Continued Post – Capital in your Restaurant

Kitchen and Building Investments restaurant

This is a larger area of improvement than one might think, when you take into account all aspects of the menu at a full scale restaurant. You need top-of-the-line equipment and facilities to ensure your team can service customers, and investing in equipment upgrades and maintenance is key to the growth of your business. On the other hand, it’s better to be amazing at a one-page menu than good with a four-page menu.

If you are doing dishes the old-fashioned way with a three-compartment sink but you are unable to keep up with the dishes, it makes more sense to invest in a high efficiency dishwasher to increase your throughput, minimizing damage on dishes as well as labor. Though the purchase may be high and not seem like it has an effect on your customer base, it will help your business in more ways than one.

The same thing can be said for the appearance of your building inside and out. Everyone loves the neighborhood bar and grill, but eventually we have to keep it up so that it continues to bring in new customers. Simple things like power washing the sidewalk and sides of your building, putting on a fresh coat of paint, and installing new signage are affordable ways to maintain the outside of your building to help drive perception and sales. But where do we draw the line of necessity, want, and return on investment? That’s where the math of the investment comes in, and what we believe the location will gain from it.

When looking at older units (15+ years old) often times a remodel can increase sales 20% for the next 3-5 years (depending on operations) because the customer base sees you are investing in them and their experience. Not every restaurant has to do this, nor do all restaurants have the means to do a complete remodel; that being said, upgrades and cosmetic refreshes can draw attention and grow customer perception. When we come into a business and evaluate it, we look at the perception the customer has when they enter, the upkeep and the overall customer experience.

Starting from your parking lot, walk up to the business and gauge the restaurant’s first impression. If you are renting and the landlord isn’t willing to do a refresh, ask for an adjusted lease, or work with them to put your rent into the upgrades needed. Look at things like the condition of the parking lot (cracks, stripes etc) and the entryway, the door and overall cleanliness. Is the entryway clean, well-kept and inviting, or does it look neglected and rundown?

Take time and walk through your business, asking your customers what they would like to see at your establishment. Go to the bar of your competitors, ask the customers there why they chose that location over yours (you don’t need to tell them who you are), and find out what’s driving them away. Taking time to think though the problem and finding solutions that can be repeated daily will maximize your capital investment.

Labor Investments

restaurant chef cooking kitchenIf done properly, labor investments can not only balance out the costs involved but lead to greater profits. Usually a company’s first reaction is to cut labor costs when revenue decreases to recover some of the lost money. The problem is that other costs begin to increase because of the shortcuts made when businesses are short-staffed. Whether it’s poor work performance that has to be fixed, or the waste of product from corners being cut, labor cuts have a lasting impact on operation costs and revenue growth.

Utilizing the capital you have to grow revenue, control costs, and maximize profits starts with the proper utilization of wage scales. Consider the restaurant industry and the base pay model of minimum wage to salary managers: One of the most effective ways to maximize your capital investment is with graduating wage scales, and allowing your managers to increase wages on an incremental level. This creates a constant reassuring that the employee is being rewarded as they progress. An employee is grateful for a 10% increase in wage after 6 months to a year from $8.00 to $8.80, so you can continually increase the employees wage $0.10 – $0.20 more often as they progress to reinforce what they are doing. This allows dialed in employees that see the progression of their work to the benefit of the company will affect their pay more often.

The most beneficial way to maximize your capital within the confines of labor is to tie your managers and shift leaders to a set of metrics and profitability. When the leaders are bought in with metrics that gauge their true leadership as well as their ability to grow profits for the company your bottom line will grow. Creating a system that measures food cost and labor as well as performance grades (audits) tied into period PnL reviews will turn your managers into small owners. This benefits any and all business owners because they learn that the more profitable the store becomes, they make more money and in turn so do you as the owner.

Often times I hear from our clients that their staff and managers don’t “get it” or “understand” how much it costs to do business. The simple answer to this problem is to make them aware of it monthly to ensure they understand the good months from the bad months and everything that goes into a business. I would wager that less than 10% of the general managers of restaurants understand what CAM (cleaning and maintenance) stands for on a PnL or lease contract. But it’s very important to realize that the costs of doing business are often times not truly communicated and this can cause the issue.

Your labor force is the lifeblood of your business; without the staff you can’t service customers in any business. The downside to not investing capital properly into your labor force is loss of revenue and profits. Watch a kitchen on a busy shift when they are short someone and look at the waste; from remade orders to upset customers who leave, you lose more than you gain when you under-invest in your labor force.

 

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s