Now, it’s time to boost and measure your restaurant’s sales performance….
Don’t Go Crazy Buying in Bulk
Some restaurant owners believe buying in bulk saves money. After all, buying large quantities to get volume discounts makes sound sense to save cents. However, what business owners don’t account for is the money that can be wasted as a consequence of having too much inventory. Spoilage and waste comes to mind.
It takes time to learn how much inventory your restaurant will need, especially for busy times of the year. Perhaps it makes sense to have a little extra inventory on hand. But don’t go overboard by ordering huge quantities. You won’t be able to bring home the bacon if your customers can’t eat it. (Unless you have a 100 percent loyal staff, ordering large surplus quantities invites employee theft.)
Higher Profit Margins Means Higher Costs
So if you don’t order in larger bulk to receive volume discounts, won’t your food costs be higher? Yes, they will. However, lower food costs don’t necessarily yield larger profit margins. According to the National Restaurant Association, many of the most profitable restaurants have food costs that are as high as 45 to 50 percent. Does this figure sound like business suicide? After all, isn’t the magic number for food costs somewhere between 20 to 30 percent? While this may be an industry standard for smaller restaurants and non-chains, keep in mind, says the Association, that what counts most is the gross profits of your menu items.
Other Sales Metrics to Consider
There are several ways to measure your restaurant’s sales performance. Some indicators and metrics seem like you would need a crash course MBA or CPA. (Hello, Earnings Before Interest, Taxes, Depreciation and Amortization, we’re talking about you: Net Income + Interest + Taxes + Depreciation + Amortization.)
Assessing employee performance
While it’s a good idea to know labor cost percentages, food cost percentages, and inventory turnover ratio, for example, many restaurateurs forget to factor this: server performance.
There is no magic formula for measuring server performance, i.e. gross profit margin = total sales – cost of goods. However, you should do the best you can to analyze your top server’s behaviors. Are they emphasizing liquor and dessert more effectively? Is their service speedier? If so, how? What else is your top server doing that’s resulting in the most profit? Train the rest of the staff to emulate your top server.
Analyze Best Selling Items
In addition to analyzing your top server’s performance, you should do the same with your menu items. In your opinion, the risotto with black squid ink might be the best dish on the menu. But if your point of sale system reveals month after month that your best-selling entree is pasta primavera emphasize make sure you have enough ingredients to sell more pasta primavera.
If that risotto with black squid ink isn’t selling well, consider scrapping it from the menu, as painful as that might be for you, personally. Poor-selling dishes do not bring customers back in.
Invest in a State of the Art Point of Sale System
Some restaurant owners have maximized profits by updating to the latest point of sale (POS) technology. For example, when lines are long, your hostess can use a tablet to keep track of tables, and even take drink and appetizer orders. The latest POS systems eliminate the need for servers to write down orders, walk orders to the kitchen and notify cooks of substitutions. In addition, new software technology can notify servers when an order is ready. This prevents a backlog of entrees and plates piling up in the kitchen.
Want your restaurant to increase profitability and efficiency? Contact us today for a point of sale (POS) demo.