How to Manage a Restaurant. Top Restaurant Management Tips that Help Increase Profit
May 1, 2019 • 12 minutes
The restaurant industry attracts a lot of talented, imaginative people who are thrilled by creating memorable dining experiences. While the public appreciates creativity in food service, a 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 your bottom line, it will most probably fail.
Let’s look at some tips on restaurant management that help set up effective processes, cut restaurant expenses 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.
Cloud POS for restaurants
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Restaurant manager duties
The difference between a highly profitable restaurant and one that is barely getting by is often the skills of the good restaurant manager. If you decide to manage a restaurant, be ready to work 12 hours a day in a hectic environment. Still you should also find time for self education, sharing experience with peers, and reading the best restaurant management books. Your day-to-day duties may include:
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organizing stock and equipment
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making orders and managing inventory
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recruiting and training staff
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coordinating staff scheduling and managing payrolls
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monitoring compliance with health and safety regulations
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handling customer complaints and queries
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preparing reports for performance analysis and more…
Restaurant checklists can help you with these day-to-day duties. While remaining hands-on in your day-to-day work, you should also be able to keep strategic goals in mind. Your main duty as the manager is to set up effective and smooth operation practices for your business. You are supposed to approach every aspect of the business sensibly and realistically to optimize restaurant 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. Consider that hiring a restaurant manager and hiring a chef would be your biggest challenges. The most Job advertising, recruiting, and training, along with the disengagement and lost productivity caused by staff shortages and premature departures, 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. To build a good team and retain them for a long time, you should be good at managing your restaurant during crises.
Must-do:
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Obey employment laws and introduce efficient tipping policy or healthy restaurant tip pooling practices, because one serious violation may not only cost you a fine but can spoil your reputation as an employer.
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Set up effective onboarding and training to help your front-of-house team avoid the common mistakes waiters make.
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Treat your staff with respect, set up clear expectations for their job roles, and decide on disciplinary actions for restaurant employees you’ll implement.
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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 of how to motivate restaurant employees rather than just raising wages. Give your team members opportunities to prove themselves creatively. This makes sense especially 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 posts on 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 you to calculate 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.
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Select a restaurant POS system with a front-office interface for employees who take orders and a back-office management console for managers.
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Find 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.
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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%.
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Design your menu taking into account the profitability and popularity of every item to draw the customer’s attention to your most profitable dishes.
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Price your menu so that you reach the target overall food cost of 25–35% of your selling price.
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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.
If you provide your customers with takeaway service or offer delivery, don’t make your entire menu available to-go. You should have a separate well-thought-out takeaway menu that includes high-margin food that travels and heat up well.
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.
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Analyze the most and least popular items on your menu and minimize your sitting inventory to release cash that is blocked in your pantry.
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Make an inventory of your food waste to track which foods typically don’t get used and adjust your purchases and preparation methods accordingly, so that you cut down on wasted ingredients.
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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 POS, 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 even 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 find ways to get by despite 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 restaurant kitchen equipment or fix restaurant plumbing issues, you should be able to find financing sources for restaurant preferably without acquiring big debts or selling away your assets to your investors.
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Develop a detailed financial plan for one year ahead for your restaurant and allow extra money in the budget for contingencies.
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If you are taking a bank loan, taking on private investment, or securing loans from family and friends, employ a professional consultant to negotiate fair terms and draw up an agreement.
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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 host 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 shows that entrepreneurs who crowdfunded to start their first restaurant can even go on to manage their own restaurant chain.
Every time your restaurant experiences hard times, you should revisit your cash flow, restaurant operating costs, expenses, and sources of funding. If you don’t do this timely during crises, your restaurant can start teetering on the edge of survival at any moment.
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 performance metrics regularly. When you experiment with different ways to attract customers to your restaurant, calculate the ROI of every marketing activity. This allows you to scale up or stop campaigns depending on their results. Only by knowing these figures can you ensure your marketing is fueling your business growth, not wasting your money.
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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.
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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.
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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.
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Make sure your marketing campaigns communicate the vibe of your location and build right expectations in your potential customers' minds, from prices, through employee communication style to the background music in your restaurant.
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 restaurant management tips will inspire you to further improve your restaurant workflow.
