How to Save a Restaurant That's Not Making a Profit

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In most parts of America, there are at least one-third more restaurants than the local market can support. In hard times, when cutting back on eating out is near the top of most people's "spend less" list, in some areas up to 50% won't make a profit sufficient to sustain themselves.

Established eateries, especially those whose equipment is paid for, have the best chance of survival. Fancy new restaurants that borrowed heavily to pay for upmarket kitchens and pricey décor are the most vulnerable, because they have little room to cut prices. Even a small dip in patronage can make it impossible to meet debt payments, to say nothing of making a profit.

Lower Your Variable Costs

For those restaurants lucky enough not to have high fixed costs, closing down a couple of the slowest days of each week may be the best option, since it will avoid paying out more in staff and supply costs than it takes in. Or, ask some of your waitstaff and other employees to leave early if the restaurant isn't busy. Make sure that you've cross-trained some employees to do multiple jobs -- that way they can takeover when someone goes home early. You can also just have some waitstaff "on call" -- they'll come in to work only if it's busy enough and you call them. You should be controlling your labor costs by making day-to-day decisions like this.

Focus on Your Strengths

Start by asking yourself "How do I make money?" Is it mostly on the weekends, on nights when the curtain goes up at the local theater, on the á la carte side of the menu, or on fancy coffee drinks, or does 80% of the profit come from the bar? Assume for a moment that, like a lot of restaurants, you make more money selling alcohol than food. If so, the strategy for a mid-priced community-based restaurant might be to create specials and events—even some that reduce profits on food to zero—that keep the place full, figuring that once folks come in they'll order their two glasses of wine or beer. Examples and ways to bring in diners include:

  • Kids' Night, where you provide free kids' meals in your banquet room along with free babysitting.
  • A Beggar's Banquet Tuesday, where you cook up only three entrées, but cut prices in half.
  • Thursday Singles' Night, where women eat free—the idea here of course is that where single women go, men will follow. And organized as a buffet where people can grab some food and sit at communal tables, chances are your booze profits will more than make up for the cost of the women's food.

Obviously these strategies won't work for a restaurant suffering from a dearth of tourists or a drop-off in business at the nearby convention center. But the questions you must ask remain the same: "How do I make money?" and "What can I do to preserve and build on the most important part of my business?"

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