11 Restaurant Management Best Practices to Maximize Your Performance in 2021

The year 2020 prompted enormous changes in the restaurant industry. The events of this year made running a lean, streamlined restaurant business a necessity to survive the many shifts.

As 2021 begins, there are many restaurant management best practices that can be applied to strengthen your business, in the short and long term. Here are 11 tips to set yourself up for success in 2021.

Manage cash flow by creating a cash flow forecast

Your total cash flow is your cash inflows (for restaurant

operators, mostly sales) minus your cash outflows (your operating costs, like food and drink, payroll, rent, etc.) over a certain period of time. A positive or negative cash flow indicates the cash funds you have available to spend, as well as the overall health of your business.

Tracking your cash flow allows you to create a cash flow forecast. Your cash flow may have been tight in 2020, so 2021 is the time to focus on your cash flow recovery and next steps.

For instance, you may need to proactively adjust your labor to meet a seasonal drop in sales, or plan for the best time to spend cash on any needed maintenance or upgrades. When you understand your future financial health based on your sales and expenses, you can make decisions that match trends in your cash flow.

Review CoGS and P&L daily

Your Cost of Goods Sold (CoGS) is the total cost of your food and beverage ingredients over a specific period of time. To run a lean CoGS, it is essential to review this number frequently. This way, you can take immediate action on issues like incorrect portions or food waste (explored below).

Reviewing your CoGS frequently is also critical to keep an eye on your supply costs. Your suppliers may have experienced fluctuations in prices for ingredients in 2020. In 2021, you will want to keep an eye on your ingredients and, if needed, adjust items or suppliers. Automating this process with a restaurant-specific inventory management system can help you quickly identify vendor pricing errors.

Similar to reviewing your CoGS daily, running and reviewing your Profit and Loss (P&L) statement daily is key to staying on top of your financial health. Your P&L summarizes your revenue, costs, and expenses over a specific period of time.

Understanding how to read your restaurant’s profit and loss statement allows you to catch mistakes before they become costly long-term issues. Running a P&L only once a month can cause small expenses to add up to big headaches. Tracking the day-to-day strengths and weaknesses of your business allows you to make data-informed adjustments in the moment.

ALL IN ONE

Cost out your menu items and recipes

Understanding the true cost of the items on your menu, along with the recipes used for each item, can help you meet your specific sales goals for profitability.

First, price every ingredient you purchase, using accurate supplier data. Then, tracking the usage and yield of each item on the master inventory list, you can calculate the cost of your recipes and menu items. Once the menu items in your Point of Sale (POS) system are mapped to recipe costing, you are set to evaluate your food costs and food waste, explored in the next section.

Compare actual vs. theoretical food costs to optimize spending

Your actual vs. theoretical (AvT) food costs represent the difference between what you should be spending on food versus what you actually spent on food, over a given period. The variance between your actual and theoretical represents lost profit, and it is where you can implement efficiencies in your portioning, food waste, and inventory management.

Tracking the variance over time, especially on an item-by-item level, allows you to dive into the reasons behind the variance. For food waste in particular, tracking the variance can lead you to the root cause of the issue. Comparing variances across multiple locations enables you to focus on the locations that need the most attention. With additional tools like a food

waste log and regular inventories, you and your team can mitigate food waste and reduce the amount you’re spending on food costs across the enterprise.

Promote your highest gross profit menu items

Once you know your cost on menu items, you can focus on menu engineering to maximize revenue. Especially if you have been running a limited menu in 2020, ensuring that the items you are preparing have a high profit margin is essential.

When you focus on promoting the menu items with the highest profit margin, you are taking advantage of the sales that add the most to your bottom line. Menu engineering helps encourage informed, data-driven decisions about popularity versus profitability, allowing you to see where there is an opportunity to promote your highest gross profit menu items.

Menu engineering also helps you evaluate the items that are overpriced or underpriced, based on their food costs. From here, you can make decisions about modifying recipe ingredients or altering portions.

Forecast by order mode

Your restaurant probably adjusted to different sales channels in 2020, adding more online ordering, delivery, and takeout. As local restrictions and conditions impact business, continuing to forecast by each order mode helps you stay ahead of trends in your business.

The POS software data on the profitability of your takeout, delivery, and in-house dining can help you create strategies for your recovery, from labor hour allocation to purchasing takeout containers for delivery.

For instance, if your locale currently has restrictions on dine-in, you will need to constantly reevaluate this revenue center. Consider local restrictions, your guest budgets, or how your menu, perhaps limited in scope, is affecting your restaurant forecasting to be best prepared for your growth in 2021.

Understand your payroll and benefit requirements

Human resources (HR) and payroll are complicated and heavily regulated areas, which can be challenging for restaurant operators. Restaurant owners know that HR and payroll are especially complex within the restaurant industry, with factors like tipped compensation. In addition to federal regulations, many states and municipalities have their own local laws. You need to stay up-to-date on payroll and benefit requirements to avoid major issues and noncompliance fines.

Not only must you comply with payroll and benefit requirements, but you must also document that compliance appropriately. Ensure that your team is using software that accommodates any changes in wage and hourly work laws, payroll regulations, shift changes, and time off. As you start off 2021, you will also want to review any updates in areas like payroll taxes, workers compensation, Affordable Care Act (ACA) requirements, and new hire tax credits.

Focus on attracting, hiring and retaining the right employees

Your labor pool may continue to shift in 2021, making it more important than ever that your investments in your team are paying off. Effective employee management is key to the long-term health of your business.

While you are attracting candidates and doing your hiring, make sure to keep retention at the top of your mind during the entire process. From writing the job descriptions that attract the right candidates to encouraging transparency during the interview process, ensure that you are attracting quality talent. A healthy team and culture, a great onboarding experience, on-time and accurate pay, and keeping employees engaged with clear performance feedback will pay dividends in 2021.

Make data-driven labor decisions

When you have the right people on your team, you also need to make sure that you are using them effectively in your restaurant. Labor is one of the highest costs for your business, so you should be using data to drive decisions around your labor spend.

Forecasting your sales, mentioned above, can help you optimize your labor spend during your recovery and beyond. Your restaurant forecasting, based on historical sales and labor data, can inform an initial schedule that is reevaluated and adjusted during the week on the fly with real-times sales data. If business hasn’t yet returned to pre-pandemic levels, it is essential to evaluate your labor as frequently as there are changes. Data-driven scheduling, based on forecasting with your restaurant management software, is key.

In addition, since many restaurants are operating on reduced hours, consider examining your labor by day part. – breakfast, lunch, dinner, late night. You can break labor costs down as a percentage of revenue, as well as sales per labor hour (SPLH). These metrics give you a granular look at your employee hours for your limited operations.

Create a safe, healthy atmosphere for your customers and employees

Because health is at the top of everyone’s mind, ensure that your 2021 strategy contains a plan for creating a safe atmosphere for both your employees and your customers.

Your employees rely on you as an employer for a safe working environment. This means that there should be HR policies in place to address issues, and there should be proactive training for managers on how to respond to any complaints, whether related to employee health or any other issue.

For your customers, going above and beyond with COVID-19 risk mitigation is essential to instill customer confidence in your business. Your employees should know the policies put in place so they can not only follow them, but also communicate your practices to customers. For your customers, it is best to follow local, state, and federal guidelines on social distancing and mask wearing. While customers will all bring their own perspective into your physical restaurant, they should adhere to your rules.

Invest in restaurant technology

As 2021 approaches, restaurant technology will be key to minimizing the effects of unpredictable changes. Many restaurants are adopting technology to meet these challenges and you don’t want to get left behind. Technology can help lighten the demands on your labor, while following best practices for the health of your employees and customers.

If you haven’t already, consider using QR codes to create a contactless menu viewing experience, or to enable online ordering from a customer’s phone. Other developments, like self-cleaning ordering kiosks, also enable customers to order while maintaining social distance from others.

Conclusion

As you look ahead to 2021, consider these 11 tips to strengthen your business’ foundation. You can’t know lies ahead, but with proactive, strategic planning, your restaurant can be well prepared.

Are you interested in applying these restaurant management best practices to your operations in 2021? Restaurant365 incorporates restaurant accounting software, restaurant operations software, inventory management software, payroll + HR software, and scheduling software into an all-in-one, cloud-based platform that’s fully integrated with your POS system, as well as to your food and beverage vendors, and bank. Ask for a free demo of Restaurant365 today.

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