Any seasoned restaurateur will tell you that the restaurant industry is risky. Revenue is never 100 percent certain, and balancing a restaurant’s finances can be a challenge. Knowing this, it’s no surprise one Cornell study found that 30 percent of restaurants fail during their first year of operation. For restaurants in highly competitive areas such as New York City, this number is likely higher.
It’s important that restaurant owners have control over their expenses, as revenue can be somewhat unpredictable. In addition to creating a budget that estimates expenses as accurately as possible, restaurant owners must be prepared to handle any unexpected expenses that come their way. While some degree of unplanned spending is unavoidable, there are ways to prepare:
Take Charge of Recurring Charges
Some “unexpected” expenses are actually regular charges that no one has kept track of, such as increased utility bills in the summer or annual fees for select accounts. By keeping a schedule of all expected payments, and not just monthly bills, restaurants can ensure these types of charges are no longer unexpected. Many restaurants manage this task by hiring an operations manager to oversee the budget.
Tune-Up Before You Break Down
Unanticipated appliance repairs and replacements can also cause restaurants unnecessary financial strain. One way that restaurant owners can avoid these unexpected costs is by creating and implementing a preventative maintenance schedule for all appliances. This type of schedule budgets for routine tasks such as cleaning, filter changes, and minor maintenance to reduce the change of equipment failure.
In addition to helping restaurants budget more effectively, implementing a preventative maintenance schedule helps maximize the lifespan of individual appliances. While this may require businesses spending money on appliances more frequently, the cost of maintenance tasks is much lower than that of a new appliance.
Waste Not, Want Not.
Waste is one of the biggest culprits of unexpected restaurant expenses, from an overproduction of food to overuse of resources. As the world’s biggest businesses begin to think more critically about their own sustainability practices, restaurants can minimize unanticipated expenses by being mindful of their own waste. Whether it’s promoted for environmental or business reasons (or both!), restaurant staff should come to appreciate resource conservation.
Overall, resource conservation practices can help minimize restaurant bills and decrease the likelihood that supplies and ingredients will run out before the next scheduled order arrives. For example, kitchen staff can work to ensure that the fridge door is fully closed to avoid wasted electricity and a high utility bill, while hosts can follow up with catering orders and large parties before their meals are prepared to reduce the risk of cancellation and decrease food waste.
Expect the Unexpected
While some unexpected expenses are preventable, others are not. As unlikely as an event such as a lawsuit, fire or robbery may seem, each could be enough to run a restaurant into debt. When it comes to these unanticipated situations, the best way to prepare financially is by purchasing a strong insurance plan. However, the “right” amount of coverage will differ by restaurants, so it’s important that businesses consult with insurance experts to see which policy best meets their unique needs.
While running a restaurant comes with some risks, an unexpected expense doesn’t have to be one of them. By taking the above actions, restaurateurs can ensure that their business is safe from unplanned spending.