How to Turn Your
Good Restaurant into a Great Business
who open their own restaurant typically possess an abundance of
highly desirable traits and skills. Almost without exception these
entrepreneurs are optimistic, self-starters, risk-takers, incredibly
hard workers, creative, and action-oriented. Entrepreneurial
restaurateurs often joke that they are “chief, cook, and bottle
washer.” In other words, they do it all.
Even though restaurant owners
consistently display these characteristics, it’s no secret that many
new restaurateurs find themselves faced with moderate and even
severe challenges in turning their restaurants into successful
businesses. Simply put, the problem is that they need to focus more
on their role as “chief” and less on being cook and bottle washer.
As the song goes, letting go is
hard to do. However, when you get caught up in the day-to-day
operations you can lose sight of the strategic effectiveness of
marketing, finance, and operations, which ultimately influence
profitability. In this article, we’ll discuss how to “promote”
yourself to chief executive officer (CEO) of your restaurant. In
short, you’ll see how to keep your eye on the big picture and create
a system that will ensure your restaurant operates the way you want
it to, without your having to attend to each and every detail.
As you might expect, the perks are
significant. As CEO, you’ll be better able to make the key decisions
that will build sales, create efficiency, and leverage resources
optimally. As a fat bonus, you will be better positioned to expand
your operation to a second or third unit, or even franchise your
Knowing How to
‘Run a Restaurant’ Isn’t Enough
Many people who open a restaurant
don’t fully understand the role they should play as an owner.
They’re convinced that managing or performing the operational
functions in a restaurant is all that’s needed to create a
profitable operation. Take the chef who opens a bistro or the
restaurant manager who raises some capital and creates his own
concept. They’re confident that because they know how to “run a
restaurant” they know how to build a successful business. This
couldn’t be farther from the truth and is the fatal assumption
behind the failure or lack of success in many independent restaurant
ventures. One of the problems of being a restaurant owner and
knowing how to run a restaurant is that you end up constantly
“running the restaurant.” And if the owner spends all his time
running the restaurant, he often overlooks or doesn’t pay adequate
time and attention to those things necessary to manage other equally
important aspects of the enterprise.
The more a restaurant depends on
the owner’s day in, day out involvement in the operational details
of the restaurant, the greater the risk of failure. When the owner
is unable to detach himself from the daily activities of running the
restaurant, he is usually unable to do those things necessary to
move the business forward.
Two Big Lessons
From Ray Kroc, Founder of McDonald’s
You may wonder what an independent
restaurant operator could possibly learn from the man who created
the McDonald’s empire. What could you possibly have in common with a
major corporation that serves millions of customers a day in more
than 30,000 restaurants worldwide?
From an organizational standpoint,
you may not have a lot in common with McDonald’s, however, Ray
Kroc’s ingenious approach and guiding principles are not only
relevant but provide gems of wisdom every restaurant owner should
know and apply. His leadership and business sense helped make
McDonald’s the largest restaurant chain of all time and made more
people (his franchisees) into millionaires than possibly any other
one organization in history. Just how Ray Kroc was able to build
such a massive and extremely profitable business operation in a
relatively short time span certainly deserves our attention.
First, work ‘on’
the business. When Ray Kroc secured the
master franchising rights to McDonald’s back in the mid-1950s, he
didn’t go to work “in” the restaurant. He went to work “on” the
business. To Kroc, the first McDonald’s restaurant was a model or
prototype that could be reproduced again and again in cities and
towns all over the country.
Instead of personally rolling up
his sleeves and running that first McDonald’s, he began the process
of analyzing every operational function of that restaurant from
purchasing to prep to cooking and cleaning and so on. Without
changing the essence of the concept, he made refinements and
proceeded to develop a comprehensive set of standards and
procedures, a system, if you will, for running a hamburger stand
“the McDonald’s way.”
After Kroc had completed his first
objective of building a complete “set of instructions” for operating
a McDonald’s restaurant, he then moved on to the next phase of his
plan. He was now able to show others — in this case, franchisees —
exactly how to run a McDonald’s restaurant in a systematic and
proven way that virtually ensured their success.
He understood that he wasn’t just
selling burgers and fries. In fact, his main product was the
business, a McDonald’s franchise. His primary customers were not the
people who bought the burgers, but the people who would pay for the
right to own and operate a McDonald’s restaurant (the franchisees).
To convince people looking for business opportunities to choose a
McDonald’s over another franchise or any another business for that
matter, he had to make it the best business opportunity available.
His competition wasn’t other restaurants, but other business
Kroc went to work on McDonald’s to
make it the business opportunity of choice. He refined it to the
point that it would operate in a consistent, predictable manner, the
same way time after time with a staff made up largely of teenagers.
‘system’ is the solution. To have any
chance of realizing his vision of a company with hundreds and even
thousands of hamburger joints, Kroc knew every restaurant had to be
operated in exactly the same manner. He required every new
franchisee to attend the corporation’s Hamburger University to learn
the McDonald’s “system” or way of doing business regardless of their
experience. Upon graduation, each franchisee knew precisely how to
operate a McDonald’s restaurant. They were told to operate their
restaurants “exactly” this way because “it worked.” If a franchisee
deviated from the system in any way they risked losing their
franchise. Kroc believed “the system” was the key to creating a
Another reason to have a system is
that it’s the only way to get extraordinary results out of ordinary
people. Restaurants can’t afford and really don’t need extraordinary
people but they do need an excellent system. You want ordinary
people and get excellent results by having a very good system.
Why do more than 40 million people
go to McDonald’s every day? They do not go there to get the finest
cuisine. No, they seek consistency and predictability. They know
precisely what they’re going to get regardless of what particular
McDonald’s restaurant they visit. You can only create consistency
and predictability, the two most important factors in any business,
with a good system.
This systems approach to operating
a business does not apply solely to franchised companies. A systems
approach works anywhere and you’ve got to have a systems approach to
operate a successful restaurant because there are just so many
variables and functions that need to be executed the same way, every
time, with every guest. Without a system, it’s nearly impossible for
employees to create a consistent and predictable experience for your
guests over and over again.
With a system, a restaurant becomes
a valuable asset in itself because it has the ability to produce
consistent results and do this with or without the constant, direct
involvement of the owner. By the way, when was the last time you saw
the owner of a McDonald’s franchise working in the restaurant?
By contrast, many independent restaurant owners
never stop working “in” their restaurant. They start out being the
primary go-to person in the restaurant during the opening, which, of
course, is understandable and necessary, but if they stay in this
role for months and even years after a reasonable startup period,
the business (and the owner) suffers.
When the owner continues to be intimately involved
in the day-to-day operations of the restaurant, in a way they can’t
also function as an owner. They are closer to being another
employee. Sure, the owner is the boss and their name is on the lease
and the bank loan, but beyond that, they are working in the
restaurant in much the same way an employee or a manager would.
It’s important that restaurant operators recognize
the implications of the way they approach their business and how
they see their role in it. If they’re spending most of their time
and energy running the restaurant, chances are good that their
business isn’t achieving its potential for success and they don’t
have much of a life outside of the restaurant either. The reason
many restaurants have problems is that the owner is not focused on
those functions and activities that an owner needs to be doing to
move the business forward.
How Would You
Build 500 More Units?
Imagine that billionaire investor Warren Buffet visits your
restaurant and is just blown away by the concept you’ve created. He
likes it so much he wants to form a joint venture and provide you
with the capital to build 500 more restaurants just like your first.
So, you’re now faced with the prospect of opening 500 more
restaurants. Do you think you’d start to do anything a little
differently in your restaurant beginning tomorrow? It should become
very evident that you could no longer run your restaurant the same
way you’re doing it now. You could no longer operate the restaurant
in a way that requires you to be there all the time doing the work.
You’d realize, just like Ray Kroc did, that your focus needs to
be on building a system capable of producing consistent,
predictable, high-quality results nearly every single time “without
you.” The more your restaurant depends on your being there every
day, the greater the chances that your restaurant will not reach its
full potential for success. Your restaurant has just got to be able
to operate without your constant involvement, and developing a
system will help you get there.
Restaurant From a CEO’s Perspective
Every restaurant has three major areas that must function well to
achieve its potential for success.
Operations. Operations include
all those functions that are necessary to prepare and serve your
products to your customers. It includes all those activities that
take place every day in the kitchen, dining room and bar.
Financial. Financial functions
deals with safeguarding cash, accounting, cash management, cost
control as well as operational and financial reporting.
Marketing. Marketing is
getting the word out about the restaurant and positioning it
correctly in the minds of the public. It includes public
relations, community involvement, advertising, promotions and
projecting the right image.
Now, think about how successful your restaurant could be if you
regularly gave competent attention to each of these three areas.
Imagine that operations was capable of consistently providing
products and service in a manner that meets your high standards.
Imagine that your financial, accounting and reporting functions were
organized and efficient, and provided you with timely information so
that you knew exactly how the operation was doing and how your
marketing efforts were paying off. Imagine that your marketing
received the attention it deserves with the result being
well-conceived and well-executed promotional activities, events and
communicating to your database of regular customers.
Do you think your restaurant would be more successful if you had
that level of organization and attention in each of these three
areas of your business? Sure. Well, what’s the problem?
The problem in most independent restaurants is that the only one
around to set up, organize or perform those functions is who? You
guessed it, the owner. And the owner is already working 70 hours a
week or more running the restaurant. Most independent operators are
to some degree buried in operations, doing whatever it takes to make
it through the day. So what happens to the systems that we need in
operations and the financial information to know where we stand and
the planning for our next promotion? Unfortunately, it often doesn’t
get done, or at least those areas don’t get the attention they need
and deserve for the business to thrive.
Let’s look at an owner’s role and involvement in the restaurant
visually. Notice in the image below that we have the three key areas
in a restaurant: operations, financial and marketing.
Notice the line that separates the three functional areas and the
owner. This is meant to delineate the owner’s direct, day-to-day
involvement in these functions. Here the owner of the restaurant,
who we will call in this case a chief executive owner (CEO), is
overseeing and directing the operations, financial and marketing
activities, but is not directly involved in the ongoing daily work
in these areas; the employees are.
This is a highly advantageous position for not only the owner but
also the business. Now the owner can turn his or her attention away
from the daily functions of running the restaurant to the equally
important “strategic” functions of planning and taking actions that
will affect the business not today but in the future.
Strategic functions include those things that don’t necessarily
have to be done today but must be considered or planned in the
present to have a shot at having a better business tomorrow.
Strategic functions in a restaurant could include planning your next
menu, starting a new catering program, developing a new marketing
strategy or creating a business plan to grow your business. It’s
very difficult for an owner to take on these types of projects when
he is buried in operations. Here’s a visual of what it looks like
when the owner is below the line involved in the daily functions and
activities of running the restaurant.
In this scenario the owner is too involved in running the
restaurant to function as a CEO and is more of an “employee owner” (EO).
It’s easy to see that a primary problem of restaurants with EO's is
that nobody is above the line doing the CEO or strategic work. When
the owner is constantly running the restaurant, there is little or
no time to spend on strategic work. While this may not affect the
success of the restaurant today or next week, eventually it will.
One primary way to turn a below-the-line EO into an
above-the-line CEO is by developing and putting in place a system.
In the restaurant business a system is a set of detailed operating
procedures and is often called an “operations manual.” Development
of a detailed and documented operations manual of how a restaurant
is to function will give the owner the best possible shot at
reducing the need for his or her constant, daily, ongoing
involvement in the restaurant. In addition, and just as important,
developing a system will help you create one of the most important
assets of any restaurant: consistency — a uniform and predictable
experience for your guests.
Developing Your System
Although developing a system or operations manual is not a simple
or quick task, it’s next to impossible to create and maintain a
successful restaurant without one. Operators who take the time and
the effort to involve their staff and consciously determine how they
want their restaurant to operate can enjoy some huge advantages over
those who don’t.
A system will:
Help you get out of the (unprofitable)
startup phase more quickly after opening. Getting a
system of checklists, forms and procedures developed quickly
reduces the usual disorganization and confusion during the startup
of any restaurant.
Increase the odds you’ll attract and keep
quality employees. Good people want to work for good
companies that are organized and serious about what they do. This
means a systematic way to recruit, interview and select employees
and supporting new workers with job descriptions, training manuals
and an employee policy handbook.
Provide direction. A system
communicates to your staff the performance and the results you
expect and it provides your people with the information and
training they need to be successful.
Create consistency. A system
makes it possible for your employees to repeat a performance that
creates a consistent experience for your guests. Consistency is
the key to creating a great reputation and repeat customers.
Give you a better chance to obtain
capital to expand your concept and enhance your ability to manage
growth. Imagine a single-unit restaurant company
building another restaurant without having a system in place in
the original one first. Not only are their more challenges in the
new restaurant but now the owner is no longer there to manage the
original one. Growth without a system has led to the demise of
many very good single-unit restaurant companies.
Enable your restaurant to function
without you (the owner) being there all the time. It
will allow you to separate yourself from the day-to-day details
and allow you to take your rightful place as owner.
Enhance the value of your restaurant when
you sell it. Businesses that are owner-dependent are
worth less than businesses that can function well regardless of an
owner’s involvement. Prospective buyers always want to know,
“What’s going to happen when the owner’s gone?” Another valuable
benefit of documenting your system and operating procedures is
that during the process you’ll have the opportunity to evaluate
virtually every task or activity that takes place in your
restaurant. You’ll learn that many activities are happening not by
design but because “that’s the way we’ve always done it.” Many
restaurants find opportunities to reduce errors, eliminate
duplication of effort, and increase productivity while they
develop their system.
How to Prepare
Your Operating Manual
What to include. A restaurant
operating manual will generally cover the following sections or
Menu and kitchen
Bar and beverage
Within each of these areas would be forms, checklists, procedures
and manuals in sufficient detail to document and instruct exactly
how each task and function within the category should be performed
to achieve the desired results.
For example, “menu and kitchen management” would contain
instructions and procedures on recipe development and costing, menu
assembly instructions, food safety, food prep, food rotation, food
storage, station setup and closing tasks, daily kitchen tasks and so
Where to begin. The thought
of documenting all of your restaurant’s functions and procedures to
create a comprehensive operating manual can appear to be an
intimidating and daunting task. One of the keys to getting started
and completing the process is breaking the process down into
manageable pieces by working on no more than one or two sections or
categories at a time.
One way to determine where to start is to begin on those
categories that have the most direct effect on your guest’s
experience. As mentioned earlier, one of the important ingredients
of any successful business is consistency. Start with the areas that
will help ensure that your people deliver the same food and level of
every service to each and every guest. If consistency is your
greatest concern or priority, then you might start with the “menu
and kitchen management” and “dining room management” sections.
Getting your employees’ involvement and
support. Before you start the process you’ll want to
inform your employees what’s about to take place. As you know, most
people don’t like change and the process of evaluating and
documenting everything that goes on in your restaurant will
undoubtedly lead to some changes, and potentially some resistance.
Explain to your people that you’re about to look at every task and
activity that takes place in the restaurant for the purpose of
creating detailed operating procedures. Explain that doing this is
very important to the success of the restaurant and its ability to
provide your guests with a consistent dining experience every time.
Also explain that once the operating procedures are completed and
put in place it will make their jobs easier by reducing mistakes,
duplication of effort and will make the restaurant function in a
much more organized fashion. Tell them you’d want and need their
ideas and suggestions as well.
Ask all of your people, managers and hourly employees, to prepare
their own job descriptions and to list in detail everything they do
in their job. This will involve them in the process and you’ll get a
good deal of information. Obviously, what you’ll get from some
employees will be better than others. That’s all right. You should
get enough well-written descriptions to help you identify a good
portion of the activities that take place in your restaurant that
you’ll need later.
Organizing the system development
process. Preparing an operations manual means collecting
and piecing together lots of information. Thus, you’ve got to be
organized. Start out by purchasing a cardboard bankers box. Using a
separate box will help you keep this information separate from your
day-to-day files and paperwork and you may want to work on this
information out of the restaurant as well.
Then, purchase some hanging file folders, one for each main
section of the manual and label accordingly. Then, into each hanging
file place standard file folders labeled with the description of
each category within the main section.
For example, the “personnel administration” hanging file would
contain standard files labeled accordingly:
Collect this information from existing forms, past memorandums,
observations and discussions with employees and place these notes or
documents in the appropriate folders. As the owner you don’t have to
do this all yourself; assign categories to your managers.
During this period it might be helpful for you and even your
managers to keep a small notebook or a tape recorder handy for
additional notes of what you’re observing and ideas about potential
changes to incorporate into your final procedures.
Putting It All
Once you’ve collected a sufficient amount of information for a
section, start evaluating what’s actually taking place or your
current policy within each section and determine what would be the
best way to satisfy the needs of your guests and meet the goals of
your restaurant. This part of the process may involve you as well as
your management team and in some cases a key employee or two
depending on the section and category.
As policies, procedures and activities are discussed and
finalized, start entering this information into a word processing
file. You might find it helpful to create a separate file for each
section of your manual.
As you complete each section, print it out and review it with
your managers and put in place any changes into your operation. Now
is the time to really check what you have prepared with what
actually needs to take place in the restaurant. If your changes
aren’t appropriate or there’s a better way, change it now and
reflect those changes in the procedures. Refine your manual until
you get the operational results you want and what is being done in
the restaurant matches what is reflected in the operating
Now it’s time to place a copy of
each section in a three-ring notebook binder. This is the beginning
of your operations manual. Continue this process until each section
Restaurant-specific, professionally-designed Microsoft Word
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Stay Focused On
If you begin this process with the same passion and commitment
you had when you started your restaurant you’ll end up with a better
restaurant and a more valuable business. While the time and effort
will be significant, you’ll be in a much better position to remove
yourself from the daily demands of operations and focus your
energies on other important functions that an owner needs to be
By developing and documenting your unique business system, you
enhance your opportunities to take your business to the next level
or just enjoy more time outside of the restaurant; it’s your choice.
And isn’t that what owning your own business is really all about?
Jim Laube is the founder and
RestaurantOwner.com. He has a diverse 25 year career in the
restaurant business as a server, bartender, restaurant manager,
controller and CFO for a regional restaurant chain. Over the past 15
years, he has been an advisor to literally hundreds of independent
restaurants in the U.S. and Canada primarily on issues dealing with
profit enhancement, financial controls and business management.