Restaurant Financials: How to Meet 2018 Restaurant Goals
By: Sam Kusinitz
Mar 09, 2018
The year is quickly coming to an end, which means that you’re likely already focused on the end-of-year financials and tax audit.
Rather than simply going through this process, take the time to critically analyze your performance in 2017, identify goals for 2018, and create a clear plan for how you can meet those goals in the coming year with these simple strategies.
Review Your 2017 Restaurant Performance and Identify Areas to Improve in 2018
You’re likely already compiling an end-of-year restaurant income statement. Rather than simply focusing on the bottom line revenue for 2017, take some time to really analyze the P&L statement.
What were your greatest challenges in 2017? What areas of the business held you back from achieving your goals or from doing even better this year?
Perhaps your liquor sales left a lot to be desired, your cost of goods sold was higher than you had planned, or your labor costs for the year were far too large compared to your sales. Take a look at each section of the P&L and identify the areas that you need to focus on in 2018 in order to take your restaurant to new heights.
Set Restaurant Goals for 2018
Your paramount goal for 2018 is likely to improve your bottom line profit margins in the coming year. However, you should also set smaller, specific goals to help you reach that goal.
For instance, if your cost of goods sold or labor cost percentage were too high in 2017, you should focus on cutting costs in those areas in the coming year. If your costs were in your target range in 2017 but you did not reach your bottom line goal for 2017, you likely want to focus on ways to increase sales in 2018.
When you set these goals for the coming year, go a step further. Identify the specific dollar amount you want for sales for 2018 and the target percentage of those sales you want to dedicate to labor and food costs.
Create Benchmarks for Your 2018 Restaurant Goals
Work backwards to break down your 2018 restaurant goals into the target metrics you’ll need to hit each quarter, month, and week in order to actually meet those year-end metrics. This exercise will help you track your progress once 2018 is underway so you can quickly identify the areas that need attention and make the necessary adjustments as you go to stay on pace to meet your goals.
So far, we’ve focused on answering the what questions: what your goals are for the coming year, what you are going to need to do to get there, and what areas need to be improved in 2018. Now it’s time to focus on how you are actually going to get there. To do this, you need to make a more concrete plan that identifies the specific actions you can take to make those goals possible. Here are some ideas:
Increase repeat customers visits and/or spend
Increase average check sizes
Increase the number of guests you serve
Introduce new revenue streams
Decrease labor costs
Decrease the cost of goods sold
Get the Tools in Place to Improve and Track Your Progress
Now that you’ve identified the numbers you need to hit throughout the year and some concrete ways you can improve to make your goals possible, you need to make sure that you have the right tools in place to track your progress and take your restaurant to the next level in 2018.
How are you analyzing your restaurant's sales reports? If you’re using a POS system, is it giving you everything you need to properly track and analyze these metrics? You should make sure that the system you use does more than simply allow you to see records of your sales and costs. The system should allow you to go a step further and identify the specific aspects of your business that are driving sales or dragging down your bottom line so you have the insight you need to make better business decisions in 2018. If you cannot easily gain insight into things like server productivity, the menu items driving your sales, and labor cost percentage, or if it is requiring far too much time to do so, you may want to look around for a new solution for 2018. 73% of restaurant owners already are.
Restaurant Tools to Grow Revenue & Cut Costs
Start by analyzing what you currently have in place. Do you offer a loyalty program? Gift Cards? Online Ordering? If you do offer these services, how effective have they been over the past year?
Restaurant Loyalty Programs
If you already offer a restaurant loyalty program, what type of return have you seen on that investment? Are your customers adopting the loyalty program at the rate you anticipated? There are many reasons that restaurant loyalty programs fail to attract customers and to drive additional revenue. In 2018, consider finding a loyalty program that is built into your POS system and/or that allows guests to easily opt in, that doesn’t require them to carry a physical rewards card, and that makes it easy for them to earn and redeem awards. Some restaurants that use mobile restaurant loyalty programs have seen customers’ visitation frequency increase by 75%, and have found that customers spend 39% more when they are about to unlock their next loyalty reward.
Restaurant Gift Cards
While most restaurants offer gift cards, few offer digital gift cards or allow customers to purchase their gift cards online. The right gift card program can be a great tool to increase revenue in 2018 as nearly 3 out 4 customers will spend more than the value of the gift card, spending an average of 20% more than the amount on the card. However, it’s not enough to simply offer a restaurant gift card program. If your existing gift card program has not contributed enough to your revenue, consider a gift card program that also offers digital gift cards and the ability to sell gift cards online.
Digital Gift Cards
Unlike most digital gift card programs, physical branded gift cards come at a cost to restaurants. Restaurants need to purchase the physical cards to have the inventory on hand which means there is a great COGS for physical gift cards than digital gift cards. The good news is that customers actually prefer digital gift cards. According to one study, 80% of total respondents (89% of millennials 18-35) agreed that they’re more interested in purchasing digital gift cards now than they were two or three years ago.
Online Gift Card Sales
Most local businesses do not sell gift cards online, which means they are missing out on a lot of potential revenue. In fact, while online gift card sales are growing at 29% per year and 97% of the top retailers and restaurants sell their gift cards online, only 3% of local businesses offer online gift card sales.
According to the National Restaurant Association, 52% of consumers said they would use a smartphone or tablet for delivery or takeout if the restaurant offered that option. That means if you are not currently offering online ordering, you could be missing revenue from the 50% of your customers who would likely order from your restaurant more frequently if they could do so online.
Offering online ordering through your POS system can also help you collect restaurant customer data, control the customer experience, and save you time managing and tracking your online ordering service. In some cases, offering online ordering through your POS system can also cut down on the costs associated with the online ordering services if they charge a flat monthly fee as opposed to the high commission most third party services take out of each order.
Mobile POS Tablets
Mobile POS tablets can help you to increase the number of customers you can serve, which will, in turn, help to increase revenue. Full service restaurants can use these tablets to take orders, fire tickets to the kitchen, and complete payments right at the table, without having to run back and forth to a central POS system. Since orders are entered right at the table and fired directly to the kitchen, introducing these tablets can also help to improve order accuracy and cut down on waste. Quick service restaurants can use mobile tablets to line bust when the line starts to back up during peak hours, helping them to move guests through the line and serve more guests.
Take Advantage of Section 179 of the IRS Tax Code
If you do decide to introduce a new POS system, or you think you’ll likely want to do early next year, it may make sense to make that purchase now, before the end of 2018, so you can take advantage of tax breaks on the purchase. Section 179 of the IRS tax code allows businesses to deduct the full purchase price of qualifying equipment and/or software purchased or financed during the tax year. That means that if you buy (or lease) a piece of qualifying equipment, you can deduct the full purchase price from your gross income.
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