Saturday, 30 April 2016

QSR Lessons - A few tips to Optimize Costs and generate more Profit!

A restaurant business must run very tight on costs. A typical formula that I follow in splitting the costs Vs Revenue for a ballpark calculation is:

1. Food Costs = 25% of the revenue
2. Salary Costs = Another 25% of the revenue
3. Opex Costs = 25% of the left over revenue
4. Profit = 25% of the rest in a best case scenario. Profit could vary from 15% to 25% depending on the revenue and other variables that may be.

In any scenario, it is very important to keep the cost in control. Unlike other businesses, the more revenue a food business creates, the food costs increase proportionately.  Here are a few tips to keep costs in Control.

1. Do not run your business 24x7:
              One of the important tricks is to observe and identify the lean days and lean periods where customer inflow is so less that the salary costs and OPex are more than the revenue that you make. There is simply no point in keeping your outlet open for just one or two customers. Pick a time in the day where you will be off and also a day in a week where you will be off. This saves a huge amount of OPex and inventory in control.  By limiting your working hours, one also eliminates salary costs by avoiding shift staff and leveraging limited staff for the entire day.

2. Create a Hype - Serve your best Dishes for Limited Hours:
              If you are known in your area for a very unique USP item or Items, then make sure it is available only for a limited period. Two advantages with this approach: 1. You continue to build peak foot fall during those hours and make sure you sell the full stock and cover your costs in this rush 2. You know exactly how much to make and sell, bringing in a lot of predictability into the entire food making process.

3. Avoid middlemen in material Sourcing:

The less the number of players that are involved in the supply chain, the better the profits. Direct from farm is not just a health fad, it is very important to eliminate the greedy sourcing partners who take their cut of profit. This is applicable for every aspect of sourcing that you do on a day to day basis.  Many food businesses, by adopting direct to table policy have been able to pass on the value back to the customers by keeping the cost on the menu very competitive without compromising on quality. This in turn attracts more customers. This is a cycle. Stick to it.


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