top of page

Back House Biz $1.01- Ten Signs Your Restaurant May Be Failing

I was reading a business article today referring to 10 signs that your business is failing. As not all pertain to the restaurant industry, many do so I would like to share them with you. I have adjusted them to pertain specifically to restaurants.

  1. 1. Inability to pay your bills on time

Paying your suppliers is just as important as paying taxes. Without them you don't have a product to sell. Yes you can rob Peter to pay Paul, but this will not end so well for you in the long run. If you are getting too far behind, the first steps a supplier will do is cut your credit terms, freeze your account, or eventually go to a cash on receiving basis. Either way, the rule of thumb for any restaurant is make sure you pay your staff and your suppliers. Everything else you can make arrangements.

2. Regularly on the receiving end of late payments

This one doesn't really apply to most restaurants unless you are a catering company or management company. Take deposits and shorten their terms.

3 . High employee turnover rate

With the labour market as brutal as this is, this might not be as much a sign as in the past. The key signs that this is a problem is when veteran staff are "jumping ship", looking for new opportunities. This may be a sign that your restaurant has adopted a poor morale , poor management, below average salary, or poor working conditions. Either way instead of complaining about how hard it is to find cooks, look at why they don't want to stick around.

4. You've reached your borrowing limits

If you have reached your borrowing limits on lines of credit or company credit cards, you have to ask why. Instead of looking for more credit, you need to have a serious look at why you are in this situation. Chances are it won't take long to figure it out and you need to decide if you can bounce back or make the hard decision to close the doors. Hopefully you give me a call before it gets to this.

5. Your not taking a salary from the business

If you are struggling to pay your staff and have not paid yourself in a few months then it could be a sign your business is on the slide. With proper budgets you can figure out what you need to do to manage your cash flow. Chances are though you must look at your profitability starting with your labour costs and food costs. These are the places you will hemorrhage money the most.

6. Taking your finger off the pulse

I've seen this many times in my career. The owner has some success and thinks that everything runs on their own. So off to Greece they go, then to California, six months go by and things are not looking as good as they were in the past. As a owner you have to be on top of your financials and keeping your managers accountable. Weekly manager meetings is a great place to start.

7. Your constantly fighting fires

If your days are spent always solving one problem after another and not working on the big picture of your business, then you could have bigger problems on the horizon. If you have to micromanage the day to day operations all the time you are usually failing to cure the root problem that is ailing your business.

8. There is a lack of management information

If you want your managers to do the best job they can than you need to give them the tools to achieve this. You must share financial information with them like sales figures, labour figures, food cost figures, budget information, ect. How do you expect them to do their job when they are going in blind or able to partially see the path ahead.

9. You have too much inventory

Having too much inventory can be a cash flow killer, which leads to other more serious problems as explained all over this article. You always walk a tight rope when ordering, as you don't want to run out of things but you also don't want to have too much on hand as it ties up cash flow. First of all taking regular inventory counts to work out theoretical food costs is a must, second is to figure out what your pars are for ordering. By doing this, you not only know how much you are going through in a week of a particular item, but you know how much you need so you don't run out.

10 You feel like your the only decision maker

If you run your restaurant with a "I'm the only one to do this or I can't depend on anyone to do this" mindset, then you and your business are in trouble. This will not only prevent you from working on your business and forcing you to work in your business. Another major drawback is that it will cause resentment with your managers as they will feel like they are not trusted or you give the impression that they are not competent to do their job. Cross training is the best solution to this problem and you also must learn to delegate. This is the only way you will move forward.

Recent Posts
Search By Tags
Follow Us
    bottom of page