By Matt Fitzsimmons, The Café Doctor
Most hospitality businesses have a straightforward but complex problem to wrestle with: bad math. They only make money from their operations for a small proportion of their day, yet they pay the bills 24/7/365. In fact, most only make a profit between 8-3pm. Seven hours a day. And that’s only if they make a profit during those hours.
There are a few solutions to this and even better – some great examples of how business owners are diversifying their income to deal with this ‘Bad Math’.
The problem-solving wish list for owners of foodservice owners is usually; 1) increase the performance of the team 2) increase revenue and 3) grow profitability. So, this is a significant issue for owners, and so it should be. It’s also perhaps the easiest to fix.
Now this might sound a bit airy-fairy, but the root of the issue is that of mindset. The mindset shift – which is tangible and significant – moves from “I own a Café” to “I own a food production facility that operates out of a café”. The mindset shift might seem trivial but its fundamental to having a successful and incredibly profitable business.
The difference in approach to the business is immense here – a café or restaurant has only one product (café or restaurant food) sold during one period (opening hours) to one customer (their café or restaurant customer). A food production facility owner sells more product to more people for longer periods of the day.
In one case I have seen a café more than double its revenue with ‘other sales’. It went from 16k/week to more than 30k. And their labour KPI went from 33 percent to 26 percent and the food costs reduced from 31 percent to 26 percent.
So what does this mean to you, a restaurant or café owner? Well, it’s as simple as asking yourself these questions:
- What else could my ‘food production facility’ produce exceptionally well?
- Who could I sell it to?
- How do I do it?
This article won’t help you with the first two questions but for an insight into a successful story, here’s an example of a business that made it happen recently:
David owns a café that’s doing really well. He sees an opportunity to do platters and grazing tables for businesses in the area. He makes a few for the photos, launches it on their Facebook page and gets a few orders. He then produces a brochure and delivers it to the businesses in the area.
Within three months the business is selling $1,000-2,000 a week in additional revenue. Food cost is less than 24 percent with no additional labour cost. Bookings are now at more than $10k for December, and it’s only September.
It’s not difficult, it’s not complex and it makes the math a whole lot better. What’s stopping you?
Matt Fitzsimmons, The Cafe Doctor, is based in New Zealand and works with cafes, coffee shops and small restaurants around the world. Find out more at www.thecafedoctor.com
