Maximizing Kitchen & Restaurant Profitability – 33 RANGGO Tips to help!
Are you looking into maximizing Kitchen & Restaurant Profitability? This article will help you navigate the oftentimes challenging, waters of profitability. Here you’ll find a collection of top tips in areas of technology, sustainability, marketing and staff engagement that have been proven effective in increasing productivity and maximizing kitchens and restaurant profitability, both big and small. We’ll also touch briefly upon the numbers that matter most in the running of any food establishment. These numbers give a clearer picture of financials for better management decisions in real-time.
Also Check out our article Empowering Your Hotel Front Desk for other tips for maximizing profitability
A word of caution. In an often-quoted study done by the Ohio State University, it was revealed that three out of five restaurants go ‘belly up’ or change owners in their first year, and by the fifth year, only one out of the five is still around. While no single factor is ever the culprit, there are some recurring themes in these closures. The following, in no particular order, are the most common:
Maximizing Kitchen Restaurant Profitability: Naivety or Inexperience
Many restaurants often go on a downward spiral because the owners, however well-meaning, are simply unaware of the specific set of demands which come along with owning and running a restaurant. To begin with, they may think that simply hiring a chef to run the kitchen and getting a manager to oversee the restaurant is all that’s needed to collect a paycheck at the end of the day. Or they may have chosen the wrong location. Or the concept and menu for the restaurant is designed simply for their personal ego and not around the needs and wants of the guests. It doesn’t help if there’s no effective marketing, no solid business plan, no market research, no clear vision to impart to employees, no awareness of nearby competition, no proper menu pricing, no procedure in handling customer complaints, and numerous other things that should have been thought out before any money was ever spent.
Maximizing Kitchen Restaurant Profitability: Money Matters
Many potential restaurateurs are not accountants by training or have limited or no financial background, much less unlimited funds, which is why they are dumbfounded by such concepts as costing, forecasting, profit & loss statements, budgeting, debt servicing, taxation, benefit allocation, cash flow, or even pricing. To make matters worse, some commit large amounts of money buying brand new equipment, overpaying the staff and management, choosing to rent a location that costs more than 10% of projected gross sales, and other expenses before the restaurant has even opened. To add injury, lack of proper accounting when the restaurant is in operation could mask employee pilferage, management theft, inequitable distribution of dividends among partners, incorrect pricing and overstocking of raw materials, ineffective promotions and all sorts of monetary mayhem that eat up all available capital before a profit could be made.
Maximizing Kitchen Restaurant Profitability: People Problem
Owners often hire general managers, executive chefs, bartenders, waiters and kitchen staff based on experience and references, assuming that everything will run on autopilot afterward. They worsen problems down the road by rushing the hiring process, bypassing quality screening and foregoing proper training in operations, customer service, and leadership. Failure to share vision, standards, and purpose leads to an unclear workplace culture and unmanaged expectations on both sides. This leads to uncertainty which is exacerbated by a negative “I am the owner, therefore my word is the rule” attitude. As a result, both management and staff may resort to bypassing any rules, and may even resort to pilferage and misappropriation of funds. Worse of all, staff may ultimately feel unappreciated and may sabotage the preparation of food, or consciously display indifference and animosity to customers who will let everyone on social media know about their bad experience.
Maximizing Kitchen Restaurant Profitability: A Bad Trip
A restaurant’s raison d’etre is to provide customers with a better dining experience than they would at home. As first impressions influence repeat business, how guests are handled at every step of their dining experience (from being greeted at the door to paying the check) will determine if they are retained as such. Customer retention is more cost-effective than acquisition and poor customer service may result in a negative reputation on social media, hampering efforts to grow the business. Hiring errors, lack of training and communication, alienation due to management indifference, poor staffing scheduling, and failure to reward hard work all lead to a demotivated workforce who only go through the motions. Finally, customer expectations raised from online information that doesn’t conform to the reality on the floor only hastens a restaurants demise.
Maximizing Kitchen Restaurant Profitability: Food Fright
It’s the cornerstone of a kitchen’s existence: to create delicious and profitable dishes that customers will pay for again and again. Stated another way, it’s the market that decides what food needs to be cooked. A menu created to cater to the ego of the owner, dishes whose ingredients cost too much, staple items that aren’t better than the established competition, exotic preparations that are too adventurous for mass consumption, complicated recipes that take too long to cook, the gradual veering from the original flavor profile or slipping quality control that dooms even best selling items to mediocrity are some of the reasons that contribute to a restaurant closing its doors.
While the above list is far from complete, it does highlight the pitfalls awaiting the unwary restaurateur. In the next section, we’ll zoom in on practices which not only help mitigate losses but can actually contribute to a healthy bottom line.
Maximizing Kitchen Restaurant Profitability: Trust the Technology
Technology helps the kitchen streamline its workflow, keep track of information, save time, energy, labor and raw materials thereby improving profit margins.
Maximizing Kitchen Restaurant Profitability: Phone Smart
Mobile apps allow customers to enter their orders which are sent to the kitchen via a printer, allowing the kitchen to service more people in the vicinity. A notification to pick up their food is sent once it’s been prepared. The app increases the speed of service, enabling more people to be served quickly. It automates and improves the running and management of what normally would require numerous manual processes.
Maximizing Kitchen Restaurant Profitability: Tracker Saver
Touch screens with smart meters located near trash bins allow kitchen staff to track food waste. They log everything they throw away; where it came from(peelings or leftovers), the type of food(e.g. vegetable), and the specific food item(e.g. tomato). The kitchen can track where the most waste comes from and make changes accordingly, like reducing portions or making smaller batches. This can lead to a 50% overall reduction in waste which can translate to an 8% savings on food costs.
Maximizing Kitchen Restaurant Profitability: Suck the Air Out
Vacuum packaging lets food last longer than other methods and is the best way to store leftover food products which otherwise would have been thrown away. Food can be purchased in bulk at lower cost and vacuum packed in pre-measured portions. This method also allows for the workload to be shared as food can be prepared in advance and kept in perfect condition until needed.
Maximizing Kitchen Restaurant Profitability: Slick Sticker
Software labeling cuts down on the need for manual labels that indicate product name, best by dates, ingredients and other details. It prevents errors due to illegibility and helps ensure consistency, time management, and improve operating efficiency.
Maximizing Kitchen Restaurant Profitability: On the Spot
Sophisticated Point Of Sale(POS) machines with robust inventory management and anti-theft systems keep a complete check on all business transactions and stocks, preventing on-counter and inventory theft. This also speeds up the generation of numbers pertinent to management on a day to day basis, such as sales reports and supplies replenishment schedules.
Maximizing Kitchen Restaurant Profitability: Greener than Ever
It is imperative for a kitchens competitiveness to operate responsibly and commit to sustainable practices. This will not only reduce the carbon footprint but also improve cash flow. Green practices can also be a factor for customers who dine out and may increase the kitchen’s profitability, as well as its popularity.
Maximizing Kitchen Restaurant Profitability: Living La Vida Local
Seasonal and local ingredients are less expensive and require less effort to produce and have lower transport costs. Promoting locally sourced seasonal dishes not only helps the local economy but also creates fresh interest and excitement in customers when something new is offered for a limited time only.
Maximizing Kitchen Restaurant Profitability: Maximize to Minimize
Energy efficiency is key to sustainability. With kitchens among the biggest consumers of energy per square foot, an energy audit will help identify inefficient energy consumption. The audit will provide hard numbers to aid in optimizing operations through equipment, energy, and water strategies to reduce consumption cost and protect the environment.
Maximizing Kitchen Restaurant Profitability: Reduce Reuse Recycle
Recycling, as well as reusing and reducing, make both environmental as well as economic sense. A commitment to sustainability through recycling programs can help the kitchen keep tons of waste material from landfills and save on costs for waste disposal. Additionally, increase the use of reclaimed materials in both the kitchen and dining area.
Maximizing Kitchen Restaurant Profitability: Alternatives
Solar thermal panels for heating water used in dishwashing and the use of modern LED lights and energy efficient equipment, as well as practices like powering off non-essentials like computers and POS machines when the establishment is closed all add up to significant cost savings in the course of a year.
Maximizing Kitchen Restaurant Profitability: Spreading the Word
The kitchen is running smoothly, and with the help of productivity tools, everything is in place for a successful operation. What is needed is a way to supercharge the profits without increasing the prices. This is where boosting sales through easy and creative marketing comes in.
Maximizing Kitchen Restaurant Profitability: A Menu to View
Strategic use of the menu through exemplary design is an important tool. Draw attention to best sellers by using boxes, colors, and pictures. Place high-profit items at the beginning and end as customers are more likely to remember the first and last items. Streamline the menu by eliminating or hiding least ordered dishes. Keep prices inconspicuous in the body of the description paragraph which itself uses enticing and descriptive language for more appeal. Harmonize the design of the menu with the rest of the restaurant.
Maximizing Kitchen Restaurant Profitability: Advertise Everywhere
Using visual displays on the front counter, tabletops, bathroom stalls, and walls to provide customers additional information and incentive to purchase is one of the most effective and affordable ways to increase sales and strengthen the brand. Displaying and communicating within the premises is a cost-effective way to increase revenue.
Maximizing Kitchen Restaurant Profitability: Netification
Online presence on sites such as Facebook, Twitter, Google+, Google Business Places, Yelp, Urbanspoon, LinkedIn, and Foursquare help keep the establishment in touch with the modern customer. Flattering pictures of the dining area help attract those who might normally patronize the place. Posting the menu online is a great way to entice and advertise what the restaurant is capable of delivering, further driving profitability.
Maximizing Kitchen Restaurant Profitability: Perks and Recreation
Membership cards with a point system that offers a freebie or discount after a certain number of visits is a great way to increase revenue by offering something exclusive to current customers. Team up with surrounding businesses to have their employees dine with discounts and easily turn them into loyal customers.
Maximizing Kitchen Restaurant Profitability: It’s A Team Effort
Your staff is the heart and soul of your establishment. Their cooperation and buy-in could spell success for your operation. It is critical to engage and inspire your team because motivated employees can easily generate improved productivity and increased profits.
Maximizing Kitchen Restaurant Profitability: Start and Finish
Every day should start and end with a staff meeting. Discuss what needs to be done and talk about issues that need resolutions. Ask what concerns they may have. Establish communication procedures so expectations are clarified, and the staff is better equipped to run the place effectively. Communicate and provide consistent feedback.
Maximizing Kitchen Restaurant Profitability: Aim and Shoot
Goal setting should not feel like a to-do list but rather a set of objectives to reach, motivating staff to be more productive. Goals need to be specific, measurable, attainable, realistic and with a timetable. Examples would be increasing sales, sourcing affordable supplies, and reducing waste.
Maximizing Kitchen Restaurant Profitability: Top This Top That
Friendly competition helps to improve productivity, stimulate creativity, and foster pride in the team. Contests can be held drive cost-effectiveness, such as who comes up with the most creative menu item while respecting food cost goals, who generate the least amount of waste, who can best reduce the time it takes to get the food onto the customers’ table.
Maximizing Kitchen Restaurant Profitability: Sweets
Positive reinforcement is the best way to get your team’s attention and let them know that their hard work has been noticed and will result in tangible rewards. Give credit and share individual and team achievements during staff meetings. Post positive results on bulletin boards and celebrate with immediate treats or rewards. Do not delay the rewards so that the desired action is continuously performed.
The next section talks about some of the important numbers that help in monitoring the profitability, or not, of the kitchen and restaurant.
Maximizing Kitchen Restaurant Profitability: Daily Sales Report is an indication of how much money went into the business as a result of sales for that particular day. Its an essential tool for monitoring cash flow, measuring cost versus sales performance, and forecasting future sales. It provides valuable information for measuring daily activities as it relates to weekly goals, ultimately leading to monthly and yearly goals.
Maximizing Kitchen Restaurant Profitability: Menu Item Sales Report is an indicator of what food and or beverage customers are actually ordering. This allows chefs and kitchen managers to plan better daily specials and facilitate the preparation of favorites or best selling dishes on the menu. It helps management decide which items require the purchase of raw materials in advance.
Maximizing Kitchen Restaurant Profitability: Hourly Labor Report tracks the total number of hours staff work, by the person, at what category, and at what part of the day. It allows the scheduling of staff to be improved and minimise the number of overtime hours thereby reducing labor costs.
Maximizing Kitchen Restaurant Profitability: Prime Cost is the direct cost of producing items for sale. It includes the price of raw materials and the direct labor involved. Food and beverage cost + salaries and wages + payroll taxes and benefits = prime cost. It is the best indicator of potential profit and how well costs are being managed. Should be calculated weekly to give a more accurate picture of financial health. Should not exceed 60% of total sales.
Maximizing Kitchen Restaurant Profitability: Profit and Loss Statement is a financial statement that summarizes the revenues, costs, and expenses incurred during a specific period of time, usually a fiscal quarter or year. Also known as Income Statement, it simply gives information as to whether the business earned money or not by subtracting all costs from all revenues within a particular period of time. A positive number means profit, a negative number means loss.
Maximizing Kitchen Restaurant Profitability: Non-controllable Expense is a cost that is “locked in” and cannot be changed or negotiated easily. Also known as Fixed Cost, these include rent on the premises, various taxes, health, and equipment insurance. It can also apply to the rate of hourly labor as mandated by the government.
Maximizing Kitchen Restaurant Profitability: Restaurant Operating Income or operating profit is the result of subtracting all other expenses from the gross margin, which itself is the result of sales minus cost of goods sold.
EBITDA means earnings before interest, taxes, depreciation, and amortization. Two restaurants may have similar operating profits but different EBITDA.