With the end of 2016 fast approaching, restaurateurs might have some sleepless nights concerned about their local economy, planning for the best and the worst 2017 will bring. Whether it’s the national outlook or your particular seasonal circumstances impacting their thinking, every restaurant owner has a list of “what ifs” the length of their arm. And the only way to get a handle on them is by planning ahead.
But here lies a real pickle: how much planning is too much? How do you balance being prepared for the holiday rush with maintaining the money and resources you need to keep your business in the black? Do you risk being underprepared just to conserve finances, or do you secure all the staff and inventory you think you’ll need at risk of catering to empty seats?
Knowing how your establishment has functioned during these types of seasonal changes in the past is the best way to start making a plan for choppy waters. But if you don’t have previous experience to look back on — or past slow seasons didn’t work out so great — here are some things to consider when planning for unpredictable times at your restaurant and how it will affect your cash outlay:
Do you anticipate a significant uptick in business when the holidays come around? Does your business area clear out at the first sign of snow? Knowing the kind of traffic you can expect in the coming months will help you schedule staff responsibly, but what are the risks?
Overstaffing during a potentially slow period can leave you covered in case of surprise activity, but at the end of the day, it’s a large outlay of capital no matter how busy you are. And it doesn’t just affect you. Having too many servers on hand can mean less tips spread across the team if things are slow. You could end up with employees that are as dissatisfied by an overstaffed night as an understaffed one.
On any normal day, you’re always going to have a little bit of slow time where your staff is overbooked. Opportunities like Happy Hour and trivia nights can help fill in those gaps, but these events become increasingly difficult to populate with patrons when competing with holiday parties and other end-of-year events.
If you have the flexibility to schedule your staff week-to-week without planning too far ahead, that can help you gauge what the trend of business will demand. But if you don’t have that option, and no experience at your current establishment to back up a solid plan, go talk to your neighbors and hear what past years have been like for them. They may have insight that can help.
This is a particularly easy scenario to fall headfirst into, as many employees like to make plans to visit family in or out of town around Thanksgiving, Christmas, and New Years. Underplanning your staffing needs can obviously put those remaining employees in a huge crunch, leaving customers unhappy with delayed service and your team grumpy at an otherwise cheery time of year.
But the risks are financial as well. Understaffing at this time of year could leave your restaurant unable to accommodate large party or party room requests, offsite catering, or other special event planning that are uniquely available at this time of year. These can be giant revenue generators for otherwise slow periods of time, so taking more than just straight service into account when scheduling staff is a good idea.
And if your business is located in an area of the country that gets a lot of holiday travel or snowbirds arriving early, planning for significant staff downtime could be leaving a lot of money on the table. If necessary, investigate temporary staff — either through a service or by putting out a call to college students home for the holidays — if you find yourself light on existing staff. Just make sure anyone you bring on temporarily can perform at the level (and with the attitude) which you expect from the rest of your team.
Like staff, maintaining your food and beverage inventory is a delicate balance when you can’t accurately predict what traffic is going to be like weeks or months out toward the end of the year. If your chef has special menu plans for the holiday months, your inventory order is about to get a lot more complicated.
The immediate danger of over-ordering food inventory — particularly fresh meat and produce — is that it will go bad before your kitchen has a chance to use it all. That is an enormous cost to your bottom line. Most beverages (especially liquor), baking staples, and canned goods won’t turn right away if over-ordered, but they still represent cash on hand that is now in someone else’s.
Having an accurate inventory process will help you make informed decisions about regular service needs, as will making sure your kitchen practices FIFO (First In, First Out). But when planning for a potential increase in customers, it’s also important to recognize the versatility of what you purchase. Can each ingredient be used in more than one dish? Is there a cost saving element to ordering in bulk that outweighs the risk of waste? How can you use the totality of each item not just to make the most of every cent you spend, but also to be more environmentally sound?
Any special order item will also needs to be properly timed in coordination with your chef. Having a case of figs delivered the day before Christmas may not provide adequate time for their famous figgy pudding to set. And if you haven’t advertised the limited time offer properly to ensure your customers know to order it, those figs may be sitting on your shelf well into January unused.
Then there’s the danger of running out of that popular item. We’ve all been that restaurant customer who decided on a late dinner Friday night and missed out on the Prime Rib they came for. Under-ordering food and beverage inventory, particularly during busy times, may not have the immediate effect a huge outlay of cash will in over-ordering, but it will have an effect in your future sales.
Customers want reliability. They want to know you can provide what you advertise. The Fear of Missing Out is a real phenomenon, and it can compel diners to dine with you more frequently — but only if they can actually get what you teased, once they arrive. The risk of underplanning on inventory isn’t just poor customer service; it’s damaging your reputation in the long run with customers you had — and ones they talk to that you might have had.
Simply put, this is the stuff bad reviews are made of.
Ultimately, how you plan out your staffing and inventory in unpredictable times is going to have a huge impact on your cash flow. Having too much cash on hand is, of course, a much nicer “problem” to have than not enough, but there are ramifications to that as well.
The tax benefits to purchasing new, necessary equipment or making renovations can be very positive to the small business owner. And taking care of needed upkeep during less busy times can prepare you to be more efficient and cost-saving when things get busy.
But more likely, unpredictability yields not enough cash flow for restaurants desperately trying to balance needs with revenue assumptions that may or may not bear out. That’s where short-term financing options like merchant cash advance come into play, offering restaurants funding upfront in exchange for the purchase of future credit card receivables.
In other words, we only get paid when — and to the extent that — your restaurant does.
Want more information about how a merchant cash advance can help you offset uncertainty in the coming months?