Your restaurant has been open long enough to show steady sales and a growing customer base, and now you have the capital you need to give yourself an edge. So where do you invest that capital to maximize the effect on your restaurant’s bottom line?
There are three main investment categories that you should focus on — customer experience, building/kitchen, and labor — and each one has pros and cons to be aware of. When investing in your restaurant, it’s usually the least likely items that will benefit you the most in your growth. Let’s take a closer look at the capital investments that will give you the best return for your dollars, and the ones to be wary of.
Customer Experience Investments
From an updated sign to an outdoor patio, upgrading the exterior of your business can help capture the attention of current and potential customers. Estimating the cost of the project versus the potential return on revenue will help you determine the benefits and risk. But be careful: One of the biggest mistakes restaurants get into is the thought that more seating equals more customers and sales, when often times too much seating leads to a perception of a restaurant being empty. (People always talk about the restaurant they can’t get into because it’s booked — not the one that always has a seat.)
In addition, increased overhead can diminish your profits and growth potential. When your overhead increases quicker than your sales and for a longer period of time, it can sink your operation. That’s why the math involved in making upgrades needs to be done ahead of time. From the items that are needed to keep the area clean to the staff needed to serve your potential customers, the investment becomes much more than the construction and permits needed to build it. The more tables you have, the more you need to clean, staff, and maintain. Breaking down the initial investment along with the continued exposure to costs shows that expansion is rarely the answer.
The alternative to this is remodeling any space you have that is currently wasted — maximizing an error in your original layout to serve your customers in a new fashion or with greater effect. For example, if you regularly have parties or business meetings coming in, and you have no private room or a way to close off an area to make it private, adding a wall or some doors to close off a small area could be a great way to serve these clients. A flexible space that can be closed off if needed, but stays open otherwise, allows you to maximize your growth potential with minimal risk and overhead.
Adding a game room or game items is often a last-ditch effort for owners to bring in a customer base. The customers these items bring in will spend more time and less money than your average customer, often creating more issues than revenue. Game rooms or any large items that require space take away from the amount of tables you can use to make revenue as well. Instead, incorporating games that use the room and equipment (TVs) you already have — trivia games, for example — minimizes risk (cost), is easy to maintain, can keep your customers busy during slower periods, and can be turned off and put away when needed, with little to no disruption to the operations of the business.
At the end of the day you have to look at the initial investment to get the new customer experience up and running and the operational cost to keep it going. Through that financial balance, you can find the answer that works best for your business. Without it you are shooting in the dark and hoping to hit your target. Unfortunately, many restaurants look to these upgrades before they look into their own infrastructure. After all, what good is new patio seating if your kitchen can’t cook the food properly with equipment that keeps breaking down? What good is adding new screens for your customers to draw them in for sporting events if you can’t service their orders?