Example for How to Increase Restaurant Sales $250K in 1 Year

Hey there restaurant pros, it’s David Scott Peters and welcome to episode 45 of the Restaurant Prosperity Formula. I’ve been coaching restaurant owners since 2003 and the Restaurant Prosperity Formula is based on what the most successful restaurant owners I’ve worked with do on a daily basis to achieve their success. The basic premise of the formula centers around achieving prosperity, freedom from your restaurant and the financial freedom you deserve. To achieve prosperity, you have to follow a very specific formula made-up of leadership, systems, training, accountability, and taking action. Today’s topic takes me out of my comfort zone and should excite you beyond belief. Why?

Because I’m going to share with you how you can increase your sales by $250,000 a year without marketing. Let’s get started. Have you ever heard the phrase, sales cure all ills in the restaurant business? Well, if you have, it’s one of those things we call a half-truth. Let me explain. Let me start off by explaining the concept of the break-even point. The break-even point is every dollar comes in, every dollar goes out. You make no money, you lose no money. Now there are two factors in a break-even point. There are fixed expenses and there are variable expenses. A fixed expense is one that is fixed. That might be your rent, $10,000.

Whether you do $1 in sales or $100,000 in sales that month, you have a $10,000 bill that must be paid. Then we have variable expenses. Those are sales that go up and down with sales. That means if I’m busier, I get more labor because it’s a percentage of sales. If I’m slower, I get less. Marketing money, paper supplies, janitorial. You get the picture. So the whole, without going into the math of the equation, basically speaking is it’s every dollar in, every dollar out. Now we will talk about at some point in time when we pass that break even point in just a second. So Here’s the challenge.

If we’re going to talk about increasing sales, if we’re going to talk about making a change in your business, it is important that you understand where your break even point is and that you can get past it. Because basically there’s a point where you can increase your sales and outpace a bad operation. So you are just blowing money left and right. You are undercapitalized. You are over-expensed. You’re not controlling labor. You’re not controlling cost of goods sold. There’s a lot going on in your business. But there is a point in time where you can increase your sales and get to your break-even point and get past it and make money.

So whether you’re overextended yourself, you’re not operating profitably based on your operations, The reality is you can make money, but you’re going to beat the crap out of your business, your team, yourself, for virtually almost no reward. But if you’re a well-oiled machine, an increase in sales can and will explode your bottom line because you’ve covered your fixed expenses. You could be making the highest margins you can imagine ever on every dollar that comes in the door if you’re over your break-even point. In fact, I would tell you, could be looking at profitability of 25 cents to 40 cents on every dollar that comes in.

Because once I cover that break even point, my variable expenses, prime cost, marketing, discount rate on my credit cards, paper supplies, janitorial and so on, let’s say for just ***** *** ***** we start with a 55% prime cost and we’ve got 15 more points in variable expenses. That means for every dollar it comes in, we’re going to use 70 cents. Well, that means we have three dimes left over. Remember the break-even point? We keep stacking 3 dimes till we pay that $10,000 in rent. Then we stack 3 dimes until we pay for that $485 cell phone bill and so on. Once we pass break-even point, you’re at a 30% profit margin.

So if you’re already efficient and you bring your break-even point down, you start making money at an explosive rate. sooner. And finally, for some of you, raising, with rising costs I should say, of product and labor, your sales really may need to go up just to handle what those increases have been. Basically sales increase is what the doctors ordered to keep things the way you want them to be. So if you’re happy with where you are today and your costs have been rising, well that increase in sales may offset that increase in cost and still put you in a place where you’re happy with your business.

No matter where you fall, there’s not a restaurant owner in this world worth their salt that doesn’t want to increase their sales. Right? Think about it. Most people don’t want to work with me because they’ve got to do work. I’m the operations guy. They want the sexy sales guys. They want the, hey, here’s how we drive more business in your doors because we think that if I increase my sales, I can make more money. Well, now that we have this understanding of the break-even point and the fact that we can have explosive profits past our break-even point, I want to address the elephant in the room. And that is I’m not a marketing expert. I’m about to talk about increasing your sales.

So you would think I’m going to be talking about marketing and I’m not necessarily going to be doing that. Maybe marketing in your four walls, not advertising outside if we want to split hairs. But I’m the restaurant systems expert. I’m the accountability reaper, if you will. I’m your biggest cheerleader. But what I’m not is a marketing expert. What I want to do is give you an operational perspective on increasing your sales and give you some concrete ideas on how you can start thinking about increasing your sales in a new light. Understand there are only three ways to increase your sales. Number one is get new customers to walk in your door. The most expensive form of marketing there is.

To get a new person to walk in the door often takes a Herculean amount of effort and money to do so. Number 2, get your existing customers to come in more often. The more they come in, the more they spend, the greater your sales. And finally, #3, get your customers to spend more each visit. So if I could get them to buy just a little bit more, spend a little bit more every time they come in, I’m going to make more money. I’m going to increase my sales. Now, for argument’s sake, because Bringing in new customers is really advertising in my world. I’m going to leave getting new customers walking your door out of the marketing discussion. I’m going to leave that to the marketing experts.

What I’m going to do is focus on increasing your visits and getting them to spend more each time. Now in my world, there are two categories when it comes to where you should place your efforts in increasing your sales. Category one is what you can do on a day-to-day basis. And category two is what you can spend money on to make this happen. So I’m going to focus right now on category one, what you can do in your restaurant as the leader of your restaurant, what you can do to increase your sales. We’re going to make some assumptions here. We’re going to say when it comes to…

Getting your restaurant going you’ve got to be knocking out of the park and make sure you’re killing it with restaurant 101 hot food hot cold food cold clean safe work environment for the guests employees Wow customer service incredible product creating memories that you have a great restaurant that’s critical and that you can increase your sales with planning training and taking measurements. The theory behind everything is that which we measure improves. With no measurements, you may not see the improvement at all. So let’s say that your goal, for argument’s sake, is to increase your sales by $250,000 in the next 12 months. You heard me right, $250,000.

Now for some of you, that sounds like an astronomical number and some of you that’s just a small increase depending where your volumes are. No matter where you are, I’m going to show you how you increase your sales by $250,000 without spending a dollar outside your four walls on marketing. Now I’m going to tell you, may want to pause this podcast right now. Grab a pen and paper. because you’re going to want to write things down and stay with me because I’ve got a long list of numbers and figures I’m going to throw at you. I’m literally going to drop them on you and you’re going to have to be writing them down to keep up.

Now the beautiful part about a podcast is you can listen to it over and over again until it all makes sense to you. So I’m not really concerned that if you don’t get your pen and paper right now that you’ll be able to follow me because you’ll be able to listen to it again, listen to it again, listen to it again. Here are some assumptions we’re going to make continuing the assumption track, if you will, for our example. And I’m going to give you the corresponding numbers. So our assumption number one is we’re going to have a sales increase of $250,000 a year. That’s $20,833 a month. Or look at it this way. 69 a week. 81 a day. 81. If you increase your sales by that, that’s $250,000 a year.

But how do we do that? For some of you, that’s doubling sales in a single day. Because in this example, We’ve got to further drill down so we can be on the same page. For the example’s sake, I’m going to say you’re a full service restaurant. If you’re a quick service restaurant and I start talking about servers, translate that to your salespeople, which are cashiers. If you were to sit there and say, you scheduled on average 5 servers a day. And let’s say you’re currently doing $1 million a year in business. 25 a day. $1 million a year says you’re doing about 3 grand a day. 25 to be exact.

We’re going to make an assumption for our example that your restaurant’s doing $25 average ticket per person. That means you’re bringing in about 110 people or 110 customers a day. That means your servers are going to average about 22 customers a day or most likely have anywhere from 7 to 10 tables, right? We have singles, we have deuces, we have threes, we have fours, we have eights, right? You get the picture. So we’re going to make an assumption that out of that 7 to 10 that they have 8 tables each shift. That makes the math work. We’ve got to make some sort of assumption and you’ll see I’m being very conservative in my numbers.

Now if we sit there and say we’re going to upsell, what does that mean? What if you get your servers to do the following? If you could teach them how to sell at the table and sell one more appetizer per shift, and let’s say that appetizer is $15. Next, you’re going to teach them to sell one more dessert per shift. So remember all those customers coming in, the number of tables they have? We’re just saying one more, and let’s say that dessert is $15. Last but not least, I’m going to get him to sell one more bottle of wine at $25. Not some $100 bottle. Imagine if you get a $100 bottle sold, how this changes the math. A $35 bottle, a $45 bottle of wine. But let’s say it’s $25.

Now, if you don’t have wine in your business, translate that into some other item that’s going to be about $25. Now, That means you’d have an average increase of $55 per server per shift per day. By the way, if you your servers to do this, let’s chase this squirrel real quick. You taught them to increase their sales by only $55 per shift. A full-time server who works 5 shifts a week would make approximately $2,860 more a year in tips at a 20% profit, or I should say tip rate, right? So by us increasing our sales and teaching them to sell three items more a shift at only $55 increase, they’re going to make almost 3 grand a year. What if they could double that and so on?

What does it mean for you, the business, and what does it mean for them? So as you teach them, we’re not just trying to say, hey, we’re the big bad restaurant owner, we’re trying to make more money. It’s, hey, let me teach you how you can make more money easily with the customers and the tables you already have. Now back to our goal of $250,000 increase, annual increase in sales. 5% of your tables, remember the 8 tables that are going to buy one more item each. So out of that, 37% of each table has to buy one more item. 6% of the customers because we had 22 of those. And ultimately, $55 times 5 servers is $275 per day. Sales increase, or $100,000, $10375 to be exact, per year.

So that $55 increase, selling 3 extra items per shift per server is already 100 grand. That’s almost halfway to our goal. 81 increase per day. And the example we just went through of the three items per server is going to average us $275 a day. 81. That’s what’s remaining. So now let’s go to our kitchen. Let’s get them involved. Let’s get our chef or kitchen manager and say, hey man, you need to create the most incredible features, the specials. I want them to be high ticket. We’re an average of $25 per person already. I want us to have something that say is $50 per person. And our goal is we’re going to sell 20 of those specials each weekend.

So we’re not talking about seven day week specials, just 10 specials sold on a Friday, 10 specials sold on a Saturday, and if we don’t get that done, we still have Sunday to get that done. Now, while if I sold, 20 specials at $50 would be $1,000 in sales. In reality, that’s only a $500 increase in sales because our guests would have spent $25 walking in the door anyway. 23 a day. So those 10 specials each day or 20 specials over the weekend is going to give us a $71 reduction in what we still need to get to get to our $250,000 a day. So after our three items were sold per server, per shift, We took that away. We had $411 left over. 23 per day.

58 remaining to get to our goal to reach $250,000 a year. What if you were to raise your prices by 5%? Now, I know we’ve been raising our prices. Over the last two years, our costs have gone through the roof and we’ve been raising prices at a record pace. But I want you to think about 5%. And it’s not going to be raised 5% across the board. If we have recipe costing cards on our menu mix, it may be raising our price by 25% on a top selling one, two, three items. It could be raising the price just slightly on some others and not raising it on some others that are still value propositions. But on average, we’re looking at a 5% increase. 36 A day. 58. 22 remaining to get to our goal.

Well, we’ve got one more tool in your toolbox to increase your sales and that’s catering. 48 each? Each and every week, 3 caterings at under $500. 22 A day. That’s your number. So by teaching your servers to upsell and measuring their success, because again, that which we measure improves, so you have to put some sort of metrics in to see that they’re selling, by putting in out larger ticket specials, by raising your prices by an average of 5% and putting a small catering program in place, just three $500, less than $500 caterings a week, which means you could do a wedding and cover it all. You could do one party at $1,500 and not worry about the other. You get the picture.

This is not out of your grasp. You, my friend, can and will increase your sales by $250,000 a year. Yes, that’s $250,000 over the next 12 months by following that arithmetic. And none of that sounded unreasonable, did it? Selling 3 items more, putting out a special, raising our prices 5%? None of that makes it unobtainable. It should be realistic for each and every one of us to make that happen. Now, let’s move to category two, and that is what you can spend money on. com, I’m going to share with you his approach to this problem. And he comes at it at a different angle.

One of the key components of his products and services that he offers is a loyalty program, which is the primary focus on getting customers to spend more each visit and get them to come in more often. But he also helps restaurants bring in new customers. I’m not going to go into what his program does. I highly recommend it. com. In fact, he’s the sponsor of this podcast. Go to the special page that I said at the beginning there and you know, you get a deal. But with that said, that’s not why I’m doing this. I’m going to share Cameron’s wisdom.

He says you can double your profits by increasing your new customers by 10%, getting your customers to visit you just 10% more often, increasing their average ticket by 10% a year. Now that’s a different perspective. He’s approaching it from the profit side. And I’ll tell you there’s some things I agree with and things that I might look at differently in just a moment. But let’s look at the math. The math is, let’s say we have 100 customers. Just 100 customers make it easy. For every 100 customers, they spend $10 each visit. Not the 25 we’re talking about, just $10. You’re going to see the math here. $10 per visit.

If they come in 10 times a year and based on that, they would spend $10,000 in sales. Now, Cameron’s going to say that you are an average restaurant and maybe above average, actually. You’re going to be on the high level of profitability. You have 80 cents on every dollar, 80% of every dollar comes in is going to be spent on food, labor, and all your fixed costs. So you’re a 20% profit margin restaurant. You’re going to net $2,000 out of that 10 grand. Well, if you were to increase your customer visits, get them to spend more and get 10% more customers, right? 10, 10, 10, Instead of 100 customers, you’d have 110 customers. Instead of $10 per visit, they’re going to spend $11 per visit.

Instead of 10 visits a year, they’re going to do 11 visits a year. You get the picture? Well, now instead of $10,000 in sales, you do $13,310 in sales. Now, Cameron’s argument is, following the National Restaurant Association’s articles they put out, that if you saw that 10% increase, you wouldn’t see an increase in labor. And he’s right. But I look at things just a little differently and I say, if you are planning on an increase in sales, I’d give you more label, but let’s just use his example. So now you just have a 30% cost of goods sold. Well, now your profitability went from 2 grand to $4,317. You doubled your profits.

Again, since I’m an operations guy, I don’t agree with that I would increase your labor costs because in the systems I teach you, I’m going to make sure you have the labor to handle the increase in sales. Plus, If you’re past your break-even point, who cares which school of thought that you live in, Cameron’s or mine? Because why? When you look at your increased sales, you’re going to find out that on those same 100 customers that we had in category one example, you’d increase your sales by $172,120 a year. Oh, wait a second. There’s a disconnect. Because why? We’re using in our example above of $25 per person. Can you see the power of this? Right? We’re not doubling.

We’re doing again even more so. And so that number could be huge. What if you implemented both categories? While the math is not going to net you double the $250,000, if you will, the fact is you’ll be hitting your $250,000 increase. right? It’s going to be a whole lot easier because you’re implementing the things you can do in your four walls plus you’re bringing a program that increases your customers, gets them to come back more often and spend more because the psychology of a loyalty program makes them loyal to you and does those things for you.

So if you’ve been following me for any length of time, then you can start to see why I want you off the floor and in your office working strategically on your business. Because this is what happens when you put your focus and your energy on increasing your sales. It gets done. So if you want to change your world, increase your sales and make more money, focus on Restaurant 101. Make sure you’ve got that down. Make sure you’ve become as efficient as possible and get your break even point as low as possible. Because for every dollar that comes in, your profitability explodes. But forget about profitability.

If you’re just looking to increase your sales by $250,000, you can by simply selling more, upselling, you know, putting specials out and making sure you focus on it without any big marketing budget. Well, I’m going to tell you right now, if you didn’t listen to me and grab a pen and paper, I want you to re-listen to this. I want you to write down those numbers. I want you to prove out the math that I put. I want you to make it visceral and internal for you. And I want you to start to put a plan in place that you can start to double your profitability like Cameron wants, or just bring in another $250,000 in sales. Either way, it’s going to take you thinking strategically.

Hey, that was an awesome episode. I want to thank you for taking the time to take action on building a better, more prosperous restaurant. Before you go, I want to give you these three thoughts. One, by combining leadership and taking action with systems and training being checked by accountability, you are on your way to creating prosperity for you and your restaurant. Two, I have something I need from you. Please leave a review on Apple Podcasts, Spotify, or wherever you happen to listen to podcasts. By leaving us a review, other restaurant pros seeking out this information are able to find it. I read the reviews, and hearing how this information has benefited you does wonders for me.

And three, if you find any of the discussions helpful, share them. The more restaurant pros who have access to them, the better we become as an industry. com. Be passionate about what you’re doing. Be persistent. But more importantly, become better and help everyone around you become better. And your restaurant is going to kick some ***.