5 Ways Your Restaurant is Losing Money

Starting up and running a profitable restaurant business is not an easy feat. Even before your restaurant can start accepting customers, you will have to invest in a variety of things. The things include your restaurant space, renovations, equipment, point of sales system, utensils, ingredients, cooks, staffs, marketing, branding and many more. That is a lot.

Tracking and monitoring cashflow closely is then vital to the survival and subsequent success of your restaurant. This is especially true if you are a new restaurant. New restaurants should expect to run business without profit for the first six months as it gains momentum.

During this period, it is crucial that you track and control your overall spending. Furthermore, if you are able to set the right culture early on, it will be easier for you to maintain your business as it grows and expands into multiple outlets.

Now, let’s look at some of the ways your restaurant might be losing money.

1. Theft

Theft is common in restaurant business. It has been a constant challenge and it can come in various forms. The most common forms include theft at point of sales, food supplies and in accounting.

The usual suspects?

Staff

A staff who works at the cashier/point of sale is the most likely suspects when it comes to cash theft. They are well trained about the point of sale system and most could figure out how to get away with stealing small sums of cash. For example, taking cash from the register or intentionally voiding items. They might not be taking a lot. Just some here and there, but adding up those up could cost you in the long run.

To learn how Slurp Point of Sale can help your mitigate theft at your point-of-sale, sign-up for a free 1-on-1 demo now.

Your staff can also steal food and beverages that indirectly causes you to lose money. There are instances of employees who has been caught giving out free meals to their family and friends. Some employees may also walk away with your supplies or equipment.

Suppliers

When it comes to suppliers, it is wise for you have multiple options. Having options lets you compare and make better decisions. You can also have backups when one of your suppliers fails to deliver. Depending on only one supplier may lead to unnecessary cost. Some suppliers take advantage of this and charge ridiculous prices.

Owner’s Family members

It is surprising to discover that family members can contribute to a restaurant business downfall. This happens because some family members have the mentality of “ownership” and they think that the restaurant is also theirs. So, they come and eat as they please without paying. This is a form of theft and if not handled properly, can lead to significant amount of loss for the restaurant.

The Owners

The biggest thieves in restaurant business is in fact, the owners themselves. Owners sometimes will use the money from the business to fund personal expenses or use it to pay for non-business-related activities. This will affect the restaurant’s cashflow in the long run and could put the restaurant at a halt.

2. Poor inventory management

Managing your inventory in a proper and consistent way is crucial. By doing so, you can maximize ingredients and optimise your product output. Without proper inventory management, your restaurant is prone to losing money. You can lose money in terms of dead stocks, overuse/underuse ingredient, expired stocks, accidentally paying suppliers twice (yup this happens to the best of us), incorrect info leading to oversupply and many more.

Inventory management is a tedious job, but it needs to be done. You should come up with a standard operating procedure (SOP) that can help guide your employees to do regular inventory checks.

A lot of restaurants are still using the traditionally method which is using spreadsheets applications such as Microsoft Excel. Inventory data are manually entered which make its prone to human errors. It is also not efficient and takes so much time and energy to execute. Luckily, with new technology, most of the manual work can be automated.

For example, Slurp Inventory management is a solution that enables restaurants to keep tabs of their inventory with MUCH LESS effort. This system is easy to learn and use, have customisation features so you can tailor it to your restaurant and is able to keep track of data in real-time.

To learn how Slurp Inventory Management can help you save money, sign-up for a free 1-on-1 demo now.

3. Long wait times

Long waiting times usually means that your restaurant is full, which is always a good sign. However, you stand to lose money if you are unable to reduce that waiting time. If you are able to optimize and increase your serving speed, you can potentially gain higher sales. How? By serving MORE people in the same amount of time.

One way to increase speed is by equipping your waiter with an ordering app, a Waiter App. With the app, they can take orders and send the orders (over Wi-Fi) straight to the kitchen without even leaving the customer’s table. Your waiter can then go to the next customer and take their order straight away. By doing this, you can significantly cut down the time, especially if your restaurant space is big.

To learn how a waiter app can help your restaurant reduce wait times and increase sales, sign up for a free 1-on-1 demo now.

Another way to help increase the speed is by having a table management system. With this technology, your staff can visually monitor orders, wait times, and the duration that the customers are in the restaurant. During a service, your staff can prioritize and optimize their service accordingly. As a result, you can serve quicker and attend to customers at a timely manner which makes them very happy!

Another way to increase speed is to improve your payment process. Having a smooth payment process that is hassle-free can help improve customer’s experience and alleviate stress from your staff during peak hours. Bear in mind that a stress-free staff will serve better than an over worked staff.

Apart from accepting credit or debit cards, you should also leverage advantages of mobile wallets. Integrate popular mobile wallets such as Boost Wallet with your Point of sales and you can instantly gain access to their 2.5 million customers and have the ability to promote digital voucher.

To learn how you can start accepting Boost Wallet, sign up for a free 1-on-1 demo now.

4. Not understanding your customer’s wants and lack of customer service

Recently, we had the privilege of hosting a F&B Talk at SukaSucre Bistro for restaurant business owners. We collaborated with SukaSucre as well as with F&B coaches, coach Zuraina and coach Yusainy.

Based on her PhD studies, Coach Zuraina found that it is no longer sufficient for restaurant to just serve good food. Restaurants need to start understanding their target market personas.

A buyer persona is a semi-fictional representation of your ideal customer based on market research and real data about your existing customers – Hubspot

You need to understand your customers by asking specific questions such as what are their roles, goals, challenges, personal and family background and shopping preferences. Once you have enough information, you can start creating personas and customize your restaurant’s offerings based on the personas.
Coach Zuraina also pointed out that a personalized customer service can have lasting impact on your customers. They are more likely to talk positive things about your restaurant and share their good experience with their peers.

As a restaurant owner, you have to lead the way by interacting and engaging your customers on a personal level. Then, you should train your staff to replicate and provide the same level of service.

Cultivating this culture of excellent customer service will differentiate you from most of your competitors. You will also make your customers feel appreciated and well taken care of.

If you think it takes a lot of work, it does. But that is the reality if you want to differentiate your restaurant and be successful.

5. Lack of menu engineering

Running a restaurant is a dynamic process and you need to constantly make small changes or shifts according to your market demands. You can no longer set up shop and pray for sales to soar.

An important aspect of running a restaurant business is menu engineering. It is a concept first introduced to restaurants by Professor Donald Smith from Michigan State University in the 1980s.

Menu engineering concept is used to study your restaurant’s profitability and understanding which menu is popular among your customers. Both of these are then used to determine your menu placements in your menu books.

By strategically designing your menu, you can subconsciously encourage your customers to buy your most profitable menu and discourage them from the less profitable.

There are various channels for you to learn menu engineering such as the internet, books and coaches like Coach Zuraina & Coach Yusainy.

There you have it. These are by no means an exhaustive list, there many other ways your restaurant might be losing money. If you have other suggestions, please feel free to share it with us!