The restaurant industry is notorious for its high risk and tight profit margins. With an average profit margin of just 13%, restaurants spend $87 out of every $100 earned. To boost restaurant profitability, operators must focus not only on increasing revenue but also on optimizing expenses. These six strategies can add 5–10 points to your profit margin and transform your bottom line.
1. Understand Your Theoretical Food and Beverage Costs
- Calculate theoretical food and beverage costs based on recipe costing.
- Identify variances between actual and theoretical costs.
- Quantify the annual impact of these variances to uncover hidden profit opportunities.
Tip: Regularly review recipe costs and align purchasing to minimize variances.
2. Optimize Your Purchasing Practices
- Join a Group Purchasing Organization (GPO) to access volume discounts.
- Establish deals and Master Sales Agreements with major suppliers.
- Ensure liquor purchasing adheres to marketing rules for maximum value.
Tip: Regularly review supplier contracts to ensure competitive pricing.
3. Manage Payroll Costs Effectively
- Monitor variable payroll costs per cover on a shift basis.
- Align scheduling with actual workload to optimize labor expenses.
Tip: Use scheduling tools to forecast labor needs and avoid overstaffing or understaffing.
4. Ensure Proper Distribution of Tips and Service Charges
- Implement clear policies for distributing tips and service charges to employees.
Tip: Use automated systems to ensure transparency and accuracy in tip distribution.
5. Optimize Workers’ Compensation Policies
- Review your experience modification (mod) in your Workers’ Comp policy.
- Develop a plan to improve your mod and reduce insurance premiums.
Tip: Implement safety training programs to minimize workplace incidents.
6. Evaluate and Negotiate with Service Providers
- Identify your largest service providers and assess their ROI.
- Regularly challenge vendors with alternative offers to ensure the best deals.
Tip: Fine-tune cost components in service agreements to maximize value.
Conclusion
Running a profitable restaurant requires more than just putting out daily fires. By implementing these six strategies, you can boost restaurant profitability, reduce costs, and improve operational efficiency. For personalized guidance, book a complimentary one-hour consultation with Accross Restaurant Consulting. Start optimizing your operations today!
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