This is a critical topic! Sad to say, but many restaurant owners were struggling financially pre-pandemic due to many common mistakes referenced below. The smart operators sharpened their pencils and have learned more about operating a business, more importantly, how to operate a restaurant business, in the past year than they knew before the pandemic. Many have made the necessary changes through hard work and innovation to survive.
We have worked with restaurants since 2014 and have seen the same mistakes repeated in the majority of establishments. We have written this to help those restaurants that have survived to improve their operation even more and hopefully, as they recover, can learn how to make a profit in the future.
All 10-bullets are critical to follow. Do not pick and choose which might help. They all need to be followed as if they are the 10-commandments of the restaurant business.
How to increase restaurant sales:
- Have strict accounting procedures using a reliable system
- Know your numbers
- Create and live by a strict budget
- Analyze your restaurant menu prices
- Frequent menu revisions to target consumer trends
- Provide online ordering
- Promote your restaurant leveraging social media
- Exercise search engine optimization (SEO)
- Provide delivery with in-house delivery personnel or third party
- Reward frequent customer with incentives
Have strict accounting procedures using a reliable system
Accounting has always been an intimidating and boring procedure that is commonly overlooked by small privately-owned businesses. However, the lack of having strict accounting system and procedures is the most common cause of business failure. Make no mistake assuming that businesses fail due to lack of sales. Many businesses fail due to poor cash management. A solid accounting system followed by strict accounting procedures will ensure success. We highly recommend QuickBooks. It integrates with most POS systems and banks for a more efficient process.
Know your numbers
Once your launch an accounting system. Integrate it with your POS and your bank accounting. Learn how to maximize your data to retrieve numbers. Know your numbers! Accounting has an intimidating effect on most people. However, accounting is an organized standard process that adds up all income, then subtracts business expenses to determine your profit or loss for the period you chose to analyze. The most common are monthly profit/loss. This is business 101.
Create and live by a strict budget
After you follow steps 1 and 2, you will have launched an accounting system to know your numbers and create a budget. A budget is not just to control expenses but to control income as well. It would help if you had somebody that understands and focuses on marketing. Marketing is an important part of the budget to achieve the necessary sales to cover its expense side. Your expenses can be whatever you decide, but the expense must be reflected in the cost and pricing.
Analyze your restaurant menu prices
Once you have achieved the above bullet points, you will arrive at this point; analyze your restaurant menu prices. In our experience, most restaurants do not make a profit because they do not know their numbers and throw money at paper ads without a solid marketing strategy. The most important part of reaching this point is to “know your numbers.” Now you can accurately know your food cost and properly price your menu items to make a profit.
Frequent menu revisions to target consumer trends
You need to know what consumers want to revise your menu to reflect what your customers want and, more importantly, what they are buying. We have seen many restaurants with large menus with items that they inventory the food to sell 1-6 items per month. It is obviously not an item that customers want to remove. Make it is a bad recipe or out of favor item. Be honest with yourself. Most POS systems have a report that gives this information.
The most common mistake is that restaurant owners think “they know” their customers. In our experience, this is never the case. Restaurant owners are not in tune with their customers. Most menus are created around what the restaurant owner likes. BIG MISTAKE! BIG MISTAKE! Know your numbers, but more importantly, make changes to solve the problems that “knowing your numbers” are telling you. Do not use the excuse that you have to be competitive to stay in business. Not true! If your cuisines are good and desired by customers, they will pay the prices to get what they love.
Provide online ordering
Consumers love online ordering! Restaurant owners have many options relating to this bullet point. There are excellent online ordering systems that restaurant owners can own and not pay a percentage of their revenue to the provider. However, the systems are complex and too complicated for most restaurant owners to maintain themselves. You can hire somebody to maintain it or use a third-party company/provider that offers online systems that charge a sales percentage.
The risk of the third party provides is that some take as much as 33%. Bad deal! Most restaurants do NOT have a 33% profit margin. On these agreements, the restaurant owners will actually lose money. The best options are to own your own system and/or add a third-party that charges a reasonable percentage of sales. Some will actually provide marketing functions to help you increase sales, which benefits them. Performance-based marketing is a perfect solution. Additionally, misc fees and increased online menu prices can offset the cost of the expense. Use a system that provides the restaurant owner the ability to own their own mobile app.
Promote your restaurant leveraging social media
It is no uncommon knowledge that social media is “social,” and marketing using social media can target your location. In other words, you can target your local audience. Simply posting on Facebook or Twitter is not enough. The most common misunderstanding is that when you post, the world sees the post. Not true! Only those that follow you will see your timeline. If you have no followers, nobody will see your posts. Learn this highly effective marketing strategy or hire an expert. Again, some third-party online ordering providers will manage your digital marketing strategies.
Exercise search engine optimization (SEO)
We recommend that you should have a website. However, not all websites are created the same. Hire only the best web design and hosting company that understands and implements SEO into your website during the design phase. Websites are created to attract customers. That will happen only if the major search engines like Google, Yahoo, and Bing can find and properly index your website. A cheap or poorly designed website will lose potential customers. This is hard for restaurant owners to judge because most web design firms are full of s___. They will give you a cheap website that is not optimized for search engines. Then, if and when you complain, they will want to charge you more for SEO. Do NOT fall for this scam.
Two fast tips; (1) minimize your images as Google can’t read an image. An image does tell the search engine who you are or what you do. (2) search engines need a sufficient amount of text created using keywords that you want to be found for. While SEO is easy once understood, most avoid it to use it as an upsell. Having said that, SEO is important, but do your homework to know if the designer is actually considering SEO.
Provide delivery with in-house delivery personnel or third party
Food delivery is a big business. Even before the pandemic, it was rapidly growing in popularity. The pandemic surfaced food delivery as a leading industry service provider. Restaurant owners have two options; provide delivery using your own staff or hire a third-party provider. Both have risk and potential management problems.
If you decide to provide your own delivery using staff you have to increase staff to make it reliable. However, to increase staff, you have to make certain that you implement a strategy to increase sales to absorb the cost quickly. The benefits are that you can save money once high volume it hit and have more control over the delivery timeliness.
The second option is to hire an independent third-party delivery provider to deliver your food. While their business plan is to survive your customers, you lose control once they pick up the food for delivery. Nothing that is done correctly is easy. It is always tempting to take the path of least resistance, but delivery can either help or hurt your business.
Reward frequent customer with incentives
Most online ordering systems will allow and provide for existing customer incentives and coupons. Use these features to express your appreciation. The most common mistake we see ALL businesses make is the failure to express your appreciation for their business. Some establishments project the image that they are doing their customer a favor. Bad attitude!