Most operators spend their energy chasing more customers. In this Loaded webinar, Rich McLeod shows why the bigger, faster profit gains usually come from the customers you already have. He walks through the profit matrix he used across his own 12-venue group, then works through real numbers to show how small improvements in average spend, cost of goods and labour can add up to more than $100,000 a year for a single venue.
Market awareness, conversion, number of customers, average spend, revenue, cost of goods, gross margin, labour, gross profit, then variable and fixed costs. Every conversation with your managers should start with which part of that chain you're trying to improve, and why.
On a venue doing $40,000 a week, improving sales, cost of goods and labour by 3% each lifts gross profit by about 21%. You don't need one big win. You need small, steady wins in every area.
That one question moves the focus onto what the team can control once guests are in the door.
Two team members served almost the same number of transactions, but one averaged about $2 more per sale and took $2,600 more in revenue. The team members with the highest spend per head are usually the ones giving the best service.
Your 10 most-purchased and 10 best-selling items drive most of your cost of goods. Get their buying prices, recipes, sale prices and discounts right, and a 2% drop in cost of goods is a conservative goal.
A hospitality business makes money in a predictable order. A certain number of people are aware your venue exists. Some of them convert into customers (the walk-past who reads your sandwich board and comes in, or the regular who comes back again). Those customers spend an average amount, which gives you revenue. Take out cost of goods and you have gross margin. Take out labour and you have gross profit. Then come your variable costs (cleaning supplies, consumables) and your fixed costs (rent).
Rich's point is that variable and fixed costs are fairly quick to get on top of. The part that needs constant attention is everything from the moment a customer walks in to gross profit: average spend, cost of goods and labour.
Take a venue doing $30,000 a week: 1,000 customers spending an average of $30.
That's $2,280 more gross profit every week with no extra customers, or more than $100,000 a year on about $1.5 million in turnover. It's how a venue moves from a 4-5% net profit towards 20%.
Measure average order value by team member in cafes, bars and pubs, and spend per head in restaurants. Share the numbers with your team, then find out what your top performers do differently and train it across the team.
The difference came down to one question: "What entrée can I get you to start with?" instead of "What can I get you?"
Buy your top 10 items well. Tender your 10 highest-value items across three suppliers, then check you're actually being charged the agreed price.
Count your top 10 items. Five food and five beverage items. If your recipes say you should have used 500 patties and you used 600, finding out why is pure profit.
Review the sale price of your best sellers. There are usually three or four sitting a dollar or two under where they should be.
Understand your discounts. Staff meals, loyalty and promotions all affect margin. Know the cost so you can decide whether the discounting is driving enough revenue to be worth it.
Know the cost of your roster in dollars before the week starts, then compare it with what you actually spent.
Track it as a percentage of sales, because some managers respond to dollars and some to percentages.
Use hours in the kitchen. Chefs often relate better to hours planned versus hours used.
Match your roster to customer demand. Overlay your sales pattern with your labour cost so you're staffed up when guests are there, and not overstaffed when they aren't.
See what a 1% improvement in spend, cost of goods and labour would do for your venue.
Customers come in, spend an average amount, and create revenue. After cost of goods and labour you're left with gross profit, and after variable and fixed costs you're left with net profit. The biggest levers you control day to day are average spend, cost of goods and labour.
Lift average spend through better hospitality and team training, reduce cost of goods by managing your top 10 items, and bring labour down by rostering to customer demand. On a $30,000-a-week venue, small gains in all three add more than $100,000 a year.
No. Set an overall cost of goods target and a ceiling for every item, but expect a mix. A higher-cost dish can be worth it if it lifts spend per head, and some low-cost items will be your biggest money makers. What matters is knowing each item's margin so the trade-offs are deliberate.
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