Many restaurant operators believe that price is the key to profits. While this may be true in some instances, it’s certainly not an absolute truth. Many restaurants don’t have pricing power and must operate on extremely thin margins. Price is less important than cost control when you can’t command a strong premium for your food or beverage offerings. Here are seven ways to boost restaurant profit margin without raising prices:
Pack Your House With Productive Labor: Increasing labor productivity will help drive up bottom-line results by reducing labor costs as a percentage of sales. A big challenge facing restaurants today is the rising labor cost and the increasing difficulty of attracting and retaining good workers. You can also create flexible labor schedules. Look for opportunities to allow your staff to work extra hours on certain days or at key times when business is strong. By increasing labor flexibility, restaurants can improve sales per hour while reducing the number of employees needed. This will also allow you to communicate staffing needs in advance rather than last-minute labor issues resulting from inadequate planning.
Leverage Technology: Technology can be a great way to improve productivity. Restaurants should look for new ways to use tablets instead of paper menus; they can usually be charged directly to customers’ bills without increasing food costs—but only if you have excellent online ordering capabilities. And don’t forget about bar-code-driven POS systems that permit bartenders and waiters to ring up orders at the tableside rather than spending time running back and forth between the kitchen and dining area.
Using Design To Boost Profit Margin: Design is a critical factor in the profitability of today’s restaurants. Restaurants without distinctive design elements are less likely to generate enough traffic to keep pace with rising labor and food costs. Look for ways your restaurant can deliver a better experience at higher prices by choosing the right colors, materials, lighting, and music.
Capitalize On Customer Loyalty: Restaurants should work hard to build customer loyalty by offering promotions that reward loyal customers and encourage them to visit more often. A good loyalty program can increase repeat business—but only if it’s properly optimized, so you’re not paying too much on average per sale while obtaining incremental sales.
Choose The Right Technology Suppliers: No restaurant can be successful without the right technology suppliers. These days, it’s critical for operators to choose suppliers and vendors wisely since they often directly impact profit margin. Look for companies with innovative products that help you better manage food costs while offering great value to customers. For example, using a unique POS system that automates order taking makes ordering more efficient – which cuts wait times and lowers costs by reducing how much time is spent preparing the order. Making just one change like this can significantly increase returns at your restaurant.
Increase Dessert Profitability: Restaurants should consider boosting profits by being more flexible with desserts and other ancillary items that don’t carry a high cost of goods. For example, instead of offering only a few limited desserts, you might try adding a dessert sampler that allows diners to choose which types they want from several different categories (chocolate/vanilla bean; pie/no-crust).
Expand Alcohol Sales: Restaurants should look for ways to boost alcohol sales without alienating customers by doubling wine markups or raising drink prices. Instead, open up new opportunities to sell drinks by offering 2-for-1 specials at lunch; offer special happy hour pricing for well drinks, with a limit of two per customer; or offer sangria pitchers during the weekend brunch period.
The average restaurant profit margin is still a critical element in the success of your restaurant, but not all efforts to improve margins are likely to be successful. The best opportunities for improving bottom-line results are often found outside of price increases and food cost reductions, but you have to work hard as an operator to identify such solutions.