In the restaurant business, we’ve become accustomed to running on razor-thin margins. Food costs, labor costs, building maintenance and kitchen equipment all cut into profits, making it challenging to stay afloat. But one thing we’ve observed over our collective decades of restaurant experience is that the numbers don’t lie.
If your numbers aren’t looking as robust as they should, here are a few strategies to give them a boost.
1. Adjust Prices, But Add Value
With the rising cost of ingredients and labor, price increases have become an inevitability for many restaurants. When incorporating price increases, consider bundling an item with a high-profit margin item like a drink or a side to create the perception of a value meal while growing revenue. Make sure you keep a few offerings at lower price points, which will encourage upsells and future customer loyalty.
Customers are more likely to pay a premium for a product that they perceive to be unique. If you’re using locally sourced or organic products, make sure that’s mentioned in your menu. Integrate in-season ingredients or regional flavor preferences as an additional premium selling point.
2. Reduce Complexity and Increase Efficiency
Take a deep dive into your back-of-house processes and look at what could be simplified. Can you make a certain item in bulk and not have to prepare it every day? In some cases, it might even be beneficial to outsource production of high-volume items like a signature sauce to a co-packer.
Next, evaluate your contracts with your suppliers. You might have the opportunity to join a group purchasing organization to drive down your food costs by buying as part of a collective.
Efficiency also comes from good staffing practices. Train your employees to handle multiple types of tasks so you can operate with a smaller staff during slow periods. You can analyze your sales numbers at different dayparts to ensure you don’t understaff.
3. Trim Down Your Menu
Here’s another place to really dig into your costs. If an item is popular and selling well but not making much money for you, figure out if there’s a way to trim the cost with a less expensive ingredient or a more efficient prep process.
If an item has a strong profit margin but isn’t selling well, try making it more prominent on your menu with a larger font or image.
If an item is neither profitable nor selling well, consider axing it. While some customers will notice that an item is gone, you can always have the option of bringing it back as a limited time or seasonal offer.
Narrowing down your menu selection means you can order fewer but higher quality ingredients and focus on higher margin items.
4. Retain Your Top Talent
Retaining the right people for your restaurant can be a challenge, and it’s well known that training a new employee is more expensive than keeping the ones you have. When you do need to hire, implementing an employee referral program can help boost your retention rates.
Referrals work well because people tend to enjoy working with people that they already like. In some cases, up to 90% of people hired through a referral program were still with the restaurant a year later.
Cross-training staff helps build future leaders. Workers with experience in multiple areas have the opportunity to pick up more shifts with you rather than working a second or third job, which builds loyalty to your restaurant. With more skills, they are empowered to excel and become strong candidates to promote into management. This helps combat a common reason why people leave the restaurant business: a lack of advancement opportunities.
Benefits are another important aspect of employee retention. As the fastest-growing segment of the restaurant worker demographic is 16 to 19 year olds, health insurance and 401(k)s might not be the strongest draw to offer.
Look into options like student loan payment matching or offering paid time off, which appeals to all ages. If you’re not sure what will appeal to your staff, ask them!
5. Utilize Unconventional Spaces
Restaurant real estate vacancies are at an all-time low, and high rent costs can really eat into your profits. It’s important to be intentional about the space you choose. For example, if a drive-through isn’t a key part of your business model, you don’t necessarily need to pay the premium for an endcap location. If pick-up or to-go ordering is popular with your customers, you can consider a smaller space and add a kiosk ordering system.
You can also think outside of the traditional restaurant box. Share space with other restaurants as part of a food hall to reduce rent costs or venture out into your community with a food truck, using your main location as a home base.
When it comes to boosting your bottom line, it pays to get creative. By incorporating these tips, you can keep your margins healthy.