Pursuing entrepreneurship in the restaurant industry can be an exciting time for new business owners, but it comes with its own unique set of challenges. One of the primary challenges being the overall cost of running a restaurant and sometimes, the fear of financial failure. With rising food prices, shortages in products forcing change in menus and operations, on top of the other financial obligations of today’s restaurant owner, entrepreneurs are asking if it’s even worth getting into the restaurant business.
At Capriotti’s Sandwich Shop, we’ve been able to maximize unit-level profitability by 85 percent, on average, by diligently tracking performance metrics and adjusting our strategy accordingly. Stores leveraging these profit-based best practices have also seen an average 10 percent increase in EBITDA over the past year. We continue to stay committed to quality while finding new ways to bolster profitability for franchisees to change the stigma of entrepreneurship in the restaurant industry.
Cost of goods sold (COGS) is one of the most important performance metrics to track as a restaurant franchise owner. Not only does it tie directly into menu engineering and innovation, but it should also be a key consideration guiding inventory and purchasing decisions. Most importantly, however, your cost of goods has a controlling stake in your restaurant’s profit margin. And, reducing your COGS by just a few percentage points can significantly boost your bottom line.
Here’s what we’ve learned about driving revenue and cutting costs – without cutting corners on quality – to boost your bottom line:
Track Store Performance to Keep a Pulse on Profitability
Regularly track and dive deep into sales, COGS, inventory and other metrics to provide visibility into store performance. This allows your team to see if there are any areas of improvement to boost profitability. As a rule, the cost of goods in the food sector will increase every year, so it’s important to incorporate even a small price increase to account for that change to help yield substantial results.
Optimize by Eliminating Extra Expenses
Take an in-depth look at invoices and P&L statements to see if you can adjust the number of goods you order, or if you can eliminate unnecessary items and waste altogether to maximize goods purchased, minimize waste and optimize your inventory. In turn, this reduces COGS and boosts profitability.
Refine Your Partnership Strategy to Streamline Operations and Boost Profits
Evaluate whether there’s an opportunity to drive down prices on the highest-cost items. This often means adjusting the quantity of goods purchased, re-negotiating vendor pricing or finding comparable brands with lower costs – but never at the expense of quality. For instance, we switched brands for our store cleaning products, which reduced that line item by 50 percent. Among other changes, we also reduced the cost of our linens, security systems and phone and internet services – each by 50 to 70 percent.
More Costs Less? Add More Options to Your Menu for Increased Value
Instead of skimping on quality ingredients, try adding smaller sizes to your menu. For example, Capriotti’s added a half-sub sandwich to the menu, giving guests another option beyond the traditional sizes. Because these half-subs offer guests a lower price point and great value, it also encourages add-on purchases and meal combos, like chips and drinks, which are much more cost-effective for franchisees. As part of the new menu and sandwich sizing, Capriotti’s created a 3-4 percent lower overall COGS when compared to stores who have not yet implemented the new menu.
Stimulate Streamlined Operations with Linear Design
Boosting profitability isn’t just limited to food costs – another factor to consider is the design of your space as well. For quick-serve restaurants, pick-up cubbies and windows are a central component of operations, especially as more consumers opt for on-the-go food options. These pick-up sections should remain near the kitchen and sandwich-making area, so guests can quickly retrieve their food as soon as it’s made. If you have a POS system, make sure it runs parallel to or alongside the longer length of the restaurant to maximize square footage, while putting guests directly into the ordering queue when they walk through the door.
Glynn Chambers is Vice President of CAPMastery at Capriotti’s Sandwich Shop. Her specialties lie in restaurant development, operations and training. At Capriotti’s, Glynn has spearheaded development of the brand’s CAPMastery program designed to aid in the development of franchise partners in operations, marketing and overall business growth. She is dedicated to helping franchise partners at more than 100 locations across the United States optimize their business opportunity while remaining true to its 40-year tradition of slow-roasting whole, all-natural turkeys in-house every day.