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     Ron's Tip Jar/Insights - Published by Ron Santibanez   

November 14, 2012

 


In This Issue:

Tips and Things - Not Every Rule of Thumb Fits Every Restaurant 

Rules of Thumb - Nonalcoholic Beverage Costs

Restaurant Start Up - Site Selection..The Principles 

How Much Does It Cost To Open A Restaurant?

 


 

 Tips and Things

Not Every Rule of Thumb Fits Every Restaurant

Most if not all restaurants will deviate from one or more of the rules of thumb covered in the last few issues. That's to be expected. Rules of thumb are merely guidelines, not an ironclad collection of industry mandates from which no successful restaurant can deviate from.

When your numbers do stray from these norms, it is useful to determine "why?" Determining the reasons for any differences may prove to be an insightful process in learning more about the financial and operating nuances of your restaurant.

Another rule of thumb says that the more you understand how your restaurant works, the better an operator/owner you will become. Using "rules of thumb" will go a long way in helping you understand your restaurant and provide insights for building a more profitable business..

   


Thought For The Day

 Worry about being better; bigger will take care of itself. Think one customer at a time and take care of each one the best way oxy can.

 


Excellent Article in  QSRweb.com

http://www.qsrweb.com/blog/9289/It-s-OK-to-fire-bad-customers

 


The Monthly Inventory  

I am amazed whenever I hear that a restaurant does not take a fiscal inventory each and every month. By fiscal inventory I mean counting what is on hand at the end of the month and extending the value. In order for the monthly income statement to reflect accurately the cost of food consumed and sold, you must take a complete food inventory. There is no substitute or shortcut for taking a fiscal count of food, beverages, and supplies if you expect your cost ratios and percentage to show what is actually taking place in your restaurant.

You wont know if you don't count.

 


Rules of Thumb

 More Rules Of Thumb

Nonalcoholic Beverages

Soft Drinks (post mix) - 10 to 15 percent as a percentage of nonalcoholic beverage sales.

Regular Coffee - 15 percent to 20 percent as a percentage of nonalcoholic beverage sales.

Specialty Coffee - 12 percent to 18 percent as a percentage of nonalcoholic beverage sales.

Iced Tea - 5 percent to 10 percent as a percentage of nonalcoholic beverage sales.

 


Restaurant Start Up

Site Selection - The Principles...continued...

Below are the Principles of Restaurant Site Selection. Over the next several issues I will examine each one of these principles in detail.

 

  1. Know Your Operation - It goes without saying that you must know and understand your operation. Moreover, knowing your operation is a pre-requisite to any expansion you have planned. In fact, this is the strength of the of the food business. Food operators can usually recite and compare food costs, labor costs, controllables, and uncontrollables. Numbers are traded and widely discussed. Daily tallies, transactions, customer counts, meals purchased, and, hopefully, profits fill numerous notebooks. Nonetheless, as mundane as it sounds, you must truly grasp the complexities of your operation and accurately gage your management ability before expanding or starting out. Have you done your homework? If you are entering the food industry for the first time, have you studied successful food operations, and do you feel thoroughly familiar with their techniques? 
  2. Determine Your Customer Profile - Customers are attracted to any food operation for numerous reasons. As a food operator, you should know why your customers choose your facility. Also, identifying the characteristics of your most frequent customers is essential. Without such data, you are going into a fire fight with a BB gun. I am continually amazed at the number of food executives , responsible for spending millions of dollars, who don't really know their customer profile. At least once a week, a major food operator or officer of a major restaurant organization tells me his or her customer is "everyone." When I ask, "How do you know that?" the usual response is, "Well, I observe," or "My managers tell me." That is absurd! I cannot overemphasize enough the need to determine who your potential are, why they would come to you, or why they wouldn't come to you. One of the primary secrets for successful site selection is targeting areas with demographics that match your "most frequent visitor" characteristics.
  3. Delineate Trade Area - Numerous factors, including the following, dictate the size of a trade areas: Type of food facility, type of location, income, topography, competition, traffic artery, physical and psychological barriers, activity generators, consumer patterns, visibility (sometimes), and socioeconomic characteristics. Historically, restaurants have focused on a five-mile trade area, while fast food restaurants have settled on a three-mile radius. In many instances, these distances are realistic; just as often, however, they are not. It is important to analyze the type of location and the extent of the trade area  that might result from a new operation. In a major urban area a "special occasion" restaurant may attract customers fro 10 to 15 miles away, and rural locations with the right type of restaurant can attract customers in a radius of 60 to 100 miles. Moreover, fast food restaurants near major regional shopping centers often take on the trade area characteristics of the mall. In reality, trade areas are not rigidly round, square, or rectangular. Instead, they are positively influenced by the attraction of the restaurant and negatively affected by factors such as competition and physical barriers. 
  4. Establish Locational Criteria - Examples of locational criteria include the following: Types of locations, traffic arteries, trade area size, speed limits, number of moving lanes, adjacent uses, traffic flow, traffic counts, ingress, egress, visibility, competition, employment, topography, demographics, ethnic characteristics, and perhaps a liquor license. For someone who is starting a new operation and has no locational experience, the site attributes of other similar and successful food operations can provide very important guidelines. Examine the experiences of other operators and competitors. How have they fared? Where are their most successful units? Why are they the most successful units? What is common to their locational success?
  5. Analyze The Market Structure - Every market, whether it is a neighborhood, a small city, or a major urban area, has a structure that partially determines the extent of a trade area, the patterns that exist, and travel times. The structure includes the shape of the city, or an area, the road network, barriers (physical and psychological), income, topography, zoning, sewer and water availability, ethnic and socioeconomic characteristics, and climate. Structure plays a role in directional growth patterns, employment concentrations, development, eating-out patterns, and other factors that have generally influenced past and present development. Furthermore, the same structure is likely to influence future growth in the community. Understanding market structure is essential in selecting good locations for food facilities.
  6. Gather Factual Market Resource Data - Restaurant operators compete for eating-out or eating and drinking dollars, usually generated by resident population, traffic, daytime working population, or some combination of these groups. Market resources include population, socioeconomic characteristics, age structure, income, eating-out expenditures, lifestyle, and household size. Through an orderly procedure, you can determine the extent of the present and future market.
  7. Ensure Adequate Accessibility
  8. Recognize The Importance Of Employment
  9. Identify Generative Areas
  10. Clarify Attitudes, Trends, Habits, and Patterns
  11. Evaluate Competitive Facilities
  12. Understand Visibility and Exposure
  13. Estimate Sales Potential
  14. Evaluate Site Economics and Physical Characteristics

 


What's Keeping You Up At Night?

 


"You can't build a reputation on what you are going to do"

~ Henry Ford 


 We are offering a FREE Restaurant Start-Up Checklist. Just send us an email at Ron@RestaurantExperts.com and request your copy.

Additional Resources Now Available On Our Web Site:

"HOW TO START A RESTAURANT"

"HOW TO DEVELOP A RESTAURANT BUDGET"

"7 WAYS TO CONTROL FOOD COSTS"


How Much Does It Cost To Open A Restaurant?

The most frequently asked question I receive is, "How Much Does it Cost to Start a Restaurant?"

The answer is.....it depends. Asking how much does it cost to start a restaurant is like asking how much does it cost to buy a house. There are many variables and options that must be selected before you can attempt to come up with the answer. 

Begin by completing a comprehensive feasibility study.  A feasibility study on a specific site or geographical location will determine the capital requirements and projected sales/profits & ROI of your concept.

For more information on this subject Click Here.

 


You can now read todays Restaurant Business News on our website .  


 

Additional "Tips" are now available on "Ron's Blog."

 


   

Follow me on Twitter @ronsantibanez. I post frequent tips and suggestions to Improve Your Profitability.


 

We are now featuring our booklet "How To Start A Restaurant" FREE on our web site.  

Send me an email at Ron@RestaurantExperts.com if you would like a copy of our booklet, "How to Manage a Successful Promotion." Type "Special Booklet" in the subject line. 


  

Visit our web site RestaurantExperts.  You can view additional tips and techniques in addition to restaurant industry news that is regularly posted on our Profit Line Facebook page.

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 We encourage you to contact us if there are specific subjects you would like to see addressed in "Insights" or "Ron's Tip Jar".

"Insights" is a newsletter discussing issues that affect your restaurants profitability delivered by Ron Santibanez. You may also view past issues of "Insights" and "Ron's Tip Jar" by clicking here.

Contact us at ron@RestaurantExperts.com


For information regarding our start-up and profit improvement services, call us at 866-903-5875. You may also reach me by email at ron@RestaurantExperts.com

 


 

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