[00:00:00] Speaker A: As the title of this episode suggests, I believe that profit is the only thing that matters in your business. And I know it may seem a little callous, but it's absolutely true. Good food, good service, good decor. None of it matters unless you can do it profitably. And today we're going to talk about the what, the why, and the how of restaurant profitability. What it is, let's really get into talking about what it is and what it isn't. Let's talk about why it's important. And finally, let's talk about how we we get there. I'm gonna share with you how I do it, the system that I work with all my clients to develop. On today's episode of Restaurant Strategy, we're talking all about profit.
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.
Hey everyone, thanks for tuning in. 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 everything in between. Each week I leverage my 20 plus years in the industry to help you build a more profitable and a more sustainable business. I also work directly with operators all over the world through my P3 mastermind program. What are the three P's they stand for? Profit, Process and Progress. If you've got a busy restaurant but struggle to generate consistent, predictable 20% profits month after month, then set up a free 30 minute strategy session with me. I'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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Now, as I suggested, this episode is all about profitability. We're talking about the what, the why and the how. What profitability is really what. It is why profitability matters. Then finally, we're going to get into the how, because that's what you want to know, right? I'm sure as we get through the first part of this episode, you're going to be nodding your head along and saying, yes, I get it, I get it. So we're going to get to it. Best of all, this episode is going to be short, power packed, lots of insights, but it's not going to drag on forever. I promise you that. So let's kick things off. What is profitability? We all know the recipe, right? Generate as much revenue as possible and minimize our expenses. As much as possible, right? As much revenue, as little expenses as possible. The surplus, the extra, the delta between those two is what we call profit. That's the part that's left over for us at the end of the month, for the owners, for the managers, the partners, the investors.
Except that's not how profit works. Yes, on a base level, that is the recipe for profitability. As much revenue as possible, as little expenses as possible. But that is not how to get there. Profit, I believe, is worked towards and you need a path to profitability. So when we talk about what profit is, profit is the extra that's left over. But profit is your reward for building a business that generates jobs that serves a community, that provides something exceptional that people couldn't get anywhere else. Profit is something you deserve. I've said this on this show before, say it to my clients all the time. But I believe restaurant owners deserve restaurants that work as hard as they do. That is true for every single owner that I work with, every single owner I've ever met. I really haven't met a lot of, like, lazy owners who don't understand the people I work with. The people I meet are hardworking. They understand. They're not afraid of long hours. They're not afraid to roll up their sleeves and get dirty. I just think you need a restaurant that works as hard as do. So when we talk about profit, there's only really one way to get there. We're going to talk about the how later. But understand that profitability is a destination.
You have to understand exactly what you want to get in order to achieve that. I always liken this to a trip, right? So I live here in the New York City area, my brother lives in California. If I want to get from New York to la, there is a specific path I take, right? I got to figure out when I want to go. I have to buy plane tickets for that time, then I have to go to the correct airport, the correct terminal and the correct gate that will get me on a plane that will take me from New York to Los Angeles. That is the path I go to get there. And I don't know any other way to book a trip to go visit my brother. And I'm guessing that many of you guys listening, if not every single one of you listening, books plane tickets for vacation or family visits the exact same way. You figure out when you're going to go, you figure out where you want to go, you purchase tickets for that destination for the time when you want to go. And, and you go to the right airport, right terminal, right gate. That's what gets you to where you want to go. Profitability is the exact same thing. And unfortunately we don't operate, we don't operate that way enough, right? How many people out there, and listen, show of hands, how many people out there does this resonate with you? Where you look at your P and L and you don't know if you, if you had a good month until you look at your P and L and that is a problem. You should know on the 5th, on the 10th, on the 15th, on the 20th, on the 25th, you should know if you are tracking towards profitability. And we're going to talk about how you get to the place where you know that. But let's just agree on the what profit is. Something is a destination, it's something you work towards and you get very specific about, especially in our industry. You need to be absolutely laser focused on that.
That's what I want you to understand. So profit is the surplus, the extra left over. And you absolutely deserve it. If you create a business that creates jobs and feeds people and serves the community, you deserve that. 5, 10, 15, 20, $80,000 a month, whatever it is.
I believe what you need is consistent, predictable profit. I work with all my clients to target 20% profit because I'd rather target 20 fall short and still hit 15, 16, 17 rather than targeting 5 or 10 and fall short and be really close, alarmingly close to a break even point. I believe there's a way to target reasonable, realistic, meaningful returns. We just have to put A plan in place how to do it. So when we talk about what profits are, profits are what's left over. Profits are something that you deserve. And what happens is that every time you go over budget in any area, you go over on cogs, you've got extra waste, you ran over in labor, you had extra overtime. All you're doing, let's be really clear, there are only 100 pieces of the pie. And all you're doing is reaching from your piece of the pie. You're giving your piece of the pie to other departments to serve them. And I think we have to change how we do that. Because profit, profit is something you deserve. Otherwise why bother running the business? Who cares if you can't do it profitably? Because if you can't do it profitably, you can't do it sustainably. Meaning it cannot sustain itself day after day, week after week, year after year. And so you're get two years down the line you're going to say, man, this is a lot of work. To just break even every single month and to sort of stress and give myself an ulcer because I'm afraid I'm not going to meet payroll. That's totally fair. You don't deserve that and you shouldn't have to deal with that. So we talk about what profit is, let's really understand what it is. It's a reward. It is what is owed to you for creating the sort of value that you create for your employees and for your guests.
Now let's talk about why profit matters.
A lot of people come to me, so the members in my mastermind group come to me for a lot of different reasons. Some of them want to step away from their restaurant, Some of them want to grow their restaurant or expand into multiple locations, or to franchise or to just be able to come into their restaurant, to dine at their restaurant or shake hands and meet people, or they just want to sell their restaurant.
Whatever it is, I promise you, profit is the path there. This is what I say to all my members. If you want to grow, you want to expand, you want to sell, you want to step away, you want to retire, whatever it is. The only way to do that well is to build a profitable restaurant. Because if you've got a break even restaurant, you're not going to be able to sell it for very much. It doesn't have much value. But if you can show a really profitable enterprise, well then it has value. Somebody would want to buy that business because you've set it up to be very profitable. You can show them.
This is what we do in order to be profitable every single month, month after month, over and over. Likewise, right? If you want to expand, you have to show profit. So you can go to the bank or to investors and say, hey, we're looking to expand. This is what we did with the first one. Just imagine what we could do when we have three locations. If you want to franchise, you have to be able to look the franchisees in the face and say, this is the system. We've created, a system that can generate these kind of returns. You are going to have the same results because I can show you how to do it.
And if you just want to be able to step away and come in your restaurant whenever you need to, profit is going to allow you to do that. Because profitability means that you can bring other people in to do the things to do the tasks that you're already doing.
So I don't care what it is, but profitability is important for any of those reasons. So why does profit matter? Profit matters because of what it gets you.
I've given a very personal story on this podcast about my personal life. I started my business about eight years ago. My son will turn eight in just a couple of months. That's not by accident, right? I spent a long time working in restaurants, grinding it out, but I didn't want to be working at nights and the late nights and the weekends and the holidays. I just didn't want that. And listen, power to you, to everybody out there listening, who continues to do that and does that because they love it and because they have to and all of that. For me personally, I didn't want to keep doing that. So I found a different way to arrange myself, to arrange my life. In this industry, it's absolutely possible, whatever you want to achieve, but you have to figure out where you're going to go. So for me, I didn't want to work nights and weekends. I didn't want to work holidays. I wanted to be able to go away on vacation. I wanted to be able to put away from my son's college education.
All of those things had a dollar amount fixed to them. I figured out what that dollar amount was. I stuck it to the wall. I figured out a way to get there. The same is true, right? That's my business. That was the solution to that problem that I had. The same is true with you. And I promise you, your business can deliver. But you have to understand what it is. You have to understand why profitability matters. So if you want to sell if you want to franchise, if you want to expand, you want to grow, you want to step out, whatever you want to do, you gotta name it, you've got to know, because that is why profitability matters. And if you don't understand, you're just going to be caught on that hamster wheel over and over and over again and you're going to be living at a break even point or just a little bit profitable, or maybe you're going to be very profitable. But you can't take yourself out of the business.
That is all problematic. And I want you to figure out a different way. This is the, largely the journey I go on with all of my clients in the P3 mastermind that I run. So I've got now, I don't know, 40 some people in the program split between two groups and they all want very different things. Some of them want a franchise, some of them want to grow into a bigger space, some of them want to be able to sell in the end of, at the end of a year or two. Some of them just want to step away, plug a management team in there who can run it as profitably and successfully as they have and just send them a check every month. These are all absolutely valid whys. You just have to determine what your why is. And I think in this industry we don't spend enough time talking about ourselves and naming it it, pointing to it. So when we talk about profitability, I say literally, it's the only thing that matters in your business. The only reason you serve good food and good wine and provide good service is to provide people with a good experience. An experience that they want to have again and again and again. An experience that they'll talk about and they'll want to let other people in on it. That just means more covers, more revenue, and yes, ultimately more profit.
So to be really clear, the only reason we serve good food is, is to get people to come back and buy more food from us. And that might sound callous, but it's absolutely true. You might have the best menu in the world, you might have exquisite taste and be able to put together an incredible dish. It doesn't matter if you can't do it profitably, because if it's not profitable, it is not sustainable.
What happens when you get hit by a bus and you can't show up to work? Then the restaurant can't operate without you. I always say it's, I think it's irresponsible and dangerous of any restaurant to rely on any one person, whether that's the busboy, the bartender, the chef, or the owner. I think you have to get yourself in a position so that you can have the restaurant exist without you, so that it can successfully operate without you being in there. And if you choose to be there, well then great. If that's where you want to be, that's the only place you want to be, then I want you to be there. I just don't want the restaurant to need you to be there. So when we talk about profitability, we've got to talk about the what and the why. We're going to go over the how in just a minute after a word from another one of our sponsors.
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So then how do you get consistent, predictable 20% returns? It's the same way, same system, same method to get 5% or 10% or 15% returns. Which is why I work with all my clients to get 20%. Because I'd rather target 20% fall short and hit 16%. Certainly better than trying to get five and landing at one or a break even point or worse, falling below that break even point and having to scramble to cover payroll and shorting your vendors just so you can meet payroll.
We should be plentiful. We should have plenty of surplus. So when we talk about profitability, it is literally the only thing that matters in your business. Everything else is in service of that. There's a book Gary Keller wrote. Gary Keller is one half of Keller Williams what what is arguably the largest real estate company on the globe.
And Gary Keller, in his book, it's called the One Thing, he said he focuses on the one thing rather than prioritizing all the things that matter or the most important things. He said, boil it down to the one thing. This book has had a profound impact on me over the last, I'll say six to nine months.
And so the one thing, the one thing in your business, in all of my clients businesses, the only thing that matters is profit. It has reshaped the way that I approach my mastermind, the way that I work with my clients and the way that I approach this podcast. To be perfectly honest, profit is the only thing that matters. A great website, great marketing, great email strategy, delicious food, great service. All of that is in service of the bottom line. And I want us to all embrace that and start acting like that. So how then, right? I said the what, the why and the how. How do you get consistent, predictable profits, consistent, predictable 20% profits? I will tell you, this is the main thrust of what we work on in the mastermind. These are the insights, the systems, the structures, the frameworks and the accountability that I provide in that group. And if you're curious about doing it, then I urge you to come join. But the crux of what we do is we focus on forecasting. We use those forecasts to generate budgets and then we use that form. It's a spreadsheet that I give everybody in the program to actually manage to do revenue management and then expense management. So again, the problem, the problem with most of the ways that we manage our restaurants, it goes something like this, right? Restaurant manager says, hey guys, you really want you focus on second beverage Sales tonight, let's really try and push sales. I really want to have a good night.
That's all vague. And a server, a bartender, even a floor manager doesn't know how to achieve a goal because there's no goal stated.
That's revenue management. This is what the big chains do so, so well. This is what big Fortune 500 companies do so, so well.
Forecasting means how much do I think I'm going to do, how much do I need to do, and what do I need to bring in every single day of the month to hit my revenue targets? We don't talk enough about how, how much we actually need to bring in. We just sort of staff the place up, open the doors, and have people wait on a bunch of tables and hope that they order big wine or hope that they order our expensive specials. And there's a better way. If you need to hit a revenue target, you need to figure out how many covers you need to come in the door at what price point, how much do you need each of those guests to spend in order for you to hit your target. And I promise you, if you start looking at your business from this direction, it changes. And again, this is starting with the end in mind. Just like that path to profitability, the path for me to get from New York to la, it's the same thing here. Where do you need to be at the end of the month and what do you need to then do every single day to get where you need to be at the end of the month? That's what's called revenue management. So you forecast, you build a spreadsheet so you can track what you do every single month.
And then you manage your expenses. You tether key expenses to revenue rather than just trying to cut people from the floor and just trying to watch our, you know, watch our hours and watch our waste. All that. Again, it's vague. We don't know. But you, you, you manage your labor on the schedule. So how much can I spend? What's my budget? If you're not giving budgets for every department, you are losing. I promise you, you have no idea what you're going to, what you're going to make at the end of the month. This is why I don't need a P and L to be able to determine whether my restaurant is going to be profitable. Because I know what we were targeting and I know where we are in relation to where we're supposed to be every day of the month. I know what my budget was for labor. I can print out a Labor report any day, any part of the week and tell you if we are on target. Same with thing, with our cogs. Same thing with everything.
So you build forecasts, you use that to generate budgets, you hold to those budgets, you manage your revenue, and you manage your expenses. For the life of me, as long as I've been doing this, it's the only way I know to teach people how to do it. And this is what we teach in the program.
So you can go, you can do it yourself. But if anyone tells you there's any other way to create a profitable restaurant, they're wrong. You have to make sure you understand all of that. Then we can figure out ways to drive more revenue. Then we can figure out ways to maybe shave our costs or to get better ROI on some of our marketing, things like that. But at the base level, you have to understand a basic path to profitability. How much revenue am I going to make? And if I want to make 20% of that number, where do my expenses need to be in order to achieve that? I say this to all my clients, right? Picture this. We're going to figure out how much profit we deserve, how much we can expect to make at the end of the month. We take that off at the top. We put that in the corner, we put a bunch of rabid dogs around it. The rabid dogs guard the money. Because every time we go over budget on labor, every time we over order or we've got additional waste and our cogs are out of whack, it's not coming from some magic money tree. It's coming from our pile of money. You're reaching behind into your back pocket and paying out all those different departments. And as restaurant owners, as operators, we get really good at paying our rent. We pay our vendors on time, we always hit payroll, and we're really bad at paying ourselves. So put yourself first. I'm not saying be an irresponsible business manager. It's not what I'm saying. I'm saying put yourself first. Put yourself in a position to succeed. You deserve to have a business that works as hard as you do. If you force your business to work as hard as you do, it will work. And it will allow you to take your foot off the gas and step away and work a little less hard because your business will be set up to work really hard. You do that, you will change your business overnight. If you need help doing that, then please get in touch. Visit restaurantstrategypodcast.com Schedule Set up a free 30 minute coaching. Call with me.
We'll find out more about you and your restaurant. I will walk you through the program. I'll answer any questions you may still have about that. We'll see if you're a good fit for the program. Again, we have incredible group of people. We've now got two groups. By the end of this month, we are going to close those two groups. So we've got about six or seven spots left and then we're going to see if we're going to open up a third and a fourth group and when we might do that. So space is limited. And so if you've got questions, if this is something that's on your mind, this is something you're struggling with, please get in touch. I will show you how to generate consistent, predictable 20% profits. And if you're not ready for coaching, if you're not ready for the mastermind, then by all means, go and do it yourself. Put a system into place on your own. It's not that hard, but you have to do it. There's something simple about what we do because it is not easy to achieve, but it should be simple to put into practice. That's what I wanted to talk to you about today, guys. Again, I promise you, short and sweet profitability is literally the one thing, the only thing that matters in your business. And you need help with that, please get in touch. I look forward to hearing from you. Thanks for being here. I'll see you next time.
[00:23:41] Speaker B: Sa.
But let me start by saying, Kevin, welcome to the show.
[00:24:47] Speaker A: Now, today's episode of Restaurant Strategy is
[00:24:49] Speaker B: also brought to you by seven Chefs. Seven Chefs 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. To hit labor targets, to keep your entire team connected with drag and drop scheduling in app communication, task management, TIP management and more. It makes restaurant work a whole lot easier from back of house, 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 seven shifts.com RestaurantStrategy. That's the number 7S-H-I f t s.com RestaurantStrategy and again, you'll get three months free and join over 30,000 restaurants using seven shifts today. That link is also in the show notes.
Once again, a big thank you to Kevin for taking time out of his day in the middle of what must be a very hectic restaurant opening. To anybody out there who's opened a restaurant, you know how that goes. So big thanks to Kevin for sharing all of his insights and wisdom with us today. As I said, all the links are in the show notes. I appreciate you guys being here, and I will see you next time.
