Running a business can be tough, especially when your business is seasonal. Restaurant owners know all too well the challenges that come with being at the mercy of busy seasons and slow seasons. 

Restaurants endure a fairly universal cycle: Summers are busy, patios are open, and revenue is good. Then back-to-school hits, and before you know it it’s the holiday season and no one has time for nice dinners out on Wednesday nights. This cycle is a simple fact of life, but it doesn’t mean restaurants have to hang on by a thread during those slower seasons. 

Restaurant Profit Margins

Restaurants operate with thin profit margins. After all, you can only sell a hamburger—no matter how good it is—for so much. Even if you make a profit on the dish itself, you have to use that profit to pay your staff, utilities, suppliers, and rent. 

Generally speaking, ⅓ of a restaurant’s revenue goes towards the cost of goods sold, ⅓ to labour expenses, and the remaining ⅓ to overhead expenses (rent, utilities). This split is only successful if business is good and steady. What does that mean for slower times? Where does that leave your compensation as an owner? How do you grow your business? 

Restaurant Finances in 2023

In addition to these more predictable cycles, restaurants have had some other curve balls thrown their way this year. 

Many restaurants are still in recovery mode following COVID-19. Some had to adapt to only offering takeout, and many had to shut down completely for some time. When it came time to reopen, restaurants faced quite a scene due to inflation, labour shortages, and COVID-19 loan repayments. According to Restaurants Canada, food service bankruptcy filings have jumped from just 12% pre-pandemic to a whopping 116% since 2022.

Additionally, the Saskatchewan Government increased the minimum wage by $1/hour, so labour costs have increased unexpectedly for restaurant owners. 

I don’t mean to alarm you with this information. Anyone in the industry knows it’s the current reality. I’m actually here to share some brighter news: your restaurant business doesn’t have to struggle, even with the current state of things! 

Knowing your Restaurant’s Numbers 

As a financial coach, I can’t change the cyclical nature of your business. You live by a seasonal and weekly clock determined by societal norms far beyond my reach. What I can help you with is your profit behaviours and mindset. It all starts with knowing your numbers. 

If you rely on the busy season (summer) to get you through the slow season (winter), or, similarly, the busy day (Saturday) to get you through the rest of the week, you’re not alone. However, it can make you very reactive when it comes to financial decisions, obligations, and payments. 

The second you get money in the business account it’s gone to employees, power companies, and suppliers. I get it, people have to be paid (preferably on time). However, this reactivity isn’t serving your financial health. The only way to gain control is to understand the relationship between your expenses and revenue throughout the week, month, and year. 

As mentioned earlier, restaurant margins are tight. That means you need to track each and every penny. Your profit and loss report (P&L) is going to be pages longer than most businesses because you’ve got a lot of tiny little variables and expenses to account for. However, this P&L is important to stay up-to-date on. It tells your financial story. 

Improving Your Restaurant’s Financial System 

Restaurant owners are often playing catchup when it comes to their finances. They’re waiting for the business of the weekend to cover the rest of the week’s expenses. Here’s my advice: 

  • Create a system to help you manage your finances. When are utilities due? When is payroll going through? When does that vendor need their payment? Track it, write it all down, and live by it. 
    • There are multiple softwares to help you keep track, such as Restaurant365 or POS systems like TouchBistro. to keep track. I’ve also outlined some helpful tips to get you started in this blog. 
  • Now that you’ve got a better idea of your numbers (due dates, revenue, expenses), you can organize your cash flow around them. Create different accounts for each category of expenses—I’d recommend some version of Payroll, Suppliers/Vendors, and Rent/Utilities. This is where a Profit Roadmap can come in handy. When we work together to create this strategy, we determine percentages rather than numbers. Then, when revenue is divided into separate accounts, we use the percentage related to each one. This way, you add a little methodology to the madness of running a restaurant. 
    • Bonus points if you work your own compensation into the equation! You need to be getting paid for your hard work too!!

And, if the above system proves to be too time-consuming or out of your realm, get some help. Even if it costs you money to hire a professional, they will save you money in the long run. 

A financial coach (like myself) will take your revenue, deadlines, expenses, goals, and every other variable, and make a strategy out of it all. Together, we will shift your mindset, get to know your numbers, and create a financial system that serves your business. 

There is a way for restaurants to thrive, even in challenging times, and much of it comes down to the management of your finances. I love working with restaurants on strategies that bring their stress down and revenue up. If you’re ready to find out more about what I can do for you, learn more about my work with restaurants and food trucks, or book a call with me! I’m excited to get to know your current financial story and write a new one with you.