Top 10 Ways to Keep Your Restaurant Alive in a Tough Economy


The most recent economic plunge has left many U.S. businesses in extreme distress. Restaurants have been especially hurt by the dramatic drop in customers and the increase in operational expenses. According to a recent survey, 54 percent of people who dine out regularly are doing so less often because of the economy, and three quarters of those are cutting out restaurant dining entirely. Commodity and transportation prices have skyrocketed, and many restaurants are seeing an almost impossible rise in food costs. The restaurant industry saw a loss of more than 67,000 jobs during the months of July through November, 2008. Even Starbucks, the world’s coffee shop monopoly, closed 600 stores in 2008. With the nation’s economy in a slump, restaurant owners and franchisees have had to put their aspirations for growth on the back burner and make survival the priority instead.

The economic downturn has caused restaurant operators to re-evaluate their objectives and their means of moving forward. Although you may not be able to keep your restaurant thriving in a poor economy, keep it from sinking by re-assessing your strategies and re-energizing your workers and your customers. Consider these guidelines:

Rethink your business plan

Your business plan is the overall strategy for budgeting and growth that you created when you opened your restaurant. Revisit the business plan and assess every detail to figure out how your strategy will need to change going forward. This likely includes putting growth on hold, anticipating inflation and minimizing any investment in overhead expenses. This can also include drastic redecorating or plans for aggressive hiring or promotions.

Examine your profit and loss (P&L) statement

Next to your business plan, your P&L statement is the best place to look before cutting costs. Go through your P&L sheet line by line to see where you might possibly be able to trim expenses. For instance, assess your smallest or most expendable costs first. You may be able to cut out the cost of repairs to your building as long as they are not a public danger. After you assess the smaller costs, move on to your biggest expenses to see what you might be able to save. You also might be able to cut some of your marketing or advertising expenses. Every P&L statement is different, and knowing the finer details of your income and expenses will put you in a better position to make decisions regarding your business. »More on the Restaurant P&L Statement

Scrutinize your food cost

Across the industry, food cost and labor are a restaurant’s chief expenses. Inspect your food costs often. » More on Restaurant Cost of Goods Consider these suggestions:

  • Look at how much of your budget is spent on every single item in your inventory. Ask yourself whether or not you are paying too much for these items and figure out how much food is being wasted.
  • Cut waste by preparing food in smaller batches and using good-quality scraps for stews and soups.
  • Vacuum seal pre-portioned foods so they stay fresher longer.
  • Always stock newly delivered food items behind older ones, so that the older items are used before the new. This ensures that old items do not expire on the shelves. This is known as first-in, first-out (FIFO) rotation.
  • Count inventory meticulously every time.

Get the best deal

Communicate with your vendors frequently and make sure you are getting the best prices on food. Although price is not everything, you may benefit from shopping around to try and find better food and beverage prices from another vendor. » More on How to Choose Vendors for Your Restaurant

Analyze your menu items

Be sure you are serving appropriate portion sizes to your customers. Check to see that your menu items are actually profitable to your operation by analyzing the gross profit on each item, as well as checking to see how often and how many of the items are sold. Try not to alter any popular plates or signature dishes since customers may see this as a drop in value. Get rid of any items that are not delivering profits to your bottom line. » More on How to Price Your Restaurant’s Menu

Promote your value proposition

In poor economic times, every restaurant is competing for guest attention and revenue. Make your restaurant stand out among the competition with a smart and effective marketing strategy. If your restaurant sells purely vegan foods, make this point one of your unique selling points. If your food comes from local vendors only, include a blurb in your menu detailing your “fresh and local” ingredients. Going green is also a great way to attract customers, so let them know of your efforts to be environmentally-friendly. Simply hiding out and hoping to stay in business is not the way to attract customers. You do not necessarily have to pay a lot, but do something to make your establishment stand out from the rest.

Provide an exceptional experience

Customer service and quality should be your top priorities. You need to train your staff to put service at the forefront of their minds in order to make your restaurant a special place that stands out in the customer’s mind. In a poor economy, restaurants that provide outstanding service have a better chance of sticking around.

Be willing to adjust

If you are able, assess your menu and adjust it to follow current customer market trends. If you believe your market area would prefer more healthful menu items, consider adjusting your menu to keep up with your competition. Similarly, if you find that customers demand WiFi in your restaurant, look into how much it would cost to provide it. Some changes may benefit your restaurant in the long run if they can attract more customers.

Invest in your people

Due to the economic circumstances, and the dramatic rise in unemployment rates, restaurant turnover rates are shrinking. Thus, it is important to value your workforce and invest in the people you employ as much as possible. If you are able, give them a slight raise, even if only a few cents added to their normal hourly wages. Reward them as much as you can for a job well done. If you demonstrate that you are invested in them, your people will stick with you and display your restaurant’s value to your guests.

Stay focused on the future

Despite the hardships, know that the economy will eventually bounce back, even if that bounce is a sluggish one. The National Restaurant Association shows that 33% of adults ideally want to dine out or order take-out more often, but simply feel constrained by the economic situation. Once the country begins to lift away from the slump, the restaurant industry is sure to pick up again. Keep focused on the future, and in the meantime, secure your concept for the road to restoration.


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