By Sarah Willingham, restaurant investor and former Dragons’ Den star
In the current climate where large high street restaurant chains are closing down or reporting difficulties, there’s never been a more important time to ensure that small, independent restaurants are given an opportunity to thrive.
Recently released research from Just Eat found that if we can help independent restaurants and takeaways increase their annual turnover by 5%, the UK economy could stand to gain £1.1billion.
I know all too well how tough it can be to run a successful and profitable restaurant business. To make the most of their growth potential, restaurant owners need to be more commercially-minded. Often, they’re so focused on day-to-day tasks, they don’t think about the bigger picture of running their businesses as efficiently as possible, helping to drive profit margins.
Here are my top five tips to help small restaurants achieve their desired growth:
Make your food profitable Just Eat’s research showed that rising food prices are one of the greatest concerns for independent restaurant owners. With this in mind, it’s important to review your prices regularly to make sure your dishes are still profitable. Anyone running a food business should know the exact cost and profit for each item on their menu. When it comes to pricing the item, your average dish should be roughly 20% cost and 80% profit.
Understand your running costs You need to know the benchmark for your running costs – rent, wages, electricity and so on. Many businesses can go months without realising what’s driving up their costs; if you don’t know what’s changing then you can’t address it. It’s also important to take advantage of ways to reduce running costs – many companies offer discounts for small businesses. Do your research and find out how you can make things cheaper.
Use data to trade more efficiently It’s incredibly important to understand your trading peaks and troughs. For example, if takings are very low on a Monday, it might be more cost effective not to open that day. Similarly, if certain dishes are doing really well, you could consider adding a variation of that dish to meet the demand.
Don’t underestimate the power of reviews A recommendation or review can be the deciding factor on whether or not customers choose to order from your restaurant. If you get a negative review, try not to reply in the heat of the moment. Take the time to respond. Take on board the feedback and consider what changes you could make. It’s important that you show you are listening.
Understand your competition It’s natural to be fearful of competition. However, healthy competition increases the market and could drive more customers. Observe what your peers are doing and consider whether there’s anything you could do differently. Talk to one another – it’s likely you’ll be facing the same pressures and could learn from one each other.
Sarah is currently offering independent restaurants mentoring as part of Just Eat’s Business Booster programme. The scheme has been designed to help restaurants address the challenges they face as they seek to grow their business.