Stop your profit margins falling | Kitchen CUT
In the UK hospitality industry alone, research is consistently showing that profits are down. Profit margins have plummeted from 19% to 1.5% – figures which for many businesses are not sustainable. The fact is, many companies are making a loss and are in danger. Here, Michelin Starred chef John Wood looks at the reasons behind the plummeting profit margins in the industry and the steps you can take to avoid disaster.
Making a profit in the the F&B industry has never been harder. Rising product costs, rising payroll costs, increased rents from desperate landlords and an extremely competitive market place that is flooded with new openings and company roll outs are just some of the key reasons why restaurants are struggling. The same can be said for the QSR, Casual dining and pub market. There is a high street “price war” going on with everyone battling for a piece of the available customer pie! Whilst the public are dining out more frequently than 3 years ago, they are increasingly price sensitive and are comparing the multiple options that are available to them.
What not do do!
With dwindling income and an unhappy bank manager, it’s tempting to have a “Knee Jerk” reaction when profits start to fall. I’ve seen many cases where panic sets in and a business resorts to using cheaper, low quality products, reducing portion sizes on all their dishes, then increasing menu prices.
Each of these measures, serves only to devalue your offering and punish your customers. This is the last thing you want to be doing in a competitive market as they will simply go elsewhere!
How can I survive?
In order to stay in business and increase profits, there are a number of contributing factors that operators need to consider. To get started, here are 5 tips to ensure you stay competitive.
Properly costed menus – You need to have properly costed food and drinks menus that are linked to your “live” supplier/vendor pricing. This will ensure that you are achieving a good mix of margins and that you are keeping your selling prices as competitive as you possibly can.
Manage your wastage – Ensuring that your menus’ “by-products” have been correctly utilised in other dishes. Being able to accurately monitor your wastage and most importantly see “why” it is happening will allow you to see patterns and trends that are happening in your business so that you can respond quickly. Check your bins – it is worse than you think.
Use Menu Engineering – Knowing the best performing dishes and drinks on your menu will help you manipulate your sales through menu psychology and pro-active suggestive selling. Basically, by changing the position of a dish on your menu and encouraging your service teams to sell, you will make more money/ profit immediately. But without Menu Engineering you cannot do this.
Buy smart Negotiate with your suppliers and look for alternatives and suggestions from them. Manage all your ordering, stock control, Invoices and credit notes through a full P2P and stock management system and you could save Thousands every month.
Manage your payroll Many businesses are bogged with additional administrative tasks which requires them to spend far too many hours per week in the office. This has a knock-on effect that there is more people required in the operations. Owners, Managers and Head Chefs are not spending enough time in their operations, managing their teams and ensuring that the teams are being productive 99% of the time.
Each of the factors above can be controlled, managed and monitored accurately and effortlessly with an intuitive system like Kitchen CUT. By getting to grips with these fundamental elements, you will build a platform to ensure your bottom line profit is improved.
Ultimately this will ensure you stay in business for longer.