The Basics of Restaurant Management in 6 Steps

Cody Cromwell
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What Does Restaurant Management Look Like?

Step One: Set Up Your Restaurant

Restaurant management is all about the weekly, monthly and yearly financial reports. You need to be able to track store expenses, food costs, business expenses, and payroll costs. In addition, you will have to participate in the day-to-day operations of the restaurant.

You will get to know where your servers sit, how servers get seated, your cover charges, your waitresses’ schedules, if your hostesses know your customers and much more. There are many benefits to this work. It’s a great connection to the people you serve.

You will build up a list of regular customers after a few years. For some individuals, it can be quite fulfilling to help people feel at home while they eat their meal.

Step Two: Understand the Menu

After you have decided on the types of food that you can offer on your menu, you have to get the prices right. It’s important to make sure that you know how much you can charge for every dish. But you must also make sure that you choose healthy foods to attract health conscious clients. You also need to make sure that you know the market and what customers want and expect.

Step Three: Learn About the Equipment

After you’ve selected the ingredients and the menu, you need to learn all you can about the equipment.

Know Your Restaurant’s Operating Costs

One of the biggest mistakes people make when they start a restaurant is that they don’t know how much money it’s going to cost to run. When I started my first business, I’d never written a business plan – not a word of it. And my business folded in a matter of weeks. So the first thing I recommend when you’re getting ready to open your restaurant is that you know what you have to pay on a monthly basis. That way you’ll know for sure how much money you can throw at marketing, food production, and other things you’re going to need.

Find a Local Business Planner

We all know how important it is to have a good business plan, but unfortunately most small business owners neglect this most critical piece of the puzzle. Seeking out a good business plan writing service can help you take advantage of the information they provide.

One important aspect of a good business plan is that it can save you a great deal of time and distress. By writing it yourself, you have to prepare all the necessary materials, conduct interviews, come up with the best ideas and so on, which is a huge time-sucker.

What Are Restaurant Expenses?

There are many different kinds of costs experienced in the restaurant business, from startup costs (such as rent and equipment) to labor, including wages, health, and insurance and retirement expenses.

Regardless of the type of restaurant, most expenses are allocated into two categories: operating expenses, which includes all of the monthly expenses for a restaurant, and fixed expenses, which are expenses that are consistent from month to month and do not change in direct relation to the restaurant’s monthly revenue.

The scope of expenses varies depending on the type of restaurant; a restaurant that is open seven days a week and caters to a rather low-income demographic, for example, will typically have a higher cost per meal than a restaurant that is open five days a week and offers only high-end food and does not offer options for healthy consumers.

Regular restaurant expenses include labor expenses, which include wages for all employees including management and kitchen staff as well as a various hourly benefits. Health and insurance expenses are another major fixed restaurant expense, covering all health insurance for employees as well as the cost of the health insurance company and claims.

Once you are in business, there are more expenses that you need to consider as well. One of the biggest is taxes, which vary from state to state and city to city. You should also consider the cost of liability insurance.

What Are Restaurant Costs?

Restaurants operate on a base of profit and acceptable costs. Total costs for a restaurant include operating costs, staffing costs, and overhead costs. The restaurant owner must maximize profits and maintain the restaurant in a profitable state while minimizing losses and expense. They should apply these costs to determine their profit margins by keeping operating costs low while staffing costs are as high as possible. The owner of a restaurant can just manage the basics in order to establish profitability or they can perform cost control procedures to realize their profitability. The cost control procedures are essential to make the restaurant efficient and help analyze and control the restaurant cost. A wise restaurant owner would control the total costs of operating their restaurants to a minimum.

Balancing Restaurant Expenses & Costs

When I think of expenses and costs in any business, cost control is one of the things that immediately comes to mind. Though many owners start with the task of trying to save money, it is much easier said than done. Storing too much inventory, maintaining too many employees and overspending on advertising are all things that can cause your financial bottom line to suffer. However, it’s crucial to understand the basics when it comes to cost control.

In this post, we’ll cover the basics of cost control. We’ll take a look at some of the costs associated with running a restaurant and how these costs can affect your bottom line. We’ll learn how to calculate the cost of operation, how to effectively manage your inventory, and how to effectively manage your expenses.

Now that you’ve had an introduction to the basics of cost control, we’ll take a look at one of the most common and basic of fundamentals – payroll. We’ll also address the expense of wages and how it can affect employee morale.

Labor Cost

The biggest cost factor in all restaurants is the cost of labor. Labor includes the cost of:

  • kitchen expense
  • wait staff
  • dish washers
  • bartenders
  • hostess

Of course, if your restaurant doesn’t have wait staff, hostess or dish washers, there will be no labor cost. But, if these are necessary in the type of restaurant you run then they will be included in the labor cost.

At the start you will have your barista, kitchen staff and wait staff already employed. From that point on, you should hire and train additional staff as needed to cover peak hours. Expense is cut when you hire part time help or seasonal help. Expense is increase when you hire full time help or end up having to renovate your menu to add more menu items.

Food Cost

One of the key components of restaurant management is the costing of your products. Failing to accurately anticipate and manage food costs could not only cause you to incur losses but could also damage your reputation and put your entire business at risk. Food costs are a significant expense, and it’s important to have a process in place that can accurately anticipate the costs and help you avoid unnecessary losses. The steps below can help you manage food cost management, both from a financial and a business standpoint.

Step 1…Document Costs

The first step to calculating your food costs is to make a list of ingredients used in preparing your meals. This includes high-quality ingredients as well as low-cost substitutions.

These ingredients need not be foods used in the meals you serve but can include items purchased by your kitchen staff for other purposes. The list will span several weeks and can include prices paid, as well as break-even retail and wholesale prices of ingredients required in your meals.

Keep track of the amount of each ingredient used in preparing meals, in addition to the amount purchased and the amount wasted.

Adjust Your Operation to Meet Targets

Whether you get one or two stars, the customers will expect you to serve them in a certain manner, and they will judge how each restaurant demonstrates this by its ratings.

It’s important to make sure that you’re serving customers with the proper manners and staff that are going the extra mile for your customers.

More stars mean more money, and you can use this to add more staff to provide a better service. You can also use this to justify larger food orders and a bigger wine menu.

Takeaway: Understand your target market and develop your brand to meet their expectations.

Ways to Control Labor Cost

Restaurant owners are often confronted with the daunting challenge of how to control the labor costs at their establishments without having to reduce the quality of the food or adjust the menu to feature cheaper and lower quality items. In this article, we will examine some of the key steps business owners can take to control labor costs and to ensure a profitable and stable business in some of the most common ways that restaurants manage their labor costs.

Hire and Train Staff

Depending on the industry you are operating in, the cost of labor alone can amount to as much as 85 to 90% of the total cost of running a restaurant. Only putting on more employees and increasing the number of shifts will not significantly reduce the restaurant's labor costs as much as well-thought out hiring and training initiatives can. However, for many establishments, training in the beginning can be as critical as the initial hiring process to a profitable and stable restaurant.

Hire for the Right Skills

If you hire based on experience alone, those with the most experience will be paid the most. But experience is only part of the equation. A well-trained, motivated, and capable employee will also perform the job better, will be more careful, and will stay with you longer.

Work Closely with the Chefs to Standardize Menus

Ways to Control Food and Beverage Cost

Food and beverage expenses are a constant struggle for many restaurant owners. The effect is felt in the bottom line. A menu that is priced too high, even for a high-end restaurant, may not appeal to customers.

While you can’t always control the cost of food and beverage, there are actions you can take that can limit or offset those costs. Below are some ways to control your food and beverage expenses.

Plan For Growth Using Logs and Forecasts

When you’re growing your restaurant business, you have to plan for growth. And it’s fair that you provide your customers with the best experience possible by expanding your operations to meet the growing demand.

As a new restaurant owner, you should be able to see and plan for both slow and fast growth. In its simplest terms, prior to your legacy and opening, your business should consist of all of the following really important elements:

  • Menu
  • Staff
  • Way of Doing Things
  • Hours
  • Equipment
  • Building
  • Furniture
  • Loan Accounts

Your company isn’t going to run on the money in your pocket – you’ll have to make business decisions based on what you can afford today and what’s going to work to grow your business and in the future.

As a restaurant owner, you’ll have to look at your establishment and evaluate as much as you can. This can include physical or financial data. Once you’ve gained some knowledge about your company, you can expand in stages, while maintaining ongoing financial data.

Use Daily Manager Logs to Communicate

This is a simple posting for any restaurant. But, for restaurant management, which we hope the guests never see if they get, it is absolutely necessary to be able to evaluate staff in a private place where only the owner or managers can see it. In my experience, I don’t think you need to be a math whiz to be a good manager in a restaurant. But, I can see the value of being able to use some form of spreadsheet or manager log to communicate to and evaluate the staff.

I have created a set of daily manager logs that you can download on my blog. All I ask is that everyone who uses it leave me a link to where they are using it, how much they like it and what challenges they have. All I ask is that you edit the title, and that you link back to this post and this blog. Thank you all in advance.

Couldn’t get this working (not sure if I’m doing something wrong)? Here is a link to the 2nd Release of the free Daily Manager Log.

Use Manager Meetings to Identify Trends & Create Forecasts

One of the most efficient ways to track your restaurant’s revenue and profits is by hosting manager meetings. Manager meetings are not only a great way to get everyone involved in the restaurant’s daily routine, but you can also use them to identify and report on seasonal trends.

Bigger restaurants use manager meetings to get everyone on the same page for the day’s routine and make sure that everybody’s working on the right things. These meetings are useful for smaller businesses, too, in order to ensure consistency and structure.

The key to a successful manager meeting is to get everybody involved. You can do this by using a one-page agenda and by having guest speakers come in and talk about trends or seasonal changes. By doing this, you can make sure you’re providing your workers with all the necessary information they’ll need to be successful.

During manager meetings you should also consider setting goals for the day. First, you should all define what the goals․ goals for customer satisfaction and satisfaction with the cleanliness of the restaurant, for instance. Then, you should assign these goals to specific team members to keep everyone focused on this important aspect of the business.

Monitor Standards Daily

Keep a close eye on each station and team member as well as lighting and facility conditions. Ensure all of your daily standards are met. Review your health and safety policies as necessary.

Keep Your Staff Trained and Motivated

A happy and competent staff will encourage your guests to keep going back. If staff members can’t keep up with your restaurant, or are having a hard time finding others, you’ll have to expend more time and money on employee training.

You should also have workers on hand to patrol your dressing rooms, restroom, and cashier areas in order to make sure employees are doing what they’re supposed to do. Sometimes putting up a hospital-style poster with instructions can work for a while, but you’ll find that the best bet for employee improvement is training.

Furthermore, recording your employees’ performance will help you see where they need improvement. Keep your employees motivated by offering incentives to keep them on board.

Focus on Customer Service

One of the keys to your success as a restaurant manager is obtaining customers—which you’ll do by giving great service. Create a salable atmosphere where customers are happy to be. The best way to do this is by having friendly, efficient service that makes them want to come back and tell their friends about you.

The first order of business is to train your staff how to provide great customer service. If you want to do this, you need to teach them (and yourself) what customer service means. Here are a few tips:

Compliment the customer on an order or meal … A positive word or smile can create a lasting impression on a customer.

Keep a friendly demeanor … Treat customers like friends, not like a number on a tablet.

Acknowledge customers’ presence … Customers appreciate it when you acknowledge them.

Make the customer feel special … No customer wants to feel that they are simply another face in the crowd.

Top 2022 Restaurant Management Challenges

How would you like to impact your restaurant’s profitability, decrease your operating expenses, optimize your marketing efforts, ensure your success doesn’t depend on one individual, or create an atmosphere that will attract loyal visitors and customers for years to come?

Restaurant managers who successfully achieve these goals will have attained their goals of success and profitability in the restaurant industry.

The restaurant industry is undergoing tremendous changes that are impacting the profitability, operations, and marketing of restaurants.

Restaurant companies must adjust to these changes in order to thrive or to even exist with growing competition. Trying to make a profit is not easy. The restaurant business requires a lot of hard work, dedication, and attention to detail. Managing everything, from customer service and the quality of food to advertising and marketing, is a full-time job. Achieving success and profitability in a difficult industry requires more than a great idea and a great location! It takes lots of hard work and dedication. If you’re ready to get started, you’ll need to follow the six steps in this post to succeed as a restaurant manager.

Here are the six steps to putting together a successful restaurant management in step-by-step detail.

Bottom Line

I think everyone in this world wants to go to a great restaurant at least once in our life time. People just can’t get enough of the great flavors, the pace, and the atmosphere and ambience, of a restaurant.

When going to a restaurant, we want our experience to be pleasurable and a food experience without waiting adds a special element for our pleasure. In this particular session, we know what are the basics of managing a restaurant and we would like to see them in the day to day life.

The owner, the managers, the chefs need to have the right attitudes and skills basic to manage the restaurant. Managers needs to be able to make short and effective business decisions which can benefit the guests and restaurant. The owners, on the other hand, need to take serious responsibility in the formation and management of the restaurant. The employees need to know the proper way in taking and serving the orders without making mistakes.