2012

Brittco Consulting Group

COVERING THE GAPS IN THE RESTAURANT INDUSTRY

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY

CONTENTS
Executive summary ................................................................................................................................................................ 4 Introduction ............................................................................................................................................................................... 5 Common mistakes made by restaurant owners ......................................................................................................... 9 Food 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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COVERING THE GAPS IN THE RESTAURANT INDUSTRY

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

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY

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 of the 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,

Sales rise by 4%

Rise in operating expenses

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

Menu Reengineering

Nominal Lifts in customers and cheque value Working with small increments on menu items

Raising Profit margins through

Running a restaurant means that the owner puts in more than 60 hours of work per week, which requires passion for 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 hall and the kitchen. Three things where they are found wanting are

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY

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.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY

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.
Depreciation 3.1% Advertising and Promotion 2.8% Utilities 2.8% Repair & Maintenance 2.6% Other 6.7% Rental and Leasing 7.6%

Pre tax Profit 4% Cost of Sales 36.0% Labor Cost 33.9%

Operating Expenses Breakup

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.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY

36.0%

Percentage Growth

33.9% 30.8% 7.6% 5.4%

40% 30% 20% 10% 0%

33.5%

2001 2010

Cost of Sales Labor Costs Rental and Leasing Costs Major Components of Operating Income

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 so as 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.

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COVERING THE GAPS IN THE RESTAURANT INDUSTRY

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 and the 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 implications

Most 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 the conventional razor cut margin levels in restaurant business.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY

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

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.

GOOD FOOD AND SERVICE IS THE KEY

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.

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

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY BEING THE FALL ON GUY

Restaurant is a business that requires a lot of hours, and is 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 manager, and sometimes as janitor.

Problem occurs that they end up being an employee in their own business rather than the owner. They need to look at the restaurant 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.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY

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

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.

Sometimes a restaurant owner can get so absorbed in their vision of the restaurant, that they fail to address other important factors such as marketing 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.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY FINANCIAL FORECASTING

As soon as you restaurant is up and running, the costs 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.

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 Asdas das d make wrong decisions.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY 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

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 the initial phase, and just when your restaurant is picking up.

ALLOCATE THE INITIAL FUNDS

Costs can be categorized and allocated certain percentages. For example, your prime costs should not exceed 60% of total costs 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. 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 the initial phase, and just when your restaurant is picking up.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY HAVE A GROWTH PLAN

Even though your restaurant may not pick up very early, its always a 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.

TAKE INTO ACCOUNT EVERY TRANSACTION

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 thin margins in restaurant industry, every cent counts.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY 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 that you 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 is that 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
WHAT IS THAT THING??

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 on the 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.

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COVERING THE GAPS IN THE RESTAURANT INDUSTRY

NOT ENOUGH ATTENTION ON EXISTING CUSTOMERS

Most restaurant owners think if their promotional tactics have people coming in, 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 about the restaurant

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 but also 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.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY 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

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 of your place every time he looks at it, when his friends/relatives look at it, they get an automatic reference to your restaurant.

CREATE A RESTAURANT CLUB

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 Tshirts/cuff links/mugs, whatever suits the theme of your restaurant best should be given to the regulars, all the time keeping in mind the above principle of free advertisement. If you are looking at the cost of using all the props, compare them with the newspaper ads, TV ads and other promotional items that you would have spend on, and you will see the cost effectiveness.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY 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. 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.

USE PUBLIC MEDIA

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 prospective customers. 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.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY 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

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.

RELYING ON EXPERIENCE RATHER THAN THE DATA

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 this data, mainly for two reasons, . This could be a fatal mistake because as has been pointed out earlier, your concept is unique; thereby you will have 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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COVERING THE GAPS IN THE RESTAURANT INDUSTRY

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

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.

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 for you; 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.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY 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

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 item runs 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.

NEGOTIATE, NEGOTIATE, NEGOTIATE

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 with the 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.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY REWARD YOUR EMPLOYEES

Rewarding your employees should 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 has created.

LEAD BY EXAMPLE

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 the minutes, it will be reflected on to the employees.

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COVERING THE GAPS IN THE RESTAURANT INDUSTRY

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 categories o 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 a high 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 in demand, 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 low demand 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 Decrease the size of your menu. A very large are a great menu not only creates a large inventory, but add-on to the also confuses your customer. A large menu meals, even if will mean a customer will take longer to offered at decide, and will most probably have a hard slightly discounted price; it will still carry great margins. 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.

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 house specials 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.

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COVERING THE GAPS IN THE RESTAURANT INDUSTRY

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%
Particulars Amount Current Customers $ No. of Visit per Customer $ Avg. Bill $ Revenue $ Gross Profit $ Gross Operating Margin $ Net Profit $ 300 5 20 30,000 20,400 18,000 2,400 New Amount $ $ $ $ $ $ $ 360 6 24 51,840 35,251 31,104 4,147 Difference $ $ $ $ $ $ $ % Difference 60 1 4 21,840 14,851 13,104 1,747 20% 20% 20% 73% 73% 73% 73%

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.

January 1, 2012

COVERING THE GAPS IN THE RESTAURANT INDUSTRY GO GREEN

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%.

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 ventilation systems, 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 less heat, 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 of energy 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 greatly reduce water wastage. Conserve hot water through insulating pipes and equipment. Not only these are cheap, you are saving both 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 contribute towards 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.

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COVERING THE GAPS IN THE RESTAURANT INDUSTRY

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. 1. Solutions too generic: All the solutions that 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 is time consuming: This is no hidden secret that running a restaurant is time consuming. 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 needs innovation, innovation need time, and time is something restaurant owners will always have in scarcity. 3. Lack of Experience: When saying lack of 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.

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 to implement 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.

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COVERING THE GAPS IN THE RESTAURANT INDUSTRY

BRITTCO SOLUTION
Brittco Advisors provides high value consulting services to the hospitality industry creating measurable results in sales growth, customer satisfaction, expense/operational management and brand awareness.

Some of the services provided by Brittco are: Audits and Action Plans: We can develop and train franchisors/area & master developers to implement audits and actions plans that measure performance in areas including service standards, product quality, food handling, recipe adherence, cleanliness, sanitation, office accounting, and Human Resource practices. These audits can be a guide to store operators, franchisees on their daily management of operations and the business. Cost Management: We conduct reviews of product purchasing and tender/ negotiate/implement contracts with local, national, multi-national suppliers and manufacturers. Product Quality Improvement: Analysis of product ingredients often leads to opportunities to implement higher quality goods from larger suppliers at better pricing - resulting in a more premium end product. Brand Development: We believe there are two areas of brand equity. First is the perception of the brand quality and the position it enjoys in the investment marketplace, and second - the trustworthiness of the product as it pertains to the individuals purchasing their goods and services.

With Brittco, you can fill in the missing gaps of your business. With experience of being in the actual position where most restaurant owners find themselves today, Brittco can offer expert advice on every aspect of running your business. This can include a re-interpretation of the company identity, advertising, printed collateral, packaging, social media strategy, and overall communication of your brand's values to the public.

Our goal for every client, every time is to get them their best store economics contributing to stable or enhanced net operating profits. We will not take on a client if we cannot make a difference.

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COVERING THE GAPS IN THE RESTAURANT INDUSTRY

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 the game. 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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COVERING THE GAPS IN THE RESTAURANT INDUSTRY

BIBLIOGRAPHY

http://www.foodservicewarehouse.com/

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COVERING THE GAPS IN THE RESTAURANT INDUSTRY

DISCLAIMER
All the information presented in this paper, is a curated work comprised from data collected by various organizations working to create awareness about the corrosion problem across the world. We do not claim to 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 the information 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 made this paper for informational purposes and have tried to credit all the sources possible which could be traced back from the data. Any omission of the source is purely accidental and complete effort has been made to give recognition to every data source.

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COVERING THE GAPS IN THE RESTAURANT INDUSTRY

ABOUT BRITTCO

Brittco Advisors provides high value consulting services to the hospitality industry creating measurable results in sales growth, customer satisfaction, expense/operational management and brand awareness. We also help struggling restaurant franchise companies and chain restaurants to restructure their franchise frameworks at operational, managerial and financial levels and achieve a better turn around, thereby restoring profitability. Our area of expertise extends to direct dealings with hotel and property management companies, equity fund lenders, restaurant designers and architects, bankers and licensing professionals.

Contact Information
Ken GoozPresident succeed@brittcoconsulting.com Skype Id - ken.gooz1 Direct: 780 425 4108 Suite #202 2520 Ellwood Drive Edmonton Alberta, Canada T6X 0A9

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