Ask the expert

Ask the Expert: Now Open, Now What?

By Rick Braa, CHAE

With the Governor of Washington opening the state 100%, how do I reset my business for operations going into the busiest time of year?

After over a year of roller coaster closures, partial openings, hopeful moves forward in capacity and indoor dining, devastating moves backward and struggles of a world turned upside down, it’s time to prep to open available capacity to 100%.

One of the most difficult riddles to solve is the timing of opening. Seasonal restaurant sales often double or triple non-season sales. This is just one of several issues facing the industry as it reopens. For the best beginning:

Control the flow from all directions: reservations, door,

third-party, operating hours. One of the lasting positives of the past dreadful year is the opportunity to control opening and closing hours as well as seating and third-party delivery orders. Restaurants traditionally opened and closed the same hours most days with increased hours on weekends. Many restaurants have unprofitable hours of the day. Since the world was disrupted over the last year, consumers have better training on checking hours of operation for businesses and accepting limitations on seating. Now is the time to drive sales per operating hour by optimizing opening/closing hours, reservations and third-party delivery platforms. Stay closed on unprofitable hours and open only when you are properly staffed, service can be flawlessly executed and profitably can be maximized.

Compete on culture not wages. Higher wages are inevitable and to afford higher wages productivity and retention must increase. Paying the most can help but having a strong culture where the staff knows they are making a difference is more important than the highest wages. Tie your culture to a platform for impacting the community and your staff will thrive.

Train, train, train—repeatedly.

Increase pricing. During the pandemic consumers used third-party platforms to support their desire for tasty restaurant food and beverage. Prices may have been the same for the items being sold but the premium of delivery charges added to the cost of a meal. Consumers were trained to pay more for restaurant quality product. Shortages in the supply chain are increasing cost of goods and services. Labor shortages and minimum wage increases are requiring higher wages. Take advantage of the consumer retraining and increase menu prices thoughtfully and carefully. The impact on margins is not one for one. For example, if prices are increased 10%, margins increase less what is directly paid on sales, e.g. credit card fees and percentage rent. Costs may increase 10%, netting 90% of the price increase. A base sales decline, however, will have higher variable costs as a percentage and likely have a cost reduction of a minimum of 40%. If sales were 1,000,000 per year, the new sales number would be 1,100,000 and if margins were 10% net prior to the increase, the new margin would be 190,000 or 17% based on a 10% increase in variable cost. If base sales decrease 10% as a result of a 10% price increase, the cost of that 100,000 sales loss is 60,000 by avoiding 40% variable cost. The net is 30,000 margin increase even though sales stay the same. If guest counts stay the same, that 90,000 margin increase stays in the business. While guest counts may decrease from higher prices, keep in mind your guests are glad you’re back and willing to pay for it.

Reduce the size of your menu by 10%-20%. If you haven’t already, decrease your menu size and keep it tight, increased execution and productivity will reward you. While it has been a devastating and trying year, the beginning of the next chapter is here. Control and drive your business strategically, attract and keep the best people, train like crazy, take a price increase and keep your menu small and tight and your profits will put this trying year well behind you.

For a more information on improving profitability and driving sales, contact AMP Services at rbraa@ampservices.com. Rick Braa is the founder of AMP Services, an accounting and consulting firm specializing in helping companies grow profitability. 