Improve Margins in Restaurant Business

By Kumar Gaurav, VP, Billionsmiles Hospitality


Kumar Gaurav, VP, Billionsmiles Hospitality

Today business is evolving, every minute and every second. Food and restaurant business is on tide of improvement in an un-organized business field. Consumer demand and consumer perception has been un-predictable and it’s changing the style of business in recent past. To protect the consumer base, restaurant business entrepreneur has been trying best to create advancement which is different, which is unique and which consumer likes.

Restaurant business cannot succeed only with evolution of customer based preferences; they also need to work on improving and maintaining their margins. The one of the best way to improve the margin is improving productivity and efficiency in various aspect of business.

"With improving customer demand and high intense un-organised competition, survival and continuing on margin improvement needs a great strategic thought process"

“Improvement and utilization of rented space in better way is the ultimate requirement today”(gone are the days when space rent used to be very low and business used to offer a lavish surrounding, in past 15 years the space rent has increased by more than 200%). Rent is a fixed expense and thus need to be dealt smartly.It is very important to understand that what are the expected earnings per sqft which a business need and accordingly the business and business space need to be planned. A good civil architect with a good sense of facility planning plays a dynamic role in creating the space which can be smartly utilized without a single inch left unused. This efficiency improvement led to the rise of QSR set of brands where the space utilization matrix works on a different calculation. Today lavishness of space has been taken over by value of money products.Business has been working hard to reduce the fixed cost and work around variable cost to satisfy customer needs. Today small format restaurants are doing a wonderful sales and margin with a value proposition to the consumers.

Manpower productivity and utilization efficiency improvement has another great scope. What we need here is the clear processes and system to work. A proper understanding of work load calculation per hour per employee and thenefficiency improvement training. Cross department or cross work knowledge training is another requirement to improve manpower productivity. Overall this type of productivity and efficiency improvement is practical and operational in nature, thus a better recruitment (right employee for right job) and continued training plays a sincere role. This helps in maintaining great consistency on product and service quality improvement in restaurant industry.

Newage machinery is another forward technique for business efficiency improvement. I think if machine can do the lay-man job where no skill-mind-common sense is required than definitely machine is the better than men.But there is caution to mark that this efficiency improvement comes with large initial investment. This is what differentiates the business between large corporate and an individual business investments. Bringing in the automated machinery in Indian cuisines has led and helped many restaurant chains. I think there is need to invest in this machinery for long term margin growth and stability.

Than finally in twentieth century, data interpretation, data analytics and data algorithm can help all the business to understand the lack of productivity and efficiency every second-minute-hour and so on. Thus these data is helping to analyse the issue instantly and act upon quickly with less reaction time. Thus post-mortems can be avoided and margins can be safeguarded. Investment in a good Point of Sales, Inventory management tool, and product sales forecast tool, Variance analysis tools, Customer acquisition and Customer loyalty and retention program, Employee satisfaction and retention program analysis, Cost analysis platform etc are an important productivity tool. Cloud based data analysis tools which provide live data every second can enhance the business without any doubt.

Spend enough time on strategy mapping for productivity and efficiency nurturing before start or investment of any business. Many investors or entrepreneurs take these aspects very lightly and makes a biggest business mistake. Especially in Indian context, people feel that restaurant business is the easiest and most simple business be in and thus anyone and everyone wants to be the part of this business. But this is not the fact. With improving customer demand and high intense un-organised competition, survival and continuing on margin improvement needs a great strategic thought process.

It is quite imperative to operate all the way and approach with all techniques to improve margin by developing productivity and efficiency. Today with so much of competition in market and with various government changing policies, there is no time towait and grow the restaurant businessergonomicallyand in traditional style. Thus it’s must that all the process and new age progressive methodto be deployed, operated and practised with start of business and not when business is showing stealth. These methods needs to be applied and deployed to all the brand and restaurant business who wants to grow and continue to be in this competition market. It’s an advising factor to Indian investors and entrepreneur that they need to infuse money in restaurant business. They need to come out of mind-set of less investment and high returns thinking in short term. Restaurant food service industry is only industry which add value proposition not only in food products but also in service. Thus this industry need long term emphasis and not short term lookout.

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