The restaurant industry attracts a lot of talented, imaginative people who are thrilled by creating memorable dining experiences. While the public cheers creativity in food service, the pragmatic approach to managing a restaurant business is usually more successful than an idealistic one.
Neither an appealing concept nor delicious cuisine in themselves will guarantee business longevity. The truth is, if operations in your restaurant aren’t tied to the bottom line, it will most probably fail.
Let’s look at some tips on restaurant management that help set up effective processes, cut costs and increase profit margins. These tips don’t add up to the ultimate restaurant managing guide, rather they illustrate the principle behind the profit-focused approach to restaurant management.
Restaurant manager duties
The difference between a highly profitable restaurant and one that is barely getting by is often the skills of the restaurant manager. If you decide to manage a restaurant, be ready to work 12 hours a day in a hectic environment. Your routines may include:
organizing stock and equipment
ordering supplies and managing inventory
recruiting and training staff
coordinating staff scheduling and managing payrolls
monitoring compliance with health and safety regulations
handling customer complaints and queries
preparing reports for performance analysis and more…
While being hands-on in the day-to-day work, you should be able to keep strategic goals in mind. Your main duty as manager is to set up the effective and smooth operation of the business. You are supposed to approach every aspect of the business sensibly and realistically to optimize operations from the profit standpoint.
Managing restaurant staff
For people who manage restaurant business operations, hiring and retaining employees becomes a top concern. If the employee turnover rate in your restaurant is high, you will always be losing money and time. Job advertising, recruiting, and training, along with the pre-departure disengagement and lost productivity caused by staff shortages—it all comes at a high cost for your business.
You can calculate the turnover rate for your restaurant using the formula: (number of employees who left your restaurant / number of employees needed to fully staff your restaurant) × 100. If you don’t want all your employees to leave within the first 90 days of being hired, make retention an important focus.
Obey employment laws because one serious violation may not only cost you a fine but can spoil your reputation as an employer.
Set up effective onboarding and training, treat your staff with respect, and set up clear expectations for their job roles.
Conduct exit interviews with employees who voluntarily leave and use their feedback to improve the working environment in your restaurant.
A tip for you. Considering your restaurant margins, you should look for alternative ways to motivate staff rather than just raising wages. Give your team members opportunities to prove themselves creatively. This especially makes sense if we’re talking about millennial Gen Z workers.
Say one of your waiters loves photography, you can ask them to double as a social media manager. They get a chance to grow personally and pursue their interests while retaining the main job. As a bonus, you get genuine feeds in social media created by a loyal and inspired employee who knows how best to communicate your restaurant’s vibe.
Choosing a POS system
Today’s restaurant POS systems can help you manage almost every aspect of your business: sales, inventory, finance, loyalty campaigns, etc. They allow calculating your restaurant performance metrics and get actionable insights from your data. However, many of the POS solutions available on the market can easily get you into analysis paralysis. Your ideal POS system would provide for the most efficient workflow in your restaurant, and won’t charge you for an excess of features you might never want to use.
Select an all-in-one POS for restaurants with a front-office interface for employees who take orders and a back-office management console for managers.
Prefer a mobile and flexible POS system that supports both iOS and Android, runs on any device, and syncs with the other pieces of software you use.
Choose an easy-to-use solution for your employees to be able to work comfortably with after a five-minute intro.
A tip for you. Cloud solutions, like Poster, work on a subscription model and don’t require intensive investment for a start. It’s best that you sign up for 3–5 trials by different vendors to compare their interfaces, support service, and get an idea of the value they deliver for their price.
Managing a menu
While your chef’s main responsibility is to make an enticing and tasty menu, your duty is to make sure the menu is profitable. To achieve this you should strive to impact profit at two stages: initial menu pricing and monitoring actual food costs. The top tips for managing a restaurant menu relate to menu engineering. A thoughtfully engineered menu can increase sales by up to 30%.
Design your menu taking into account the profitability and popularity of every item to draw the customer’s attention to your most profitable dishes.
Do the initial menu pricing correctly to reach the target overall food cost of 25–35% of your selling menu price.
Use a POS system to track menu costs per recipe and review them regularly to keep food margins at the target level.
A tip for you. Mixed beverages are a great way to make money on your menu because their gross profit margin makes 75–85%. Highlight them on your menu and instruct your staff to upsell customers by offering these items.
Your guests will enjoy cocktails while waiting for their food or while sitting and talking after they finish their meal. This leads to a more pleasant experience for them and a higher profit for you. Try pairing your low-margin food items with high-margin drinks to keep the balance.
In addition, fancy-looking beverages are in trend and your restaurant will appear on Instagram feeds more often :)
Managing inventory and supplies
Inventory checks are one of the most tedious and painful tasks for people who manage restaurant business operations. All the same, they can uncover countless ways to improve your restaurant cash flow. By tweaking your ordering schedules and volumes, eliminating potential areas of shrinkage and taking measures to prevent product waste, you’ll save a ton of cash.
Analyze the most and least popular items on your menu and minimize your sitting inventory to release cash that is blocked in your pantry.
Make an inventory of your food waste to track which foods typically don’t get used and adjust purchasing and food preparation to reduce the amount of money you throw away in your trash can.
Steadily increase the number of ingredients you source locally, which should result in fresher and tastier food for your customers, more productive supplier relationships, and lower purchasing prices for you.
A tip for you. Using inventory management software, like Poster, you can conveniently monitor how the fluctuations in purchasing prices affect the food cost of menu items.
Having purchased an ingredient at a much higher price, you can quickly check whether this increased the food cost of a particular dish to an unacceptable level. If so, you can temporarily adjust the recipe by reducing the amount of the costly ingredient to keep the food margin at the target level.
Managing restaurant finances
Opening a restaurant is expensive. Before a new place opens, its owner usually runs out of the funds they had to start the business. In the best case, a sum of money remains to cover sourcing and overheads during the first three months.
From the first day, restaurant managers often have to handle the business being cash-strapped. However, the restaurant may require additional funding for numerous reasons before it breaks even.
Whether it’s an urgent replacement of broken kitchen equipment or reconfiguring restaurant space, you should be able to find financing sources preferably without acquiring big debts or giving away equity.
Develop a detailed financial plan for one year ahead for your restaurant and allow extra money in the budget for contingencies.
If you are taking a bank loan, involve a private investor, or securing loans from family and friends, employ a professional consultant to negotiate fair terms and draw up an agreement.
Treat your investors with a long-lasting relationship in mind to develop a connection that you can count on in the future.
A tip for you. When you badly need funding but fail to get it in a traditional way, you could try crowdfunding. You can advertise the improvements you plan to make in the restaurant on a crowdfunding platform. If your restaurant has a great concept and loyal patrons, the public may be receptive to your appeal.
To motivate potential backers, offer them free Sunday lunches or hosting a private party for those pledging a big sum. You may be surprised to find that you can raise the money in just over a week. History knows people who crowdfunded to start their first restaurant and are now managing a restaurant chain.
Managing marketing campaigns
It’s often hard to predict and estimate the results of your marketing initiatives. There may be plenty of restaurant managing tips related to marketing, but the most important thing is to track the performance metrics regularly. When you experiment with different marketing channels, calculate the ROI of every marketing activity. This allows you to opportunely scale up or stop campaigns depending on their results. Only by knowing the figures can you ensure your marketing is fueling your business growth, not wasting your money.
Establish an online presence for your restaurant: launch a website, tap into social media, register on Google My Business, and get your restaurant reviewed on as many review platforms as you can.
Focus your offline marketing on delivering value to the local community: sponsor or host charity events and get your target audience involved in doing good deeds together.
Find the right balance between customer acquisition and customer retention campaigns: acquiring a new customer can cost you five times more than retaining an existing one.
A tip for you. Research the social media profiles of your patrons to build an actual customer profile for your business. For this, sign up to the profiles of people who tag your location in their posts.
Look through the profiles to find the most representative people. Find out what they have in common and study their communication style, interests, places they like to visit. The result may surprise you because your actual loyal customers may differ from those who you expected to see in your restaurant. The insights you achieve will help you adjust your marketing campaigns and attract more loyal customers.
We hope our top restaurant management tips will inspire you to further improvement and optimization of your restaurant workflow.