The restaurant business is one of the most difficult and competitive industries to take on. Many restaurants fail because the owners don’t understand restaurant operations and management.
We always hear the exaggerated claim that 90 percent of new restaurants fail. It isn’t that bad, but it is a risky business. According to a 2012 study at Cornell University, approximately 60 percent of restaurants fail in the first year.
According to the study, most of the reasons restaurants fail are avoidable. Having great food isn’t even in the top five reasons for success. At the top of the list is poor management and a lack of operational standards.
Many people who love food and are great chefs open restaurants but they don’t have any business training or they aren’t good leaders. It’s true that food, ambiance and location are important, but you need business savvy. You can have the chic-est burger joint in town, but if your food and staff costs are consistently higher than your profits, you are going to sink.
Are you one of these people who goes to a restaurant and complains about the mark up on a bottle of wine, or says something like, “How can they charge $30 for this when I could make it at home for five dollars?”
If you can make it at home, stay home. There is a reason wait staff have to count on tips. The profit margin on food isn’t very high. Many restaurants make their money on alcohol sales.
Chef Graham Pratt is the chef at The Gabardine, a popular dining establishment in the competitive restaurant scene in Toronto. He says that they use Excel to track budgeting and operations, including the following:
- Food Costing
- Scheduling staff
- Order lists
- Prep lists
- Par levels (What we go through on a daily basis.)
Graham works with restaurant management consultant, Nanci Giovinazzo of Food Forward Consulting Services. Nanci uses spreadsheets to help chefs find that balance.
“I do something called restaurant metrics, so I created a very minimal incremental expense report with prime costs of what’s coming in and out of a restaurant. I use Excel for that. It’s essential for restaurant management and operations.
I train the senior management in understanding what is involved in menu development and menu engineering and moving it on to the actual business on the plate. It’s not necessarily how beautiful the restaurant is or how great the service. The only product they sell is what’s coming out of the kitchen or the bar. All the prices have to include all of the expenses, all of the moving parts. There is a very simple way to make that understood.”
Daniel Ferry is a Microsoft MVP and the founder of the Excel Hero Academy. He may not be a restaurant consultant but he understands the benefits of Excel in many businesses.
“The menu idea is interesting and yes, Excel could assist in menu management to determine appropriate pricing and item inclusion.
Excel could also be very helpful to model how much of each ingredient should be on hand based on ranges of predicted customers and predicted order selection from the menu.
And then like virtually all businesses, Excel can be very beneficial in employee scheduling, payroll and HR management. In addition, accounting is often accomplished with Excel.”
Check out Daniel’s Excel Hero blog.
By using a PDF to Excel converter, restaurateurs can add another level to their operations spreadsheets.
You can scan or import all your POS receipts, your expense receipts and your invoices and convert them to a spreadsheet. This saves a lot of work which is an incredible value when you are running a fast-paced business like a restaurant.
If your dream is to open a restaurant and receive those rave reviews, don’t forget the practical side while you are working on the creative. Those organic, locally source ingredients are delicious but you have to be able to cover the cost and make a profit. Having the figures in front of you allows you to plan your menu, serve the finest ingredients and still pay your sous-chef.