2020 was a worst-case scenario year for many restaurant owners. More than 110,000 U.S. restaurants closed in the midst of the pandemic, and many of those that survived are still struggling. As the tide starts to turn in 2021 and people are flocking back to restaurants, we’re now dealing with labor shortages and supply chain issues. It’s never been more vital to take a good hard look at your restaurant’s finances and REALLY take control of the situation.
If you started a restaurant, you probably didn’t do it because you love managing finances. You love to cook, to create, to make people happy with extraordinary dining experiences. But like it or not, you’ve got to look at your finances if you’re going to survive.
At DSR Hospitality, we provide fully outsourced management of restaurant finances for our portfolio of clients. We’ve seen it all, and we have the solutions. “One thing I always hear from restauranteurs is that they feel like they’re just churning money and never really getting ahead,” says Dakota Reid, President of DSR. “That’s why I recommend a fully transparent financial system with checks and balances. We work closely with restaurant owners to protect them from financial mistakes. We unpack and translate the financial information and give owners the tools they need to actually make a profit in their restaurants.” We’ve gleaned some of our best advice from our years of restaurant finance consulting, so today, we bring you our six tips for getting a grip on your restaurant’s finances in 2021.
1. Track Your Restaurant Cash Flow Every Day
It may seem obvious, but it truly all starts here. It’s not enough just to review monthly P&L reports: by the time you get the numbers, it might be too late to save your business. You need to have a DAILY window into the money coming into and out of your business every single day. We set all of our clients up with the Compeat system, a complete accounting and back-office solution that gives restaurant owners minute-by-minute business KPIs, inventory, labor, and accounting, from their computers or cell phones, 24/7. It’s accounting explicitly designed for restaurants, and it’s the backbone of what we do here at DSR Financial.
2. Design and Follow a Restaurant Budget
It all starts with a plan, and you don’t just want to count where the money comes in and goes out; you want to design it optimally. Starting with your restaurant’s goals, we proactively design flexible budgets that include a margin for variables like labor costs and ingredients. You will want to have short-term budgets and also projections that help you achieve your long-term goals.
3. Make Marketing a Priority
We know that budgets are tight, and there never seems to be enough money to go around. But if you stop marketing, you start dying, and there’s really no way around it. Take a look at your brand and your restaurant’s voice- is it fresh? Does it reflect who you are? IF you don’t know, your customers will tell you. Use the data you get from POS to reach out to customers with messaging that will bring them back. Check reviews and benchmark competitors. Reach out to our DSR team for help with brand identity and storytelling that will draw people to your restaurant and create raving fans that spread the word in your community.
4. Know your Customer Lifetime Value
Speaking of marketing, it’s a lot easier to know what to spend to acquire new guests when you have an understanding of your customer lifetime value (CLV). This term refers to the amount of money a customer will spend on your business over the course of their relationship with you- whether it’s over a few visits, a few years or a lifetime. Obviously, you’re seeking to earn a lifetime of customer loyalty, but you want to know what is the typical cadence- how often do people tend to visit your restaurant, and how much do they spend?
5. Explore New Business Models
Restaurant owners all pivoted in a panic back in 2020, setting up takeout and delivery systems on the fly to capture business while people stayed at home. We all had to find ways to become more touchless, with mobile ordering and QR code menus changing the experience for diners worldwide. Now many restaurants are seeing a return to in-person dining much faster than expected. It may be time to implement new reservations systems, and you’ll want to take a look at your takeout operations to decide what’s going to work well for the long haul. I would add something about learning how to keep the new revenue streams all the while staying a head of the game with increased guests. Opening up a commissary, prepping differently and maximizing their space in BOH to accommodate all the different ways
6. Evaluate and Optimize your Menu
Guest preferences are ever-changing, and ingredient procurement has become a bit irregular in the last year. Now that things are settling down take a good hard look at your menu. Can you easily identify which items are customer favorites and which are getting a bit tired? Build your menu strategically to encourage purchases, with an easy-to-navigate structure and a variety of price points. QR code menus make it especially important to have a clear, concise menu with readable fonts and photos that makes it easy for your customers to find and select the foods they really want to enjoy at your restaurant. We partner with Restaurant Partners Procurement to ensure we stay ahead of the game on the supply chain and make sure we get all of the manufactures rebates and purchasing credits to maximize earnings and stability to your COGS.
When you have that number, the next step is to GROW it! Adding on upsells like branded merchandise, bottled sauces, glassware, and take-home treats is one way to increase customer value. Promoting your appetizers, cocktails, signature sides, and desserts is another method. Consider combos and new ways to encourage guests to spend more once they are in your restaurant.
We hope these tips will help you navigate the new world of restaurant ownership and finances in 2021. If you’re seeking professional help, we have experienced restaurant consultants that are ready to help you. DSR Financial offers complete outsourced solutions to handle the business side of your restaurant. We become your partner, bringing the infrastructure and stability of a corporate restaurant to smaller to medium restaurant owners. We give you back your time, with complete visibility into your business at every moment. Contact us for more information on how we can help your restaurant succeed in 2021 and beyond.