Restaurant Expert David Scott Peters' SMART Systems Blog

Demystifying Restaurant Financial Statements – Part 2

admin — Tue, 31 Aug 2010 09:21:44 +0000

By David Scott Peters

Restaurant Tip of the Week

There are three basic tools/reports you need to understand when it comes to demystifying financial statements. They are the balance sheet, the profit and loss statement (P&L) and the general ledger. All of these tools are intimately connected; one cannot exist independently of the others.

The P&L

Let’s make an assumption that you take a picture of the business (a balance sheet) on the last day of each month. That picture has changed from one photo to the next. Things happened to make those pictures change; deliveries were accepted at the back door, customers came and purchased your products, people worked and were paid, and so on. A P&L is like a movie showing all of those things happening on a daily basis. Simply put, a P&L is a moving picture or movie that shows everything that went on in your restaurant between the times you took the photos.

David Scott Peters is a restaurant expert, coach, trainer and speaker, specializing in teaching independent restaurant owners how to use systems for increased sales and increased profits. He is the nationally acclaimed restaurant coach whose unique “SMART Systems” approach to boosting profits has earned him the title of, “The man who can walk into any restaurant in America and find $10,000 in undiscovered cash before he hits the back door – Guaranteed!” Visit www.TheRestaurantExpert.com for more. Learn more tips, tricks and secrets in David’s free five-part e-course, “How to Explode Your Restaurant Profits NOW!” Simply sign up to receive the e-course at TheRestaurantExpert.com.

Restaurant Marketing – Inside Your Four Walls

admin — Thu, 26 Aug 2010 09:11:06 +0000

By David Scott Peters

Following a few of my favorite four-wall marketing ideas.

Have a calendar of events to tell people what’s going on in your restaurant. Include everything from live music to the night when kids eat free. Include happy hours and special event celebrations, such as a prime rib dinner for two for New Year’s Eve. Put the calendar wherever it’s appropriate in your restaurant: on the tables, in your menu, on the walls, etc. But please make sure to keep it current. Replace those calendars on the first of the month without fail.

Put a fishbowl up front to collect business cards for a free lunch. Do a drawing for one winner a day for something small. Let your frequent diners win something. They won’t want to eat their free meal alone, so they’ll be sure to bring their friends. Or go bigger and pull a card a week for a happy hour for 10 of their closest friends. Include a set number of drinks and appetizers. They’ll have so much fun; they’ll stick around and spend more money. Then post who won and bring attention to the fact that your frequent customers are rewarded.

Try a bounce-back, something that encourages people to come back to earn their reward. This is like a frequent diner card. Give customers a card and once they get 10 punches, they get a free meal, appetizer, something. But make sure it matches what they’ve been spending. If you punch the card for sandwiches, reward them with a free sandwich, not a free drink or bag of chips.

In full-service restaurants, give them a bounce-back coupon with their checks to drive other parts of the business. For example, for lunch customers, you could give a $1 off a breakfast order. Whatever your bounce-back is, make it worthwhile. Give them a reason to come back.

Marketing within your four walls to the people who are in your store is a great use of your money.

Demystifying Restaurant Financial Statements – Part 1

admin — Tue, 24 Aug 2010 09:20:39 +0000

By David Scott Peters

Restaurant Tip of the Week

The balance sheet

The balance sheet is a tool that shows you the health of your business. The simplest way to think about a balance sheet is like this: take your digital camera out and take a picture of your business. Print out the photo on your printer immediately. What you will see is a snapshot in time, showing what assets you have and who owns them.

Increase Restaurant Sales

admin — Tue, 17 Aug 2010 09:21:10 +0000

By David Scott Peters

Restaurant Tip of the Week

There are only three ways to increase your sales:
1. Find new customers.
2. Increase their visits.
3. Increase their ticket size.

The most expensive and slowest way to increase your sales is to focus on finding new customers. The easiest and fastest way to increase your sales is to increase visits and ticket size. Focus your marketing dollars in these two areas.

Restaurant Accounting Tip

admin — Tue, 10 Aug 2010 09:19:59 +0000

By David Scott Peters

Restaurant Tip of the Week

Know Your Restaurant Accounting

Understanding your accounting is a building block of your success. Why? Because the financial statements are the report card for the business and if you get a bad report card, you need to know where to look to get your grades up. Your accountant is the expert, but you do need to be able to recognize if what they have produced is accurate. It’s important to know what they need to give you reports that are useful in running the restaurant. If you don’t know how to read your financial statements, ask for a tutorial.

Restaurant Expansion Pitfalls

admin — Thu, 05 Aug 2010 09:30:42 +0000

By David Scott Peters

I’ve talked to a lot of restaurant owners who are looking to expand their businesses these days. With deals on real estate and low interest rates, it could be the right time for you, too. Before you make any moves, make sure your systems, concept and numbers work before you expand.

The systems

Many independent restaurants are successfully built on the premise that you — the owner — are on the floor, in the kitchen, managing the books, greeting guests, etc. The problem with this situation is that the business is dependent on YOU!

If you expand under this scenario, your original location will ultimately suffer. When you remove yourself from the floor, a void will be felt in direction and leadership. And your customers will notice you are not there to touch tables. But with operational systems in place you have the ability to work on your business, not in it. With systems you empower your management. Not only do they know what to do, they know how to do it and how to get it done. In addition, your guests have married the idea that your managers are the people to know, not just the owner.

And on top of that, systems create a paper trail, allowing you to monitor your managers and ensure they are doing their jobs, making it easier for you to monitor multiple locations.

The concept

Assuming you know who your customers are (you’ve been collecting their email and mailing addresses for marketing and customer loyalty purposes), you can contact a list broker such as InfoUSA.com and ask them to tell you about your customers by giving them your list. They will be able to tell you an incredible amount of demographic information. With this data in hand you can start to look for other markets where the population matches your current customer demographics.

Other things to look for when picking a new location for your concept:

Traffic patterns – are you on the going-to-work side or the going-home side of the rush hour?
Traffic drivers – are there other businesses nearby or next door that cater to your demographic?
Other restaurants – while many operators feel like having a lot of other restaurants around you is a bad thing, I think they are a benefit because they make your block a destination for dining out.

The numbers

When it comes to the numbers, I want to bring to your attention the the things that are probably the most important:

Design costs: Designing your new restaurant can be exciting because it’s finally the chance to fix everything that doesn’t work in your current location. While fixing these current issues can be critical to making your new location work, many restaurant owners fall victim to what I like to call “The Taj Mahal Syndrome” or TTMS for short. It’s when you see all those people waiting every weekend to dine in your restaurant and you think that if you build bigger, they will come… you build your Taj Mahal! But building bigger means higher debt service, which can kill a restaurant faster than anything else. And building bigger can give the impression of a less popular restaurant if there are more seats to fill and fewer butts to put in them. This will cost you, too. The key to designing your next location is to not forget about what made your customers fall in love with your concept in the first place and then modify for efficiencies after that.
Debt service: With a second restaurant you have greater corporate or overhead costs. While you think you can do all of this on your own, I’m here to tell you that you’re underestimating how much time two locations are going to require from you. As you put together your business plan, make a 5 percent to 10 percent allowance from both restaurant budgets to take care of expenses.
Cash flow: Profits don’t pay your bills, cash does! I can’t tell you how many great restaurants I’ve seen go out of business because of the cash flow demands of the second restaurant. Managing the flow of cash in and out of one restaurant is often the key to its success. Imagine that times two.

Moving forward

When you look at your business and determine that it’s time to expand, it can be extremely exciting. With that type of exuberance you need to tackle your business plan to make sure this is the right move for you. Make sure your restaurant’s success is not dependent on you alone, that your concept has legs and the numbers work. Most importantly, also remember that while all these are really important, nothing can replace being a good operator.

Restaurant Marketing Ideas – Part 2

admin — Tue, 03 Aug 2010 09:19:27 +0000

By David Scott Peters

Restaurant Tip of the Week

Tell people what’s going on

Put a fishbowl up front to collect business cards for a free lunch. Do a drawing for one winner a day for something small. Let your frequent diners win something. They won’t want to eat their free meal alone, so they’ll be sure to bring their friends. Or go bigger and pull a card a week for a happy hour for 10 of their closest friends. Include a set number of drinks and appetizers. They’ll have so much fun; they’ll stick around and spend more money. Then post who won and bring attention to the fact that your frequent customers are rewarded.

Stop the Struggle in Your Restaurant

admin — Thu, 29 Jul 2010 09:01:31 +0000

By David Scott Peters

Make your restaurant fun and profitable again

I teach independent restaurant owners how to use operational systems to be more efficient and to position themselves to compete with the chain restaurants around them. But running a successful restaurant goes beyond systems. It requires the right attitude as well.

You work hard every day to make your restaurant a success. But if you’re not having fun, do you think your employees are? So give yourself a timeout and see if your restaurant could benefit from implementing any of the following ideas. I know you can make your restaurant fun and profitable again.

Appreciate your guests. There is an acronym in the industry that focuses on putting your customer first. GUEST stands for greet, understand, educate, satisfy and thank. Without your guest, you have nothing, right? So show them that you appreciate them and that you appreciate that they want to spend their discretionary income in your restaurant. Make them glad they chose you to do business with.
Appreciate your employees. One of the best ways to make work fun is to make it fun for everyone who works with you. And you can make coming to work and being at work more fun in the way you treat your employees.
Try some new and inexpensive marketing ideas. When you’re lean on cash and can’t afford a lot of advertising — outside your four walls — I encourage you to look inside your four walls for advertising opportunities, also known as four-wall marketing. You’ve got them in your doors, now you need to tell them what you do. Give them more reasons to come back.
Increase the chatter. Teach your employees that they have everything to do with how much money they make. If they simply take orders instead of taking an opportunity to sell with each order, it’s their bank account that suffers. If they can increase ticket averages, they can increase their take-home dollars. It’s the art of the upsell.
Create a little competition. Develop server incentives and contests that encourage upselling and increase sales. Not only teach them how to upsell, but pick items, whatever it is that you want to sell, and create a concept, something fun. For example, the server who sells the most specials one night gets the prize. Or whoever sells the most bottles of wine in one night wins. Get them to compete with each other, increase their ability to sell, increase their average ticket. They make more money, you make more money. It may have cost you a little bit of money to put up, whether it’s a cash prize or movie tickets or whatever, but it’s a lot less than advertising. And it fuels great customer service, giving your customers the feeling that they’re special.

You spend a lot of time inside your restaurant’s four walls and so does your staff. But it shouldn’t be a struggle. A few simple things can make work fun again. I challenge you to implement just one of these ideas and see the response you get from customers and employees. If it works, let me know.

Restaurant Marketing Idea – Part 1

admin — Tue, 27 Jul 2010 09:18:55 +0000

By David Scott Peters

Restaurant Tip of the Week

Tell people what’s going on

Have a calendar of events to tell people what’s going on in your restaurant. Include everything from live music to the night when kids eat free. Include happy hours and special event celebrations, such as a prime rib dinner for two for New Year’s Eve. Put the calendar wherever it’s appropriate in your restaurant: on the tables, in your menu, on the walls, etc. But please make sure to keep it current. Replace those calendars on the first of the month without fail.

Restaurant Bar Controls – Foaming at the Tap

admin — Wed, 21 Jul 2010 09:01:12 +0000

By David Scott Peters

When foam is OK and when it’s not

I’m a beer guy, so talking about beer gets me excited! But nothing peeves me more than watching a bartender pour good beer down the drain in the form of foam. It screams profit loss.

A great beer is much like a good wine; it has bouquet, aroma, flavors and all these different characteristics, imperfections and so on. Then there are beers that aren’t meant for taste, but are meant to specifically quench your thirst.

Either way, every good beer comes with a little foam, and while just the right amount of foam is good, too much foam is your nemesis.

What is foam?

It’s beer!

What’s beer?

Your product!

Where do you make profit?

Selling your product!

Do you have the bartender who swears he has to open up all the tap handles and run off the foam? Stop! That’s money that could be in your pocket instead of down the drain.

Don’t let your bartenders pour your profits down the drain. Find the problem, solve it and educate your staff.

When foam is bad

If your bartenders seem to be pouring more foam down the drain than they are manaHere are the three main causes of foam:

Incorrect pressure – too much or too little.
Interrupted flow in the lines caused by something such as ice or kinks in the line.
Temperature – if it varies somewhere in the lines, you’ll get foam.

These things are correctable and since it’s like liquid gold for you, call your distributor and ask them to come check it out. They will only check out their lines, what their kegs are on, but call them all in and ask them to take a look. A good distributor should be cleaning your lines at least once a month, if not every other week. They want you to put out the best product possible, and they don’t want too much foam. So they’ll take care of you.

When foam is good

Write down the three ‘Ps’, the reasons why you should have one inch of head on every beer you serve.

Presentation. You want it to look good.
Protection. It’s going to keep the carbonation in, the temperature right and the flavors in.
Profit. An inch of foam is two ounces of beer in most glassware.

Draft beer is a great profit maker for most independent restaurants. But there are ways to leak profit in your beer service if you aren’t well acquainted with your equipment and products you offer. Don’t take this liquid gold for granted — make every ounce count!