There is a lot happening in the Boston restaurant landscape. It seems that restaurants, places we have loved for years and places we haven’t even had the chance to try out yet, are closing their doors. Some say it’s the ridiculous and ever-escalating Boston rents, some say Millennials are to blame, but in either case – complaining never pays the bills. This article, with the help of some of Boston’s Top Restaurant Influencers and Experts, is meant to be a helpful outline, or guideline, to those brave souls who still venture to enter this tumultuous, yet passionate, marketplace.
HOW DO I MAKE MY RESTAURANT MORE PROFITABLE?
1. The Food. There is no avoiding the importance of food in a restaurant’s success. It may not be the only thing – but it may be the most important thing. After all, it is the reason your guests will leave the house in the first place. Ensure that you have a chef/kitchen manager whom you can trust, who can run a team which can prepare food in a timely manner, with consistent quality and presentation. In addition, our contributor Restaurateur Matt Sullivan (www.ackprime.com) adds that it is important not to put all your “chef eggs” in one basket… meaning be prepared to be able to execute your menu with a new chef/kitchen manager, thus, systems and recipes are a must. Make sure that the menu is not too long, to ensure you have the freshest food, and keep inventory of perishables down. Invest in quality ingredients, it is the only way to ensure a superior product is being provided to your guests. The execution of the food served is also extremely important and can be ensured by a great expeditor. If “all things food” is not addressed, there is little point in going on to the next points.
2. Location and Demographics. Invest in a good realtor who is an expert on locations and demographics in your city. What kind of demographic are you looking to attract? Where does that demographic live in your city? What do they like to eat? If you are looking to serve urban professional hipsters, find out where a Whole Foods has opened recently, (why not piggy back on Wholefoods’ first-rate demographic modelling?). If you are looking to open a New York style Steakhouse serving wealthy baby boomers, find out which part of the city buys the most Cadillacs. A top-class realtor, such as our Contributor Charlie Perkins of Boston Restaurant Group, (www.BostonRestaurantGroup.com) must have an authoritative grasp of these facts. Charlie tells us to have your concept solidified first, then set about looking for the right location. Charlie also shared that 65% of all restaurant openings are quick-casual concepts – which speaks to the Millennial demographic who aren’t out to get the traditional “3 course” meal but prefer a drink and to share a few appetizers. Another great, possibly business-saving tip, from Charlie is when working on your budget, your total Occupancy costs should be no more than 8% of gross sales. Those restaurants with higher Occupancy costs tend to struggle and most often fail. And then there is thinking forward, way forward and down the road of possibly selling, and the 3 things that make the sale value of a restaurant are, at least in Boston, location, license, lease… so it will literally pay to think ahead on these things. And here’s an old school tip… if you find a location you think might work, spend a few hours, at different times throughout the day, parked at a nearby business and study who and what happens in that area.
3. Financial Foundation. This is key. Setting up your financials, your cash flow, your “books”, correctly and accurately from the beginning will save you in almost every way. After all, if you don’t know your numbers, you don’t know your business. The Profit First Cash Management system is the best at absolutely ensuring profitability from the very first deposit. In the restaurant business, you generally have no idea how much sales your establishment can bring in on any given week… there could be snowstorms, school holidays, power outages, large televised sporting events, so many variables that can affect sales. But, in the end, the restaurateur makes it work. So, whether you bring in $15,000 a week or $25,000 a week in sales, you make it work because there is no other option. Setting up a cash management system from the get-go where profit is taken first off of every deposit, then Owners Pay, then taxes, sets up the Operating Expense account that the restaurant has to manage with… and guess what? They’ll manage.
4. Website. Over the years, we have worked with dozens of restaurants which have committed over a million dollars in renovating their property but have opened without a website being live or updated or useful! The fact that this still happens in 2019 is remarkable. Our Contributor Honor Lydon of BostonChef.com (www.BostonChefs.com) shares that you must have your press kit ready to go, BEFORE you open the doors. If you wait to do it after, or when someone asks for this info, after you’ve opened and are in the thick of it, then it won’t get done. Or it certainly won’t get done well. And this is important because having a strong identity in a world filled with so many dining options, is imperative. Honor highly recommends getting your website together sooner rather than later, having headshots, recipes, and food photographs at the ready so when people reach out who want to talk about your restaurant, they can do so eloquently and accurately. In the grand scheme of things, a website is relatively inexpensive, with a high quality one available for between $2,000 and $5,000. The revenue driven by the website will be ten times the outlay and is crucial to driving revenue, so do not scrimp on the cost with a part-time nephew or friend, or one of those “free” website platforms who might not have you live at least a month before opening. Choose a professional, and better still one which specializes in restaurants.
5. Great Concept. A disproportionate number of the most successful new restaurants are profitable because they give the dining public what they want, in many cases before the public know they want it. Some restaurateurs are just great at predicting new trends, but one thing we can state after 20+ years in the business, is to repeat that old adage “there is nothing new under the Sun”. Even the most exciting American chefs borrow from the Spanish, French and Italian masters. If you are stuck for some inspiration, why not spend a week in New York, San Sebastian or London, three of the most Avant Garde food cities. See what is really clicking there, and the chances are, in a year or two it will be popular in your city too.
6. Overestimate your Capital Requirements. From experience we have seen restaurants spend over a million on renovation, only to shutter within six months. Why? In nearly every case, the restaurant assumed it would break even as soon as it opened; or the build costs were higher than expected, and the reserve fund for the first six months was used up for the build. Either way, the bottom line is that it is common for restaurants to underestimate costs and actually go bust before they have really hit the ground running at six months. Make sure you have enough capital in place for the build, start-up costs, a loss for six months, and some extra for unexpected events… ALWAYS. Our contributor/restaurateur Matthew Sullivan recommends adding 40% on top of what you “think” the budget might be… if you’re estimating $100,000 in start-up/building funds, have $135,000 or $140,000 in the bank… you’ll need it.
7. Ensure Sufficient Two-Top Tables. The cardinal sin of most architects is completely ignoring economic reality when designing floor layouts. The fact is, the most common party size in fine dining restaurants is two, followed by four tops. Even more important, two-tops tend to have a higher spend per head, and a shorter turn time, which means they earn far more per hour. It is incredibly common for restaurants to have banks of large tables and booths, and a relatively small number of two-tops, often situated in the least hospitable parts of the restaurants. The result is that most restaurants will not sit two-tops at a six-person table, thus causing a wait which then gives the reputation of being a place where there is “always” a wait and guests may decide to go elsewhere before even trying to see if a table is available. To ensure the profitability of your new venture, remember that you will probably get more two-tops than any other party size, they will spend more per head, and be in and out relatively quickly, so ensure plenty of two- tops, and that some of these are in nice locations, like beside the window (and not near the bathroom or kitchen door). Finally, it is easy to combine several two-tops into a larger table, but you cannot split a larger fixture like a booth between two or three parties.
8. Accept Reservations. If your restaurant is full service, reservations are a must. Not only are they requisite for the guest experience, but they are highly effective for the operator as well. Walk-ins tend to come in large lumps, around 7pm for example, or Sunday Brunch at 10am. A well-planned reservation system is far more effective at smoothing the loading of diners over the whole shift versus walk-ins, which improves food and service, consistency, the guest experience and your profit. OpenTable is still the leader in online reservations but it is also a great CRM (customer relationship manager) software. While not cheap, you can absolutely make your money back and then some by utilizing this tool to its capacity.
9. Invest in a Lead Host. In Europe and New York, it is not uncommon for the best-paid member of staff to be the Maitre’d. And why not? It is the most intellectually vigorous position in the restaurant when done correctly. Yet in many American restaurants, the host team are the least well-paid members of the staff. It is crucial to have one person beside the door who knows what they are doing. Invest in a well-paid, experienced lead host or reservations manager, who understands the importance of maximizing reservations and walk-ins, and is incentivized to manage the floor in a profitable way for your business. In many of the most successful restaurants, the GM or restaurateur takes on this role themselves, but we would recommend having someone else take on this role so that the GM and restaurateur are free to engage the guests.
10. If you are New to the Industry, Open with a Restaurant Consultant. Restaurants have an incredibly high failure rate, and if you have never owned a restaurant before, the learning curve is painfully steep. Working with an industry veteran can smooth the curve and reduce the amount of your savings/investment which is burned approaching break-even. Be wary of some “consultants” however, as many are failed restaurateurs, who failed for a reason. Always check references, plus their successes and failures. If you are not sure where to find a consultant in your city, why not call the five restaurants you most admire locally and ask them to recommend someone? Or better yet, contact BostonChefs.com and see who they might refer too. Most will be happy to help, and cross-referencing their recommendations is useful. Better yet – build a Team! This article alone includes 4 industry experts that can help you on your way to restaurant stardom. Don’t be afraid to reach out – while this industry can be competitive, we all want to add great places to our dining landscape and thus the comradery far outweighs the competitiveness.
Let’s meet the Experts…
First up, Matthew Sullivan. Matt is one of those “fixture” restaurateurs that you might see at random bars about town – but in a good way! He has owned and managed restaurants in several of the different Boston Neighborhoods. Matt has run the full spectrum of the “dive bar” outside the Garden in downtown Boston to quite the chic-chic “ladies who lunch” dining establishment in a very wealthy suburb. Today, Matt splits his time between his longtime restaurant in Milton’s quaint downtown, Prime Milton, and the Island of Nantucket where he’s entering year three of a very successful tenure at his island steakhouse, Nantucket Prime. https://www.primemilton.com/ https://www.ackprime.com/
Next, we have Honor Lydon, co-founder and Executive Editor of BostonChefs.com. BostonChefs.com is THE hub for all things’ restaurant in and around Boston. It is a digital marketing network that connects chefs, diners, and brands through a shared passion for food and drink. Their platform provides insider coverage of the local culinary scene to an audience of food-lovers. In addition, BostonChefs.com enables independent, chef-driven restaurants to reach engaged and passionate diners, provides brands a platform to connect with their audiences in the context of content they are passionate about, and connects the best industry talent with jobs at the top restaurants in the region. https://www.bostonchefs.com/
And last but not least, the famous restaurant broker-guru, Charlie Perkins, of Boston Restaurant Group. Founded by Charlie in 1990, The Boston Restaurant Group, Inc. is the commercial real estate firm that specializes in selling restaurants, leasing restaurant space, appraisals, and management consulting. Charlie is a frequent speaker on subjects relating to Restaurant Valuations and Opening a Restaurant and I am thrilled that he has generously participated in this article. http://www.bostonrestaurantgroup.com/
Oh wait, one more, then there is me…Kasey Anton, restaurateur turned bookkeeper turned Profit First Professional. I have had the opportunity to work in all kinds of restaurants since I was 14 years old, in every position, and loved every second of it. My lifelong goal as a child was to open my own restaurant one day and, with the help of 2 partners, I did just that in 1999 with the opening of my first restaurant, Bomboa, located in between the Back Bay and South End of Boston. But as all good things must come to an end (especially in the restaurant world), I sold Bomboa in 2006 – the year I had my first child and decided that 4:00AM closings weren’t in the cards for me anymore. From there, I began helping other businesses, restaurants and others, get their finances straightened out and create a solid financial foundation for these businesses to grow. I was introduced, via audiobook, to Profit First on my honeymoon in 2017 and knew within the first few minutes that this was the solution for so many of my clients – especially our restaurant clients – and it has been my mission ever since to work with our clients to help eradicate restaurateurial poverty. https://sparkbusinessconsulting.com/