Part two of a two-part series

Q: With all the changes in the industry, especially with competition, wage growth, and labor shortages, what are the characteristics of businesses making money?

A: The restaurant industry is hitting a saturation point in many markets. Part I of making Money in a Growth Economy pointed out some of the financial disciplines of profitable companies: high sales per square foot, beverage sales at 30 percent or better, prime cost of less than 60 percent and optimized business hours. There are several other disciplines profitable operators have in common:

There is a strict adherence to systems.

great systems are a requirement. From POS to business intelligence software, there are affordable systems for understanding guest behavior and profitability. Given the ease of access and affordability of these systems, it is imperative to interact with data daily.

The most financially successful restaurants have managers and owners who use information daily and manage a key set of metrics. Useful information is based on the five P’s of the business: engaged people, happy patrons, forward-looking planning, a spotless property and stellar profitability. Keep information front and centurion all these areas and turnover will be lower, guest traffic will increase, the business will move forward, employees and guests will have a safe and clean place to be, and profitability will flow.

Owner involvement is intense.

The people who care the most for a business are its owners. Most restaurant owners grew up in the restaurant business and worked through the ranks to ownership. Eight out of 10 owners started at the entry level, and they understand the vision and direction their businesses need to travel.

Successful owners insist on continuing to improve to their business, and they develop plans to share the business by providing ownership opportunities to key employees through value-appreciation plans, profit-sharing or phantom ownership.

They build an ownership mentality and continuously impart knowledge to operators, sharpen focus on the guest experience, insist on precision and build speed in the culture to maximize labor spend at all levels and keep product offerings fresh and facilities opening-day fresh.

The most successful owners bring an intensity to their organization in strategic areas and clear decision making.

Value equation is right.

When the value equation is correct, guests perceive the value is equal to or better than the price. With value, guest counts grow.

The key is matching what is offered to what is expected for the price. Finding the balance between growth and check average is the challenge. For example, if guest counts begin to sag, prices have exceeded value perception, so the solution is to introduce new products at a lower price to attract more traffic and then focus on converting new guests to regulars. Regardless of approach, evaluate the value equation and keep it in balance.

Overhead is Lean.

The only source of revenue in a restaurant company is operations. Every other area is overhead and a cost center. Operations rules and all other activities should support operations. Overhead employees cost money. When overhead grows, projects grow and money is needed for those projects. Having non-operations employees will cost more money regardless of function. They often need help from industry experts, which in turn costs more and drains resources.

Keeping overhead lean and shared as much as possible is particularly important. Outsourcing or sharing resources brings higher levels of competence that can’t be afforded when using an in-house staff. Keep overhead limited to operations, and outsource everything else. Having a strong team to support and focus on the success of operations must be the center of all decision making.

Consistently measure and apply discipline with systems, constantly monitor value perception, keep ownership intensity with lean overhead and financial success is sure to follow.


For more information on improving profitability and driving sales, contact AMP Services at rbraa@ampservices.com. Rick Braa is the founder of AMP Services, a Seattle restaurant accounting and consulting firm specializing in helping companies grow profitability.