Monday, March 28, 2016

The $5 Whole Chicken and Beer

I was in the Northern Boot of Idaho on a Steel-head fishing trip and found myself in the towns only bar. It was defiantly a throw back in time complete with a smoke filled bar area and karaoke blaring away on a big screen that appeared to be one of the first ever built. It was late and my group was hungry when the special posted above the bar caught my eye. "Anglers Special:Whole Chicken and Beer $5". I couldn't pass that up so I ordered up. About a minute passed when my server returned with a bottle of Coors Light and one hard boiled egg and with a grin giggled "That'll be $5 bucks....enjoy!" The locals were enjoying the moment tremendously and I must admit I thought it was pretty great myself.
The restaurant guy in me also thought what a great marketing scheme.
In the restaurant/bar business real world it more often than not leads to not so humorous consequences.
The good old "Loss Leader" these days can turn into just a Loss pretty easily with a few other unintended consequences. Lets look at how savvy customers work around the leader these days. Example: "1/2 Off Dinner Tonight at Bella Viva Italian Bistro". The owner is thinking that the deal will fill the place and the customers are sure to buy that great bottle of wine where the profit will live. The COG on the one plate is 30% which I will receive the full price for, they will surely spring for a full price app as well. I'll only be giving away 30% on the free plate so my investment into getting the customers to purchase the others will only equate to $4.50 (Entree is $15). This will be great!
2 for 1 (1/2 off) $15
App $9
Bottle of wine $32
Bill for two $56
Entree $ 9 (60%)
App $1.80 (20%)
Bottle of Wine $9.50 (29%)
Gross Profit: $35.70 (63%)
Sounds like a great way to promote and get those new faces that will surely be back at full price right?
Now here come the deal seekers and they are savvy, "We'll have the Chicken Alfredo and water with lemon and can we get some more bread and olive oil". Your COG just went above 60% which is UN-survivable. The next night someone else has "The Deal" and round it goes. Your special should be your product and the environment and manner in which it is presented. The restaurant business runs on very tight margins, choose your path wisely. Another unintended consequence is reinforcing the average customers belief that you make a killing at full price and by cutting the price by 50% just goes to show that....I mean, Look at your's packed, you must be making a fortune!
There is a formula, it is necessary for success just as a good location and revenue stream are. Follow it and compete with a better quality product and your chances of an enjoyable and profitable endeavor increase dramatically.  If your revenue stream is dependent on giving it away change your approach.  
If your going to work for free find a good charitable organization and make the world a better place! This is a business, run it like one and it will reward you in the greatest of ways, mismanage it and you will work the longest of days everyday just trying to survive.
There is a difference at The Restaurant Farm, your not a commission, your a restaurant person and I speak restaurant. If your considering selling or buying I hope you'll place a call and lets have a discussion about YOUR goals and what will work for YOUR unique situation. If your restaurant/bar is struggling, let InLine Restaurant Consultants help. "Long Live Small Independent Business in America" 

Thursday, December 10, 2015

Keeping your Food Cost on point

I love the show "Bar rescue", I enjoy it mainly for the entertainment value and do not rely on it for improving restaurants/bars in the real world. One of The Restaurant Farms sister companies is InLine Restaurant Consultants. We don't have the drama of the TV show but InLine does rescue restaurants/bars. I thought I would offer a technique I've used in some cases to hit a target regarding food costs as my blog for this month. When I say "I Speak Restaurant" I mean it. If it helps you as the owner or manager get a percentage down, that would make my day.
I'm going to keep it simple because the best solutions are often that way.
1)Pull your food sales from your POS at the end of the week.
2) Calculate the percentage you want, for this we will use 30%.
Example: Food sales $1,000.00 x 30% = $300.00
3) Inform your Kitchen Manager that the order cannot exceed this amount. Be prepared for a debate but hold the line even if it's with yourself.
Running tight means running weekly on a daily basis period. 
I've taken food costs from as high as 42% down to 30% by using this simple method. There are certainly adjustments that have to be made, but the method makes those stand out for you to address with either portion control, pricing or waste control.
I'll be back to blogging about buying,selling or expanding in January's blog.
Have a wonderful profitable customer filled Holiday Season!
If your thinking about selling, expanding or buying I hope you'll include a conversation with me.
George Hilliard
"I Speak Restaurant"
The Restaurant Farm
KW Commercial Atlanta Perimeter 

Friday, November 6, 2015

Know the Signs

Know the signs or lose it all

One of the most difficult tasks of brokering restaurants is informing an owner that their investment has become an "Asset" sale. An asset sale is the term used to describe a business that is negative cash flow usually ranging from $99,000 down to as low as $20,000. There are always going to be "Monday Morning Quarterbacks" but at that point opinions won't change facts. I often hear "I put $350,000 into this", there is no good news to answer that with, a buyer is looking for a positive cash flow, a good location or the potential which the seller can't sell. 
This blog is not intended to be about how to avoid getting into this situation, its intended for "You are in it already" and how to cut your losses before there is nothing left to lose.
1) Sales are slipping but not that badly: If you see a 10-15% drop in your revenue stream you need to be on high alert. First, talk to your sales reps.. Don't ask them about a specific location, you would not want that information going to your competitors right? Ask them if orders are slowing generally speaking and across the board. They will be aware if a down trend is happening in your area. If there is a downtrend then tighten up your operation and weather the storm if possible, find the leaks and plug them. Get your staff together and make them aware that it is widespread, morale is a key element in any business. 
On the other hand and this is important, if others around you are doing well and your operation starts to slip you would be wise to consider a move, a 10% slide going to 18% the next month often turns into 50% or greater quickly. People like to be where people are, they like the "Buzz". 20% less people in your place means 20% more people elsewhere and the momentum is moving away from your favor. Hoping they will return more often than not leads to catastrophic failure. 
The trouble starts:
#1)You take the "It'll work itself out" approach.
#2)You move to drastic specials where you do not make money hoping that you will become popular at which point you can remove the special and start making a profit.
#3)You collect Sales Tax but commingle those funds with operational money and cannot recover in time to Pay the Taxes.
#4)You fall behind in your lease obligations. Depending on your Landlord, he may start the eviction process after no cure in 30 days, I've seen it allowed to continue for months and payment plans arranged for when "Things Turnaround".
There are other signs but these are generally the Red Flags that time is now working against you and the longer you hold out the more options you lose.
Take #4 for example: If you are under the eviction process you cannot list, a buyer will know this information and why buy what you can take for free. I've seen operators misread this agreement to take payments from the LL as a pass to keep trying and although no one can dispute that sometimes it works out in the case of a general downtrend, if its the other more often than not the lease payments are still missed as well as the arranged "Catch up" payments. The Landlord will most likely become very aggressive at that point. Think it through carefully, if you've bought some time it may serve you best to use that time to list and sell.
I had a client that had made an accepted offer with earnest money, when we met with the Landlord to secure a new lease as part of the APA, the LL informed us that the current tenant was out in two months and had no lease to transfer. Needless to say we pulled the deal, got the earnest money back and my clients signed a new lease with the LL while the tenant received nothing.
As much as it pains me to see anyone lose their dream, it pains me more when they lose it all. If anything in this blog strikes home in your situation please reach out to a restaurant broker and sit down to discuss what your options are BEFORE you have none left.
I hope you'll include me in that conversation.
George Hilliard
"I Speak Restaurant"
The Restaurant Farm