Plating Up Profitability
Chef Owner of acclaimed restaurants Bank House and Number Eight, and former CEO of the Gordon Ramsay Group for 7 years, Stuart Gillies knows a thing or two about running a profitable business. We caught up with him to get some tips and advice to help operators find some light in a challenging trading period.
Typically, what are the three largest costs impacting profitability?
The three biggest costs affecting any restaurant business are always labour, rent and cost of goods (COGS). Over the past year, however, the cost of utilities has risen so dramatically that this is now also a major cost to businesses.
Approximately what margin should operators be aiming to achieve?
The target gross profit (GP) margin for restaurants ideally should be 75% so that the costs of labour, food and beverages average out at 25%. Although, this has become difficult to hit for most businesses and is closer to 70% GP.
What operational or fixed cost savings should businesses focus on first?
Business costs are constantly in fluctuation due to increases and drop-offs in sales. A key area to look at regularly is product costs, especially when buying food, as this fluctuates a lot. Overuse of products by teams is also a hidden cost and needs regular monitoring, plus gas and electric (items left on unnecessarily), excessive use of cleaning products, laundry etc.… all costs basically outside of rent, rates and finance are possible areas to control costs better. Regular discussions and price reviews with suppliers is an important part of this, but on a phone call, not by email.
How can operators strike a balance between an attractive salary and managing staff costs?
You need to pay a fair wage and know that the team understand this is what you can afford by sharing the pressures on the business in the right way. That said, businesses can also support team members in other ways and keep adding value to their employment by offering many other cost effective elements.
What are your top tips for reducing food waste to improve profitability?
Food waste can be enormous, so only buying what you can use and checking the stock levels daily is critical. Utilisation of food products for one to three dishes is a standard process that we have always used, which takes creative thinking.
Would you suggest increasing prices?
Increasing prices is a very sensitive area. It’s easier if you are in a high footfall area, like big cities where your guests come less frequently. If you want to increase prices then you need to add more value for the guest, as this does get noticed.
Is technology enabling cost savings?
Yes of course, technology can help control costs enormously, so it’s often worth the investment. There are numerous new systems, not all of which we use. The ordering app that is used by many pubs makes a big saving on labour taking orders, although you do lose the connection with the guest which may be important depending on your business model. Food and beverage ordering and stock control systems are essential nowadays as that’s how you can control spending remotely.
