7 ways on how NOT to cut costs at your restaurant!

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7 ways on how NOT to cut costs at your restaurant!

Most independently owned restaurants close their doors for the last time, within their first year of operation. In fact the statistics show a staggering 90% close within that first year. Despite this shocking statistic, there are innumerable chefs and front of house people lining up like lambs to the slaughter.

Only last week I visited a newly opened eatery and couldn’t help but remark that it would hardly make it past the three month mark. They all have this massive honeymoon period, most get huge traction on social media but when the dark Tuesday evenings in February set in, so does a nice big helping of reality.

Of course most fail because they are undercapitalised, but quite frankly most fail because they get caught up in believing their own hype about the prowess of their chefs cheffing skills. Sure they may be able to cook a mean steak or a delicate piece of fish but that alone, coupled with a fancy fitout, will not pay the rates on those dark Tuesday evenings. Those with solid management and accounting are more likely to make it past the first twelve months as are those in a chain of some description.

Your competitive environment has a big impact on success and failure as has your ability to identify trends and change rapidly to meet consumers’ needs. When you start to struggle, here are the things that you shouldn’t do in order to survive.

  1. Hire unqualified staff!! Staffing is a massive overhead so you would think that it’s the first place to start looking. I can tell you though from first hand experience that underpaid, unqualified staff are typically demotivated to the extent that customer care and customer retention suffers badly. So just when you need customers to return, you start to serve them in a way that makes sure they won’t. Waiting for menus for 30 minutes, not charging for those extra drinks, not getting orders right are all hardly a way to guarantee your success. Some new restaurants even cut corners on hiring staff to compensate for a construction budget that has overran. It’s the fallacy of a fool.
  2. Cut Quality & Portions!! Probably one of the first, and most common, strategies restaurateurs use to save money and although it can bring about savings, beware the risks. The customer who can’t find the chicken in their chicken salad is unlikely to recommend you, or come back. This is where restaurants need to finely balance that need to deliver value in every experience. Cutting costs is fine but looking at it purely from a financial perspective and not from a “delivering value” perspective, is a sure fired way of making you part of the unfortunate statistic discussed above.
  3. Over advertise!! Please don’t hire an external social media person to post on social media just to have a presence. I was delighted to see a local restaurant post on social media that they were “open all day for brunch” on a bank holiday. So I headed off with a sense of excitement, drove for 20 minutes, secured and paid for parking, bought my paper and walked to the restaurant. Imagine my joy to find out the shutters were down!! Standing around with another four customers, we decided not only to frequent another establishment but also decided that we probably wouldn’t return. They had cost us time and money but more importantly they had disrupted our bank holiday.
  4. Close Early!! If you have started closing earlier and earlier believing this will save you money, you’d better rethink your strategy. Most places think that by letting the kitchen staff go early or by focusing a smaller team on prep time between shifts, that they are saving money. The reality is that the owner rarely sees the amount of people that are either turned away or turned off, because they just don’t know when the establishment is open. Only last week, I witnessed a restaurant turn away four couples at 3.30pm in the afternoon and all whilst there was a big sign outside that said “open for food”. Now do you think any of those people will be back to ask that question again? Pick your hours and stick to it. Change them if you have to but don’t forget to engage with the people that matter most.
  5. Listen to your chef alone!! Absolutely no point in being able to cook the best steak if all your customers want seafood. Very little point in opening a seafood restaurant in a fishing village that is overpopulated with seafood restaurants. You have to be able to respond to your markets and respond to your competitive environment. The restaurant business is not just about how well you can cook. Sure it’s an important part of a restaurant’s success but focusing on that alone will mean a short lived life. It may be that the chef has to go, but what if the chef is the owner?!! Some places say that if the chef goes, you may close the doors. Most sustainable restaurants will find that actually it’s the overall experience that matters and while a chef has an impact, he/she is only just one cog in the overall machine.
  6. Penalise your customers!! Yes it’s true, some restaurants that are struggling actually penalise their customers and it comes in the form of the “service charge”. An extra revenue stream for restaurants for the privilege of delivering a worse service! It’s more cost effective to serve a table of six than it is to serve three table of two, so why tell all those family functions, office outings and other valuable groups, that you would be better off frequenting somewhere else. It’s penny wise and pound foolish and I personally have refused to go to establishments that ask you to pay extra for bringing a large volume of business to their door.
  7. Dismiss genuine feedback!! Some chefs and managers do a tour of the restaurant asking people if their meal was ok?. A large proportion of these however are doing so to get their belly rubbed and can’t actually handle genuine negative feedback, they just expect people to tell them what they want to hear. When someone goes out of their way to provide feedback, it’s typically not an easy thing for them to do so you should be thankful of the feedback and embrace it as a possible learning curve to improve the restaurant. In one situation relayed to me recently, the owner acknowledged that the service wasn’t up to scratch but felt the feedback from his customer was a little harsh as they were really very busy…I doubt that customer will be back to pay for his excuses again and I doubt the restaurant will see past the winter.

Dulann is a provider of technology-enabled learning solutions for many of the world’s leading organisations. Services include Product & Process Simulations, Contractor Inductions & Employee Onboarding, Mandatory & Commercial Training, Contractor Management & Learning Management Systems. Dulann are also the leading provider of online food safety L1 & L2 to the Irish Hospitality sector.

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About Damian Donlon.

Damian is a Non Executive, Senior Consultant, Interim Manager and Talent Adviser with specialist experience in the Construction & Technology sectors. Please feel free to contact him directly on 0879218616 for a confidential conversation.