Big and Small: 10 Financial and Money-Management Best Practices
1. Install fiscal responsibility from day one. From negotiating the lease to working with a credible contractor who understands the budget, operators can save thousands by being attentive to start-up costs and injecting fiscal discipline into the restaurant’s culture from the start.
“If you overspend, the chance of failure only rises,” Beef ‘O’ Brady’s CEO Chris Elliott notes.
2. Embrace patience and a long-term outlook. Since opening Another Broken Egg Café in 1996, founder Ron Green has received regular calls about expanding the concept. He long resisted the temptation to “sell, sell, sell” and only added what his system could handle. As a result, Green never assumed more financial risk than necessary and never spread his corporate staff so thin they couldn’t execute.
“So many concepts seek growth before they have their feet under them, which can create lower revenues and greater expenses,” Green says.
3. Screen partners. From investors to prospective franchisees, Green has made it a practice to exhaustively screen all prospective partners. With franchisees, he assesses their ability to run an efficient, effective, and profitable establishment, while he examines if investors can stomach his patient approach.
“If you’re not doing your due diligence up front and have someone pull out down the line, you can be left with some costly troubles,” Green says.
4. Step back. Operations expert Anna Eddy suggests all in-house leaders occasionally step away for one shift to observe gaps in service and inefficiencies, such as seating new guests, delivering drinks, or producing all dish components in the kitchen at the same time.
“Close these gaps and you’ll have better service, more fluid shifts, improved revenue, and reduced costs,” she says.
5. Train and train well. Before opening a new Another Broken Egg Café, franchisees receive six weeks of training at the company’s headquarters in addition to another 3-4 weeks at the new store. Green knows installing comprehensive and thorough training for operators as well as frontline staff is critical to the company’s sustainability.
“The restaurants that fail are those that aren’t managed or trained properly,” Green says. “We make sure our stores know how to execute.”
6. Rightsize the operation. Upon his arrival as CEO, Kerry Kramp pushed leaders throughout the Sizzler system to examine spending and efficiency. His team analyzed guest traffic rates to better manage production, purchasing, inventory levels, and staffing. They investigated areas where technology might offset manpower and analyzed the elements that might be outsourced as well as what could or should be accomplished in-house.
“If you’re not digging down deep into these performance metrics and getting everything in line, then you can do some serious damage to the business,” Kramp says.
7. Bring back barter. A centuries-old practice, barter has been reborn in the recession era as restaurants look to keep cash on hand and attract new customers.
Barter exchanges, both local and national (the publicly traded International Monetary Systems, for instance, is the nation’s largest), allow restaurants to accept “barter dollars” from registered barter partners on the full cost of meals. Earned on the restaurant’s wholesale dollar, that barter currency can later be redeemed for any number of products and services from advertising to plumbing.
8. Spend money, make money. At Grub, co-owners Denise DeCarlo and Betty Fraser take advantage of credit card companies’ cash-back and incentive programs, returning thousands of dollars to the business each year. In many cases, points can be multiplied on select purchases.
9. Make repairs in-house. Whenever possible, DeCarlo and Fraser have employees make repairs to their operation’s early 20th Century bungalow, a measure to offset hefty contractor fees. In fact, the co-owners have even adopted a regular practice of hiring people with “handyman” skills in addition to restaurant experience.
“We’ve had a couple of waiters who could have walked out of Grub right on to the site of Extreme Home Makeover,” Fraser says.
10. Have an energy audit. Given rising energy costs, many operations are turning to energy audits. Courtesy of business assistance from Urban Solutions, a nonprofit economic development agency, Miss Saigon Restaurant received an environmental audit and consulting. As a result of the audit and implementation, the San Francisco restaurant is reaping annual savings of $5,000 on energy, more than $6,000 in water, and another $6,000 in waste pickup.