The worst mistake I ever made in business was at my own restaurant, Vintage. It wasn’t the first mistake I made, nor the last, but it stands out for irony. There I was with Culinary Accountants, advising other people how to run their restaurants in a financially sustainable way, and then ignoring my own good advice.
Vintage has never had problems with either service or cuisine. Even in the earliest days, when we had the same sorts of miscues that all new restaurants have – slow ticket times, misfires, service inconsistencies, etc. – we anticipated those issues and treated our guests the right way. For the entire first month, not just the soft opening week, all guests were welcomed to the restaurant by a letter on their tables that thanked them for trying us, gave them a heads up that we were brand new and far from perfect, and let them know that we would be discounting their checks because of the imperfection…the only thing we asked in return, was for them to give honest and fair feedback via a short customer survey at the end of the meal.
The successful execution of smart, subtle operational ideas like this – and a slew of other great things we implemented as a team – probably blinded me to the fundamental financial mistake I was making: I was running the restaurant I wanted to have, not the restaurant I had.
At the beginning, I staffed the restaurant expecting twice the volume we ultimately started with. That, in-and-of-itself, isn’t uncommon with restaurants – it’s healthy even. It’s often said that the staff you start with will not be the staff you have when you’re three months in. You simply don’t know who will turn into an A-player, and who will no-call, no-show on the second day.
What you can do when running a restaurant is forecast your sales levels and overstaff for those levels at the beginning to get ahead of the naturally high turnover during the restaurant’s first quarter. What you can’t do is open your restaurant and keep managing the restaurant you forecasted you’d have rather than the one that you actually have – but that’s exactly what I did. I sat there and I watched our sales levels over two months and I knew the restaurant that I had. Then I saw that our management structure was too expensive for the restaurant – we couldn’t afford the management structure I’d set up. I knew we would need to drop our sous chef, upgrade our line kitchen staff to compensate, and find a creative way to provide adequate FOH management coverage.
And I did nothing.
I waited a full 18 months before I started making the right financial decisions for Vintage. We dropped our sous, we upgraded our line staff, and we created a unique hybrid position to cover assistant front-of-house management shifts. It worked, and we were a much stronger company for it. We stopped losing money and became a sustainable restaurant. A sustainable restaurant can afford to give raises to hard working employees, offer health insurance, pay bonuses, and give the staff a sense of security.
So what gives? Why did it take me so long to make the decisions that needed to be made? Decisions that I have no trouble advising others on – helping them make those decisions, insisting that they make them even when they appear difficult?
Probably because I was too close to the problems. I was emotionally involved and didn’t have an objective third-party to help push me. For 18 months I made excuses. First, I ‘needed to see a full annual cycle to know what we’d have.’ Then I needed to see some YOY performance – maybe we’d get dramatically better! Then spouses of some of the employees that I couldn’t afford were 8 months pregnant, so laying them off would be immoral. And so on.
It was only when I ran out of excuses that I started making those decisions. Some of them were as hard as they appeared, but most of them were actually relatively easy. As a restaurateur you are responsible for running a sustainable business – you owe it to your employees, your guests, your investors, your family, and yourself to make the decisions that will keep your restaurant in business. Even if it takes a lot of thought, careful planning, and a bit of outside-the-box thinking. It turns out that when you keep your mind on the goal of developing a sustainable business, it becomes much easier to get to that goal.
It also turns out that I’m not alone.
Most restaurateurs spend long, long hours in the middle of their restaurants and feel personal connections to every element of the business. Just like I made excuses for Vintage rather than admit that I had misjudged the forecasts or lay people off that had worked hard for me, most restaurateurs I know are too emotionally attached to their restaurants and their team members to make the decisions required to make their businesses sustainable. I can’t tell you the number of times I’ve had long, difficult conversations about business changes that needed to be made at one of our client restaurants that have started with the client believing that ‘all we need is $x,xxx more revenue each day/week/month/year’ and everything will be fine. They’re usually right about the number – we’ve generally honed in on it through careful analysis and review of the operational performance. With just $x,xxx more revenue each day/week/month/year, that restaurant will be just fine.
Hope is not a strategy.
In reality, the best restaurateurs don’t rely on ‘more revenue’ to solve their restaurants’ challenges. Instead, they establish a culture of feedback, intelligent analysis, and responsive change to meet their challenges.
These restaurateurs realize that there many things a restaurateur can do to drive sales. Special events like wine dinners, private events sales, catering, consistent execution to build a vibrant repeat a la carte business – all of these things help. They all take time and a consistent concerted effort to execute in a meaningful way, however, and none is a panacea for the ills of a restaurant that doesn’t have the proper financial design.
Successful restaurateurs realize that this makes it imperative to work with great restaurant financial advisors to make the adjustments needed to set a restaurant up for financial success. Your financial team should be capable of analyzing your financial information with you and distilling it into meaningful feedback. Maybe you’ve planned to open a dive bar, but the PMix is telling you that your guests are looking for a higher end cocktail experience. Maybe you think you’ve hired the best bartender in the city, but your cocktails are all costed incorrectly so you’re going to throw away $50,000 a year unless you rework your drink recipes. Maybe you thought you would do $4M per year, but you’re on track for $2.5M – can you afford 3 kitchen management positions and 3 FOH management positions, or do you need to rework things?
As a restaurateur you are responsible for running a sustainable business, which means you have to analyze your financial information and make decisions based on this feedback. Make sure you aren’t doing this alone. You use a doctor to keep your body healthy. Use a restaurant financial advisor, like the team at Culinary Accountants, to keep your business healthy. Your restaurant financial advisory team should be there with you every step of the way, focusing an objective, expert eye on your restaurant’s financial performance to help you achieve sustainability.