New restaurants are popping up all the time, and competition is fierce for diners’ dollars. That may give you the impression that operating a food establishment is easy. In actuality, these businesses are labors of love, physically and emotionally demanding to run, and one of the highest ranked industries to failure.
But get it right and that corner restaurant you run now could become a gold mine. An eatery that prioritizes consistency, utilizes current technology and hires the right staff is on the path to success. But there’s plenty more you can do to take your restaurant to the next level and ensure its longevity.
Business tips for restaurant owners
There are many things to consider before starting a restaurant, including whether your restaurant should only accept credit cards and which kind of restaurant security you need. Truth be told, the work is never really done. Once your eatery opens, your goal should be to maintain a steady revenue and then eventually grow your profits. To take your food establishment to the next level, embrace these business tips.
1. Treat consistent quality as a nonnegotiable.
Go to any McDonald’s or KFC in America and you know what you’re going to get every time. Major food brands build their reputation on consistent quality in all aspects of operations, and you should follow their lead. Make sure that on each and every visit, customers get the same great-tasting food, attentive wait staff and inviting ambiance they seek. To achieve this, you’ll first need to be clear on what you want from your kitchen and front-of-house staff. Then, you’ll need to keep motivating them to deliver time and again, even when your restaurant seems uncontrollably busy.
Be careful to ensure quality and consistency doesn’t incrementally fall over time or slip during busy seasons. Are you tasting menu items regularly? Is the restaurant always as clean as you want it to be? Are tables served fast enough? Consider hiring mystery shoppers during peak hours to give feedback on their experiences.
2. Look after your staff and give them more to do over time.
The most successful business owners don’t do everything themselves – they know how to delegate tasks related to finances, HR, inventory and scheduling. Hand some tasks over to managers, chefs and experienced waiters bit by bit. Show them exactly what you want them to do and support them as they learn.
Let your own personal strengths and weaknesses guide you in delegating responsibilities. Start by passing on assignments that you know a particular colleague can do better than you. They’ll appreciate the trust you show in them. As their boss, do everything you can to make staff feel like family rather than colleagues. Foster a stronger relationship with staffers through team building and social events.
By involving workers more in the day-to-day running of your restaurant, while also seeing them as more than just an employee, you’ll have more time to work growing your business – and your staff will be more motivated to help your enterprise succeed.
3. Weigh expansion options.
Consider opportunities to grow your business in your current location, perhaps you’re booked most nights and there’s room to expand. Work out how much it would cost to renovate that extra space, including paying for an additional lease or construction expenses. Then determine how many customers you’d need to seat on a given night for an ROI.
If expanding in your current location isn’t an option and you’re thinking about opening in a different area, do as much research as possible to make sure this is a new market that could use your business. Bear in mind that opening a new restaurant is usually more expensive than extending an existing one.
4. Welcome online reviews.
Thanks to Yelp and Google Reviews, everyone is now a critic. According to Trustpilot, 89% of consumers read reviews before spending money with a company. With this in mind, make sure you respond to all online reviews – good or bad. Engaging with customers who have left a bad review shows you care about diners’ experiences and that when something goes wrong, you want to put it right. If someone pays you a big compliment after they’ve finished their meal, ask them to leave a review. Over time, your online rating will likely improve.
FYI: Poor experiences kill restaurants in two ways. First, you lose the chance of repeat business. Second, you increase the risk of customers posting bad online reviews, which deters other prospects.
5. Be smart about purchases.
According to Lightspeed, a successful restaurant should have a food cost percentage between 28% and 35%. Your goal should be to find the best ingredients for your menu without going over your budget. Apply a similar financial mindset to all aspects of your establishment – you don’t want to sacrifice quality, but a restaurant that spends more than it takes in isn’t sustainable.
There are opportunities to save everywhere: Choose a restaurant payment processing provider with the lowest fees and the fastest settlement time. Consider the costs of installing food prep stations and replacing dinnerware. Avoid overpriced furniture and decor. Take advantage of special deals – certain vendors have trade programs where you can get volume pricing and be connected with a curated list of designers and architects for consultation.
Did you know? Many vendors both lease and sell restaurant equipment. If you rent equipment, you don’t have to worry about having all of the money upfront, and there could be tax advantages to spreading the expense out over time. Consult your accountant to determine what’s in your best financial interest.
6. Establish your online presence.
Market your restaurant online with a Google My Business listing, active social media channels and local directory listings. Pay particular attention to your website. Patrons will almost certainly visit it when deciding whether they’re going to book a table or not. Keep your site up to date with your menu, location and hours, social media links and enticing images of gorgeously plated food. [See unique ideas for restaurant promotion.]
7. Revisit menu item pricing.
The cost of ingredients is always going up, especially in the recent past, and your profit margin will diminish if you freeze your prices. However, raising prices can be a problem for established restaurants as repeat guests may have somewhat concrete expectations of what they will spend at your venue.
What are your options? You could reduce your portion sizes or opt to replace unprofitable menu items. Perhaps you post a sign notifying customers of price increases and why they’re necessary. There will be a consequence to each course of action. Most restaurants make changes to pricing gradually instead of in one go. Regularly revisit ingredient costs and the pricing of each item on your menu to ensure you’re serving both the customer and yourself well.
8. Value customer retention over acquisition.
It’s essential to find new customers as people move in and out of the neighborhood surrounding your restaurant. However, repeat business is more important. Local restaurants can’t survive without the goodwill and continued patronage of their regulars. Experiment with different methods to boost customer engagement and retention, such as special deal nights, loyalty programs and tasting evenings. You don’t want just to give people a reason to try you out – you want to give them reasons to come back.
Tip: Restaurants can use text message marketing and email blasts to get regulars to come in more often. Always ask patrons for their contact details and permission to get in touch. Incentivize them by offering a percentage off their next meal if they join your mailing list.
9. Use the latest technology.
You can save money and improve experiences for staff and customers alike by investing in the latest restaurant technology, like modern POS software. Here are our top recommendations:
- Restaurant management systems: Use a restaurant management system to help you manage all aspects of your restaurant, including sales and staff rosters, and inventory.
- POS systems: Read our review of TouchBistro and our Toast review for two POS options specifically designed for restaurants.
- Table tablets: Provide restaurant tablets so patrons can order their food and drinks independently instead of waiting for a server. They can also use the tablet to pay for faster checkout. [Learn more about the benefits of restaurant iPad POS systems.]
- Inventory management software: Implement the latest restaurant inventory management software to reduce food waste, which dents many eateries’ profitability.
Some restaurant tools only apply to certain types of food businesses. For example, consider a bar POS system if your establishment emphasizes drinks more than food items. There’s also specific technology best suited for food trucks. Stay in the know about other restaurant technology trends as the industry rapidly evolves.
10. Open a delivery arm.
When some states forced restaurants to stop in-person dining during the coronavirus pandemic, many of these establishments started offering home delivery services to keep food going out and money coming in. Some began offering their dishes via platforms like DoorDash and Grubhub, while others created in-house delivery systems with their servers now acting as delivery drivers.
Carefully study the terms of each food delivery service app and weigh their charges against expenses you could incur handling delivery yourself. For instance, Grubhub charges 15-20% to be listed on their site and another 10% if a customer wants to have their food delivered. It’s expensive, but it can be extra revenue from periods of spare capacity in the kitchen without requiring additional staff. [Related article: Is Grubhub Good for Restaurants?]
11. List your restaurant on table booking apps.
You can use restaurant reservation software so patrons can conveniently book a table from your website or via listings on platforms like OpenTable, the Eat App, Yelp Guest Manager and TripAdvisor. OpenTable charges $1 per seated cover and a monthly subscription of $249. Competing apps just charge subscriptions, ranging from $199 for the basic Eat app to $899 for Resy.
Like with food delivery apps, keep these two drawbacks in mind: Subscription charges eat into profit margins, and reservation apps are an intermediary that essentially own your customer’s contact information. You’ll get bookings, but you never get to keep customers’ email addresses or cell numbers, so you can’t market to them directly.
12. Hire a reputable accountant.
Working with a financial professional who knows how restaurant accounting works is critical to staying profitable. An accountant with extensive experience in the dollars and cents of the food industry can keep an eye on your spending and give you ample warning if costs are running away in a particular area. They can also make sure you claim all possible tax deductibles. More money in your bank account means more money for you and your family or to reinvest in the business.
13. Rethink daytime hours.
Many restaurants open only for evening service, but they’re paying rent 24/7. That could mean leaving money on the table. When it comes to maximizing your revenue potential, think outside the box to develop profit-generating ideas that bring in cash outside of your traditional busy hours.
For instance, if kitchen staff arrive early to prep, why not develop a daytime takeout menu? If it really takes off, hire someone to make daytime deliveries. Or what about sharing your expertise and passion for cooking? Many bars hold special classes to teach drink lovers how to make signature cocktails. You could even run a beginner, intermediary and advanced course for local residents on how to cook their favorite dishes like a pro.
How to avoid restaurant failure
Restaurants fail all the time. Why? Because they don’t address the important factors within their control – they think the formula that works now will work forever and therefore never change, or they don’t delegate tasks and get burned out. Give your restaurant the best opportunity to survive and thrive by following the tips above and checking out our additional strategies to help your restaurant increase profits.
Jonathan Bentz contributed to the writing and reporting in this article.