cost

of sales has risen from 33.5% in 2001 to 36% today. This is primarily because of the rise in costs of

inputs such as flour, meat, vegetables, tea, coffee, and eggs. Similarly rise in minimum wages has

increased the labor cost from 30.8% of the operating revenue to 33.9%. Other costs which have also

added on to the rising cost table are rental and leasing costs which have risen from 5.4% to 7.6% of

operating expenses.

Depreciation

3.1%Advertising and

Promotion

2.8%

Utilities

2.8%

Repair &

Maintenance

2.6%Other

6.7%

Rental and Leasing

7.6%Labor Cost

33.9%

Cost of Sales

36.0%

Pre tax Profit

4%

Operating Expenses Breakup


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The thinning margins are not the only problem in a restaurant industry. Several changes in consumer

behavior have also forced restaurants to shut down who have been unable to cope with the changing

consumer preferences.

While there are many changes in consumer preferences which affect the restaurant industry, we will

discuss one which has really made a dent. Take a look at the declining number of drinking places in

Canada over the past few years.

Is the above graph an indication that people have actually reduced their drinking habits so drastically soas to bring down the number of drinking establishments to a mere 5,724 in 2011 from 8,882 in 2003.

Seems unlikely, considering as per Euromontiors report the sales of liquor have increased to 154 million

liters in 2011.

However the fact remains that sales at drinking places have seen a total loss of $204 million in the past

decade, while 38% growth is observed in the rest of the industry. With decreasing sales and increasing

operating costs, the profitability of a drinking place has been dipping and therefore no longer a sensible

business for many.

0%10%

20%

30%

40%

Cost of SalesLabor Costs

Rental and Leasing

Costs

33.5%30.8%

5.4%

36.0%33.9%

7.6%

PercentageGrowth

Major Components of Operating Income

2001

2010


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The change is also in consumer habits; people have started demanding more food options in these places.

The original ratio of 30:70 of liquor to food has started moving in the opposite direction. Many bars now

allow people to bring in their own food and use the grill at the establishment. Some have increased the

number of choices on their food menu.

While this is just one example, there are many observations similar to the above which are happening in

the market, such as increasing importance of coffee in restaurants, the rise in snack category of meals andthe increase in number of mocktails, lemonades and other innovative options.

The number of commercial restaurants in Canada has actually decline by 2% in 2011 as compared to

2010. The ones most affected were the independent restaurants which saw a loss of 1,261 units (3%).

While the restaurant fails due to many reasons, the factors of failure can be broadly categorized into

1. Financial Implications 2. Managerial Implications 3. Marketing implicationsMost restaurant owners work put in 70-90 hours per week provide excellent food and service, but they

still fail to survive the restaurant business. The report addresses two very important aspect of the

restaurant business, which allow not just survival but also ensure you make healthy profits even in theconventional razor cut margin levels in restaurant business.


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COMMON MISTAKES MADE BY RESTAURANT OWNERS

You know all there is to know about food, all about good service and you have a unique theme for your

restaurant. Yet, most restaurants with good food, service and theme are almost as prone to failure as any

other ordinary restaurant. Listed are some of the most common mistakes people make in the restaurant

business.

FOOD COST PERCENTAGE CONCEPT IS UNIVERSAL

GOOD FOOD AND SERVICE IS THE KEY

These three will be discussed in detail in the later section.

While controlling food cost percentage is a critical, most

restaurant owners feel by bringing it down they will be able

to make more profits. This concept fails in times of slow

business. You have to remember that when number of

customers goes down, the food cost percentage may come

down, but other expenses such as your labor costs, the

rental and lease costs, insurance costs etc. stay the same.

Therefore, reduced no. of customers can not be countered

by low food cost percentage.

While good food and quality service are

important, their importance is not even

close to being called the key. On a

restaurants success map, that is only a

quarter of the whole territory of success.

There are several other elements that go

into making a restaurant successful.


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BEING THE FALL ON GUY

Restaurant is a business that requires a lot of hours, andis therefore taken up by people who are passionate about

a restaurant. These people are mostly ones who have

been in the business in one role or other and have

watched closely how the business is run. They open the

business and put in more than 80 hours per week, they

work sometimes as the chef, sometimes as the line

Problem occurs that they end up being an employee in their

own business rather than the owner. They need to look at therestaurant from an investors perspective, and focus on creating

a system for business and employees, rather than being in the

system. They need the observers perspective but they stay

stuck where they get only the participants perspective. This is

where the game is lost, because you stop taking other factors

into consideration which also affect your business directly or

indirectly.


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MAJOR REASONS WHY RESTAURANTS FAIL

While many micro and macro factors play a role in the success or failure of a restaurant, most can

be broadly categorized into these categories:

FINANCIAL PROBLEMS

A restaurant business encounters much financial instability in the initial and later part. Some of these are

FIXED COST

Sometimes a restaurant owner can get

so absorbed in their vision of the

restaurant, that they fail to address

other important factors such asmarketing efforts. Best example of

this would be the investment made by

two entrepreneurs in Columbus, Ohio,

where they spent a major part of their

cash in restructuring an old bank

building into a Greek theme

restaurant with pillars and high

ceilings. At the end they were not left

with enough money to make their

prospective consumers aware of their

creation and any substantial

marketing efforts. This is also

popularly known as Taj Mahal

Syndrome, where every penny is

spent on realizing a dream, and the

restaurant never flourishes as a

business.

Another example of spending too much on the fixed

cost is when people start looking for a prime

location. The cost of lease/rent goes so high, that

other factors have to suffer. It has been proved over

and over again that the location does not hold as

much value as the quality of the restaurant, and

while good restaurants can overcome a bad

location, a badly run restaurant cannot be overcome

by a good location.


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FINANCIAL FORECASTING

POOR RECORD KEEPING:

Most independent restaurants will have the owner

working out the financials. Unfortunately, the financial

statements are very sensitive, and the whole picture

can change by one wrong entry. For example, when

discounts and coupons are not accounted for, this

would show you excess credit than what you have.

When cash is not paid to the suppliers, but the entry is

made, one needs to understand that there are still

liabilities to be paid off, which will affect your

financial outlook. Posting entries on the wrong side of

P&L statement can be fatal when making plans with the money in hand. Because of the wrong picture,

you can either underestimate and overestimate your cash flow and thereby make wrong decisions.

As soon as you restaurant is up and running, thecosts are further up and running. But the same does

not happen to you revenues. One of the biggest

mistakes in financial planning people make is that

they would start making money from the first day.

Based on various factors such as location,

consumer demographics, local competition etc.

one needs to have a base period. This period is

where you will not start making profits but will

incur expenses in marketing efforts, operating

expenses and similar, and this can extend from 3 to

6 months or more. Good financial forecasting is

required here, and that would mean you will have

enough capital that would cover your costs for the

base period. Most restaurants that fail due to low

capital are victims of misjudging he base period

and therefore do not have sufficient capital to back

them.


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FINANCIAL SOLUTIONS

While expertise is required to read and record the financial statements correctly, few quick steps can help

you save from the unexpected financial blows.

HAVE SPARE FUNDS

ALLOCATE THE INITIAL FUNDS

Most successful restaurant

owners will have back up

reserves of capital. This not only serves to address the unexpected section, it also means that in case your

base period elongates, you dont have to look for emergency funds. This is the last scenario that a

restaurant owner would want to see himself in especially after having been through the torment of theinitial phase, and just when your restaurant is picking up.

Most successful restaurant owners will have back up reserves

of capital. This not only serves to address the unexpected

section, it also means that in case yourbase period elongates,

you dont have to look for emergency funds. This is the last

scenario that a restaurant owner would want to see himself in

especially after having been through the torment of the initial

phase, and just when your restaurant is picking up.

Costs can be categorized and allocated certain percentages.

For example, your prime costs should not exceed 60% of totalcosts under any circumstances. Prime costs include cost of

food and labor costs. Similarly, no matter how lucrative a

location may be, do not spend more than 6%-7% of total costs

on rental and leasing. Most studies have revealed that poor

location can be overcome by good food and service, but bad

food and service cannot be overcome by a good location.


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HAVE A GROWTH PLAN

TAKE INTO ACCOUNT EVERY TRANSACTION

Even though your restaurant may

not pick up very early, its alwaysa good idea to plan the financial

budget, when you decide to grow.

Evolution is the requirement of

the day, with new items on the

menu, new promotional programs

to cater to the changing consumer

preferences; you need to allocate

some money for future. You

cannot depend on the earnings of

your restaurant for future growth

in the initial stages. After all, you

dont want to go bankrupt just

when your restaurant picks up.

Biggest mistake in

financial terms that

restaurant owners make is

they stop taking into

account small expenses,

such as discounts, flyers or

other promotional items,

stationary, food spent on

friends and family, and

many other which are

considered negligible.

Know this, with the thinmargins in restaurant

industry, every cent counts.


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MARKETING PROBLEMS

You have great food and excellent service, you have managed to keep your finances under check, and the

concept is unique and brilliant. Three months down the line, you are closing down because somehow you

did not generate enough revenue to keep the restaurant running.

THE BIG QUESTION IS WHY?? Why when all was well, did you go down? The piece of puzzle thatyou missed on was Brand Promotion.

Some of the major problems faced by the restaurant owners are given below:

OVERRELIANCE ON WORD OF MOUTH

Agreed, word of mouth is the best

promotion that you can get. What

you need to understand that it is

also the slowest process when in

initial phase. Also, the flip side isthat there is also negative word of

mouth, and one negative word is

enough to destroy the positive

feedback of ten. In the previously

discussed base period, you do

not have enough customers in the

first three to six months to depend

on their positive feedback.

FAILURE TO CONVERT RESTAURANT THEME INTO RIGHT MESSAGE

You know what your restaurant theme is. You created it, you will understand it. The problem occurs

when the restaurant owners make an advertisement/promotion plan as per their understanding. You have

to remember that your prospective customers

understanding your message is more important than you

understanding it. Most times, owners would come up

with an advertising gimmick that

they think is very appealing since

they understand all of it, but if you

ask a guy from the street, can he

easily understand the message onthe banner when he looks at it.

Secondly, you only have a fraction

of a second or at most a second to

grab the attention of your customer.

Check if the advertisement requires

people to think, before they

understand it.

WHAT IS

THAT

THING??


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NOT ENOUGH ATTENTION ON EXISTING CUSTOMERS

.

FAILURE TO UTILIZE ALTERNATIVE METHODS OF BRAND PROMOTION

If you think newspaper ads, big banners

and flyers are the only way to successful,

think again. With the technology upgrading

every day, there are many new ways

around to not only gain new customers butalso retains loyalty of old ones even when

they are not in the restaurant. Use social

media, create a webpage, and organize

activities that would involve your regulars,

create a club of your own. The list is

endless, if you put the innovative part of

your mind to it.

Most restaurant owners think if their

promotional tactics have people comingin, the job is done. What one needs to

keep in mind is that getting people to

your restaurant is only half the job, may

be even less. You also need to promote

your restaurant within the restaurant, to

make sure that you have gained your

customers loyalty. A repeat customer

will not only mean revenue, but free

advertisement when he tells his friends


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MARKETING SOLUTIONS

When there are problems, there are always solutions and same applies to all your marketing problems.

Some of the solutions are illustrated below.

USE STICKERS/MAGNETS

CREATE A RESTAURANT CLUB

One of the best ways to use the word of

mouth without the words is to distribute

souvenirs. When giving out the bill, or a

takeaway put magnets, stickers etc. with

them. Once your customer puts it on his

refrigerator, wall or anywhere in his house,

you have already created a full time

advertisement. Not only is he reminded ofyour place every time he looks at it, when

his friends/relatives look at it, they get an

automatic reference to your restaurant.

Once you have a loyal customer, you need

to fuel that loyalty. This will not only keep

him or her, but will also attract their peers.

Create special discounts for loyal

customers; create a club with special

privileges for customers who have come in

more than a few times. Creating T-

shirts/cuff links/mugs, whatever suits thetheme of your restaurant best should be

given to the regulars, all the time keeping

in mind the above principle of free

advertisement.


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USE MOBILE APPS AND SOCIAL MEDIA

In this age, any news on internet spreads like wildfire. With the social media and mobile apps merging in,

it would be a good idea to make use of this technology. Create a facebook fan page, start a tweet up and

get people talking about your restaurant.

Organize a party, and post the invitations

online.

USE PUBLIC MEDIA

Events, combined with social media and

mobile technology will be the cheapest and

fastest form of publicity. However, this is

very similar to the word of mouth

publicity, so one should be aware of the

potential risks of negative publicity.

While most people think it to be an

extreme, when your restaurant gets talked

about in media or gets written about, it

captures the attention of many prospectivecustomers. Remember the first part, you

may have the best deal, but people wont

come in until they know about it. This is

one of the better ways to get to new

prospective customers especially at the

start of the business. Hiring a PR manager

may seem going overboard, but can you

deny the attention that it creates for your

restaurant.


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MANAGERIAL PROBLEMS

The biggest reason this problem exists is because people deny having it. Turning your face away is not

going to take care of the problem. You have to understand that managing a restaurant is like managing

any other business, where you cannot solve the problem until you take an unbiased fact based idea.

Passion will only drive you so far, good management practices will bring multiple benefits.

Some of the most common managerial problems in the restaurant industry are

INSUFFICIENT IMPORTANCE TO TRAINING

RELYING ON EXPERIENCE RATHER THAN THE DATA

.

This could be a fatal mistake because as

has been pointed out earlier, your

concept is unique; thereby you will have

The biggest asset that a restaurant has is

Goodwill; the fastest way to lose it is

through incompetent staff. Remember,

your concept is unique (without a

uniqueness quotient you wouldnt survive

anyway), however experienced and

qualified your staff may be, until they grab

the concept, they wont be able to deliver

the service that you had imagined for your

customer. With bad service, you will lose

your all important asset, the Goodwill, and

thereby the restaurant.

Your restaurant functions every day, every day loads of

information is generated which when put together even

if monthly if not weekly can provide you valuable

insights to how things are working out in your

restaurant. However, most owners tend to ignore thisdata, mainly for two reasons,

a.) Collecting and analyzing data is a tedious task.

b.) It negates the emotional judgment based on

experience, knowledge and instinct.


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new and different problems to take care of than your experience and knowledge. Using the information at

hand, will allow you to make decisions based on facts and figures rather than thin air

DELEGATION OF TASKS A LITTLE TOO EARLY

INABILITY TO CREATE A SYSTEM

As a restaurant owner, creating a system around your concept should be of paramount importance, over

and above creating better employees, better service or better food. This may seem like an awkward thing

to demote the priority of employees, service and food, but if you can work out the perfect system that

works for your restaurant, you will not have to worry about retaining best employees, or improving on the

existing offers and services, managing customers or even marketing campaigns. The system will do it foryou; all you have to do is standardize methods and practices. This will also help create a culture within a

restaurant with which your employees and customers will identify and further promote the uniqueness of

your concept.

Failure to do so will mean that you will always be running short on time for most things, and careful

evaluation before a decision is made will become increasingly difficult.

As discussed earlier, the restaurant owner should not

become so involved in the restaurants day to day

activity, that he stops being the owner and starts

acting like an employee. Restaurants are started by

people who have a passion for it, putting in more than

60 hours in a week, and soon they take on every role,

from being the accountant to the chef to the janitor.

They need to look at the restaurant business from an

investors point of view.

Having said that, one of the mistakes most often done

is delegation of responsibilities to the employees.

You need to get your evaluation exactly right, and be

very sure of delegating the right responsibility to the

right person. Delegation seems like an attractive

option because it clears the table for you and gives

you the room to think, which is necessary, but not at

the cost of putting the responsibility on incapable

shoulders.


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MANAGERIAL SOLUTIONS

The best ways to address the above stated problem is to counter them doing exactly the opposite of the

mistakes, such as training your employees, creating a system, timing the delegation of responsibilities and

working as an owner rather than the all round employee. While making a complete manager through few

tips and methods is as far off as making a meal through bread and butter, some of the things which can

further help are listed below.

GAIN CONTROLL OF YOUR INVENTORY

NEGOTIATE, NEGOTIATE, NEGOTIATE

Keeping too large an inventory will only result in

waste. Most restaurant owners are afraid that a low

inventory will cause some of the menu items to run

out when required, it is better that way. Not only you

have saved money on the waste, when a menu itemruns out, it can add to the popularity of it, by

displaying the large demand for it.

Another system that you need to follow is the FIFO

method of inventory. Items which come in first will

need to be disposed off first, before getting on to the

other item. Serving the most fresh item is a

temptation, but remember most items will stay fresh

for certain period of time, so use them within that

time and you will still be serving fresh items.

Famous CEO Jack Welch believed that there is

always a new idea out there in the market, get it, and

when you have it, get the next one. Same applies to

the deal that you have worked out with your supplier,

there is always a better deal out there, sometimes withthe same supplier that caters to you. Find out that

deal, look at what others have to offer and then

negotiate with existing dealer. Never stop thinking

that you have the best deal, because there is always

someone out there, who is getting a better deal than

you for his supplies.


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REWARD YOUR EMPLOYEES

LEAD BY EXAMPLE

Rewarding your employeesshould not be a rare occasion.

Remember even the smallest

of appreciation can work in

further strengthening the

employees loyalty. It need

not be monetary but through

various recognition programs,

through offering extra day off

and various other ways. Better

yet, create your own unique

awards most suited to the

culture that your concept hascreated.

One of the oldest, but still the

most effective management

strategy. While this does not

mean that you keep showing

them how to do things, what

they would take on from you

is the energy that you create,

the commitment that you

display and the values that

you work on. If a restaurant

owner is continuously striving

to achieve customer

satisfaction, improving all theminutes, it will be reflected on


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RAISING YOUR PROFITABILITY

While the above stated strategies can help you thrive your business, a few nudges here and there can help

you raise your profit margins as well. Below are some of the ways where a simple tweak can result in

substantial increase in your margins and thereby the profitability.

MENU RE-ENGINEERING

Your menu is the key to your margins. Here are a few steps to follow to re-engineer your menu items for

their utmost utilization.

1. Categorize all your menu items into the four categorieso Stars: These are the items which have a high

demand and also deliver the highest margins. These are the

items which you should focus on selling the most

o Cash Cows: These are the items which have ahigh demand and low margins. These are the ones which are

stocking up on the inventory, but are getting customers in.

They are to be watched though, because when they lose

popularity, they would become the dogs.

o ???? : These are the items which are low indemand, but offer high margins. These are the items which

need the most push. They can be the next stars on your menu.

o Dogs: These are the items which have lowdemand and low margins. They need to get out of your menu

as soon as possible, because they are stocking up on the

inventory and have a very low ROI.

Once you have done the categorization, start serving the ????

as add-ons.

For example,

French fries

are a greatadd-on to the

meals, even if

offered at

slightly discounted price; it will still carry great margins.

Keep trying and offering

novelty items, and try to make

them from the same inventory.

See which items are left most

on the shelves, and ask the

chefs to come up with

innovative ideas. This will

keep your chefs engaged and

happy, and when you offer

these as add-ons or housespecials for loyal guests, you

might find your new stars of

the menu. Novelty beverages

are a good way to go. First

they do not need special

ingredients and skill, second

they carry high margins.

Looking at how beverages are

driving the industry right now,

it will be a good idea to start

on it right now. Decrease the size of your menu. A very large

menu not only creates a large inventory, butalso confuses your customer. A large menu

will mean a customer will take longer to

decide, and will most probably have a hard

time remembering what he ate last time when

he returns. Loyal customers come back not

just for ambience and service, but also their

favorite food. A large menu is reducing those

chances.


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INCREASE CONFIDENCE ON SMALL NUMBERS

Instead of cutting down on the quality or quantity of your servings, increase the price. The trick is to

increase the price very marginally in cents, nickels and dimes. Look at the bigger picture, if you were to

increase even 10 cents on a meal with four items, difference would come out to be $120 for a day, and in

a year it becomes$43,200. Imagine what you could do with this money at the end of the year.

INCREASE YOUR MARGINS WITH NOMINAL LIFTS

Why aim for an increase in profits of 50% when you can achieve almost 75% through few increments.

Make the following your goals.

1. Increase your new customers by 20%

2. Increase the repeat visits of your existing customers by 20%

3. Increasing the sales per guest by 20%

The above table summarizes how it works. All we have done is taken an average of 300 customers, who

visit 5 times, with an average bill size of $20. When everything increases by only 20%, your net profit

increases by 73%, this is taken considering the industry average of 60% operating expenses and 68%

gross profit. You can switch the values and see the best that you can do.

Particulars Amount New Amount Difference % Difference

Current Customers 300$ 360$ 60$ 20%

No. of Visit per Custo 5$ 6$ 1$ 20%

Avg. Bill 20$ 24$ 4$ 20%

Revenue 30,000$ 51,840$ 21,840$ 73%

Gross Profit 20,400$ 35,251$ 14,851$ 73%

Gross Operating Marg 18,000$ 31,104$ 13,104$ 73%

Net Profit 2,400$ 4,147$ 1,747$ 73%


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GO GREEN

Some of the ways that can help you conserve energy costs are given as follows:

Make sure the equipment is on only when in use, and is in good working order. The ventilationsystems, heating and lighting controls, various appliances used. Not only this cuts cost, it enhances

the working condition for employees and ambience for your customers. Consider this, by cutting

down one hour on the broiler each day; you could save as much as $450 annually. Look at it as profits

generated from $6000 worth of sales.

Replace the fluorescent bulbs with T8s, they are more energy efficient and since they generate lessheat, they also will make the kitchen staff more comfortable.

Use of response systems and variable speed motors can save you money by reducing the costs ofenergy and also putting fewer loads on the ventilator and heating systems thereby making them less

prone to regular maintenance and sudden breakdowns.

Use low flow faucets, pre rinse sprays and dual flush toilets. These are inexpensive and will greatlyreduce water wastage.

Conserve hot water through insulating pipes and equipment. Not only these are cheap, you are savingboth on energy used in heating water and waste of water once it becomes cold.

Recycle cooking oil, reduce use of disposable goods and donate surplus food. Not only you contributetowards the environment, its a good CSR. You can use this in your marketing promotion efforts and

add this as a feature of your brand promotion.

When people think environmental friendly

they think high initial costs. What restaurant

owners need to understand is that restaurants

energy consumption per square foot is 5 times

more than any other business and most of it is

used in the kitchen. It is estimated that by

reducing the cost of energy by 10%, you can

actually match a sales increase of 1.6%.


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COMPLEXITIES OF SOLUTIONS

While all the suggestions and tips & tricks will help your restaurant, there is still one problem that comes

with it.

YOUR RESTAURANT CONCEPT IS UNIQUE.

Anyone in the business of restaurant is aware that

without uniqueness a restaurant will fail. While

uniqueness is what is going to attract customers, it

also attracts its own set of problems.

You cannot anticipate problems based on problems

faced by other restaurants and your previous

experience, not completely at least. While most

your problems will fall in the three categories of

financial, marketing and managerial implications,

all three are vast areas to be explored. So lets jot

down the problems that will make it hard toimplement the solutions discussed in this paper.

All these factors together create a need for expert

advice and someone who can complete the little

pieces of puzzle, which is running a restaurant.

While paying someone to tell you what to do is

something most restaurant owners will avoid, it

needs to be understood that the role of expert is

more that of a partner, rather than of a teacher.

They help and guide you, but at the end decision is

yours, even of hiring expert help.

Developing a system for your restaurant is also

vital, and while you have the concept, how many

restaurant owners can safely say that they have the

perfect system to run it.

1. Solutions too generic: All the solutionsthat are provided can work as guides, but

not the perfect solutions. This is because;

every restaurant as said earlier is unique.

A unique concept will have its own

unique set of problems, which may lie in

the same categories, but will need a

customized approach to set it right.

2. Keeping Track of market changes istime consuming: This is no hidden secret

that running a restaurant is timeconsuming. When a restaurant owner puts

in 60 hours a week, he hardly has time to

look around the market, study changing

consumer preferences, look at new

competition and what the existing

competition is doing. When you are

making promotional efforts, so are your

competitors. While you are serving the

best food, the choice of meal is changing

among your customers, even the

demographics, your existing customers

are changing. Marketing needsinnovation, innovation need time, and

time is something restaurant owners will

always have in scarcity.

3. Lack of Experience: When saying lackof experience, we are not talking about

lack of experience in terms of running a

restaurant, rather lack of experience in the

external functioning of the restaurant

business. External factors are not limited

to customers, suppliers and competitors.There are many others which affect your

business such as regulations, changing

standards, threat of substitution for your

products. All these need to be taken into

account, when running any business, and

most times than other this is the

experience most restaurant owners lack.


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BRITTCO SOLUTION

Brittco Advisors provides high value consultingservices to the hospitality industry creatingmeasurable results in sales growth, customer

satisfaction, expense/operational management andbrand awareness.

With Brittco, you can fill in the missing gaps ofyour business. With experience of being in the

actual position where most restaurant owners findthemselves today, Brittco can offer expert advice onevery aspect of running your business.

This can include a re-interpretation of the companyidentity, advertising, printed collateral, packaging,social media strategy, and overall communication ofyour brand's values to the public.

Our goal for every client, every time is to get them their best store economics contributing to stable orenhanced net operating profits.

We will not take on a client if we cannot make a difference.

Some of the services provided by Brittco are:

Audits and Action Plans: We candevelop and train franchisors/area &master developers to implement auditsand actions plans that measureperformance in areas including servicestandards, product quality, food handling,recipe adherence, cleanliness, sanitation,office accounting, and Human Resourcepractices. These audits can be a guide tostore operators, franchisees on their dailymanagement of operations and the

business. Cost Management: We conduct reviews

of product purchasing and tender/negotiate/implement contracts with local,national, multi-national suppliers andmanufacturers.

Product Quality Improvement:Analysis of product ingredients oftenleads to opportunities to implement higherquality goods from larger suppliers atbetter pricing - resulting in a morepremium end product.

Brand Development: We believe thereare two areas of brand equity. First is theperception of the brand quality and theposition it enjoys in the investmentmarketplace, and second - the


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CONCLUSION

While running a restaurant is a dream for many, not all are able to accomplish it. There are various

reasons for failure and not all are monetary. Almost one third of failed restaurants were making profits.

The owner quitted because the time it demanded, which does not allow them a lot of social or even family

time.

Most failure in restaurant business occurs when you either get too innovative and forget the thumb of

rules such as not exceeding the 7% cost on rental and leasing or 60% on prime costs, or they try to serve

too many things thereby creating a large menu and losing focus. Having said that many restaurants have

also failed because they did not try new things, and stuck to what worked earlier, eventually leading to

their downfall.

While the sales have increased for the restaurant industry, so have the operation expenses along with

other such as rental and leasing, thereby eating in the profits of increased sales, and you are still where

you were earlier. With the thin margins that are available in the restaurant business today, one need to

come up with strategies all the time to raise their profitability. Little tricks here and there can always work

for you in the short term, but to survive longer and make it big, a good plan is required to get ahead in thegame.

Restaurant businesses unlike most businesses have their own complications and specific rewards, but like

most businesses they also have the same motive, Profit. If a restaurant does not make profits, it will fail

just like any other business. Like most businesses flexibility is of prime importance in todays digital

world where every decision is to be made in real time.

Taking expert help is no more a luxury but a necessity. One needs to admit, that no one knows all. So

when running a restaurant, a consultants help will only benefit you as it adds to the existing knowledge

base of yours and aids in running a successful restaurant. There are multiple aspects to a restaurant which

one needs to understand, so as to look at the big picture and see the future before it happens. Once you

have done that, you are immune to failure.


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BIBLIOGRAPHY

http://www.foodservicewarehouse.com/
http://www.foodservicewarehouse.com/http://www.foodservicewarehouse.com/http://www.foodservicewarehouse.com/


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DISCLAIMER

All the information presented in this paper, is a curated work comprised from data collected by variousorganizations working to create awareness about the corrosion problem across the world. We do not claimto have collected any data and the statistics based on which the charts of various types are made, are work

done by the organizations/institutions which have been quoted in the sources and the links from where theinformation was collected has been accounted for in the Bibliography.

We do not claim complete accuracy of data and deviations from the given are possible. Brittco has madethis paper for informational purposes and have tried to credit all the sources possible which could betraced back from the data. Any omission of the source is purely accidental and complete effort has beenmade to give recognition to every data source.


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ABOUT BRITTCO

Brittco Advisors provides high value consulting services to the hospitality industry creating

measurable results in sales growth, customer satisfaction, expense/operational management andbrand awareness.

We also help struggling restaurant franchise companies and chain restaurants to restructure theirfranchise frameworks at operational, managerial and financial levels and achieve a better turnaround, thereby restoring profitability. Our area of expertise extends to direct dealings with hoteland property management companies, equity fund lenders, restaurant designers and architects,bankers and licensing professionals.

Contact Information

Ken [email protected] Id - ken.gooz1Direct: 780 425 4108Suite #202 2520 Ellwood DriveEdmonton Alberta, Canada T6X 0A9

Consulting|[email protected]

Copyright Brittco Consulting Group 1988 - 2012 All Rights Reserved
mailto:[email protected]:[email protected]://www.brittcoconsulting.com/consulting.phphttp://www.brittcoconsulting.com/consulting.phpmailto:[email protected]:[email protected]:[email protected]://ca.linkedin.com/pub/ken-gooz/8/ba1/28bhttp://ca.linkedin.com/pub/ken-gooz/8/ba1/28bmailto:[email protected]://www.brittcoconsulting.com/consulting.phpmailto:[email protected]

Covering the Gaps in the Restaurant Industry

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