The biggest mistake of restaurants owners

Some actions to pay attention if you wanna thrive through this pandemic.

Everyone knows how hard the pandemic hit all sectors, even so, some owners and managers, while trying to survive, are worsening their situation. If you don’t wanna be one of them, read about what you shouldn’t do.

Opinion based decisions.

It may be cliché, but while trying to solve a problem or thinking of a new way to bring revenue to your restaurant, this is what you should avoid at all costs.

When we talk about entrepeneurs, we know we’re talking about action, imediatism and confidence, even more so when we hear how their feeling made them successful.

Yes, a feeling may have got right once, but you can’t give yourself the luxury of picking wrong when the pandemic is dealing the cards.

And all of that can be avoided with the proper embasement to guide your decisions. If you don’t know how to do that yet, i’ll show next.

The first step to embase your decisions is to know your restaurant. The majority of owners does not have a proper hold of their KPI’s or even know which KPI’s they should be aware of. Because of that, they also don’t know how their decision affects them.

To be sure your feelings aren’t going to throw into disarray your operation, be sure to:

• Confirm your problem and quantify it (you can run a few tests or calculate what you think is the main problem to assure it).
• Antecipate how the solutions will affect your whole operation in the best case cenario and in the worst.
• Test it first. (Always, always test it first in small scale, you don’t wanna make big investments only to see you put the effort into the wrong solution).

For a better understanding i’ll ilustrate an example:

John has a beverage bar with two employees, working from 18:00 to 23:00. He knows that with the restriction in place, he can’t pay the rent, providers and it’s employees. He needs more money.

As you can see, John doesn’t know exactly what to do, he needs to raise the income of his bar, but that can happen in a lot of ways, cutting work force, working longer hours, raising price, increasing marketing effort, negotiating the rent and reducing costs with his providers.

Here, the first step he has to take is to quantify his problem, how much money he needs? For that, John will have to antecipate his revenue, costs and due dates using past data to better a estimative.

He can also raise a few data of his bar to understand better what kind of solution fits better into the situation. Like his revenue per hour and day of the week, how much he’s spending with each of his providers, what are his most sold beverages and how much each customer tend to spend with him.

After quantifying his problem and with this informations gathered, he already can make a much better decision than before, he now knows wich of his products sell better and can focus on negociating with that providers, he can also focus his marketing into the products with low sales that he already have good cost prices. Aside from that he will be able to adjust his work force to better cover the hour with most sales and antecipate his stock, keeping it minimum to avoid stopped assets, he can create bundle pricing promotions to estimulate the custommer spending and sell together his most sold and most profitable products.

The next step is to calculate each one of his solutions and understand wich one of them is easier to achieve and also wich one of them put him closer to the amount needed to pay his expenses. A few of them can just be especulated, but it’s good to have a starting point and just keep adjusting with his first tests (like the marketing campaigns and work hours). Does not forget to especulate the bad side for each one of them, the same way things can go right, they can go wrong.

The last step is to start testing. He can start negociationg with his oldest provider or with the one he has the greatest power of bargain (high volume, fidelity or rapport). The bundle pricing and low cost products can be provided as promotions on the least customer flow hours and be adjusted accordingly to the feedback and reports of sales. As to his stocks, he must try buying only the amount needed to sustain the operation between providers deliveries dates.

For John’s case cenario, if he went with his feeling to bring solutions he could have made some mistake, like erasing a few products from his stock to avoid raising the acquiring costs and loosing profitable products or marketing oportunities. Sending off one of his employees and losing the work force needed to serve his costumers. Even raising the price of his products could have had a bad impact and reduced his clients fidelity and frequency.

All of that could be avoided with the proper embasement acquired with the three steps mentioned earlier. Also, the solutions brought with this process are more effective and directed onto the business objective.

That’s for John’s case, but you, will you understand better your own operation to avoid decision based opinions?