Updated: Feb 10, 2019
There are multiple things that can contribute to a restaurant failing but this one specific thing can help you know if things are truly headed in the wrong direction!
By now it should be common knowledge that the restaurant industry is tough and that 70% of all restaurants that open today will fail within 3-5 years. If you own a restaurant that generates at least $1M in annual revenue, your best efforts should bring you a net profit of about 7% while if you make $3M or greater in annual revenue you should net 20% max but the average being 15% or less. In short...... the restaurant industry has razor thin margins so you need to do everything right!
After working with dozens of restaurant owners and hundreds of restaurants I've seen a lot of restaurants fail. If you're like most people, you're probably wondering..... "what happened?". Unfortunately there's no single answer to this question because each restaurant had its own challenges and although some of the challenges were similar, the circumstance were unique. For example, I've seen restaurant owners who forgot that their customers opinion is what matters most. I've seen owners who tried to expand without proper funding, managers who were way too friendly with the staff and owners who focused more on atmosphere than actually serving quality food and service. I've seen managers who thought there was a real benefit to selling drinks for a penny and owners who wanted to carry every brand of high-end liquor in the world. I've seen owners fail because they decided to pay themselves before anything else and owners who failed to understand that "it's not about how much you make, it's about how much you get to keep".
In almost all of the above noted situations, I've always noticed this one thing happening which is usually a sign that the restaurant is headed in the wrong direction.
Allowing employees to eat and drink at work for FREE is the #1 biggest thing I warn owners against and the #1 sign that a restaurant will very likely fail.
To be clear "not all restaurants who allow their employees to eat and drink will fail but we noticed that almost all restaurants who failed, allowed their employees to eat and/or drink for free (even moderately)".
Some restaurants allow their staff to eat and drink from day one, other restaurants allow it to happen over time and some stop to care when they know the end is near so the eating and drinking begins. No, I am not referring to theft or something happening without the owner or managers knowledge. I'm referring to the authorized or complicit consumption of your inventory products by your staff for FREE and both owners and managers excuse it.
The problem with this goes beyond just loss of revenue and inventory, it literally helps define or disrupt a culture, diminish authority and blur the lines between company goals and employee performance.
Depending on your type of bar or restaurant, trying to change this policy won't be easy. Sometimes, even your customers have become apart of the problem and any changes you make to fix it could result in loss of both employees and customers. We've seen this happen first hand. The change wasn't easy but the owner rebuilt her culture and turned things around.
Simply stated, by setting standards and sticking to them, you're saying to your employees that you take your business seriously and what they do matters therefore you're expecting them to do it right!
Tips to change your culture:
1. Always make employees pay for their meal even if its at a deep discount but limit the discount to a reasonable daily use (1-meal per employee) and designate a break area outside of the kitchen. This includes NO nibbling unless its an authorized tasting.
2. Never allow employees to drink while on the clock or after the bar closes. This includes drinking with customers. If the employee drinks while off the clock, create a limit on complimentary drinks and charge accordingly for any drinks beyond the comp.
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