In this current economic climate, it can be a challenge for restaurant owners to adequately plan for the future while dealing with the day-to-day necessities.
To learn about best financial planning practices, Modern Restaurant Management (MRM) magazine reached out to Ben Johnston, COO of Kapitus, which provides financing for small and medium sized businesses.
With ever rising costs for supplies and staffing, how can a restaurant owner/operator best plan for the future?
Restaurant owners should work to forecast their busy and slow seasons and use these projections to determine whether they are likely to need capital as they transition into their busy season.
This can be especially true going into the holidays. Banks have been reducing exposure to small businesses ever since the pandemic, and now with higher interest rates putting pressure on bank deposits and greater regulatory scrutiny, banks are reducing their loan books even more.
Fortunately, there are a number of small business lenders who have been expanding their ability to provide small business capital in the face of this bank contraction. Small business owners should consider exploring options with their bank as well as these non-bank lenders.
What can restaurants do to provide value for guests who are being particular with where they spend their dollars?
Restaurants trying to attract price conscious diners should make sure that their menus carry several low-cost, higher margin staples that can be sold at reasonable prices. Consider reducing the size and price of certain staples and then offering a “super-sized” portion for a higher price.
What can restaurants do besides offering competitive wages to attract and retain staff?
Flexible shifts and secure shifts may actually be more important than wages to some employees. An effort to maximize staffing levels by cutting shifts short or imposing last minute shifts can be very disrupting to employees’ lives. It may be easier said than done, but allowing employees more input into their shift times and durations can go a long way to creating employee loyalty.
In such uncertain economic times, what are best practices restaurants should put in place to be more efficient and try to be profitable? Should they rethink expansion plans?
When considering expansion plans, restaurants should understand the demand in their local market as well as the competitive environment. A restaurant’s success is likely to be driven more by the local economy and by the competition than by national economic indicators. That being said, unemployment remains low across the country and consumer spending is strong despite higher interest rates. We expect this continue at least through the holiday season.
In these uncertain times, we encourage restaurant owners to automate as much of their process as possible, keeping headcount light. Keep a close eye on your margins, and don’t be afraid to slim up menus and reduce hours of operation if demand begins to slip.
If someone is considering becoming a restaurateur, what are some economic realities they need to acknowledge?
Restaurants are expensive to start and can take years to become important fixtures of the community. As a result, it is important to have a good capital plan in place before you open for business. Most restaurant owners have financial backers to help them get off the ground, and debt financing relationships to help them grow and cover temporary shortfalls of capital. Having the right financial relationships is important, and fortunately there are a number of non-bank lenders who are able to provide financing options to restaurants.