Is Your Restaurant Business Thriving?

Have you completed a small business checkup at your restaurant lately? If not, you might be overlooking ways to improve your eatery’s financial health and learn to thrive in this challenging economic climate.

Full tables, employees earning solid tips, shifts being fully staffed and the restaurant having the ability to source quality provisions at reasonable prices and dependable delivery times, are among the signs the business is thriving, according to Ben Johnston, COO of Kapitus. He added that wage expense should be stable and within a range of 20 to 30 percent of revenue and rent expense should be within six to 10 percent of revenue. 

If you are experiencing the opposite: if check sizes and alcohol sales are declining, employee turnover is increasing, and vendors are refusing to deliver without receiving payment in advance, then your business is not thriving, he warned. 

“Owners should be examining the table turns and cash receipts of the business daily and comparing them to expectations for that day of the week and time of year,” Johnston told Modern Restaurant Management (MRM) magazine. “If sales are slipping, the owner will need to consider promotions to drive additional business or cost cutting measures to maintain margins.”

One way for restaurant operators to have a sense of security is to have flexible and emergency funds on hand. 

“Sales in the restaurant business or notoriously volatile,” Johnston said. “Having the ability to access capital to help bridge slow periods and ramp up spend in advance of the busy season is important. A restaurant would ideally be able to keep one month of operating expense on hand in order to handle any unforeseen expenses or business volatility, but if this is not possible, having a strong lending partner is key.”

Having an understanding about debt can help operators make long-range informed decisions.

“Restaurant owners should use debt opportunistically to finance long-term investments in the business such as the purchase of equipment and furnishings,” he added. “As tables, chairs and kitchen equipment wears out, it can degrade customer and employee experience. It is important to keep the restaurant concept clean and fresh. Securing loans to purchase new equipment can be an important way to match payment of for new equipment with the expected life of these materials.”