On the Line / Operations / How to Run a Restaurant: 8 Running a Restaurant Business Tips

How to Run a Restaurant: 8 Running a Restaurant Business Tips

Running a restaurant isn’t easy, but with the right people by your side and the right tools and processes, you can build a successful restaurant business.

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How to Run a Restaurant

DISCLAIMER: This content is provided for informational purposes only and is not intended as legal, accounting, tax, HR, or other professional advice. You are responsible for your own compliance with laws and regulations. You should contact your attorney or other relevant advisor for advice specific to your circumstances.

How to Run a Restaurant: 8 Running a Restaurant Tips

Whether you’re brand-new to the industry or a longtime devotee of restaurant life, take the time to learn how to run a successful restaurant in 2022.

Running a restaurant takes perseverance, empathy, grit, delegation, organization, business acumen, creativity, and next-level people skills. The to-do lists never end: managing inventory, running payroll, dealing with equipment repairs, ensuring every menu item is performing well, and taking care of your team are just some of the constantly recurring tasks involved in running a restaurant.

And it can’t be done alone. Restaurant work involves an incredible amount of high-speed teamwork, so finding the right people to be by your side is critical. Treating employees well, investing in their skills and their careers, and providing meaningful benefits is the easiest way to build your dream team and ensure your business’s long-term success.

In this article, we’ll cover everything you need to know when running or owning a restaurant in 2022 and beyond. We’ll link out to lots of helpful resources that will get new restaurant owners up to speed and even teach longtime industry powerhouses a thing or two. You’ll learn how you can improve each individual component of your restaurant operations to grow your profits and succeed in the long term.

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8 Tips for Managing & Optimizing Key Restaurant Operations Costs

1.Keep a close eye on paying rent and overhead

Paying rent is a constant when it comes to keeping your restaurant open, but it’s important to review and negotiate lease agreements before you sign and whenever they’re up for renewal. This guide to renting a restaurant space can help prepare you to get the best deal you can.

Overhead costs are the costs you’ll need to pay that aren’t tied to producing your product or service: rent, electricity, gas, water, internet, admin/legal costs, and insurance. Knowing how much of your budget will go to overhead each month is critical, so keep tabs on the costs that are semi-variable (like utilities) and variable (like legal costs). If they’re going up, investigate why. 

2. Maintain legal permits and licenses

Before you even have a restaurant space, you’ll need to tackle many different licenses and permits. Depending on your jurisdiction, they’ll vary, but a business license, certificate of occupancy, EIN, food service license, and liquor license are generally standard. You can learn more about each permit (plus 10 more you may run into) in our guide to restaurant licenses and permits.

Getting legal help with all of the above permits, as well as any other complex issues that can arise throughout opening and beyond, is often needed in the restaurant business. If you hit a snag, ask for help from a professional. It’s an up-front cost that can save you much more in the future. 

3. Make room in the budget to cover labor costs

Labor cost has skyrocketed in recent years, and increasing employee pay can be a big shift for longtime owners — but your people are your #1 investment, so ensuring they have stable, livable wages is now non-negotiable. For new restaurant owners, paying your employees a livable wage should be built right into your business plan from the beginning. 

In either case, here are a few ways to make room in the budget to cover your high labor costs:

  1. Charge more for your food and drinks. You can include a note on your menu to explain your price increases and share that you’re doing right by your staff.

  2. Take stock of your controllable costs and trim the fat. Some examples include delivery service commissions, food waste, late fees, and noise complaint fines. 

  3. Implement the New Steps of Service system that allows restaurants to function with fewer staff, while keeping their current staff paid well.

4. Regularly analyze food costs

Calculating and regularly checking on your restaurant’s food cost and food cost percentage is an important part of running a restaurant. Especially now, with wild inflation increasing the cost of virtually every item needed to get food onto tables, keeping a close eye on costs is critical. It’s a great way to identify areas of food waste (and wasted money).

You can calculate your overall food cost, as well as your overall food cost percentage, but it’s also helpful to drill down and calculate the food cost of individual menu items. If certain ingredients have become too expensive, the menu item’s food cost percentage will go up, and you’ll be faced with the choice of increasing the price of the item or retiring it (and the offending ingredient) from the menu altogether. That’s part of menu engineering, which is a great way to increase profits and reduce waste.

5. Market your restaurant with paid and free strategies

Restaurant marketing is an important part of bringing revenue up. Many longtime restaurant owners are surprised by how easy and effective it can be. From email to paid ads to social media to flyers to sponsorships and partnerships, there are so many things to try.

Use a restaurant marketing plan template to plan out all your marketing activities, and keep checking on the performance of each thing you try. Targeted social media ads might work for your business while email marketing works better for another business, so it’s important to try various methods and see what works.

6. Design your restaurant interior and create an inviting atmosphere

When starting from scratch, design your restaurant layout to be inviting, accessible, and in keeping with your overall brand (that includes your type of food, uniforms, social media, signage, and more). Some restaurant brands are punchy and colorful, others are demure and elegant, but no matter what, your restaurant decor should be in line with your brand.

And for those looking to level up their decor without spending a lot, there are many ways to improve your interior design on a budget, like adding plants, local art, and new lighting.

7. Allot budget for professional restaurant services

Professional services are a big part of running a restaurant, because no one can do it all alone. It’s important to have great equipment repair techs, lawyers, accountants, and other consultants in your orbit so you’re ready to tackle any challenges that fall onto your plate.

8. Invest in the best restaurant technology and equipment

Invest in a platform that allows you to manage virtually every aspect of your business, all in one place — from sales and marketing to takeout and delivery to staff management to inventory to accounting.

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How to Successfully Run a Restaurant With No Experience

Like any new venture, it’s impossible to get everything right on the first try. But there’s a few things you can do to set yourself up for success when starting a restaurant with no experience.

First, talk to your peers in the industry. Before you get started, reach out to restaurant owners in your area, ask them for a meeting, and buy them a coffee as you soak up all their best advice. No one will understand the nuances of operating a restaurant in your city or town as well as someone who’s already doing it. They’ll point you to the right people to talk to in government agencies for permitting, which suppliers work best, and who they use for accounting, legal issues, and repairs.   

Prepare to do paperwork. Permits, licenses, contracts, invoices, payroll — it’s all paperwork, and it never goes away. If you’ve never done much accounting or managed payroll, find an online course and learn the basics, because if your payroll and your finances aren’t solid, nothing else will be.

Know that people management is the most important part of the job. The restaurant industry may seem like it’s centered around sourcing and creating the best food and drinks, but really it’s about people. 

Set yourself up for long-term success by deeply investing in your team. It will pay off in spades when you don’t have to waste time and money down the line by hiring and training new people nearly as often.

How Longtime Restaurateurs Improve How They Run Their Restaurants

Many longtime restaurant owners hit a profitability plateau after running their restaurant for many years. But costs continue to rise, and the industry is as competitive as ever, so it’s important to stay agile and try new things.

There’s a lot that longtime restaurant owners can do to grow their sales and margins, and manage their costs to increase profitability and invest in growing the business. 

Tips to grow restaurant sales and improve margins

  1. Marketing. Work off of a restaurant marketing plan and test various types of marketing (email, social, paid ads, sponsorships), and track the results to choose how to proceed.

  2. Menu costing and menu engineering. It’s important to constantly check in on food cost and keep revisiting menu items to make sure they’re priced correctly and selling enough.

  3. Promotions. Tuesday half-price drinks, live music brunch, 15% off appetizers, no delivery fee — there’s a near-infinite pool of restaurant promotional ideas, so try out one at a time and see what works for your clientele.

Tips to manage costs while increasing revenue

  1. Dive into data. Using your restaurant POS’s reporting and analytics dashboard, you can easily spot which times of day need better promotions, which dishes aren’t selling, and what sales forecasts have in store for the week.

  2. Use smart inventory software. Automatically monitor the value of your inventory when ingredient prices change, and turn beginning and ending inventory numbers into insights for COGS reports with Toast Inventory Management.

  3. Curtail food waste. Don’t let money go into the garbage! Put food waste prevention protocols in place. If an ingredient repeatedly ends up in the garbage, it might be time to pull the menu item it’s used in.

Restaurant Metrics Calculator
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Restaurant Metrics Calculator

Use this free calculator to calculate the key restaurant metrics needed to understand the health and success of your business.

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Operating Costs Breakdown & Benchmarks for Successful Restaurants

Average expected restaurant costs and average expected restaurant revenue vary widely: a mom-and-pop sandwich shop will be much less costly to run, and bring in lower revenue, than a high-end taqueria with a huge patio and live music. 

Restaurant startup costs are estimated to run between $95,000 and $2 million, but restaurant operational costs are typically explained as a percentage of revenue. 

Restaurant Operating Costs and Benchmarks

The five major categories of recurring operational costs for a restaurant are:

  • labor cost

  • food cost

  • overhead

  • professional services

  • technology 

Labor cost is typically 30-35% of revenue, and food cost is typically another 32% of revenue, utilities are another 5% of revenue. Overhead (including rent or a mortgage), professional services, and technology will vary significantly by type of restaurant and number of locations. 

If a restaurant brings in $300,000 in its first year, they’ll likely spend $105,000 on labor, another $96,000 on food cost, and $15,000 on utilities. That leaves just $84,000 to cover everything else, including overhead, technology, professional services, marketing, and incidentals. 

Expected Restaurant Profit Margins

Typical net profit margins for a restaurant are only 3-5%, meaning owning a restaurant that brought in $300,000 can generate just $9,000 - $15,000 in net profits (however, an owner’s salary is included in labor cost, so these amounts are exclusively true profit). An extremely successful restaurant can generate up to 15% net profit, but it’s uncommon for this to happen right away for a new business.

For more details specific to different types of restaurants and food businesses, check out these additional articles: 

Stay Up to Date on Restaurant Industry Trends

The restaurant industry is very much subject to the whims of the public. What’s trendy one year might not be the next, so restaurant operators should try to create a restaurant concept that’s timeless and appealing — not just opening a restaurant to try and jump on a viral trend.

However, keeping track of larger industry trends is still helpful. Talk to your peers, subscribe to restaurant industry newsletters like On the Line, follow lots of restaurants in your area on social media, and read websites like NRN, FSR Magazine and Eater.

Run Your Restaurant with Confidence

Running a restaurant requires a lot of juggling, but with a great team and the right systems and technology, it’s a rewarding business to be in. 

Related Restaurant Resources

Restaurant Metrics Calculator
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Restaurant Metrics Calculator

Use this free calculator to calculate the key restaurant metrics needed to understand the health and success of your business.

Download
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