Ask most operators how they plan to improve their profitability and they’ll often refer to promotions, marketing or social media. In other words MORE SALES.
Sure, the preferred way to grow profit is to attract new more customers, get more repeat business and push up check averages. But often, the quickest way to improve your bottom line quickly (and easily) is to take a hard look at lowering your costs.
A couple years ago we asked our RestaurantOwner.com members how their restaurants performed during the first 6 months of the current year compared to the same period of the prior year.
Of the 628 respondents, only 25% reported an increase in the current year sales, yet over 40% said their profit had actually improved during that same period.
Many reported that they had improved their results by reducing their costs and operating expenses. Here are some of the things they were doing:
- reducing staff and cross training to improve productivity
- training dishwashers to be pantry cooks on slow nights
- renegotiate credit card processing fees
- shopping insurance policies
- shopping waste removal services
- we went through every single line on our P&L to find items to eliminate or reduce
- under prep our special to avoid waste
- tracking our numbers much more closely
- eliminating bussers and runners
- tied management compensation to food, labor costs and profitability
- no more print ads, no more yellow page ads
- reducing inventory levels to reduce waste
- re-training staff and more focus on portion control
- got rid of breakfast M-F
- converted to new sources for electricity and phone service
- we let our high priced manager go
- got lease concessions from our landlord
- renegotiated terms with payroll company
- closing on slow nights
- eliminating menu items that don’t sell
While many operators have been able to positively impact their profitability by lowering expenses, obviously there’s a limit. Never slash costs indiscriminately.
Always consider how a proposed cut will likely impact your restaurant’s two most important and essential functions: 1) retain current customers 2) attract new customers.
Any change that could diminish your customers’ dining experience or their perception of your restaurant is probably NOT worth the potential savings.
However, reducing appropriate costs and expenses is a necessary part of smart business management and can be the quickest way to prop up your profitability.