We all know that hospitality has always had exceptionally slim profit margins but here’s a sobering statistic: according to the Australian Bureau of Statistics, if you own a restaurant in Australia, you can expect an average profit margin of around 3.8%.
The biggest profit killers in the restaurant industry are CoGS, labour, and overheads. A rule of thumb is that each should be around 30% of a venue’s total spend. The reality is that for most venues this won’t be the case but identifying the biggest culprit can give you a good indication of where to start.
With RCA’s 2021 Report showing that over 32% of venues didn’t turn a profit or only broke even, implementing some of these profit boosting strategies is a necessity. The three main ways to widen your profit margins are increasing sales, improving your operations and decreasing costs.
While there’s no way of avoiding these costs altogether, there are many creative ways to rein them in - which is crucial given the current climate hospitality venues are forced to operate in. We know that you're busy, so we’ve put together a few easy ways to see fast results with minimal changes to the daily running of your business:
Scrap dishes with low profit margin that aren’t popular with customers, or which take up excess staff time to prepare. Your menu should ideally offer 9-10 options max.
When you bring produce into your restaurant, it’s likely that it’s used for one dish and nothing else. This greatly increases the likelihood that you’ll end up with deadstock or product spoilage. Cross-utilizing inventory, from starters to desserts, will ensure you are able to optimise produce for maximum profits.
For dishes that are popular with customers but make little profit, use Foodbomb to compare similar ingredients that may be cheaper. You may also want to review the size of dishes, research suggests that you can decrease your meal sizes by 10% without customers noticing.
Encourage your staff to be creative with inventory that has been sitting on your shelf - use a bottle of wine to make Sangria! Your deadstock is liquid cash and there are always ways to sell it on and boost profitability.
Take the dishes with the highest profit margin and promote those via ‘Dish of the day/chef’s special.’
Seafood Night, A Taste of Italy, Beef and Wine Pairing – whatever makes sense for your restaurant. This is also a great idea for events such as Valentine’s Day or Mother’s/Father’s Day.
Combine your highest profit items into a deal such as ‘coffee and cake’, ‘parma and a beer’ or a 3 course meal.
Offer a set menu of high profit dishes for private functions. You could also add in a booking fee to hire out the restaurant, or set a minimum spend.
Use online comparison websites to find cheaper utility providers. Promo-offers are in abundance to nab new business.
Check your pantry and fridge and create dishes from ingredients nearing their ‘best before’ or ‘use by’ dates. Get every bang from your (ingredient) buck! There are always creative ways to remain sustainable.
“We reduce waste by utilising bread off cuts for croutons!” - Tanya Wilson from Token Toasties
Bonus Tips:
Prompt staff to ask customers to add extra items to their order eg. sides, starters and desserts.
Sell restaurant gift vouchers at various price points. When done right, a loyalty program can keep guests coming back more often, have them spending more money overall, and makes them more likely to recommend your restaurant to friends. Just make sure your program is easy to use!
Ordermentum is the smarter ordering solution for food service. Order everything you need in one place, find the right suppliers and get full control of your COGS
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