"I love going over my finances!"
...Said no restaurant owner ever.
But as any successful restaurateur knows, finances are just another part of the job.
Recently, we teamed up with Wisely to create a new eBook on 65 Tools, Tips, and Tactics Restaurants Use to Personalize Guest Experience and Grow Profit. While the topics of management, marketing, and operations are all covered in detail, one of the sections that promises to be most helpful for restaurateurs is finances.
Here are five restaurant finance tips we think will help you get more guests in your door and keep them coming back.
1) Understand How Much Comping Impacts Visit Frequency
Today, for the first time, comps are a science that are specific to each individual restaurant. It's up to you to find this number out for your business.
First, understand how comps relate to future visits. Ask yourself these questions.
- When you comp an item for a regular, does it translate to a faster-than-usual visit cycle for them?
- If you comp an item for a first or second time visitor, does that translate into a faster visit frequency?
- For each item on the menu that's comped, how much faster is the guest’s cycle time, if at all?
Answering these questions are watershed moments for many operations teams, and lead to fine-tuned optimizations in the guest experience.
2) Know if the Market is Slow or if it's Just Your Restaurant
Almost every restaurant has shoulder periods, when the restaurant is less than fully utilized.
The trick is to understand whether your restaurant is uniquely slow, or whether it’s systematic of the market around you. For smaller groups, it’s as easy as peeking down the block. For larger groups, it’s not that simple.
Here’s how: position a camera near the entrance, such that it can see whether a person enters or passes by. Then, use Wi-Fi to determine how many visitors there are relative to passers by. From there, you can compare the visitor to passer by statistics relative to other similar restaurants. If you have many passers by relative to visitors, that suggests a unique issue with your restaurant.
3) Turn a Slow Day Into a Prime Day
I’ve seen restaurant groups do it. Restaurants that used to be slow in the late afternoon were jumping at the same time just three months later.
How did they do it?
In every case I’ve been party to, it starts with understanding exactly who your customers are during the part of the day in question.
- Where they work geographically
- Whether they’re there on business or personal time when they come in
- Whether or not your target market has kids
From that understanding, you can piece together a strategy on how to create a uniquely attractive offering for the day and day part.
Keep In Mind...
This doesn’t have to mean giving discounts on food & drink. In one specific case, one restaurant wanted to improve its performance between lunch and dinner. They found that the lunch managers were closing up their shift, and the evening managers were prepping for dinner service — causing a sub-par experience for guests. The result was to bring on an extra manager, and double down on service during that period.
The CEO of the group I’m referring to said that just 90 days later they could see a meaningful lift in revenue, and 12 months later they became known in their neighborhood for their late afternoon vibe.
In other situations, however, if you have a slow Monday night, our recommendation is three fold.
- First, dive deep in understanding guests that do visit during that day part.
- Second, look for low hanging issues by reading feedback and talking with guests.
- Third, target guests similar to the ones you already know visit during the slow period, highlighting the reasons they cite for coming in.
4) Calculate How Many Guests Are Most Likely to Churn
It's not uncommon for 30-50% of guests in a restaurant to be one-time-ever guests, especially in areas with transient populations or large tourism industries.
The trick to compounding same store sales over time is to know which guests have high potential customer lifetime value, and whether they're likely to churn.
In many cases, the warning signs are implicit in visit behavior or explicit in feedback, but the breakdown happens because restaurant operators don’t know who those “Churn Risks” are while they’re in the dining room.
5) Determine the Lifetime Value of a Particular Customer
In a mathematical sense, future Customer Lifetime Value (CLV) is a function of Visit Recency, Visit Frequency, and Spend per Visit.
In English, if you have a customer who visits all the time, spends a lot, and was in yesterday, they're likely to be valuable in the future.
Let's discuss how it can be useful from a marketing perspective.
First, as a rule of thumb, the top 10% of guests will account for 50% of total revenue. You simply need to know every time one of these guests walks in the door, or if one is at risk of churning. Once you have the expected CLV calculated at the individual guest level, you can design operations and marketing interventions—and finance can measure their effectiveness.
Want more restaurant finance tips?
Download your free copy of One Guest, All Day: 65 Tools, Tips, and Tactics Restaurants Use to Personalize Guest Experience and Grow Profit from our friends at Wisely below!