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The Pareto Principle (20/80 Rule) of Restaurant Management

Have your heard of the 20/80 rule, or the Pareto principle? If not, it’s high time you should, since industry analysts and consultants are saying that it’s one of the best ways to manage your restaurant business. And if you have long heard about it, let’s take a refresher.

The Pareto principle goes by other names– the principle of factor sparsity or the law of the vital few, but gives one simple message: for many things that take place, nearly 80% of the effects originate from 20% of the causes.

The principle came from an Italian economist named Vilfredo Pareto, who discerned way back 1906 that 80% of Italy’s land are properties of 20% of the country’s population. He later developed the theory when he further observed that only 20% of his garden’s pea pods held 80% of the peas.

The idea then became a rule of thumb in business—80% of a company’s sales would usually come from 20% of its clients. There are mathematical equations that go with it, but don’t you worry, we definitely aren’t going there. Besides, we don’t really need equations and formulas to check how your restaurant is faring as we apply the Pareto principle; the ideas are quite simple, really. Here are three of them:

First, realize that approximately 80% of your business comes from only 20% of your customers. Taking this in mind, you and your apron-clad staff need to identify the 20% who are giving you money in your business and the other 20% who aren’t and just constantly disappoint you. Grow and nurture the good 20% and slowly weed out the other bad 20%.

Second, more or less 80% of your headaches actually come from roughly 20% of your customers or staff. Majority of the problems that are stemming from your more-often-than-not apron-clad employees are likely to have originated from a good 20% core group of people. Identify them and deal accordingly.

Third, about 20% of the time and effort you spend on your restaurant is responsible for 80% of your results. Realize that despite the “noises” you have in your everyday life, it’s important that you be smart in apportioning your energy, resources and time to the aspects of your restaurant that are actively performing. Putting to waste 80% of your energy on trivial things, taking into consideration the bigger and more vital picture, is a total waste and might affect your business in the long run.

We do have more; but as always, we don’t want to make this too long and take the risk of boring you. So stick around and wait for Part Two, where we’d give you more simple, important 20/80 rules that you can apply to your restaurant management style.