Effective restaurant management is balancing many different groups and processes in a seamless operation. Food costs, inventory tracking, staff scheduling, food production, customer service and marketing are part of restaurant management. Here’s a look at how to manage a restaurant in six steps, along with tips and advice from experienced restaurateurs.
Since restaurant management depends on tracking every aspect of your operation and tying it all to your bottom line, you really should consider using a restaurant point-of-sale (POS) system. Lightspeed Restaurant POS tracks ingredient inventory to meals sold, streamlines orders between kitchen and servers, and provides an array of detailed reports so you can closely monitor operations and costs. Try Lightspeed free for 14 days to see how it can boost your operation.
1. Create a Menu with Food Costs in Mind
Your restaurant menu plays a defining role in communicating your brand to patrons. The types of foods you sell, your pricing and even the way your menu is presented — every aspect impacts your customers’ overall impression of your restaurant. Naturally, for many restaurants, menu management is job one.
However, when it comes to sound restaurant management, your menu is more than just a colorful list of the foods you sell. “Profitability should drive every menu decision you make,” says Allison Bethell, who has owned and managed a variety of restaurant and bar businesses.
“Your food and liquor costs should dictate your entire menu, whether you run a burger and beer joint or a swanky upscale eatery,” says Bethell. “We make up our food and drink menus, including specials, based on our potential profit for each item.”
Develop Your Standard Menu
According to Bethell, the first step in planning how to manage a restaurant is building out a standard menu from a profit standpoint. “Ideally, the restaurant owner, manager and chef should develop this together,” she says. “For startups, it’s really important that at least one of these decision makers has experience in food costing and preparation needs to ensure that the menu is profitable.”
Bethell says the restaurant management team should:
- Decide on the types of foods the restaurant will offer
- Create ingredient lists for each menu item
- Figure up average costs for each menu item
- Create recipes and preparation processes for each menu item
- Price menu items only after knowing both the actual ingredient costs and preparation times
She reminds managers to include “dash” ingredients like salt and seasonings in food and mixers and garnishes in drinks. “It’s easy to overlook small ‘dash’ ingredients, but your cost of ‘a pinch here and a splash there’ adds up over time,” says Bethell, “so you need to include these costs in each menu item, even if it’s just a few pennies.”
When pricing your menu items, Bethell recommends following these food cost average rules of thumb to ensure you leave enough room for profit:
- 25 percent for casual dining: If a menu item has a $4 total food cost, your menu price for that item should be $15.95 or more
- 35 percent for fine dining: If a menu item has an $8 total food cost, your menu price for that item should be $22.95 or more
Once your menu is set, Bethell has another piece of advice. “Research shows that a reader’s eye naturally rests about one-third of the way down the menu page. So, when you design and print your menu, specials or more expensive and profitable dishes should appear in this spot on your menu. It’s also smart to use callout boxes or highlighted text in this area of your menu to attract attention.”
You can find a huge selection of ready-to-go menu designs on Vistaprint or create your own look using simple, free, online design tools. After all the details are in place, you can order menus using Vistaprint’s fast, budget-friendly printing service. Prices start at just $15 for 50 full-color menus like those pictured above.
Make the Most of Specials
Specials are a great way for restaurant management to maximize profits and keep the menu current and fresh for repeat customers, according to Bethell.
“We create drink specials that use liquor we have in bulk or that we find on sale,” she says, and the same applies to food specials. “If we get a discount deal on a fresh food item like salmon, we buy more than we need for regular menu sales. Then, we create a variety of salmon-based specials in addition to our usual salmon menu items. This lets us maximize our profit on fresh food deals, plus sell through fresh stock before it gets spoiled.”
Remember Your Liquid Moneymakers
“Liquor sales are always more profitable than food sales,” says Bethell, “and mixed drinks are generally more profitable than beer and wine.” She recommends including pairings of wines, craft beers and even mixed drinks on the menu to boost profitability. She also adds, “restaurant management should train waitstaff to make these suggestions when taking food orders. It really helps if they understand and can explain the nuances behind the pairings, especially in a fine dining operation.”
2. Always Watch Your Food & Operating Costs
The top reason that restaurants fail is not watching actual costs over time — food costs, in particular. “Creating your menu with your food costs in mind is step one,” says Bethell, “but regularly reviewing your actual food costs over time is the only way to know what you’re really spending per meal.”
Reviewing actual food costs also helps restaurant management spot excess waste and even theft, says Bethell. “If you know your average cost of the ingredients that go into meals, then you know the number of meals you can prepare with your current inventory. If you run out of ingredients before you make the forecasted number of meals from stock-on-hand, you know you have a waste or theft problem.”
So, be sure to track running food costs as part of your weekly or even daily restaurant management tasks. Here’s the basic formula for tracking your average food costs over a period of sales, like a day, weekend or week:
Beginning Inventory + New Purchases – Ending Inventory = Cost of Goods Sold (COGS)
COGS ➗ Number of Meals Sold = Average Cost per Meal
Let’s look at how this works using inventory and sales numbers from a hamburger shack that sells a variety of burger baskets:
In this example, knowing the average cost-per-meal — in this case, $2.74 per basket — lets the restaurant’s manager:
- Set profitable sales prices: Using the casual dining 25 percent food cost rule-of-thumb, baskets with a $2.74 food cost should sell for at least $10.95
- Forecast the number of meals: If the shack has $100 in food inventory, it can expect to make 36 meals
- Spot waste or theft issues: If the shack’s inventory shows it can make 36 meals but runs out of burger ingredients after making 28 baskets, there’s probably a waste or theft problem that restaurant management should investigate
How to Track Sales Income & Food Costs
Tracking sales, inventory numbers and food costs can be done manually or by using the inventory and sales management tools that most restaurant point-of-sale (POS) systems provide.
“For manual sales, inventory and cost tracking, restaurant managers can pair cash register tallies with an inventory spreadsheet that tracks food quantities and purchases,” says Bethell. “But a restaurant POS system makes all of this far easier, plus it provides up-to-the-minute numbers and really detailed reporting.”
In fact, a system like Lightspeed Restaurant POS lets restaurant managers track menu costs by recipe, even to the ingredient level. Plus, you can review real-time running sales totals, meal orders and per-meal costs anytime with just the click of a button.
Consider Your Other Restaurant Management Costs
When planning how to manage a restaurant, your bottom line is everything and you need to track it closely, says Bethell. “Tallying sales and ticket totals should be part of any restaurant’s daily closing procedures,” she says. “Beyond that, you also need to track all of your operating costs closely.”
In addition to watching food costs, Bethell recommends that restaurant management pay close attention to overhead costs and trim excess spending wherever possible:
- Payroll costs: This is generally the second-largest restaurant operating cost, after food; smart scheduling can help minimize your payroll costs
- Property costs: This includes rent or mortgage payments, plus any property taxes and maintenance; be smart when picking a space and don’t overcommit to large space or long lease with a new launch
- Insurance: Property, commercial liability, liquor, health and workers’ compensation insurance adds to your overall operating costs; be sure to review and compare rates each year
- Improvements and equipment: Set aside funds to cover equipment repairs and replacement so these issues don’t catch you by surprise
- Utilities: Electrical, water, gas and Internet costs can add up, and some like heating or air conditioning can spike due to seasonal temperatures; plan for these fluctuations or look into flat-rate billing so you don’t have cash flow issues due to large bills
- Licenses: Food handling permits, liquor licenses, building permits and related permits need to be kept up to date; the licensing costs are far lower than paying a fine or getting shut down for not having the proper permit
- Marketing: Some marketing and advertising outlets like radio, local magazines or newspapers can be more costly than social media or email marketing but, sometimes, that’s money well-spent; watch your marketing dollars but also use the most effective medium for your brand and customers
- Taxes: Don’t forget your taxes! — sales taxes, payroll, local property taxes and state and federal income taxes all need to be reported and paid on time to prevent costly fees and other headaches
POS systems like Lightspeed Restaurant POS include a range of staff management tools to help track employee productivity and control payroll costs. Plus, you can connect all of this data to your bookkeeping software like QuickBooks to integrate sales, inventory and staff data into your overall bookkeeping easily.
3. Manage Your Inventory Closely
Since food costs are the primary cost in any restaurant management plan, it’s critical that you have a sound inventory management process in place to track food inventory to the ingredient level. “You always need to know what inventory ingredients you have on hand, what it all cost and how many meals you can make with it,” says Bethell.
Know Your Ingredient & Menu Needs
Any restaurant, large or small, should have a master inventory list that outlines every ingredient that goes into menu items. This helps you track per-meal food costs plus ensures that both your fresh ingredient and dry goods orders are timely and accurate.
Chef Michael Bargas of the culinary school at The Art Institute of Houston says correct inventory starts with ordering the correct ingredients.
“It’s important to be as detailed as possible when creating ingredient lists and placing orders,” says Bargas. “An onion is not necessarily an onion. It could be yellow, white, red or green. It could be pearl, globe, large, small, jumbo, sliced, diced, peeled, frozen, dried and so on.”
Bargas recommends using product specification sheets that clearly identify all necessary information about the items in your inventory and to use these “spec sheets” when ordering.
“A specification sheet helps communicate the right information about an ingredient to your supplier,” says Bargas. “It also clearly describes ingredients to your kitchen staff, who are the ones will be using them in recipes,” he says.
Small, limited-menu operations can get by with manual or spreadsheet-based ingredient spec sheets and master inventory lists, but larger establishments benefit greatly from using a POS system with restaurant-specific inventory management like Lightspeed Restaurant POS.
POS inventory systems let you create a master inventory list with detailed ingredient items, and then link each ingredient to specific menu items.
Know How Much Inventory You Have & Need Each Day
You can’t prepare and serve what you don’t have on hand, but you also don’t want to overorder inventory, especially perishables. “Par” is the restaurant industry term for the inventory needed to meet daily demand. Accurate inventory checks and sales forecasting are restaurant management tools that keep stock levels on par with daily sales.
“A restaurant must have a keen focus on expected sales levels,” says Bargas. “If I have a good idea of how many meals are going to sell on a given day, I can forecast my needs and purchase the appropriate amount of food.”
However, being caught short on inventory is also something to watch, according to Chef Tommy Child and culinary instructor Vennessa Garner from the culinary school at The Art Institute of Houston.
“You can’t do $20,000 in sales if you only have $5,000 worth of inventory,” said Child and Garner. To prevent overspend or understock situations, they advise restaurant managers to set par levels that reflect projected sales but keep inventory levels low. “Bring in produce and fish daily,” they say, “and order dry goods biweekly or as needed to maintain par without overspending.”
“First-in, first-out inventory, called FIFO, is the inventory management process that restaurants use, especially for fresh ingredients,” says Bethell. “This translates to the newest produce, meats, dairy and other perishables going to the back of the shelf and using the oldest stock first to prevent spoilage and waste.”
Regular inventory count procedures help you manage par levels and prevent overordering, especially on fresh foods. “A daily inventory check walkthrough allows you to order foods based on immediate need,” says Bargas. “However, a monthly count of everything in stock should be done to see trends in usage from month-to-month.”
A small operation can track inventory and stock quantities manually or in spreadsheets, but a POS system does it all much faster and far more accurately. POS systems track ingredient usage in real time, plus you can print inventory-on-hand sheets to check stock counts.
Using a restaurant POS system, as you order and receive food from suppliers, your inventory counts are updated constantly. Plus, ingredient counts are adjusted as meals are ordered, so you always know what you have on hand. You can even set up low-inventory notifications so you’ll know when it’s time to reorder to ensure you’re not caught short.
4. Create Your Operating Procedures & Training Manuals
Planning how to manage a restaurant starts with clear processes that define and guide the daily tasks involved in producing food, serving customers and maintaining facilities.
“Without processes and procedures, it’s difficult to set expectations, train staff and manage the overall food production and serving process,” says Bethell. “Front-of-house (FOH) processes that drive dining room and bar staff activities differ greatly from back-of-house (BOH) kitchen-area processes,” she says, “but both are equally important.”
Small operations like burger joints and food trucks might need just a few procedures that all staff adhere to like opening and closing procedures. Large establishments generally need procedures tailored to specific operational areas and functions like food prep stations, food storage and serving procedures.
Small or large, most restaurants can benefit from having:
- Opening and closing procedures: From turning on the lights upon opening to shutting off the grill at night, opening and closing procedures ensure that every step if handled correctly
- Inventory checking procedures: These govern when and how often you count inventory
- Food storage procedures: Correct food storage rules and procedures are critical to your restaurant’s reputation and health inspection grade
- Food prep, cooking and plating procedures: The kitchen is an assembly line and these procedures ensure that every plated meal looks and tastes great
- Bar stocking procedures: Good restock procedures help you stock liquor correctly per your permit, allowing you to serve drinks quickly and keep your patrons happy
- Serving procedures: From greeting patrons upon seating to the way glasses are refilled and plates served, serving procedures cover every aspect of your waitstaff’s interaction with customers
- Bussing procedures: Cleaning tables promptly is a necessity and these procedures make sure it’s as unobtrusive as possible
- Cleaning procedures: From kitchen end-of-day sanitizing to day-long dining room tidying, good cleaning procedures keep your FOH space inviting and BOH safe for food production
Career restaurateur Tara Sullivan emphasizes that procedures are the lifeblood of sound restaurant management and the secret behind many large operations’ success.
“If you look at all the big corporate restaurants, they all have one thing in common — there are rules and everyone sticks to them,” says Sullivan. “Everything is documented, and they run reports and analyses regularly to make sure everything is running efficiently.”
In fact, once you’ve outlined the processes and procedures that define your restaurant operation, it’s a good idea to collect them into two working documents:
- Standard operating procedures (SOPs): This is the master copy of your processes and procedures for every area of your operation; include in this roundup any regulatory, health or licensing procedures that your operation must follow so your SOP document is complete
- Staff training manuals: This can be a single manual or BOH/FOH specific manuals, depending on the size and demands of your operation; include all human resources-related documents in your training manuals, such as an employee handbook, to give employees a single point of reference for all employment-related information
Having SOPs and staff training manuals in place makes your next step, which is training staff, far easier.
5. Train Staff & Manage Schedules
Staff training and retention are among the top challenges that most restaurant operations face. According to Bethell, that’s no surprise. “Most restaurant positions are part-time at minimum wage,” she says. “For many workers like students or night help, it’s simply a stopover job, not a career commitment.”
Management issues like bad scheduling, incomplete training or favoritism often drive staff to quit unexpectedly, which leaves management to fill in the gaps. “But. effective training, combined with clear processes and efficient scheduling, can help you retain good employees,” she says.
Create a Staff Training Program
No restaurant operation is too small for a training program. If you’re not sure how to put one together, start with the procedures covered above and combine them into a staff training manual. Once you set up procedures to cover the operational tasks in your operation, you can use these procedures as checklists to train your staff.
Also, consider letting the shining stars on your staff take on training responsibilities or at least let new hires shadow or back up your top performers. This frees up time for you and your managers and helps new staff slide into the workflow more quickly. A simple training checklist like the one below can help guide the process, track your new hire’s progress and ensure all key training points are covered.
If you use a POS system like Lightspeed Restaurant POS, you can even give new staffers a limited-access login to create practice orders and self-train on the system without saving actual data.
Schedule Staff Effectively
Restaurant scheduling is critical to smooth day-to-day restaurant management operations. “The challenge,” according to Bethell, “is to have enough staff to provide efficient service but not be overstaffed and find yourself paying people to stand around.” Bethell also warns against excessive cutting due to overscheduling. “If you regularly overschedule and cut staff, employees will get frustrated and start to quit. Scheduling should be handled carefully and not thrown together at the last minute.”
Clearly, scheduling is a delicate balance and here’s a look at how industry pros manage it effectively:
- Use shifts: If your restaurant is open breakfast through dinner, try running a morning shift, swing (midday) shift and late shift to cover service needs throughout the day
- Publish schedules early: Try to publish schedules at least five days before the schedule’s start date so staff can plan other needs like school or child care around scheduled shifts
- Don’t play favorites: Be fair with your staff and spread shifts out among better nights like Friday and Saturday nights and slower midday times when tips aren’t as plentiful
- Respect your staffs’ availability: If you hired a student knowing they have early classes, don’t abuse them by regularly scheduling closing shifts during the week
- Have a firm no-show policy: Being firm on firing staff that no-shows without a completely unavoidable reason prevent others from doing the same
- No same-day drops: A firm no same-day drops policy (except in extraordinary circumstances) helps you prevent abuse
- Dedicate your top servers to private functions: If you have a party room or a reservation for a large group, dedicate one or more of your best servers to this group so they don’t split their time between stations
Everything above, ranging from standard operating procedures to good scheduling and staff management policies, sets up clear expectations that Danica Copus, the retail district manager for Caffe Umbria, says “employees respect and even appreciate.”
“One thing I’ve learned in my years managing people is that they like to have clear expectations and a clear job description,” she says. “It’s very easy for communication to break down, and this can create poor morale that can morph into poor customer service.”
She advises restaurant management to make sure employees know what you need from them and what their role is in your organization. “That can make all the difference in your restaurant’s overall success, plus it goes a long way in helping retain good employees.”
6. Manage Growth Through Marketing Channels
With a sound set of restaurant management procedures and processes in place, a well-trained staff and a system to track your income and costs, you’ve set the stage for growth. There are many ways to manage your marketing and advertising efforts. We outline the entire process in our restaurant marketing guide, but here’s a quick look at the many marketing avenues available to you:
Your restaurant website – Every restaurant should have its own website to list menus, specials, events, communicate with repeat and potential clientele and even take online orders.
Our free restaurant website template helps you set up your own restaurant website on WordPress quickly, complete with your own customized menu and easy-access contact information for your customers.
Loyalty programs – Point- and discount-based loyalty programs incentivize customers to return frequently and are highly effective restaurant management and marketing tools. Some operate independently while others integrate with various POS systems.
In fact, Copus heartily recommends using loyalty programs to connect to and grow a customer base. “Loyalty programs are not only a great way to keep regular customers but they’re also a great way to get new ones,” she says. “It’s a good conversation tool and people feel more invested in your cafe or restaurant.” At Caffe Umbria, Copus uses an online rewards program as well as the old standby — a punch card, “and customers love both,” she says. “Living in a time where coffee drinks can cost upward of $5, it’s a wonderful perk.”
Email campaigns – Email marketing campaigns are low cost and, done right, highly effective at driving repeat business to restaurants establishments.
Social media – Social media is another top marketing tool that restaurants use to reach repeat and potential customers. Facebook and Instagram campaigns can target very specific geographic locations as well.
Review platforms – Platforms like Yelp and Google reviews are also effective in driving customers through your doors. They also give you insight into the customer service experience your restaurant delivers and give you a chance to respond to dissatisfied customers that you otherwise might never hear from. Streamline your reviews management process with a roll-up service like Yext.
Coupon and deal site marketing – Groupon and similar online deal and coupon marketing sites are powerful traffic drivers and are especially useful for bringing in new customers who might not otherwise know about your restaurant.
The Bottom Line
A successful restaurant operation is made up of many moving parts and we’ve touched on several key factors here: menus, costs, inventory, processes, staffing and growth. The main takeaway is that learning how to manage a restaurant right starts with understanding your costs and watching every detail that affects them like inventory and creating processes and training and managing staff.
With a sound operation and trained staff in place, you’re ready to focus on marketing your restaurant. However, are you ready for the extra demands that growth can bring?
In micro-operations, things like sales, pricing, inventory and staff activity can be managed manually. But, to really prepare for growth, a POS system like Lightspeed Restaurant POS is an invaluable tool that gives you insight into and control of an array of operating details like ingredient-level inventories, automated purchasing, seating management, staff performance and comprehensive business reports. If you’ve set the stage for growth, it’s time to see how a POS system can move you to the next level.
How do you manage the day-to-day tasks in your restaurant? Do processes drive your operation or do you handle things differently? Does technology play a role? We’d love to hear your thoughts on how to manage a restaurant in the comment section below.