4 Red Flags You Can’t Ignore When Running a Restaurant

Restaurants have notoriously slim profit margins. The success of a restaurant depends on many factors, but what is universal in the industry is that any number of small issues, left unaddressed long enough, can bring the business to a screeching halt. If you own or manage a restaurant, it’s crucial to prevent or catch seemingly small problems before they snowball into business-ending catastrophes.

There is little room for error in the business. Here are some of the most common problems restaurants face that can quickly get out of control. Know what they are and understand the red flags so you can fix them early.

Your Restaurant Seems Busy but Your Numbers Say Otherwise

Your seats are full during pretty much all your open hours. That’s a sign of a successful restaurant, right? It certainly should be, but if your restaurant is consistently packed, and you’re not making a profit, something is wrong behind the scenes.

It could be that your prices aren’t high enough. Another commonly overlooked problem is the speed of turnover. Your restaurant may be packed all of the time because customers are sitting at their tables for two hours or longer. Maximize profits by moving people along. Also, check the kitchen to determine if the service is too slow in the back of the house.

POS Terminal That Can Only Take Payments

Technology can do a lot for a food service business, making it more efficient and profitable. So if you’re working with an outdated POS system that does nothing other than take payments, you’re missing out on a lot of important functionalities.

The solution is toupgrade your POS software to take advantage of:

  • Inventory management
  • Customer loyalty programs
  • Online ordering
  • Cloud data collection and storage
  • Back-office applications
  • Remote management
  • Custom menu building
  • Streamlined and automated employee scheduling
  • Sales reports

No Bookkeeper on Staff or Being Too Dependent on a Bank

Many restaurant owners make the mistake of being passionate about food and service without really doing their homework on the financial aspects of running a business with tight profit margins. Relying on a bank for financial advice or management is not ideal. The bank does not have your best interests in mind and will simply collect your deposits with no insights on your finances.

What you need is a dedicated bookkeeper to help manage finances and discover profitability issues. A bookkeeper, or even an accountant will track costs, make profit and loss statements, assess cash flow, and otherwise find areas where you can improve profit margin.

Malfunctioning Equipment

Running a restaurant is a time-consuming, often stressful job. It’s easy to overlook and avoid things that need to be fixed. Why spend time and money on that leaky sink when there are more pressing issues? Why worry about the malfunctioning stove if it’s working well enough to get food out?

These equipment issues may not seem urgent, but they are a ticking time bomb. Broken or malfunctioning equipment hampers efficiency, may present safety issues, and certainly doesn’t look good to customers. And when that stove suddenly stops working during a busy night, you will have to pay to fix it right away and lose out on a lot of revenue. Take the time and spend the money to make sure everything is running correctly and safely.

Keep on Top of Problems for a Successful Restaurant

The restaurant business is a challenging one. A study found that 60 percent of new restaurants fail within a year, while a whopping 80 percent close within five years of opening. Successful restaurant owners are vigilant and proactive. They keep a firm grip on daily operations and find and fix problems before they get out of control. To avoid failure in your food business, stay on top of the little things.