16/10/2013 - 15:16

Refresh your business recipe

16/10/2013 - 15:16


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The health of the hospitality sector is a good barometer of the state of the overall economy.

HEART STARTER: Global giant Starbucks is feeling the pinch, having closed 600 stores recently.

Many businesses feel the pinch during the tough times, but restaurants and cafes often bear the brunt.

Whether independent or part of a franchise chain, no business is bulletproof. A general drop in customer numbers and customer spending has been coupled with an overall increase in operational expenses – and this can be a recipe for disaster.

There have been significant job losses in the restaurant and hospitality industry recently, as businesses seek to cut costs; even global player Starbucks has closed more than 600 stores.

Rising utility prices, unrealistic rents and higher costs from suppliers are leaving many restaurants and cafes fighting for survival.

If this situation rings true for your restaurant or cafe business, it may be time to re-evaluate your objectives and put aspirations of growth on the back burner. Survival is now the priority if you want to live to cook another day. So, how to move forward?

Rethink your business plan

The business plan you (should have) created, provides an overview of growth and budgeting strategies that you designed at the onset of your business journey. Now is the time to take another look at it and find ways of adapting to the current climate. Most likely this will involve shelving any growth plans and minimising overhead expenses such as marketing, refitting and staffing.

Go and work in your business

This is a major cost cutter and also allows you to take control of day-to-day expenses, wastage, stock rotation and other issues as they come up. It is amazing the number of cafe/restaurant owners who feel they are above working in their own business is ridiculous.

Scrutinise your profit-and-loss statement

This is the place you will find ways to cut costs. Look through carefully and find ways to trim the fat. If you don’t know where to start or how to interpret the numbers, find someone who can.

Look at the operating cost; look at the food purchased and where smarter buying can save you dollars. Do you need a bookkeeper or can you do this yourself and have you the correct level of staffing?

Renegotiate everything

Communicate with your suppliers, landlord, bank, and utility providers – everyone who costs you money. Spend time shopping around for the best deals and remember, if you don’t ask, you don’t get.

Analyse your menu

Look at your menu in terms of profitability. Check portion sizes, how often each item sells, scrap unpopular dishes and focus on giving the customer what they want and are willing to pay for. This will vary according to your location and style of service so make sure you know your market and cater to it.

Don’t underestimate how much money can be made in a well thought out menu. Give clients what they want in an acceptable portion size and you will gather repeat business. What you want to cook may be a luxury that you can’t afford; you must cook what your customers want to pay for.

Stand out from the crowd

In poor economic times, every venue is competing for customers’ hard-earned dollars. You need to find your unique value proposition. If your food is all organic and locally sourced, include a blurb in your menu that highlights this. Find innovative, low-cost ways to stand out.

Most importantly of all, you must stay focused on the future. Running any business is a journey, full of constant challenges, highs and lows. Stay flexible, invest in your staff and yourself and you can succeed. If you feel you lack the confidence to implement some of these guidelines find someone who can on your behalf. There are many business advisers and professionals who will fight in your corner so use their experience and skills as an investment in your future if you need to.


Paul Rowe is managing director of The Business Squad, which works with businesses to implement strategies, systems and procedures to improve performance.  


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