My mission in life is simple — to help chefs and operators build more profitable restaurants. When I work with clients, I am well aware that some things take time. But recently I set out to answer the following question: are there things we do that could make an immediate impact on the bottom line?
The answer, of course, is yes. Absolutely yes!
Keep reading for my four keys to increasing profitability in your restaurant. Two ideas on the revenue side, and another two on the expense side. Implement them and you will immediately have a more profitable restaurant on your hands.
Increasing Revenue- Tip #1
“More butts in seats.”
That’s all I ever hear operators talk about, as if that were the only way to drive more revenue. In reality, they are ignoring a huge opportunity: the guests they’ve already got! If you’re not maximizing revenue within the four walls of your restaurant, you are leaving serious money on the table. Plus, even if you do succeed in getting “more butts in seats” you’re capturing business at a lower level than you probably should.
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The better plan is to first focus on increasing check average. Of course, the natural question is… what’s the best way to do that?
My answer? Table maintenance.
Sounds strange, right? But it’s true, because table maintenance helps drive second beverage sales. And improving second beverage sales is the #1 most effective way for increasing average guest spend.
A thought experiment… imagine a server with a four-table station. The restaurant does two seatings a night, which means she waits on eight different tables over the course of the evening. If you can keep her on the floor, in her station, focusing on clearing empty glassware and offering additional drinks, she will inevitably drive more revenue.
Let’s assume she sells one additional drink — not a round, but just a single drink — on each of those tables. Some people get a beer, while others order something more expensive like a glass of wine. On average, let’s say a drink costs $10. If she sells an extra drink on every table that’s $80 in additional revenue for the restaurant. And that might not sound like much, but if there are five servers on the floor that turns into $400 at the end of the night. Extrapolate out and that’s $2,800 at the end of the week. By the end of the month, that’s an additional $12,000. By the end of the year — simply by focusing on getting one additional drink onto every check — your service staff will have generated nearly $150,000 in additional revenue for the restaurant.
Is there anyone out there who couldn’t use an extra $150K at the end of the year?
Notice we’re not getting another round of drinks on each table, just a single drink. And we’re not doing anything beyond simply getting your staff to focus on the fundamentals. Put this into practice and I promise you will see a profound difference by the end of the month.
Increasing Revenue - Tip #2
I want you to make two simple edits to your menu. To address the first, I want you to run a Product Mix report and identify the most popular items in each category of your menu. What is your highest selling appetizer, entree, side dish, dessert, wine-by-the-glass, signature cocktail, and so on? Got it? Good. Now I simply want you to raise the price on all of those items by 10%. In many cases it’ll just be a dollar or two. But the effect on the bottom line will be huge.
Next, I want you to add a premium offering to every single category of your menu. This should be a high-end item that is significantly more expensive than everything else in that section. By that I mean, if all of your entrees are priced $24 to $32, add something in for $44. If all of your specialty cocktails are priced at $12, add in something special and charge $16 for it.
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Psychologically this does two important things. First and foremost, just by listing it on the menu it will get ordered. There’s always that guy who has to get the most expensive thing on the menu. Give them the opportunity to be that guy.
Second though — and perhaps more importantly — you’re helping to anchor the prices on your menu. Listing a $44 steak makes the $32 pork chop seem more reasonably priced. Do this and track the numbers for a month and see if you don’t sell twice as many $32 pork chops as you did last month.
Managing Expenses - Tip #1
On the flip side — because remember, there are two paths to profitability — the most important thing you can do to maximize profits is to manage your food costs. Especially now, as we’re all struggling with inflation, there’s never been a better time to get a handle on your margins.
I’m constantly amazed by the number of chefs and operators who don’t have a system in place for costing out their recipes. Yes, it’s cumbersome, and yes it takes time. But it’s impossible to track your profitability unless you know what it costs to plate a given dish.
What you need to do is create a recipe costing spreadsheet in a program like Excel. The first sheet should be an ingredient list (that doubles as a vendor list if you build it right) where you track every item you purchase with up-to-date pricing for that item. Build a series of columns left to right that track the item, brand, vendor, price, size, and finally price per pound. Extra credit for anyone who adds additional columns with your rep’s name, email address, and phone number. The most important piece of this document is the price per pound. We’re now going to pull that number onto the other sheets.
Every item on your menu should then get its own sheet. Record the name, the price listed on the menu, and then a separate line for each and every ingredient that goes into the dish. If everything is meticulously weighed out, you’ll be able to easily track the cost of goods sold. Add up each line and you’ll be able to figure out what it costs to send that dish out to the table. If you’re able to build something like this in Excel, then good for you. If you’re feeling a little lost, email me directly and I’ll send you my template.
Do this and you will be able to understand how to adjust portion sizes and pricing. You’ll figure out which items need to be promoted, and which ones need to get scrapped altogether. Without the data though, you’re just wandering in the dark.
Managing Expenses: Tip #2
Finally then, I want to warn you against top-heavy payroll. If there’s anything we learned during the pandemic it was how to get scrappy — the importance of being able to do more with less. Gone are the days of the General Manager, AGM, Service Director, Wine Director, Floor Manager, Mixologist, Sommelier, Maitre d’, and so on. If you want to boost profits, you’ve got to run lean and expect more from you team.
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Building a Better Restaurant
If this were a longer article I would encourage you to implement more technology into your restaurant, and embrace collaboration both from the other operators you know as well as from your staff. We would talk about managing labor, and reassessing your hours of operation.
Together we can build a better industry — one that supports our individual goals as operators — and creates an altogether better experience for our guests. If you’re serious about improving your margins, then implement the things I’ve mentioned in this article. If you need help, don’t hesitate to ask. We are a rich community filled with brilliant minds, most of whom are more than willing to lend a helping hand.
It’s literally the best part of this job, getting to help operators chase their dreams.
Speaking of helping, I’ve written two e-books on the topic. They’re companion pieces of sorts and you can get the two downloads by clicking here and here. They are mercifully short and 100% free. My gift to you. In the first I share ten tips for increasing revenue in your restaurant, and in the second I share ten tips for managing expenses. After all, those are the two paths to profitability. If you want all of the tips, go get the downloads.
Chip Klose is based in NYC, where he runs the marketing agency Chip Klose Creative, working with chefs and restaurant owners to help them grow their brand presence and increase revenues. Klose is also the host of a weekly marketing podcast, Restaurant Strategy, where he talks about many of the strategies and tactics he uses day-to-day in marketing restaurants. To learn more, visit ChipKlose.com.
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