Restaurant Management Talk about Cutting Costs vs. Increasing Sales- Daily Tip for Monday Aug. 8th.

Posted on 09. Aug, 2010 by Gary Tripp in Daily Tip

Post by good friend to Inside Hospitality & guest blogger Michael Hartzell

“When all is said and done, more is usually said.”  Many rely on a street sign for advertising and hope for the best.  These comments came from restaurateurs during the last 25 years:

• I can’t think of anything right now; let’s do what we have usually done.
• What is the restaurant up the street advertising?  We will copy them.
• Our advertising isn’t working very well so we need to spend more.
• I just got a call from Advertising salesman pete with a special that ends next week so we have to do it.
• I just thought of a marketing idea while I was washing my hands in the bathroom.
• The economy is down and people are spending less so we need to cut the advertising budget.
• Since business is down, we need to cut labor and get the managers and staff to be more productive.
• Let’s cut all the services that make the restaurant look great to every other month to save costs.
• We can open later and close earlier since no one is coming in.
• Oh?  There are fewer transactions?  Then we need to raise the prices.
• Don’t worry; the slower sales trend is only temporary.  We can dig in and wait it out.
• The boss just cut our hours and is working more herself to save money while business is slow.
• If we cut out  ______, we can save 2 cents per transaction.

Tendency to play it safe:

There is a tendency to make decisions about what we know can be controlled.  It is a sure thing to cut costs, work more hours, reduce portions, or raise prices.  The impact is immediate and can be measured easily.

Where is the Bottom?  When focusing on what I call “defense”, there is a bottom.  Do you know where yours is?  I hope you are first inclined to put on your to-do list those activities that impact sales.

The simple formula to conduct your breakeven analysis is to take your fixed costs, divided by your price, minus your variable costs.  As an equation, this is defined as:

Breakeven Point = Fixed Costs/(Unit Selling Price – Variable Costs)

If you are surviving each month but in reality making no profit, the first action anyone is inclined to do is:  Go on defense and focus on keeping the cash.

Feeling is NOT Reality:

Any good game plan also includes a more aggressive offense when behind.  Defensive strategies give a FEELING of accomplishment but there is a good chance that the new focus is taking MORE energy and time.  Therefore, there is not much time, energy nor resources left to invest into offense.

A year down the road a management team might say:  “Look!  Sales are flat!  We are making progress!”  In one respect this is true.  After all, if costs are in line with goals (based on percentages) it might appear the managers and owner are “in control” of the business.

This is often a conflict between the less experienced, hard working leadership within the restaurant vs. the seasoned veteran leadership who know that defense is only half the game.

It’s been a year:

It has been more than a year since the “economy went bad”.  You have cut every cost possible and continue to look at the P&L when the best thing you could do is to make more introductions and invitations.

In reality this is may not be exciting and the repetition of marketing may soon wear you to the point of monotone mundane script reciting over and over.  When do the lines and judgment begin to blur?  After the 1000^th handshake?  After the one millionth advertising piece sent?  You have cut costs, streamlined, sweated over your P&L statements and also have to be innovative and interesting.  You may not feel so interesting and in fact may feel tired.

Reminder that it’s work:

People are searching for you because they want to have a great experience.  Marketing is not quite as exciting as some make it out to be.  It is hard work and takes personal discipline.

• Mail
• Telephone
• Mobile Text Messaging
• Facebook, Twitter, Foursquare.
• Newspapers
• TV
• Radio
• Magazines
• Doorhangers
• Walking Around Marketing
• Many more

In fact I have a whole list here:  Restaurant Marketing Planning Spreadsheet

This is a special link just for you at Inside Hospitality that bypasses the opt-in form.  It is free.

“When it’s all said and done, make sure that more is done.” Michael Hartzell

About Michael

Michael Hartzell – Entrepreneur, writer, coach and Inbound Marketing Certified Professional.  As a self proclaimed Professor of Magic Marketing, author of “10 Magic Marketing Tips” and over 30 years experience as a restaurateur, Michael helps business owners “Boost Sales & Build Teams” on the foundation of Knowledge Empowers so Learn & Teach ™.  Read more from Michael at Restaurant Marketing Ideas Blog or contact him at ask@michaelhartzell.com.  Member of the American Marketing Association and Guerrilla Marketing Association.

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