Running a restaurant successfully involves more than just serving delicious food.

To be competitive and profitable, restaurant managers must focus on achieving efficiencies in operations, menu design, labour costs, inventory management, and overheads. One of the best tools for achieving this is financial modelling. This article will explore financial modelling strategies that can help restaurant owners increase their efficiency across their business.

What is Financial Modelling?

Financial modelling involves creating a detailed representation of your restaurant’s financial performance to project future outcomes, or to make strategic business decisions that can benefit your business. Financial modelling can be manipulated for various purposes, but it often involves projecting revenues, tracking expenses, and analysing profitability. A well-constructed financial model can provide useful insights that help you make informed decisions to improve efficiency.

Areas in Which You Can Improve Productivity and Efficiency

1. Streamline Operations

Financial modelling can help you identify operational inefficiencies, for example, workflow and routine procedures, and suggest ways to streamline them. Here are two examples:

• Optimise Workflow: Analyse your kitchen and service workflows to find and eliminate bottlenecks. This can help you speed up service and reduce wait times.

• Standardise Procedures: Implement standard operating procedures (SOPs) for tasks to ensure consistency and efficiency. SOPs can help staff perform their duties more effectively, leading to smoother operations.

  
  

2. Menu Engineering

Menu engineering is a very popular tool for which clients come to us at Horízōn, it involves analysing the profitability and popularity of each menu item to optimise your offerings. You can read our dedicated blog post about Menu Engineering to learn more about this. In short, it involves identifying bestselling menu items and the costs of their ingredients and identifying low-performing menu items and how much they cost to make. The key is to offer the bestselling menu items at the most affordable price possible without compromising quality.

3. Optimise Labour Costs

Labour is one of the largest expenses for any restaurant. Financial modelling can help you manage labour costs more effectively. This is done in financial modelling, by using historical data to predict busy times and schedule staff accordingly. This helps ensure you have enough staff during peak hours without overstaffing during slow periods. It also involves tracking overtime hours to avoid unnecessary costs and cross-training staff members to cover multiple roles in times of necessity.

4. Inventory Management

Financial modelling helps you plan your inventory to reduce costs. By analysing historical sales data and accounting for seasonal variations, financial models help predict the required inventory, reducing the risk of overstocking or running out of key ingredients. Additionally, these models can calculate the cost of goods sold (COGS) and carrying costs, enabling restaurants to manage their budgets more efficiently, minimise waste, and maximise profitability. This data-driven approach ensures that restaurants can maintain a balance between supply and demand, leading to smoother operations and improved financial performance.

5. Reducing Overheads

Financial modelling can help reduce the overheads of restaurants by providing detailed insights into cost and identifying areas for optimisation. By analysing both fixed and variable expenses, financial models can highlight inefficiencies and suggest cost-saving measures. These include the aforementioned labour costs, but also supplier contracts which can be renegotiated to be more advantageous, as well as the cost of energy usage which can be reduced by monitoring bills and usage patterns to upgrade to energy-efficient appliances and lighting to reduce energy bills.

Conclusion

Financial modelling is a powerful tool that can help restaurant owners increase efficiency and profitability. By streamlining operations, engineering your menu, optimising labour costs, effectively managing inventory and reducing overheads, you can make informed decisions that improve your restaurant’s performance. If you would like to learn more about how a financial modelling workshop can benefit your business, you can sign up to attend one of our workshops, or alternatively, sign up for a free 30-minute consultation.