Episode Transcript
[00:00:00] So let's say you got a struggling restaurant. What are the things you can do to turn that restaurant around? I am faced with that question all the time today. On today's episode 248, we're going to talk about the eight things you can do to turn your restaurant around quickly. I'm talking in the next two months. Don't go anywhere.
[00:00:17] There's an old saying that goes something like this. You'll only find three kinds of people in the world. Those who see, those who will never see, and those who can see when shown. This is Restaurant Strategy, a podcast with answers for anyone who's looking.
[00:00:48] Hey everyone, my name is Chip Close and this is Restaurant Strategy, a podcast dedicated solely to helping you build a more profitable restaurant. We cover marketing, operations and a whole bunch in between. Each week I leverage my 20 plus years in the industry to help you build that more profitable and more sustainable business. I also work directly with operators all over the world through my P3 mastermind program. And guess what? We just launched the third group. So we've had two groups. We filled those two groups and now we've started a third group that launched in July.
[00:01:18] So listen, if you've got a busy restaurant but struggle to generate consistent, predictable 20% profits month after month and set up a free 30 minute strategy session, we'll get to learn more about you and your restaurant. You'll get to ask some questions about the program. To see if you're a good fit for the program, visit restaurantstrategypodcast.com schedule. As always, you'll find that link in the show notes.
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[00:02:30] Best of all, Spoton's direct online ordering puts you in control of your takeout and delivery operation without the third party commissions They've got all these tools in one integrated system backed by a customer support team that actually answers the phone. Listen. Learn more by visiting spoton.com chip and yes, that link is in the show Notes. Now, today we're talking about struggling restaurants. If you are in the position where you've got a restaurant that is not doing the kind of business, not turning the kind of profit that you, that you expect it to, that you know it can, it's time to tighten up the bolts. It's time to turn this restaurant around. I get asked all the time, hey, you know, you're, you're a coach to, to work with me. It's. People come into my mastermind group and they commit to a year. So they are working with me two hours every single week in a group format for an entire year. Right. It takes time, and I really believe it does take time. The work we do takes time to do. And I, and I love having all that time with the, of that group. So I get asked all the time, but could you turn a restaurant around in two months? And of course, I think the answer is yes. It's not easy, but it is absolutely possible. And I've, and I've answered that question over and over and over again. So here I'm presenting it to you. What are the things we could do to turn that restaurant around? I think there are eight areas that you really want to focus on, and we're going to bullet point these and go through these as quickly as we can without going into too much detail. But I do want to make sure that you step away from this conversation, from this episode, with some actionable pieces, things you can put into practice right away so that any further ado, let's get to the eight things you can do to turn your restaurant around again. If you got a struggling restaurant, if you're struggling to generate consistent, predictable 20% profit, if you're stuck in that 5, 6, 7% profit range, or worse, break even, or worse, at a loss, then, yeah, you got to turn your restaurant around. So how do you do it? Here are the eight things. Number one, make sure you know your numbers inside and out. I've said this before. I will say it again.
[00:04:32] Profit is quite literally the only thing that matters in your business. A business exists, to use the old cliche, the textbook, right? A firm exists. A business exists to increase shareholder value, right?
[00:04:47] A business exists to make money. Profit is the only thing that matters. Good food, good service, cool decor, a great place for the community. All of that is great. But if you're not doing it profitably, you're not going to be there. If it loses money every single month without a. Without a benefactor, without someone to subsidize the business, it will not exist. You have to be able to survive. So in order for a business to survive, it has to be profitable. I really mean it. Profit is the only thing that matters. I've said this before, but I believe restaurant owners deserve a business that works as hard as they do. I think if we work a little bit smarter, we can help the business work a little bit harder, and then we can settle back, spend more time on the business than in the business. So you got to make sure you know your numbers inside and out. Profit's the only thing that matters. So you got to figure out what your path to profitability is. If you've been listening for a while, you know, I talk about something called the 30, 30, 20 rule. These are three buckets, right? All of the expenses that we have over the course of the month fall into one of three buckets. Cogs, cost of goods, sold, labor, meaning your people. And then I call everything else. E. Or we can call those operating expenses. Everything you spend money on over the course of the month goes into one of those three buckets. Cogs, labor, or operating expenses or everything else, right?
[00:06:05] Roughly, I think those numbers should be 30, 30, 20. Really, what we're looking for is at least 60% prime cost. COGS plus labor equals something that we call prime cost.
[00:06:17] Those should be at 60%. So 30 plus 30 equals 60. Now, maybe yours is 25, 35. Maybe it's 28, 32. You understand what I'm saying? It should add up to 60. But those three buckets, if we want to make 20% profit, should add up to 80. Those three buckets, 30 plus 30 plus 20 equals 80. That leaves us with 20% left over. That's 20% profit. So if you can keep all of your expenses at 80% of your revenue, that leaves 20% left over for you. You have to figure out what your path to profitability is, what your three buckets should be at.
[00:06:51] Number two, you got to start forecasting. Use those projections to then build budgets for every department in your restaurant. Again, maybe your buckets will be 30, 30, 20. Maybe they'll be 30, 25, 35, 20.
[00:07:06] Whatever those are, you create your forecast, right? Meaning you close your eyes, you look into the future and say, I think next month we're going to do $100,000 in revenue, right? Got to figure out what your Path to that is what sort of revenue you need to generate on the 30 or 31 days over the course of the month that get you to 100k. And then you got to figure out where do your buckets need to be. And that gives you your budgets. And you got to break out those buckets even further. If you say, hey, we want our labor at 30%, 30% of 100K is $30,000. And you got to figure out what's the split between salaries, back of house hourly in front of house hourly, and then tax burden and benefits and your payroll fees, all of that goes. The labor number. There is a formula. You need to simply figure out what it is. So number one, you got to understand your path to profitability. What are your three buckets? That 30, 30, 20 rule, your bucket is going to be a little bit different than that. What is it? Number two, you got to start forecasting and then use those forecasts to generate budgets again, using the 30, 30, 20 or whatever your buckets are at. Number three, this is super important. Right. What makes it so hard? Right. So hard in business, when you've got a moving target. And I always say that we've got three moving targets because revenue is variable, cogs is variable, and labor is variable. So how do you make a profitable business with a moving target? I don't know. How do you do with three moving targets? It's what makes what we do so difficult. What it's what makes it so, so important for us to put a system into place. You got to have a system for creating recipes and for costing those recipes. And yes, that includes beverage as well. Cocktail is a recipe, an ounce of this, 2 ounces of this, half ounce of this. You got to figure out what it costs you to put all that liquid in a glass and send out to the dining room. Just like you got to figure out what it costs you to put all the food on a plate and send it out to the dining room. So you need a system for creating recipes, for costing those recipes, sourcing the ingredients you need responsibly and cost effectively. Right. Your menu needs to be profitable on paper if you want it to be profitable in real life. Again, we got all these variables. Revenue is variable, cogs are variable. Those are the first two variables in our three moving targets. So you build a forecast so that you can set targets for revenue, and then you gotta cost everything out here so that you know how you can source and how you need to price everything so that on paper, it's profitable. Now, when we talk about food costs. For example, we got theoretical food cost and actual food cost. In order for it to actually be profitable, it first needs to be profitable on paper. So theoretically, we look at the recipe cards and we say, hey, there's six ounces of chicken, there's two ounces of rice, there's one ounce of whatever it is.
[00:09:52] On paper, it should be profitable, should be running at 30% cost, 28% cost. And then we have the other side, which is actual. Right?
[00:10:01] Because other things influence that. How much waste the portioning for your cooks. Are there. Are there safeguards in place to make sure your cooks are portioning the same amount every single dish? Right. So waste and portion control and inventory and spoilage and all of that stuff.
[00:10:18] But on paper, it's got to work. It's got to work on paper in order, or it'll never work in real life. Right? We're gonna have to solve the theoretical, and then we might have to solve the actual as well. But we gotta start by putting a system into place for making sure, on paper, it's profitable. And then we put a system into place for making sure it can be executed profitably, meaning we're sourcing the right ingredients.
[00:10:42] We've got good pars. We know how to take inventory. That helps us do our ordering as efficiently as possible. We've got safeguards in place to manage was portion controls for all of the cooks. All of that's gotta be there. And if it sounds like a lot, it's actually not. But it does have to be all in place. That's the third one. Number four, you gotta upgrade your training, right? So again, we're talking about, how do you turn your restaurant around?
[00:11:05] Number one, you understand your path to profitability. Number two, you gotta forecast and create budgets for your departments. Three, you've gotta make sure everything is cost out that on paper, on theoretical side, it works, and then on the actual, it works. Number four, you gotta upgrade your training. I'm guessing that your training is subpart par. I've talked about this on past episodes about a level one, level two, and level three training.
[00:11:26] Most of us do what I call level one training. Level one training is simply the first seven days. How do you. How do you teach people as much as you can so that over the course of three, four, five, seven days, they are, they know enough, they're good enough to be able to take a station, and then most of our training stops. And I think that's a huge, huge problem. So here is how you upgrade your training. You build level two and level three training into your restaurant. Again, level one training is that first week, what do you need to teach people so that they are ready to take a station by the end of that first week? Level 2 simply says, now that they're trained and they can take a station, what else do they need to know so that they are as good as the best person in your restaurant by the end of 90 days, when you start looking through that lens of, again, systems and goals, where do you need to get people? Then you can start saying, what do we need to teach people? What do we need to do in order to get them there? So undoubtedly, I come from fine dining, and when I came into fine dining, I was totally green, straight off the bus, didn't know anything about food or wine or cocktails or anything.
[00:12:36] The restaurant where I worked had a program where for the first 90 days, for the first 12 weeks, you had to take three classes a week. It was a Monday, Wednesday and Friday, and it was like a food class, a wine class and a cocktail class every single week for an hour. Right. So it was three hours of training for 12 weeks.
[00:12:55] They basically invested 36 hours of additional training not, not to mention all the product that was being wasted or spent or invested in as part of the investment in the people.
[00:13:08] And it was incredible. I didn't want to do it, just to be absolutely clear. I was dead set against it. But by the end of the 12 weeks, I had a pretty good knowledge, certainly way more than I had going into it. And I was a better salesman. I was more confident I could generate more revenue for the restaurant because you need to think about something like that. That was my experience. Right. So they taught me a lot. I got shot out of the cannon in the first six days or five days when I was working there. But then over the next 90 days, over the next 90 days, I learned a lot more. And I became not as good as the best server there, but I was certainly in the top 20%, let's say 20, 30%. I was pretty good. I knew what I needed to know. And that restaurant, I've shared this before, that had, I don't know, 75 or 80 servers on the schedule. It was a 400 seat restaurant in Times Square, so it was a big restaurant with lots of staff.
[00:14:00] But over the course of the 90 days, they taught me enough so that I took that next level up. Then finally level three is how we think about staff development.
[00:14:10] What does a busser need to know to become a server? What does a Busser need to be need to know to become a runner? What does a runner need to know to be an expo? What does a server need to know to become a bartender or a manager or a general manager? What does a floor manager need to know to become assistant general manager or a bar manager or a general manager? What does a general manager need to know to become director of operations or an area manager? There's always somewhere else for our people to go. For the most part. There are always ways that we can promote from within. And one thing that we do particularly poorly in this industry is promote from within and develop our staff so that they are ready for that promotion when they get it. So level one, level two, level three training, that's if you want to know how to upgrade your restaurant, you do that. Now am I saying to do three classes a week for your new people? No, but I bet you you could run an eight week program that for, you know, the. Every Friday from three to four for eight weeks, different people teach different classes. And so for new servers, maybe one day's an appetizer class, one day is an entree class, one day's a dessert class. So they get to try all this food and ask questions about the food. Maybe one day is all about white wine, one day is about red wine, one day's about beer, one day's about clear spirits. It's very easy to see how you could teach, how you could provide further continuing education for the people on staff. You're making them, you're making them better at what they do, which ultimately is going to help you.
[00:15:40] So level one, level two, level three training that goes hand in hand with number five, which is that you gotta start doing quarterly sit downs with your managers. That's. Those are one on one, 360 reviews and annual sit downs. So once a year with your hourly staff, understand what your people want so that you can make sure that they can get that here. If they've got everything they need here, they don't have to go anywhere. If they are no longer served by this restaurant, that's where they'll start. That's when they'll start looking elsewhere. They'll start shopping around for different jobs. So understand what your people want so that you can provide them with what they want.
[00:16:18] Ask them what they need and get them what they need. Understand who's ready for that level three development. Right, that level three training that we just, just talked about. So again, four times a year you should be sitting down with your management team, one on one, not in A group setting, but one on one and at least once a year you should be sitting down with your hourly staff now. The last three coming after a word from another one of our sponsors.
[00:16:42] Today's episode of Restaurant Strategy is also brought to you by seven Shifts. Seven Shifts is a team management platform built specifically for restaurants. Great restaurants are built by great teams and seven Shifts is your secret weapon to better understand your restaurant, hit labor targets and keep your entire team connected with drag and drop scheduling in app communication, task management, tip management and more. It makes restaurant work a lot easier from back a house to front of house managers, franchise owners and larger corporate teams. Seven Shifts has benefits at every single level. Plus it integrates with the other systems your restaurant already uses, like POS and payroll. Turn your team into your competitive advantage. Restaurant Strategy podcast listeners get three months absolutely free. Get started at 7shifts.com RestaurantStrategy that's the number 7s h I f t s.com RestaurantStrategy to get three months free and join over 30,000 restaurants using 7shifts today. Yes, that link is in the show notes. Now we're talking about the eight things you can do to turn your restaurant around. We covered the first five. They were all focused on the operations piece. 6, 7 and 8 are all going to be focused on the marketing piece. There's a specific way I like to think about marketing. Let me introduce you to it. Now, some of you who have been listening for a while and again, we've been on the air now for four years. Some of you may be familiar with it, but I'm gonna try to present it in a little bit different way. Number six, you gotta make sure you understand the ABCDs of marketing your restaurant. Now what are the ABCDs of marketing? It's a framework that I developed a couple years ago as a way of understanding how to actually market your restaurant. How your restaurant understanding how your restaurant, your product fits into the market.
[00:18:24] Abcd. It stands for audience brand competition and differentiation.
[00:18:30] First things first, you got to understand your audience, right? Two ways to market either you create a product and then go find a customer for your product, or you find a customer who needs something and create a product for them, right? You craft a solution to their problem.
[00:18:46] By far, the latter is the better way to market. The best companies in the world do it this way. Unfortunately, most of us in the restaurant industry are used to doing it the first way. We create the restaurant we want and we open it up and then we wait for people to come in.
[00:18:59] Rather figure out who needs something, create the thing they need, and then go tap them on the shoulder and say, hey, you know that problem you had? You know that thing you needed? I got it. Come on. Right this way. So we start off with audience understanding who has a problem that we're uniquely qualified to solve.
[00:19:16] Right? That's our audience. Our audience is the. Is the who. The person, the group of people, the kind of person that has a problem that we are uniquely qualified to solve. B stands for brand. Your brand is simply your restaurant. Your restaurant exists to solve a specific problem for a specific kind of person at a specific point in their life.
[00:19:37] You just simply need to understand how you can solve the problem. That's a brand is all about.
[00:19:42] So, audience, who has a problem you're uniquely qualified to solve? B, how does your brand. How does your restaurant solve that problem?
[00:19:50] C stands for competition. You got to look around and say, hey, who else is trying to solve the same problem? We are.
[00:19:56] Those are your competitors. Right? The cool thing about competition is that it does two things for you. Number one, it validates your idea because you look around, you say, hey, at least I'm not crazy. I thought this was a problem. And they think it's a problem too. And they think it's a problem, too. And they think it's a problem too.
[00:20:11] Right. It also gives you a category. When you're in a category, you're on a short list. Your job is to simply get onto that shortlist. It means you're top of mind with the consumer at a point when it matters. So A is for audience who has a problem that you're uniquely qualified to solve. B is for brand. How does your restaurant solve a specific problem for a specific person at a specific time?
[00:20:35] C, competition. Who else is trying to solve the same problem? You are. We now get a category, and now we got to differentiate ourselves. D stands for differentiation. How can we separate ourselves from the others that are in that category? There's a reason that someone would choose you as opposed to all of the others. You simply have to articulate that to the consumer. That's the best brands in the world. Do they excel at convincing people to choose them over any of the alternatives? There is no one way to do it, but you have to do it.
[00:21:06] I always start with the question, what are the stories only you can tell? Meaning what are the things that set you apart from anyone else in your category? That's a great place to start. So before we go into marketing, we have to understand marketing. Marketing is simply about trying to solve problems. Trying to solve problems in interesting ways, right? I always say, what's my definition for marketing? It's three questions. What's the product? Who is it for?
[00:21:32] How can you reach them? Right? That's what we do. We spend all our time on the third part, which is how to reach them. That gets us to number seven. Number seven, make sure you have a marketing plan. Make sure that marketing plan is actionable. All the members in my mastermind know that I do this three page marketing plan. It's called the triangle principle, right? Attraction, retention and evangelism. Attraction, how do you acquire new customers? Retention, how do you retain those customers?
[00:21:57] C the third part, right? Evangelism is how do you get those people talking? Right? So get them in, get them back, get them talking. Your three page marketing plan, you take out three pieces of paper, lay them out on one, it says attraction. One, it says retention. One, it says evangelism. How do you get them in? How do you get them back? How do you get them talking? There are specific things we do to accomplish each of those three goals.
[00:22:22] And often social media has nothing to do with it. It can have something to do it, but social media is not. Marketing is a tool available to the marketer. You've got sms, you've got email marketing, you've got your website. You've got reputation management, right? Yelp And Google and TripAdvisor, those, those review sites, that's all part of it. Direct mailers, in store, collateral. The way we talk to our guests, what we tell them about all of that, all of those are tools. Just, just a few of the tools that are available to us.
[00:22:52] So to build out the marketing triangle, we figure out what do we need to accomplish and what are we doing to accomplish each of those three? So you can build a big marketing plan. I've certainly talked about that before on the show. I have built those for restaurants and other companies. But all I need you to do is come up with an actionable marketing plan, which are those three pages. Attraction, retention and evangelism. What do you do to get people in? What do you do to get people back? What do you do to get people talking?
[00:23:19] Finally then, and I know I sound like a broken record, but you've got to get organized. You've got to build a marketing calendar to track all of your efforts throughout the year. I've talked about this in past episodes. Let me go through it very, very simply here, right? You build a marketing calendar, an Excel spreadsheet. I've got it. I've given it out plenty of times on this show, if you want it. In fact, just email me chipclose.com that's C-H I P K L O S E.com email me, ask me for the marketing calendar. I will send you my template. It's a very simple Excel spreadsheet that maps out every single day of the year, 1, 2, 3, 4, all the way down to 363, 364, 365. Map it all out and it maps out all of your marketing channels, right? You can certainly build your own, you can reach out to me and I'll give you mine, but it maps out every day of the, every day of the year and then every single marketing channel that you have available to you. So Facebook, Instagram, TikTok, Twitter, your email, your, your reputation management, your website, your on and on, everything. These are all separate channels.
[00:24:25] So if you're gonna figure out who you're for, right, who you are and who you're for through that ABCDs of marketing, how you convince someone to come to you instead of going to a competitor, you put together that three page marketing plan, right? That marketing triangle, making it actionable. What are you doing to get people in? What are you doing to get people back? What are you doing to get people talking? Then you build a marketing calendar to outline what you're going to do, when you're going to do it, how you're going to do it, how much you're going to spend to do it all in the effort to try to achieve specific goals. If you don't already have a marketing calendar, right, that would live on a Google Drive or in Dropbox, something to map out your entire year's efforts, mapping out what you're trying to achieve and then what you do to try to achieve that, then this is your call to action. Again, you can reach out to me directly, chipclose.com and I will send you my template. It's super easy and you can model that one and copy it for next year and the year after and the year after. Use it. I give this out to all of my clients. So again, the subject of this episode was how do you turn a restaurant around, right? So if you're looking at single digit profits or if you're a break even or worse, if you're operating at a loss, it's time to get organized, build some structures and systems.
[00:25:34] Your restaurant again, the question I'm asked all the time is sure, I can go and coach with you, but could you turn a restaurant around in two months? The answer to that question I believe is, yes, but it takes real work. It takes dedication. I put together an online course. It's called Restaurant Rechore Restaurant.
[00:25:52] I actually put together an online course. It's called Restaurant Recharge. It is for sale. It has been for sale for a while, but then we took it off. It's sort of like the Disney movies. It went back into the vault and we. And we sort of. And we sort of, you know, ignored it. We forgot about it for a while. But it's now available. We've dropped the price to $297. It's 44 videos spread over eight different modules. And largely it walks you through all of this and more. How do you turn a restaurant around in two months? Right? It's an, it's an eight week turnaround. That was the idea of that. So eight modules over the course of eight weeks. You do one module every week. And if you take action on everything, there's a workbook that goes along with the course. You print that out and you work through the course in that way and you take action on everything that the videos tell you to take action on. You can turn your restaurant around so you can listen to this episode. You can do the eight things that we've talked about. You can also, if you are interested, go buy the course. It's an online course. It's called Restaurant Recharge. You get lifetime access to it. You should work through it in two months, but if it takes you longer, so be it. You've got access forever. You can also give your logins to your managers, to your partners, so that everyone can be on the same page. If you want to turn your restaurant around, this is one way to do it. So I'm going to include the link in the show notes, but the website is RestaurantStrategyPodcast.com Recharge2023. That's R E C H A R G E2023. So Restaurant Strategy Podcast 2023, that course is available now for $297. So for less than 300 bucks, you get all of this plus all of the resources in there, including, including this marketing calendar. But you get the budget template, my projection spreadsheet, you get food costing spreadsheets, you get employee handbook templates, everything that will help you to get organized to build systems and structures for your restaurant so you can turn your restaurant around.
[00:27:52] This episode is meant to be actionable. I hope you take action on all of these eight things. And the ninth thing, the unspoken thing, the unnumbered thing, is that if you're really serious about it, I would urge you to go get the course. Already. We've put more than, I don't know, 200 people through the program. The program works. That online course works again. It's called restaurant recharge, 44 video lessons doled out over the course of eight modules. You do one module every week for eight weeks and I promise you it works. In any event, I hope you got a lot out of this episode. Again, eight ways, eight things you should do to turn your restaurant around. The ninth unspoken thing is now been spoken. If you want to get more specific, more intentional about doing this, I would urge you to check out the online course again. Go visit the website that is in the show notes and I hope many of you take action on this. All the best to you and I will see you next time.
