Money can’t buy happiness, but for restaurant owners, it sure can buy peace of mind and a range of capital projects.
Having enough capital on hand allows operations to run smoothly and provides a safety net for any surprise costs, such as dealing with a flooded basement or an unplanned insurance fee.
If you don’t have cash on hand, you’ll likely have to explore funding options from third-party vendors. With the advent of new lending markets, such as online lending and personal credit cards for small businesses, obtaining working capital has never been easier.
Working Capital And Restaurants
Let’s say you took out an SBA Loan or received a cash advance. Great – but don’t forget to take advantage of the Section 179 Tax Incentive.
What exactly is the 179? It’s one of the most lucrative incentives released this year by the IRS. The incentive is for small to medium-sized businesses that have purchased equipment in 2018. Those businesses have the ability to write off up to one million dollars in taxes. Talk to your CPA or a tax specialist to fill you in and see if your business is eligible.
So now that you have working capital, and enough cash on hand to invest in projects, what are you going to do with it? Having an effective strategy for how to use these funds is almost as important as procuring the capital. Whether it’s developing a new marketing campaign or obtaining overhead cash for a slow winter season, here are five ways to put money back into your business.
1. Investment Projects
An investment project is a great way to put money back into your restaurant in a meaningful way. You can build additional revenue centers, increase the number of guests on a given night, and ultimately make more money for the business.
Starting a catering business is a great way to market your business and the food you’re cooking up. Through a catered event, you not only hit a potential new customer base, but the costs are minimal with a ton of potential net revenue.
Does your restaurant have a great brand that customers flock to? Then perhaps it’s time to increase brand awareness to new markets. Opening a new location is one option, but if you think your brand has growing power, the best way to expand quickly is to franchise. Setting up clear guidelines and a strong company message will allow your franchisees to follow in your footsteps and develop your brand to the next level.
A few other ways to invest your restaurant's working capital:
- Build a patio for additional seating and traffic every night
- Open a popup restaurant
- Refinance or pay off debts
2. Marketing Projects
Adding new customers and retaining the ones you have is essential for a restaurant to remain profitable. You don’t want customers forgetting about that great meal they had, or the awesome ambiance you’ve created. Building an engaging and diverse marketing strategy is a great place to put your additional working capital.
We’ve talked about building a great marketing strategy before, and one of the best ways that you can get your restaurant in front of potential customers is a strategic advertisement on Google. All it takes is to fill out Google’s My Business Form and then place a bid for ad placement on the search engine. The next time someone searches “where to get lunch near me,” your restaurant will come up first and not that pesky rival restaurant down the street.
A more traditional marketing strategy is to sponsor a team or event. This will increase brand penetration in your local market as well as offer quite a bit of upside in ROI. On top of that, you’re giving back to your surrounding community.
A few other ways to use your restaurant's working capital for marketing:
- Generate brand focused merchandise
- Advertise on social media
- Bid for ad placement on Google Adwords
3. Reactive Projects
“Anything that can go wrong will go wrong.”
Murphy’s Law may seem cliche, but being prepared for the unexpected is a vital part to operating a restaurant. A refrigerator that shuts down overnight could cripple operations, spoil food and drinks, and leave a dent in your overhead cash. Every restaurant owner and manager should have readily available capital to cover the costs of a reactive project.
If you live in the Northeast, dealing with the winter can be tedious. On top of having to salt the sidewalks and shovel snow, what if your HVAC system crashes and your restaurant turns into an icebox? You would most likely have to close down the restaurant for a day or two to procure the capital for such a repair. Making sure you have the appropriate overhead capital will be key for these surprise costs.
A few other ways to use your restaurant's working capital for reactive projects:
- Repairing a broken window
- Purchasing additional inventory for an event
- Hiring a plumber
4. Employee Projects
Restaurants have a unique opportunity to delight their customers through amazing food and a welcoming environment. Both the front of house staff and back of house staff play an essential role in making a great customer experience a reality. Doing this day in and day out is no easy task, yet employees succeed every day across the United States. Investing in your staff and celebrating their accomplishments not only increases team morale, but also grows the appeal of potential candidates interested in joining the team.
One trend that has been making ripples in the news lately is taking restaurant staff on a vacation. Some restaurants are rewarding staff with relaxing trips to an all-inclusive resort for some much-needed decompression. Others take staff to a destination where they can try food and drink, inspiring the next season’s menu.
Additional ways to use your restaurant's working capital for employee projects:
- Give your employees a bonus
- Comp employees to take classes on subjects they’re interested in
- Throw an employee party
5. Technology Projects
Investing in technology for your restaurant can improve operations as well as increase ROI in several ways, such as loyalty, online ordering, and an increased turn times on orders.
One smart investment that can cut costs and also give you a rich set of data is purchasing an inventory management technology. With inventory management, you can reverse engineer any item on your menu and know exactly how much an ingredient costs on a granular level. For example, if you know one slice of cheese is 1 cent, how much money could you save over time if you made sure the cooks only put on two slices of cheese rather than three on a cheeseburger over a month or a year?
Another great technology advancement that has found its way into restaurants is mobile tech. Using your capital to purchase a handheld point of sale system like Toast Go can increase revenue with quicker turn times, while also improving the customer experience through easy order taking and payment.
Additional ways to use your restaurant working capital for technology projects:
- Update your payroll system
- Purchase a bluetooth temperature monitor
- Buy a restaurant API.
How do you plan on using working capital for your restaurant?
With accessible working capital that you can invest into your restaurant, and a clear, thought out strategy on how to use that capital, there are large amount of options to increase ROI.