[00:00:00] Speaker A: In 2012, Gary Keller released a book. It was called the One Thing. And if you've been listening to this show for a while, you know that this book has had a profound impact on me, one of the P3 members. So I run a coaching program and one of my members introduced this book to me and it changed not only my life, but specifically my business. Deep in the heart of the book, he gets to the crux of what he's trying to say. And in it he asks this question, question, what's the one thing I can do such that by doing it, everything else will be easier or unnecessary?
What is the one thing? And in our business, what? It struck me like a bolt of lightning. In our business, the one thing is profit. So let's get really clear on today's episode on what profit is, how you get it, and why it matters.
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.
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. Each week I leverage my 25 years in the industry to help you do just that, to build a more profitable and sustainable business. I also work directly with owners and operators all over the world through my group coaching program. It's called the P3 mastermind. I also host two live events, two in person events every single year. These are three day summits. In January, we have the Marketing Summit. And coming up in July 2024, we're hosting the P3 profitability summit in St. Louis, Missouri. This is two and a half days, right? So Sunday night there's a welcome party all day. Money is education, right? Workshops, speakers sessions, panel discussions. Monday night we have another party. Tuesday, all day again, another, the education portion of the summit. And then Tuesday night we always close out the events by doing a really cool food crawl. So we go to four, five, maybe six different places, meaning we'll get dumplings at one place and a beer at another and then a slice of pizza at another and on and on and on until we can't go anymore. We pass out or explode and then we go back home. This is a three day event right now. Early bird tickets are available right now through the end of May. Then they go up to full price. So right now, for less than $400, you can join that event, two full days. Again, it's like nine hours one day, nine hours the next. It's a ton of information and you also get access to those two parties. Food, beverage, open bar. You're gonna have a great time. All you gotta do is get yourself there and put yourself up. But we got a great block of rooms. If you are interested. The best way to get your ticket is to go click the link, show notes and if you've got questions about any of this, you're sort of on the fence and you're not sure if you want to go, just email me directly my email chip close dot com. You spell my name c-h I p k l o s e dot com. I will answer any questions you have. We cap these event at a hundred attendees. We're a little more than half sold. If you want to be there, I would love to have you there again. The P3 profitability summit happens July 14th, 15th and 16th this year. It goes to St. Louis, Missouri if you want to be there. I want you to be there. I hope you come join us.
So Avi, when it comes to guest feedback, how do you recommend restaurants approach managing their reviews?
[00:03:37] Speaker B: Yeah. So there are three things that we highly recommend, right? Number one, block out 30 minutes a week, one day a week, respond to reviews. While it'd be nice to respond to all of them, focus on the two, three and four star reviews because that's where you're going to win people over and have room for improvement. Number two, create templates for yourself. Proven templates that you know, work for two, three, four, five star reviews. Save time. Number three, if you want to take it completely off your plate, come to Marque. We have a wonderful manage review product where we will respond to all of your reviews as a true brand extension and take it completely off your plate.
[00:04:13] Speaker A: And where can people go to learn more about Marquee?
[00:04:15] Speaker B: Come Visit
[email protected] that's M A R Q I I dot com. We look forward to chatting with you.
[00:04:24] Speaker A: Now today we're talking about profit. I want to talk about what profit is, I want to talk about why it matters and then most importantly, I want us to talk about how we get more of it in our restaurant. Of course, you heard me earlier talk about the P3 profitability summit. You heard me talk about Gary Keller, Gary Keller's book. The one thing changed my business, changed my life, changed the way I look at the way I coach restaurants. Because profit is literally the only thing that matters in your business.
What's the One thing you could do would make everything else easier or unnecessary. Well, if you made a profitable restaurant, one that provided for you and your family, well then that makes a lot, a lot else that we do a lot easier.
So let's talk about it. Let's talk about what profit is and why it matters.
It matters because we know the statistics. 80% of all new restaurants shutter in their first three years.
Last year, 2023, the average independent restaurant in this country made just 4% profit. And that takes into account all the ones that were killing it at 20, 25, 30%.
Because of course there were also the ones that operated at a 15, 20, 25% loss it netted out. The average was just 4%.
I've said this before on this show, I'll say it again, what you do is way too important. The way you provide jobs, provide people's livelihoods, build up communities, feed people, provide a backdrop for them to live their lives and celebrate and all of that, what you do is way too important. And it's way too hard to not make money doing it.
We all know this. We work the 60, 70, 80 hour work weeks. But to work all that, to only make 4%, right? Average independent restaurant in this country makes about a million million and a half. So give or take, that's a hundred thousand dollars a month in revenue to do all that work and only take home $4,000 at the end of the month. I'm sorry, it's just crazy. All that revenue going through your, going through your restaurant, not including all the tip revenue that comes through, all that revenue passing through your restaurant and you see only a tiny fraction of it. That's insane.
That's insane. And we can do better that. That's why I'm on a mission to help independent restaurant owners improve the profitability of the restaurants. That's why I started the P3 mastermind. So again, we've got, I don't know, 170 people in the group now spread across four different groups. It's an incredible, it's been incredible to watch this grow from just 10 people in the original group back in 2021 to where it is now. Four different groups, almost 200 people in the program.
And the work works. The impact we're making is real.
That's not what I want to talk about. If you ever are curious about that, of course you can get in touch, you can reach out, you can go to the website, you can set up a call and we're happy to talk to you about the P3 master, right now I just want to talk to you about profit. Let's make sure we get really clear. What is profit? Profit is what's left over. It's the surplus, right? You make as much revenue as possible.
You keep your expenses as low as possible, and what's left over is profit.
All of us got into this business to make money. I believe that as much as you may want to feed people and take care of people and provide jobs and all of that, you got into this to take care of yourself and your family and maybe leave something behind and provide some legacy.
It's okay. It's okay to want to make money.
I feel like I spent a lot of time talking about this to the people I work with, to the clients I work with.
It's okay to make money.
I am an advocate for restaurant owners, especially independent restaurant owners all over.
I am your advocate. I am your cheerleader.
You wouldn't dream of missing your rent. You wouldn't dream of missing a payroll. You pay all your vendors, you get all your invoices paid, and then we save us for last.
And I am on a mission to get everybody out there, everybody listening to this, to get you to start thinking about profit, about your distributions as airtight, lock solid, locked in stone as your rent.
You pay your landlord every, every month, pay all your vendors, you pay your staff, and you get paid. Sometimes I think it's crazy. So what is profit? Profit is what's left over. It's the surplus.
Except that's not the way I like to think about it.
Profit is the value you provide.
It's not just what's left over.
It's the value that you feed people. Right?
I talked about this before. We were talking about the difference between a luxury mindset and a commodity mindset.
Profit is value. You provide value.
You went and spent a career getting good at what you do.
You had the knowledge to put together a menu. You went shopping for it, you prepped it, you cooked it, you served it, you got people whatever else they wanted while they were there eating with you, and then you cleared it away and you did all the dishes for them.
There is value on that.
There's value in there. People pay you for all that you provide.
They're willing to pay way more. Right? I can go to the supermarket, get ground beef buns, make cheeseburgers for like a buck, maybe less than a buck per burger, and yet I'm willing to go out to a restaurant and spend 18, 19, $20 on a really great burger. That's insane.
1820 times markup.
But it's worth it to me because I don't have to cook, I don't have to clean up afterwards. I can just enjoy my time with my family. Somebody will just go get me a drink and bring it back to me.
Profit is not what's left over. It's not. The extra profit is the value that you provide the community, the value you provide for the diners you take care of.
Again, none of us got into this to be a charity, to run a nonprofit.
So we have to turn a profit.
I want you to start thinking about profit as security and as stability.
The more profit you can generate, the more stable this business is.
And that's really important because the more stable it is, the more you're able to take care of other people in a lot of different ways. Right?
Think about it this way.
If you have a successful business and it generates a lot of profit, you can reinvest that profit into another location, maybe on the other side of town.
So now you get to feed the people on this side of town, and you get to feed the people on that side of town. You get to employ people on this side of town, and you get to employ people on that side of town.
You're growing the economy. You're generating sales tax revenue for the state income tax for the state and the federal government because of the people you're employing. And those people then will have money to provide for their families, to buy houses and cars and food to go on vacations.
A stable business can then reinvest its profits into growing that business.
That's how we get into the heart of the other question, right? So what profit is. Now, let's talk about why it matters.
It matters in different ways to different people.
So I'll often say this to a prospective member. So when I'm talking to somebody on the phone who's considering joining my mastermind, and I'll say, whatever is on the other side of profit, whatever you want, it doesn't matter to me. And everybody in the group wants something different.
The thing they all have in common is that profit is the key. And let me explain what I mean. So I just use the example of expansion, right? If you've got a business and you want to expand, if you make it more profitable, you can then reinvest some of the profits into expansion. Either expanding your space into a larger space or opening a second, third, fourth, fifth location.
You can do that. Profitability allows you to do that.
Well, let's say you want a franchise in order to look a franchisee in the eye and say, yes, you will make money here.
You have to be able to, to make money there.
So you have to be able to generate 22, 24, 26% profit because you're going to look them in the eye and say, hey, after the 6% royalty you're going to pay me and the 1% marketing for national and the 1% local marketing, so we're going to lob 8% off the top, but we generate 22 minus 8, you're still going to make 14% return on this business. And I know it because I've done it for years. And let me show you how profit will help you grow a franchise business.
You can't be at 6, 8, 10% and say, well, my idea is so good. I want a franchise.
You're going to take 6% royalty and 2% marketing fee and the 8% profit is going to disappear. And then somebody's just working really hard. A franchisee is working really hard to make you money, not them money.
It's never going to fly.
So if you want to expand, you can reinvest the profit.
If you make a profitable restaurant, you can franchise because you can show them. Here is how it works. I know how it works. I can teach you the system.
Let's say you want to sell your restaurant, you have to make that restaurant look as profitable as possible so you can get the highest possible number that you can.
And let's just say you want to step away from the business, because that's my secret goal. With all the, with all the members that I work with, all the members of the P3 mastermind, I say my not so secret, secret goal is to turn you all into absentee owners so that you don't have to be at the restaurant. If you want to be at the restaurant, by all means. But they don't require you to be running the front door or to be back on the line. The restaurant can run itself just fine.
And then the owner gets to change the relationship they have with their restaurants. I can't tell you the number of people that I, that I meet that say I really hated. I was starting to hate my restaurant.
But once we, once we unlock profitability and I was able to put people into the roles that I didn't want to do anymore, I was able to change my relationship with the restaurant. And I realized I love it again, I love it. And that's great.
That's fine.
It's okay to feel that way.
So if you want to expand profit Will let you.
You can generate profits to reinvest in the business. If you want a franchise, you have to show a profitable business so you can prove to the franchisee that they can make money even while they're making you money.
If you want to sell the restaurant, you want to make it look as profitable as possible, and if you just want to go live on a beach somewhere, then you need to make it as profitable as possible so that eventually you can invest some of that extra, some of that surplus into your replacement.
Hey, I'm the chef owner. I'm on the line every night, but I don't want to be on the line every night. So I got to make it profitable enough so that I can step out, I can live off the distributions, and I can use that extra profit we're generating to pay my replacement, to pay the new chef, the chef de cuisine, the kitchen manager, whoever's going to do what I have been doing these last many years.
Whatever it is you want to do, whatever's on the other side of profit is fine, and it's different for everybody. But I promise you, profit is the key. That's the one thing Gary Keller had it right. Gary Keller, right, is the one half of Keller Williams. He's a smart guy, and I find that when smart guys want to tell you something that they know, you should listen.
He changed the way that I think about this. He's changed my business, and he's changed, whether he realizes it or not, he's changed people's businesses for the better.
That's what profit is. That's why profit matters.
So let's talk for just a minute about how we get profit.
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Okay, so profit isn't the, the little bit that's left over at the end of the month. Profit is the value you provide. What people are willing to pay you for, what they're not willing to do themselves or what they're not able to do themselves.
Profit is the value that you provide.
Why it matters. It matters because it means stability, it means security, it means you get to do what you want. Right?
It's the difference between the car you drive now and the car you'd like to drive, where you're able to send your kid to college, and where you'd like to send your kid to college, where you'd like to go on vacation, and where you are going to go on vacation.
Profit matters in so many ways. And like I said, if you want to expand, if you want a franchise, if you want to sell, if you just want to step back, profit is what's required.
Okay? So I'm going to assume we're all on the same page. If you, if you feel guilt about making money, I'm here to tell you you have taken the chance, you have taken the risk. You were the one who suffers through the down months and the downturns, the pandemics, all of that. It's okay to make money. And if you need to look at it in the, in a global context, the better your restaurant is, the more jobs you're able to create, because you're able to open up more restaurants and more restaurants and feed more people and create more jobs and put more food on people's tables and roofs over their heads and put other kids through college, right? Other people who work for you, their kids through college and on and on and on.
It's the oxygen mask analogy, right? When you get on a plane, the safety briefing says you always put on your own oxygen mask first before you help others around you. Because if you're struggling to get the mask on the person next to you and you pass out, well, then now you're both dead.
But if you put on yours, you can help the person to the right, to the left in front of you, behind you, you can be of much greater help if you are taken care of.
Now, I'm not talking about building a crazy profitable business on the backs of people who are killing themselves for you.
You take care of people the way they need to be taken care of. But the better Off. The better you are, the better and more stable your business is, I promise you, the more lives you will be able to impact, both with your guests and your employees.
Okay, so now how do we get it? We get it by managing the three moving targets in our business. I talk about this a lot. Revenue, cogs, and labor. So when I went back to business school a couple years ago, I got my MBA in food marketing. And one of the questions I wanted answered, one of the questions I wanted answered was, why is our industry different? It feels like it shouldn't be so hard to make money.
And yet it is. And what I realized, right, I realized to a friend of mine, a colleague who works over at the Campbell Soup Company, and he was talking about his business, I was talking about mine, and he pointed this out to me. He's like, you've got all these moving targets. You've got all these variables. That's really hard.
That's really hard. He said, for us, our salespeople go out and sell the soup, for example, sell our products months in advance, quarters in advance.
So we know all the sales we have because we know how much revenue is coming in.
We know how much product to order and how many people to schedule.
We can staff the factories accordingly so we don't have extra food left over.
We don't have extra people that we don't need.
We know our revenue, therefore, we know our cogs and we know our labor.
The three things that plague us, they've got locked down. And that's the case with many, many, many businesses out there.
For us, in the restaurants, we don't know how many people are going to come in on a given night. We don't know how much each of them are going to spend. We can guess, but we don't know.
And because of that, we don't know how much food to order. Order too much, we got waste, not enough. We got 86s and pissed off guests.
Then we don't know how many people will schedule. I think Thursday is going to be busy, but I'm not sure if it's not. Maybe I've overstaffed. If a storm comes in, maybe I've overstaffed, and then I'm heavy on labor and I can't make a profit on that particular day or that week.
The three moving targets are what makes our industry so hard and the way, right. How do you. How do you increase the profitability of your restaurant?
You find a really good way for managing all three.
Now that's what we're going to talk about at the P3 Marketing Summit. That's what we're going to talk about. So we talk about every week in the P3 mastermind, the group coaching program I run.
There are books about it, there are YouTube videos about it, there are 300 and some episodes of this podcast all meant to help you do that.
I'm sure you have mentors out there, colleagues. There are people out there that can help you.
You just have to take the first step of saying, I need help.
I don't know how to manage revenue.
I don't know how to properly manage my cost of goods sold or my labor. And you have to go seek out the answers. Software can help.
Margin Edge is an incredible piece of software that will help you do inventory, set pars, manage your plate costs, really get your cost of goods in line.
Seven Shifts is an incredible scheduling software that will help you be able to better target a payroll number every single week.
There are forecasting tools out there.
There are also spreadsheets you can build yourself. There are. There are many tools out there.
So I'm not here to tell you that my way is the best or the only. It's not.
I'm focused on this and we've gotten really good at this and I'm really grateful for the people that trust me to help them get there.
Again, the proof is in the pudding. We've worked with hundreds of people to this point. We've got so many case studies and testimonials that we utilize for people to take the systems that we show them how to do and turn around a restaurant that makes 3, 4, 5% and turn it into something that's making 18, 19, 20%. We do that. We see that every single week. The work works.
I'm simply telling you you need a way to wrangle those three.
If there's a certain amount of revenue you need to make every single day, every single week, every single month, then you need to put a plan in place to hit the revenue you need to hit.
You need to set budgets for your team so that you don't over schedule, you don't over order, we don't over portion, we don't over pour, we don't waste food, we don't overcook food. You need to plan for all of that.
And you could do that little by little by little, right? How do you eat an elephant one bite at a time so you don't have to do it all at once. And in fact, we don't do that in the mastermind that I run we look at the biggest opportunities we have, and we fix those numbers, and then we look at the next biggest, and then we fix those numbers and the next and the next. That's how we go from 3 to 23 in four months.
It happens.
The people that show up, that do the work again, you don't have to do it my way, but you do have to do it some way.
If you don't have a good system, then ask for help.
Go online, ask colleagues, ask friends, find a coach, get a consultant.
Whether it's me or someone else, it doesn't matter.
We got to know what profit is now. We know what it is. It's the value you provide.
It's directly related, can directly tied to the value you provide.
Why does it matter? It matters because it will help you get to where you want to go.
And how do you do it? You do it, in my experience, by wrangling those three things, making sure you set targets for your revenue and actually have a plan to hit them. That has a lot to do with marketing, for sure, but revenue targets have to be hit. If you need your restaurant to generate a certain amount of revenue each month, then you need a plan to hit that revenue. And then you need to keep your cost of goods in line. You need to keep your labor in line. Now, cogs plus labor combined is what we call prime.
Prime cost. For me, a profitable restaurant must have prime cost at 60% or below. If you want to have a chance at doing 15, 20% plus, you need prime at 60%. Closer to 55 would be better.
So cogs at 30%, labor at 30%. Fine, that's 60.
Cogs at 25%, labor at 35%. Fine, that adds up to 60. Whatever it is, that's as close to gospel in the year 2024 as I can come up with. You chisel that in stone. You cannot be profitable unless you got a sweetheart of a rent deal.
You cannot be profitable if your prime cost are over 60%.
Chisel that in stone. Put it on the wall.
Make sure you understand that. Make sure your team understands that.
So today's episode is about those three things. Profit. What it is, why it matters, and how we get it.
Profit is directly connected to the value that we provide.
It matters because it's security. Stability.
There's so much you can do with a stable, profitable restaurant. I promise, there's so much you can do from a business perspective. There's so much you can do personally for your family, for your friends, for your colleagues, on and on and on. And I hope that when you figure out the secret to profitability, right, when you know how to do it, I hope you tell everybody you know.
I hope you tell everybody you know what, you know what you've learned. It's the best part of the mastermind that I run. We get 30, 40, sometimes 50 people on a call every single week. And they just tell people what they know. I share what I know. They all share what they know. They all take notes, they all ask questions, and they all level up every single week. So now we know what profit is. I hope you have a better understanding of why it matters. And then how do we get it? The how is by wrangling those three moving targets, revenue, cogs, and labor.
You cannot be profitable unless you can. Unless you can manage those three numbers.
That's what I wanted to talk about today. Again, another reminder, it's directly connected to what we're talking about now. The P3 Profitability Summit happens in St. Louis, Missouri, July 14th, 15th and 16th. Tickets now are less than $400. They can be found using the link in the show notes. If you want to be there, I hope you'll come join us. Three days, right? Two parties, two full days of education, you know, speaker sessions, panel discussions, workshops, all of that. It is a ton of information. It's a. Again, open bar, food. We're going to take care of you. You just got to fly yourself there and put yourself up. We got a really great block of rooms and a really cool hotel. If you want to come, I hope you'll come join us. Appreciate you being here. As I say each and every week, be well, and I will see you next time.
