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What Should Restaurateurs Prioritize—Growth or Profitability?

Here’s a common scenario: a restaurant opens, builds a unit with robust sales, comes up with an interesting product and cultivates a smooth cash flow. Pretty typical; the pattern gives everyone the impression that the restaurant in indeed on its way to success.

One thing that most restaurants ignore, though, is profit. There’s this common misconception that once a joint opens, and with all that cash flow, glowing reviews, positive customer feedback, healthy sales and trusted brand, the restaurant can later on “tune-in” to profitability. But not so. Analysts say that gaining profits should always be the priority, starting from day one.

Misled restaurateurs who failed to focus on profitability from day one often find themselves mortgaging, putting up assets for sale, or borrowing money just to cover not only today’s debts but the historic deficits as well—all those monthly discrepancies that accumulated since the business opened.

So restaurateurs are always advised this: open your restaurant with commercial principles from day one.

One way to do this is to cater to a set of profitable customers from the very start. This does not mean that you shall only focus on profit alone and undervalue customer experience. Stick to the fine line of allowing your chefs, in their quality chef clothing, to provide your diners value for their money and a wonderful experience, and at the same time making money for your business.

Concentrate on your efficiencies from the first day, and maximize profits. Using the profits, you can then proceed in investing further into your restaurant’s advertising, marketing, growth and in building an even improved customer experience.

Refine your margins, improve your operations and organize your back of the house based on your set financial principles. Everything you do should be aligned on these principles—you can focus on beautification and all else when the earnings are there for spending.

Smart restaurant management is operating with realistic financial intentions. Assess each product that your chefs in outstanding chef clothing create and check how much money you make on each. Ideally, every dollar earned should generate a profit. There is no point in launching a restaurant and charging your diners for an experience that makes you lose money. Once you have established the pattern, it would be complicated to change, so it is best to detect it right away. Once you are trapped, the busier the restaurant gets, the bigger the losses you would incur. Restaurants that are loss-making at the onset, and without clear plans as to how to overturn those losses would only create a false sense of security to the management and staff.

The gist of this? Build your restaurant’s growth on profit – not just on cash flow. Operate based on profits (we can’t stress it enough), irrespective of gross sales. Some say this is overzealous capitalism, but we think it’s not. It’s merely being sensible and practical, a necessary frame of mind that you need to make your restaurant survive.