Most of us as restaurant owners and operators focus our number-crunching-attention on a few metrics that can be very telling bits of information as to the health of a restaurant or bar. One of the big ones is costs – food costs, bar costs, labor costs. Inventory management is another big one – there is certainly a science to properly inventorying a restaurant – order too much and you end up with spoilage or the opposite – tied up capital sitting on the shelves not being used. Order too little and you might run out of food half-way through service on Saturday night – resulting in a bunch of unhappy guests and a bunch of missed out sales.
Let’s be honest there is no real fun way to talk about cost control, inventory, labor management and other expenses that greatly impact the well-being of the organization. Fortunately, we now live in a world where a lot of those numbers are far more easily tracked than anyone would have ever imagined fifteen or twenty years ago and we owe it all to those computer geeks that we all made fun of in high school – they are the ones responsible for the POS systems of today that have fortunately started to cut into the market share of the big dinosaurs of the industry, including my least favorite – Squirrel.
Actually, a company that’s popped up on my radar recently is Poster – lightweight, not bulky, super affordable and keeps track of just about anything you could possibly imagine, including inventory in real time, plus a pretty stellar loyalty program integration.
** If you’re in the market for a new POS or aren’t thrilled with your current system, you can get a free 30-day trial of Poster by signing up with code “CHRISHILL”. Just Click HERE. **
On the other hand – the opposite of costs or expenses is sales. Costs and expenses are money going out. Sales, quite obviously, is money coming in. I’m glad you’re still with me here. Understanding the power of how you control sales can be the difference between the doors staying open versus slamming shut (bankruptcy, new jobs for everyone, and a whole host of other issues). Most of us have a number in our head for where we’d like sales to be over a given week, month and year. If you look at those sales and see that they aren’t where they need to be, what do you do? What do most of us do? Most of us start cutting back on labor or buying cheaper (diminished quality) products. Some will cut back on your pars, thus decreasing inventory and the number of dollars sitting on the shelves not being used in the best possible way. Others will tighten up on waste and even change your portion sizes to save a few cents on every dish that goes out the kitchen to decrease food costs an extra couple tenths of a percentage point. These, as these teach you in Econ 101 are variable costs – they fluctuate based on operations, versus fixed costs (the ones that don’t change, like rent).
But, all of the energy invested in these cost-saving tactics is focused on minimizing the number of dollars spent while achieving the same amount of sales. So, owners and managers sit around in their offices saying to themselves,
“Okay, sales are 50K. Our costs are 52K. How can we lower our costs to 48K?”
That’s certainly a question worth asking – ask that question too many months in a row, and you’re not going to have a restaurant anymore. But, the more important question is:
“How can we increase sales to 60K?”
You can only trim the fat so much by tightening operational costs, which is some sort of fixed number based on your total variable costs. But for sales, while there is most likely some point of diminishing returns, there technically is no cap or limit. Thus, why not focus more on increasing sales. Increase sales enough, and you’ll realize that you don’t have a cost problem anymore. While this is happening, employee morale is better, because tipped employees are busier and making more money, while hourly workers are getting more hours – no one is having to worry about whether or not their next check will bounce.
The brilliant restaurant and hospitality mind, Jon Taffer of Bar Rescue focuses on three key ways to grow sales through cost-effective marketing:
1. Spend Programs: Getting existing customers to spend more per visit.
2. Frequency Programs: Getting existing customers to return on a more frequent basis.
3. New Customer Acquisition: Targeting new customers for our establishment.