From the blog 3 Mistakes Restaurant Owners Make When Trying to Increase Profits
Profit margins are notoriously slim at restaurants. Even successful eateries often operate only a little above break-even, especially in neighborhoods where rents are rising faster than most businesses can grow. It’s no surprise that restaurateurs are always looking for a clever fix.
Many find success by introducing alcohol — which generate higher returns than food as a rule. Others add brunch service on the weekend or pare down their menu to their most tasty and popular dishes.
A lot of resources are available to help increase restaurant profits. This isn’t one of them. Instead, here are three common mistakes that restaurant owners make when trying to increase profits:
Using Cheaper Ingredients
Pretty much every restaurant or cafe starts out with the same objective: “I want to make great food that uses the freshest ingredients.” It makes sense — fresh ingredients are healthier and more flavorful in most instances. They also give a restaurant a certain esteem. High quality ingredients say “this isn’t fast food!”
Most budding restaurateurs quickly realize how expensive the highest quality product is when compared to a cheaper equivalent. When you are running a business on the average 3-5 percent profit margin, an extra fifteen or twenty cents per pound for local organic veggies adds up quickly.
The first big mistake many owners make: switching to cheaper, lower quality ingredients.
Why though? First of all, diners know the difference between good quality and poor quality ingredients. Consistency is essential for getting people to come back to your place time and time again. Set high standards and that’s where your benchmark lies. A sudden decrease in quality will come as a shock to return diners.
Regular diners are the fundamental revenue base that restaurants need to survive. Using lower quality ingredients can alienate your strongest supporters.
Beyond that, low quality products are also more difficult to work with. Something as simple as poor quality plastic wrap can slow down your line, as well as increase food waste due to poorly wrapped bowls and trays. Also, it can frustrate your cooks.
More than even taxes, wages present a major challenge for owners.
A lot of restaurant owners will cut down the number of servers they have on the floor at any time to save money on wages. One or two star servers must be equal to four or five servers — right? Unfortunately, that’s a big mistake.
Overworked servers are likely to make the kind of mistakes that ruin the dining experience for customers. Exhausted servers are more likely to forget drinks and appetizers, miscalculate bills, or drop plates. They are also less likely to remember food allergies, which can present a big problem for owners.
Beyond that, overworking your service staff will lead to high turnover. Unemployment is low and demand is sky-high for talented and trustworthy servers. If you are overworking your people and they aren’t getting enough back in tips to justify it — someone’s gonna come knocking for them. Turnover costs restaurants big in lost knowledge, recruiting, training, and relationships with regular customers.
Constantly Shifting Operating Hours
A lot of restaurant owners will change hours to try and find the “sweet spot.” This practice can actually push customers away, rather than accommodating their needs.
Your manager says there’s never any customers from three until around four thirty. Do you start opening an hour and a half later every afternoon? If you’re just starting out, there may be some flexibility, but when established restaurants start shifting around their schedules, things can get dicey.
Let’s say you expand your hours to serve brunch. After the first couple weeks opening at 9am, it doesn’t seem to be taking off. You have a couple regulars who now come for a late breakfast, but there’s no big rush coming in. The logical thing to do will be to push back to 11— or even 12 — to meet demand. Then the next week, diners show up at 9:30 wondering what’s up.
Once again, consistency is key for restaurants. Changing operating hours creates the outward appearance of instability, which drives customers away. In many instances, setting plans to go to a place that isn’t open when it used to be can result in regular customers finding a new home with one of your competitors.
Keeping a restaurant thriving is a delicate balance. From ingredient sourcing to providing a living wage to finding the right payment processor for the job, there’s a lot to take into consideration. At the end of the day, avoiding these three seemingly-logical fixes to your revenue shortcomings can lead to a more successful eatery in the long run.