During a recent discussion with a restaurant franchisee, the issue of profitability came up. As he put it, the restaurant business has three basic levers that the owner/management can control: food sales, food costs, and labor costs. I call these the trifecta of restaurant profitability since you simultaneously need to get all three correct. (Ok, food and labor costs are prime costs, so technically it should be called exacta or perfecta of restaurant profitability. I wouldn’t describe most restaurants as exact or perfect. So I went with trifecta.)
These are so important, but when was the last time you looked at them in your restaurant?
Here’s a simple suggestion for each to get you started.
- Food Costs
Create a simple sheet that tracks throwaways daily. The restaurant franchisee found $75 a day in savings here.
- Labor Costs
Pick a day of the week and look at the staffing verses the sales. Is there an extra hand here?
- Food Sales
Pick the five most popular items on your menu. Does your wait staff consistency upsell add-ons for these entrees (assuming it makes sense)?
P.S. We are working on a product to make the management of the trifecta much easier. More on that in 2013.
Why did I start Cloud Dine Systems?
Here’s half the answer. The other half will come next month.
A wave of enabling technologies recently came into existence that will allow restaurants to be run in radically more profitable and customer focused way. Cloud Dine was created to bring the potential of these technologies into reality.
Recent innovations in technology have created sweeping changes in the possibilities for how restaurants operate. The list of changes coming together is amazing. Just to name a few: commodity hardware in the form of consumer off the shelf tablets, ubiquitous wi-fi wireless networks, cloud technologies, internet enabled smartphones, inexpensive internet connectivity, remote management technologies. These changes and others combine to create the foundation for a revolution.
Cloud Dine Systems was founded to utilize these enabling technologies and revolutionize the restaurant business.
So why should you care as a restaurateur? Because these coming changes will increase your profitability and efficiency. The last significant technology adopted by restaurants was the change from paper based systems to computer based point of sale systems. This increased the net profitability of restaurants by 1 to 3 percent. The upcoming revolution will have a similar impact and then some.
I believe these changes will reduce the horrible restaurant failure rate (by some counts 70% fail within ten years), reduce the need for 80-100 hour weeks with the associated burnout, and give restaurant owners and staff some of their life back. The potential to make a positive impact on millions of lives is a lot of the reason why this is worth doing and why I’m doing it.