Industry Update
Opinion Article30 September 2020

Revenue Optimization for a Restaurant to be Financially & Economically Successful!

By Jefrey Walter, Culinary Management Intern

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I have observed in recent years that a restaurant or a food business losses revenue and customer satisfaction which is influenced by the team's ability to understand the concept and timidity.

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Eventually, a business tends to generate revenue and profit focusing on quality and food calculations. As far as I have analyzed, even a food wastage of even $3 per day for a single ingredient would cost thousands of dollars of wastage on a monthly basis. The essential key here is NEVER to compare your home cooking to a commercial kitchen because the main concept of home cooking is neither you generate profit nor you have customers to deal with.

1. Actual edible Food Cost and yield:

What most of the Professionals do is they don't focus on the calculation on wastage. By calculating the actual edible food cost & the trimming, as purchased quantity, restaurants can generate revenue effectively. The strategy here depends upon the actual calculation of trimming and wastage and to avoid the same in the future. It is also important to calculate net profit and gross profit.

Yield percentage = edible potion quantity ÷ as purchased quantity.

PRICING strategy:

  • 30 percent - Food Cost
  • 30 percent - Labour Cost
  • 30 percent - Operational Cost (eg.linen,cleaning)
  • 10 percent - Profit (it can also be adjusted based on the popularity of the particular item)

2. Menu Development:

Menu engineering or Development is something that is used in the evaluation and construction of a menu in a strategic manner. This includes proper knowledge of the theme of the restaurant and the target customers. The strategy of pricing has a great emphasis on customers trying to find the right price for the right product. These techniques can be developed by proper forecast, quality, and understanding of the price of the customer. If the restaurant is in a hotel, there are opportunities to attract customers by just using the menu and the hotel's room division marketing in an effective way.

3. Inventory management:

One of the most effective ways of controlling wastage is controlling inventory. And to understand inventory, proper forecast, and understanding the perishability of the product is necessary. A fixed Inventory or emergency inventory is essential which mostly are stored in a deep freezer. Forecasting ( which includes no.of guests who are going to dine, checking with the marketing team regarding the seasonal offers and forecast, proper calculation of product to be stored, and FIFO (first in first out ) which is Most Important here.

4. Food safety and hygiene:

Without food safety and hygiene there will no Customers and no revenue. By proper storage of food and control in inventory can reduce the effect of shrinkage in revenue. To understand food safety is to first understand the Temperature and proper storage and more essentially personal hygiene at its top priority. The following seven principles of a HACCP System are a mandate for any food establishment:

  • Analyze hazards
  • Determine critical control points
  • Establish limits for critical control points
  • Establish monitoring procedures for critical control points
  • Establish corrective actions
  • Establish verification procedures
  • Establish a food record system

5. Food theft Management:

This is something that happens everywhere. We should understand that we do not run a charity, but a food business, and generating revenue and customer satisfaction is at top priority. Just by stealing a couple of tea bags or Banana can lead to a loss in revenue and inventory. And for the staff to be able to understand this, the head chef/ chef de cuisine has to make an effort to analyze and interpret the effects of theft, thereby providing with an encouraging staff meal or etc. 

6. Profit & Loss Statement:

This is a statement of your profit and loss report for a particular period of time. This statement has a great emphasis on planning & forecasting. It will not only help you to set a budget and understand the operational cost but also to identify the mistakes and the mishap.

7. Marketing & Promotional activities:

"You cannot sell anything if you cannot tell anything."

Effective Marketing strategies play a very important role where the Business itself will grow like never before. To understand marketing, we should understand the competition and innovate new and unique strategies to deal with different kinds of people. Digital marketing is at top priority but if not utilized in a smart way, then it will lead to a loss. During this COVID -19 Crisis, Restaurants can connect with food delivery services and offer discounts, combo for a limited period of time until the pandemic ends, and follow strict safety & hygiene procedures for a physically open restaurant. For Restaurants situated in hotels, there are definitely lots of opportunities for promotion by connecting spa, gym, other services.

Simple Examples:

  • Effect of wastage which I have noticed:

Romaine lettuce - Most of the commercial kitchens in hotels tend to use only the interior part of the lettuce, thereby eliminating the outer part & sometimes even 2-3 outer leaves. And if one bunch of lettuce costs you $1.50, the wastage is $0.75. And you're cutting and Sanitizing 10 bunch of this per day, The Actual wastage per month would be $225. Imagine every month you're losing $225 just in one ingredient then imagine other ingredients such as pineapple etc. Once again a reminder, Never compare home cooking to commercial cooking or kitchen operation.

The solution: Try to use the interior part only for the VIP buffet or a fine dining restaurant and use the rest for banqueting, regular brunch, or even mix it up with mixed lettuce. And the food which cannot be reused can be put in a separate bin for recycling.

  • Effect of butchery wastage:

If a restaurant buys all its meat, poultry, and seafood products from a qualified supplier for the right economical price then it's not a problem. But, of the restaurant/ outlet in a hotel that depends upon its own butcher to supply the item, it is necessary not to waste the bones during the deboning of any item. These items which are actually perishable can be put in the deep freezer for further use to prepare stock for sauce and soups which enhances favor unlike using a chicken stock powder and demi-glace.

Last but not the least, the above-mentioned strategies will work out only through TEAMWORK (f&b service & kitchen) who understands the concept, proper communication, and work as a team to reach the objective. I hope all the above-mentioned strategies were well understood and would be followed by the restaurant business to successfully generate revenue and increase guest satisfaction. Yet, if the staff continues to do the same fault again then proper training and understanding the SOPs of the organization is necessary. The above concept can also be helpful for beverage operation. And the use of technology is booming rapidly, helping businesses to reach its objective! I would be really grateful if you could comment on the same and give suggestions.

"Anyone can cook, but understanding the concept & objective of a food business thereby Acting in accordance with it and taking action will lead to success." - JEFREY WALTER.

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Jefrey Walter

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