If you own a restaurant, you may have heard some dismal statistics about the failure rate. Some studies say it’s as high as 90% for startups. According to Forbes, however, just 17% of restaurants close in the first year, which is a lower failure rate than other service businesses. If you know how to run a restaurant successfully, you can increase your chances of staying out of the 17% that have to close up shop. There are several culprits that can lead to restaurant failure, but the top problems are often finance-focused. We’ve gathered three key tips for restaurant owners that will keep the cash flowing and doors open.
1. Balance Your Cash Flow
Cash flow is the lifeblood of any business. Restaurant owners can face a lot of expenses, like paying rent, staffing servers and keeping inventory. It’s important that the money coming in can cover them. If money is too tight, cash flow problems will eventually catch up with you.
Manage your cash flow by keeping detailed books. Know your weekly bills and compare them with your forecasted sales. You can get good estimates by keeping track of your average daily numbers. A restaurant POS system can provide you with helpful information, such as analytics on your best-selling menu items, your top-performing employees and your overall sales. This can help you determine when to offer promotions, like early bird specials or buy one, get one free offers on slow days.
In addition, secure a restaurant business loan before you need it. This can help keep your restaurant in the black during slow periods, providing a safety net to help you survive.
2. Streamline Your Inventory Procedures
Restaurant owners should know the precise cost and inventory of their food and supplies. Prices change, especially for seasonal food items, which can impact your profits. You also don’t want to overstock on perishable items. The National Restaurant Association found that less than half of restaurants track food waste, which leads to lost revenue, higher operating costs and a larger environmental footprint. Make sure you’re tracking waste so you don’t repeat mistakes.
A POS system can automate inventory to avoid overstocking and overspending. It will also help ensure you have the correct menu prices by calculating what you’ll need to charge to cover expenses and make a profit. If you’re ready to trade in your cash register, you can lease a POS system through restaurant equipment financing, instead of buying it outright.
3. Treat Your Employees Right
The turnover rate in restaurants is one of the highest of any industry; it reached a high of 74.9% in 2018, according to the National Restaurant Association. There are several reasons why the restaurant industry has trouble keeping its employees. First, restaurant jobs are popular with students, who may be taking the post temporarily. Second, with an abundance of restaurant jobs available, good employees often leave to make more money elsewhere.
While turnover probably won’t go away, you can take steps to reduce yours. First, recognize your top employees. Simply acknowledging their hard work can go a long way — but so can a cash bonus! Conduct exit interviews to find out why your employees are leaving. If you hear murmurs of bad management, address them immediately. It’s often said that people don’t leave jobs, they leave managers. And make sure you’re offering competitive pay. While many restaurants offer a low wage in addition to tips, you want to be sure your employees are fairly compensated for their dedication.
Owning a restaurant is rewarding, but it’s also hard work. You make people happy by sharing your passion — cooking. Leading with your heart will come through in your food, but make sure you use your head. Knowing how to run a restaurant successfully means creating and sticking to a solid restaurant business plan. These tips for restaurant owners can put you on track to serve customers for years to come.