If you own a restaurant, you know the importance of providing great tasting food and enjoyable customer experience. However, this is merely the start of what you need to do when managing a restaurant.
Restaurant management is just like running any other business; you need to take care of all aspects of the organisation to ensure it runs smoothly.
This is equally the case for small restaurants with just a handful of staff as it is for large chains with multiple outlets.
One difference is that a smaller restaurant may not have the resources to hire employees to perform each task, leaving a lot of the responsibility on the owner and making restaurant management difficult. This can be especially daunting if they don’t have any formal restaurant management experience.
If you are a restaurant manager looking for tips about how to improve your business, then look no further. This article is a full guide that will detail how to manage a restaurant.
Here is a look at what we will cover:
Table of Contents
- 1 1. Mission Statement and Strategy
- 2 2. Production
- 3 3. Managing Your Employees
- 4 4. Finances
- 5 5. Marketing
- 6 6. Procedures
- 7 Wrapping Up
1. Mission Statement and Strategy
In most cases, coming up with a mission statement for your restaurant is straightforward. You just need to be clear about why you set up your restaurant, what sets you apart, and what you hope to achieve. Some mission statements from famous restaurants are:
- In-N-Out Burger: Serve only the highest quality product, prepare it in a clean and sparkling environment, and serve it in a warm and friendly manner.
- Panda Express: To deliver exceptional Asian dining experiences by building an organisation where people are inspired to better their lives.
While the mission statement is relatively simple, things get a little bit more complicated when it comes to a business’s strategy. Writing in the Harvard Business Review, Michael D. Watkins defines a business strategy as:
“a set of guiding principles that, when communicated and adopted in the organisation, generates a desired pattern of decision making. A strategy is, therefore, about how people throughout the organisation should make decisions and allocate resources in order to accomplish key objectives.”
Basically, a strategy is a roadmap that defines how a business’s mission will be accomplished. It will tell you what to prioritise and will drive the decisions that you make. Your mission and strategy will influence all parts of your restaurant management, as every decision you make should be, on some level, one that will push you towards achieving your mission.
Restaurants produce two things: food and experience. Managing production comes down to creating an experience and menu that will bring in customers and allow the restaurant to operate at a profitable level.
Producing great food that aligns with your mission statement is arguably the most important part of managing a restaurant. However, doing so in a way that can drive your business to success is the ultimate aim. Because of this, it is important that you get menu pricing right.
How to Price Your Menu
Most restaurants will make most of, if not all, their money through the menu. Price your items too low and you won’t make enough money to survive. Price your food too high and you’ll limit the number of customers who come to your restaurant.
There are many things you should consider when pricing your menu, including your restaurant’s positioning and the cost of ingredients.
When pricing menu items it is important to set the prices at a level that will provide enough profit for your restaurant to be successful based on the anticipated number of customers and the cost of running it.
Calculating how much it costs to produce each item on your menu shouldn’t be too problematic – simply tot up the price of all the raw ingredients that go into each item on the menu. This must be accurate: if your avocado salad uses a third of an avocado, you need to work out exactly how much this amount of avocado costs.
Once you have worked out how much an item on your menu costs to produce, you can price it at a level that will generate enough profit.
Jonathan Deutsch, a Food Studies professor at Drexel University, says many restaurants aim for food costs to come in at around 30 to 35 percent of the menu price. However, he points out that this may differ if a restaurant has particularly high operating costs, such as rent and staff, or if it sells a high volume of lower cost food.
Alternatively, restaurants that make a lot of money from drinks or events may not mind a slightly lower profit margin on some food items to get people through the door.
Your food costs are unlikely to be uniform across the menu. Some items will have higher base costs while others will come in lower. Think about grouping high-cost items with low-cost ones to balance this out. You could do this through set menus or offers.
Keep Your Menu Pricing Up to Date
Costs of ingredients change frequently. Because of this, you should ensure your menu prices reflect this.
You’ll have to balance any price increases with potential backlash from customers. Perhaps swap out menu items that are becoming too unprofitable with new items to avoid this. By putting the focus on the excitement of the new item, regular customers may be less annoyed by the change than if you simply raise prices.
How do Your Prices Fit in With the Competition?
A final thing to think about is competitor pricing. If a competitor is selling pasta dishes for between £11 and £15, you may struggle to sell yours in the £18 to £22 range unless you have other ways of differentiating yourself. This is problematic if that’s how much you need to sell them for in order to be profitable.
You do have options, however. Think about swapping out expensive items for cheaper ones or reducing the number of pasta dishes you sell so you can buy certain items in bulk at a lower cost. Alternatively, you could reduce the profit margin on the pasta dishes but increase it on some of your other items.
Understand the Customer Experience
While your food may be the bedrock of your restaurant, the overall customer experience is arguably as important when creating a successful business. Good restaurant managers will take steps to understand the current customer experience and ensure their restaurant provides a great one.
Reports have listed the importance of customer experience to customer spending and loyalty. For example (via Benbria.com):
- An American Express survey found that 7 out of 10 consumers spent more money with a company that delivers great service.
- The Harvard Business School found a one-star increase in a restaurant’s Yelp rating correlated with a revenue increase of between five and nine percent.
- New Voice Media found 51 percent of customers will cut ties with a business after a single bad experience.
- In an OpenTable report, 69 percent of diners said complementary extras would increase customer loyalty, while 65 percent said seating preferences would do the same.
There are several things you can do to understand the customer experience. Asking diners to provide feedback through surveys is one method. Alternatively, you could check reviews on websites like Trip Advisor to see if any trends appear that could point to your restaurants’ strengths or weaknesses.
Finally, speaking to staff that regularly deal with customers could provide insight into what it is like to eat at your restaurant.
How to Produce a Great Customer Experience
A 2017 Deloitte survey into customer experience identified five things that diners want restaurants to provide. These are over and above the basics of quality food, good value, great staff, a convenient location, and cleanliness.
The five things restaurants can do identified by the survey were:
Engage the Customer
The survey found customers thought being engaged by staff at the restaurant was important to customers. This was especially the case with sit-down meals as the customers spend more time with staff.
Empower the Customer
Restaurants can empower customers by providing them with the knowledge they need to make good decisions, as well as the ability to personalise what they order. Personalisation was found to be especially important in takeaway and delivery restaurants. It was also the second most important factor in sit-down restaurants.
Listen to Customers
This relates to the ability of customers to provide feedback on the restaurant experience. While the survey found that this wasn’t normally especially important, it became more so if anything went wrong during their time at the restaurant.
Delight the Customer
Restaurants can delight customers by creating an appealing ambiance or using sustainable practices.
Know the Customer
Knowing the customer doesn’t necessarily mean staff being on first name terms. Instead, it relates to restaurants remembering customers and personalising their experience to make transactions easier. Customers found it to be especially important for takeaway or delivery restaurants.
3. Managing Your Employees
Your employees are an important part of your restaurant. Ensuring you have the right staff, from dishwashers to chefs, can help drive your business to success. Here are some things you should think about when managing your employees.
Hire the Right Staff
The first step is to ensure you hire the right people in the first place. When you hire you should look for people who are likely to have a positive influence on your restaurant and fit in with existing employees and culture.
When publicising jobs, be clear about the duties of the role and what will be expected. This will reduce confusion later.
Train Employees Well
The next step is to train your employees to allow them to perform their duties effectively. For restaurant owners or managers with lots of experience, it can be tempting to assume that staff will know how to perform certain less important tasks. However, this may not be the case, especially if the person doesn’t have experience in the restaurant industry.
One way to ensure all your employees are on the same page is to provide training programs and manuals that they need to complete. These programs will be specific to each role and will contain all the tasks employees need to perform.
When the employee has learned how to do each task in the program, the trainer — be it a manager or a senior employee — can check the task off the list. This lets everyone in the organisation know the training has been completed.
You could even think about creating short training videos that show employees how to perform tasks. This is a technique that has been used by sandwich chain Arby’s, with their vice president telling Restaurant Business Magazine the company thinks “providing content in the same ways that our restaurant employees are consuming all other content” is important.
Clearly Define Employee Roles
Clearly defining the roles of those who work in your restaurant can ensure everyone knows what they need to do and who they are reporting to at any one time. This way, if an issue arises in your restaurant, your staff know exactly whose responsibility it is to take care of the problem.
Defining roles is also essential if you are a restaurant owner and you expect to take time off. By designating someone who will be in charge while you are away, and who reports to them – as well as what they should do – your restaurant will be able to survive without you, even if it is only for a short time.
Release Work Schedules in a Timely Manner
Scheduling is important both for managers and employees. Ideally, you will produce your schedule as far in advance as possible so that employees can confirm they are available when you have asked them to be.
Additionally, you’ll need to be aware of variations in how busy your restaurant is likely to be. While most weekday evenings may be fairly quiet, if the following day is a public holiday or if there is a large event happening in the area, you may find your restaurant is busier on those days.
You should be fair with shifts, especially when it comes to weekends or working on holidays. Unless you hire part-time staff with the specific intention of covering these days, you may find it best to rotate who works on these days so people always get at least some of the weekend off (assuming they want it off).
A final thing to remember is the legal requirements of the area you work in. You may have staff who want to work every day for as long as possible. However, not only does this risk burnout but it may also be breaking the law if they work over a certain number of hours in a day or a week.
Unlike a restaurant’s menu or product, a restaurant’s finances won’t drive it to success.
However, getting finances wrong can lead to your business failing. Profitable restaurants with lots of customers and high revenue can also go bankrupt if finances aren’t managed correctly.
Unfortunately, managing finances is one of the more difficult parts of running a restaurant, especially if you don’t have any formal training. Still, with a bit of preparation, there are things you can do to manage your accounts better.
Understand Your Cashflow
When organising your finances, the most important thing is to ensure that you always have enough money coming in to cover expenses.
While this sounds simple enough, the unpredictable nature of the restaurant business means it isn’t always as easy as it sounds. Because of this, you should ensure you have a good understanding of your restaurant’s cash flow.
The first thing you should do is make a note of all your expenses. This can be food, rent, staffing costs, equipment, drinks, debt payments, energy bills, and anything else you need to pay for. This will give you an idea of how much money you need to earn per day, week, month, or quarter to cover costs.
To ensure you have the money to cover these expenses, you’ll have to be able to estimate how much money will come into your business.
If your restaurant has been around a long time, you should have a good idea about how much you will make in sales in a given period.
If not, you should start tracking your restaurant’s daily sales to build up a record of money coming in. This will allow you to spot trends. The longer the period you have this information for, the more accurate your estimates are likely to be.
Create a Cash Flow Forecast
Once you have this information, you can create a cash flow forecast. While it will never be 100 percent accurate — sales can vary compared to your forecast or unexpected costs can arise — a cash flow forecast will give you a good idea of when and how much money is expected to flow into your business, as well as when payments need to be made.
If you notice you aren’t making enough money to keep your business afloat, you’ll have to take steps to either reduce costs or increase profits.
For example, can you save on labour costs by having less staff in work at a given time? Alternatively, can you cut costs on food by reducing waste, or refining your menu? You may also be able to reduce expenses by paying for supplies up-front or refinancing any loans you are making payments on.
Other restaurants may find that they can raise prices or attempt to sell more high margin items in order to increase the amount of money they have flowing into their business.
Marketing is a key part of building a business’s sales. Restaurants are no different. An effective marketing plan can provide a stream of customers coming to your restaurant. This can be the difference between success and failure for a business.
There are two main goals when it comes to marketing: building your brand and increasing sales. Some methods of marketing will do both, while others will focus on just one aspect. When choosing a marketing strategy, you’ll also need to decide between online and offline marketing solutions.
Here are four steps to think about when choosing a marketing plan. For more information about marketing, you can check out our guide to restaurant marketing.
What Do You Want Your Marketing to Achieve?
The first step to choosing a marketing plan is to decide what you want the plan to achieve. The objective you choose should be realistic, yet one that will be worth the investment you spend on it. It can also be helpful to set a timeframe for the idea. Here are some goals you could use:
- Increase sales by 30 percent.
- Increase the number of customers on Tuesday evenings.
- Increase lunchtime spend by 10 percent.
- Improving brand recognition in the local area.
- Increase the percentage of repeat customers.
It’s possible to use more than one objective at a time, although you don’t want to overstretch yourself and your resources.
Who is Your Marketing Aimed At?
Once you have defined your marketing goals, you need to ensure you know who your customers are and who your marketing will be aimed at. This will allow you to choose messaging, offers, and marketing channels that are most likely to resonate with your audience.
One way to effectively get to grips with your customers is to create a buyer persona. This is essentially a model of your restaurant’s ideal customer and it is the person you will target your marketing at.
Buyer personas include customer details like age, gender, location, and income level, as well as information on the person’s buying motivation and buying challenges. There are many ways you can get this information including customer surveys, data from your restaurant’s social media pages, competitor data, and data from Google Analytics.
Many restaurants serve a number of different customers types so you can build profiles for each one. However, it may be difficult to effectively target the same marketing campaign at more than one persona.
What is Your Message?
All your marketing efforts should have a message that fits in with your restaurant’s mission and is likely to appeal to your buyer persona.
The message is essentially what you want your restaurant to say. For example, that you are a fun place to go, that you only use organic ingredients, or that you provide a high-quality dining experience.
What is Your Offer?
The next step is to choose an offer that is likely to resonate with your buyer persona and fit in with your messaging. The offer should also be attractive enough to make people want to take it up.
Be aware of how messaging on offers can clash.
For example, a good offer for a fine-dining restaurant could be complimentary wine. On the other hand, a big discount could cheapen the brand while free shots of tequila are unlikely to be attractive to the ideal buyer persona.
How Can You Measure Your Marketing ROI?
The final step is to work out how to measure the ROI of your marketing campaign. This will let you know if your campaign is effective. If you notice it isn’t, you can make adjustments. For example, change the offer or the design of the advert. Alternatively, you could stop the campaign.
To find out your ROI, you need a way of measuring a metric before, during, and after a marketing campaign. This metric should relate to your marketing aim as specified in part one.
For example, if you want your marketing to increase customers through the door on Tuesday evenings, you just need to work out how many customers you normally get on Tuesdays, and then how many you get during and after the marketing campaign. You’ll then need to compare this to the amount you spent on the marketing campaign to get these people through the door.
There will always be outside factors that could affect your measurements. For example, if on a Tuesday before you start marketing the weather was bad fewer customers may have visited your restaurant than normal.
If you use this number as a base, it could make your campaign seem more effective than it actually is. Because of this, the more historic data you have access to, the more likely it is you will be able to gain an accurate ROI reading.
As you have seen in this article, there are a lot of things restaurant managers need to have under control.
While this may seem overwhelming to those who have just begun to manage a restaurant, they can be made much easier through the creation of standard operating procedures. These are the things that make the difference between running a restaurant and managing a restaurant business.
Why Create Standard Operating Procedures?
Standard operating procedures are standardised processes that tell those working in an organisation how things should be done. In restaurants, they have several benefits including:
- Ensuring quality in the food you serve. By using the exact procedure you know will result in the highest quality finished meal every time you cook a dish, it is easy to ensure every dish you serve is high quality.
- Providing a consistent customer experience. Customers return to your restaurant because they enjoyed the experience the first time around. Having set operating procedures ensures the experience will be just as good each time they come back.
- Make work easier for staff. When staff understand what they should do in every situation, from greeting customers to clearing the table, there is no confusion when it comes to performing the task. This can make things quicker and easier.
- Reduce the effects of staff turnover. Staff turnover in restaurants can be high. By having set procedures, you aren’t relying on any one employee to get things done in your restaurant. It also makes it easier for new staff to get on board.
- Reduce reliance on the manager. Without a written down set of operating procedures, the success of the restaurant relies on the knowledge of the person in charge. This increases pressure on the manager and can make it incredibly difficult for the restaurant to continue should the person in charge need time off or be unable to work.
- Satisfy health and safety regulations. Many areas require restaurants to have a set of standard operating procedures regarding how they handle food in order to comply with health and safety regulations.
How to Create Standard Operating Procedures
Before you create standard operating procedures, you need to decide if you are generally happy with how your restaurant does things, or if you would rather create a new set of optimal procedures.
If you are happy with how things are done, you just need to follow the steps below to note how the tasks are completed. If you want to optimise your steps, you need to find out what exactly an optimal step is. How you do this will depend on the procedure you are creating, although one way could be to find out what the industry standards for that task are.
In terms of documenting your standard operating procedures, you have several options. They can be created and stored in a Word document or using software like Process Street. You should choose the method that will be of most use to your team.
Each procedure should consist of:
- The name of the task.
- A summary of what it is for.
- The exact steps the people involved should take to complete the task.
To do this properly, you’ll need to speak to the people who are already doing each task to discover if you have missed anything out. You could also ask for input about what could improve the steps.
Once the process is written down, you can begin to test them out to ensure that:
- The steps work.
- The steps are written in a manner that is clear to those unfamiliar with the task.
Once you have written down all your standard operating procedures, it can be helpful to organise these in a procedure manual. This will make it easy for you and your employees to find how tasks should be performed when needed.
Effectively managing a restaurant means juggling several roles. However, it isn’t an impossible task if you are clearly focused on what you are doing and have a strong mission and strategy.
Having great food, a profitable menu, and providing an excellent customer experience will put you on the path to success. Ensuring your finances are in order, processes are in place, and that you have a core of reliable, well-trained staff will help you put your plans into action.
Hopefully, the ideas explored in today’s article will help you manage your restaurant to its full potential.