The Financial Habits That Keep Your Restaurant Doors Open

Hey there, restaurant pros. It’s David Scott Peters, and welcome to the Restaurant Prosperity Formula podcast. For over 2 decades, I’ve been guiding restaurant owners to success with the proven principles of something I call the Restaurant Prosperity Formula. I originally created the formula based on the daily practices of the most successful restaurateurs I coached, and it’s now the foundation of what I teach restaurant owners like you so you can achieve success. What do I mean by success? Success is a restaurant owner who dictates the terms of their life and their bank account instead of their restaurants dictating those things for them. Success is a restaurant owner who has the freedom from their restaurant and the financial freedom they never thought possible. How you define success is up to you, but I do know the way to achieving it is using the restaurant prosperity formula. In this episode, number 154, we’re talking about the financial discipline that separates survivors from closures. And we’re doing it a little differently. Instead of me walking you through it solo, my AI assistant, Claude, is going to interview me, asking powerful questions to help you avoid economic failure. Let’s get started. But first, a word from our sponsor. Boost your restaurant’s performance with the Service with Styles secret shopping program. Get comprehensive reports with photos, customized visit templates, a vast network of experienced shoppers, and a fantastic scoring system so you know exactly what your guests are experiencing. You control the frequency and rotation. No minimums, no contracts, no cancellation charges, and no hidden fees. Enjoy industry-leading reporting and scoring software, plus a 10% discount off the price, and your first shop is free. Set up a quick call today at www..servicewithstyle.com forward slash DSP. I’m excited about today’s interview because this is the second time that I’m using AI to interview me. Questions that every independent operator needs to know. With that said, last time it was Alex, this time it’s Claude. Claude, let’s get started.

Brilliant, lovely to have you. So David, what would you say is the single biggest financial pressure squeezing independent restaurant margins right now in 2026?

I think the biggest pressure that’s squeezing margins in 2026 is the economy itself. We now have operators. restaurants across the board that are well back to 5, 10% down, and that’s the new up in sales. It’s been confirmed because chain restaurants are seeing a 5 to 10% drop in sales. Now I have many restaurant owners who buck that trend, whose sales are up and dramatically up. They are, well, the exception, not the norm. But the reality is it’s It’s the combination of sales being down, added to it, inflation. Inflation just keeps going up, up, up, whether it be the tariffs, whether it now be fuel surcharges, whether it be all the other expenses that are going up because every business expense has gone up. And those two pressures are the perfect storm to make it very difficult for an operator to make money.

That’s A sobering picture. Sales down across the board while costs keep climbing. So when you’re working with operators who are bucking that trend and seeing sales actually go up, what’s the common thread you’re seeing in how they’re different from the ones struggling?

The biggest thing is they’ve become the leader their restaurant needs. A part of the restaurant prosperity formula that I teach starts with leadership. You’ve got to become the leader your restaurant needs. And what that means is you are setting the standard. You are setting the direction for your business. You can work strategically on your business. And the way to do that actually starts with two very important steps. Number one is operate on a budget. Become A proactive management team versus a reactive management team. Set your plan for success. The second is as a leader, make sure you have a growth mindset, not a fixed mindset. The fixed mindset owner says, oh, the government’s done this. The costs are out of control. We’ve got all these different challenges, customers and employees and rent and you name it. It’s so difficult. It’s all out of my control. Well, yeah, you have these challenges that are very, very difficult. But an operator that has the same challenges but sees them as an opportunity to outwork it, to outlearn it, to find a solution has what we call a growth mindset. They have the same challenges another operator has, but they see the positive in that they can fix what they can fix. They know they cannot fix what taxes are. They cannot fix what their power bill is. They cannot fix what’s happening in inflation. But they can control their menu. They can control their labor. They can control what they can control through their business. And by doing so, they lead their business to success. That’s probably the biggest thing.

So it really comes down to mindset and taking control of what’s actually in your hands rather than getting paralyzed by what isn’t. Given that most operators aren’t making that shift, what’s the financial discipline or specific practice that separates the ones who survive from the ones who close?
The biggest is understanding. See, a lot of people think that when I implement systems, when I start knowing my food cost, I start knowing my poor cost, I start knowing my labor cost, that the number that’s produced is the problem. No, that’s not the problem. The problem are your habits. It’s like death by 1000 paper cuts. When you see your food costs out of control, it wasn’t one major event. It was 100 little tiny mistakes, 1000 little tiny mistakes, one after another, repeated over and over again that have compounded to, oh my gosh, my food cost is out of control. So to truly take control, you have got to operate on a budget. Your budget is the critical piece to show you where your numbers are to clarify add clarity to what you need to do in your business for you to make money. And that’s where we can start to see the changes we need to make.

Right, so the budget is your diagnostic tool that actually shows you where those small leaks are compounding over time. How does an operator realistically start implementing that budget discipline when they’re already drowning in day-to-day operations?

Therein lies the rub, is how do we put ourselves in a position that we can take control of our business when the business has already taken control of us? And I think the biggest thing is this. Before we get into the numbers and what you can do, Claude, I would tell you that every operator needs to sit back and find the one thing that is chewing up their time and creating the most stress. The one thing that if they could fix it, would have the biggest impact on their life and possibly their bank account in the restaurant. That’s the place we would start. Before we get into the numbers, before we get into, oh my gosh, a budget and feel like an elephant is sitting on your chest because the stress of putting that together and actually seeing what the numbers are, let’s start small and start with something that can have a great impact. So we’re going to start, find that one thing. What is it? Whether it’s food cost, whether it’s labor costs, whether it’s a manager making sure checklists are done. Does not matter what it is. What’s that one thing? Not 10, not 75, just one thing. Then we’ve got to make it clear. What do we want to accomplish when we train or create this system, this tool, What does success look like? When I train somebody on it, what will they be able to do? How well will they be able to do it? By when? We’re going to then make sure we train someone, whether that’s a manager, a lead, someone that is going to help me. And we’re going to train them. And I want to make sure everybody understands that. by training someone. I’m not talking about announcing a system and saying we’re putting in an inventory control and this is how you do it. This is how we’re going to control labor and this is the tool you’re going to use. We often confuse tools for systems. The tool is what we’re going to teach. The system is when we actually get people to do it successfully and we change their behavior. Now, we’ve got to go one step further. We’ve got to make sure that wherever that system is, it is present, it’s visible, I can use it. So if I’m using a waste tracker, it’s got to be on a clipboard where waste happens, not in chef’s office. I’ve got to make sure somebody is accountable, meaning somebody owns that task. It can’t be owned by everybody on the team. It has to be owned by one person on duty. Is that the supervisor on duty? Is it the manager on duty? Is it a very specific lead? Don’t care. One person. It can’t be everyone. And that person needs to have, well, a cadence that they inspect. That whether by shift by shift, daily, weekly, monthly, that there’s this cadence that people understand that it’s going to be checked. That way we ensure people use it because they know it’s being checked. Then if people falter, we don’t want to rush to, you’ve done a bad job. Why didn’t you do that? We’ve got to be in a position where we go, hey, because we have a system. We go, I noticed that you got the first four steps correct, but step 5, we faltered. Tell me what happened here, what I can do to help you to make sure you understand what needs to be done, and that we successfully get that done. Now, whether there’s a write-up in there, that’s a whole nother story, but the reality is I’m going to coach you and I’m going to do it immediately. I’m not going to wait. I’m going to do it right away now. When I get to a point where I know that I made it clear, I’ve made it visible, I’ve made sure somebody was responsible and owns it, I’ve made sure that I’ve coached you over and over and over again, we now reach something called don’t know versus don’t care. Don’t know is my fault, but I made sure that you did understand and you could demonstrate you knew it. Now you’re choosing not to follow through. Now it’s my job as an owner to protect the standard. Now it’s the time to move you off my team. Now I have coached you all the way through. I did not yell at you. I did not make you feel small. And I did not come down on you until I ensured, I trained you, and I saw the behavior changed. Again, remember, the tool could be a waste tracker. The change in behavior is the system. And when I have to, I protect the system. And that’s going to have the biggest impact because when I have the system in place, I can focus on the financial. And oh, by the way, many of these tools that we put in place or systems are going to protect that standard, which is food cost, labor cost. Does that make sense?

Absolutely. You’re saying start with one high impact problem, define success clearly, train the behavior, not just the tool, make it visible where it’s used, assign one owner and protect it ruthlessly. When you work with restaurant owners who finally implement this discipline, how quickly do they typically see the financial turnaround?

It’s amazing. I can tell you that without a budget, because I would want to get you into a budget as soon as possible. That’s in fact what we do with our members. It’s probably the most critical piece that we do because we get to take you from proactive, or sorry, reactive to a proactive management team. Again, to be clear, from a reactive management team to proactive. We get to see where your problems are and what’s screaming the loudest, whether it’s food costs, poor costs, labor costs. We can see where the problem is. But the reality is, it doesn’t matter if you don’t have people who will execute your standards. If you don’t have, whether it’s managers, key employees, does not matter, somebody who will actually do the work, we’re not in a position to make the change. So the successful people that we work with have figured out that, hey, If we can identify that problem and we can get some success, it builds. success into the next system, into the next system, into the next system. And what happens is we may do things as simple as implement a key item tracker, clipboard system, a waste tracker, clipboard system, the restaurant checkbook guardian, which is a spreadsheet, takes 5 minutes of work on a daily basis. And by implementing those three systems within two to three months, I have operators who see a two to three-point drop in their food cost, almost guaranteed because all of a sudden we’re paying attention. And oh, by the way, Claude, that is not some, we’re adding recipe costing cards and we’re adding inventory systems and we’ve got a HACCP checklist in and we’ve now got a new prep system in place and da, da, da. No, it’s three quick systems. But because we’ve trained them, we’ve made them visible, we’ve changed the behavior and we followed all the way through to protecting the standard, we’re changing our company culture. And the financial benefit in two to three months is often Two to three points.

That’s remarkable. Two to three points on food cost in just two or three months with three simple systems and actual behavior change. So with that kind of quick win under their belt, what do you see operators tackle next to keep that momentum going?

Well, I would say obviously it’d be the, I shouldn’t say obviously. To me, it’s obviously the other half of prime cost. Prime cost is total cost of goods sold plus total labor cost. So now we go into our controllable expenses and we look now, we said, hey, we took care of cost of goods sold. Now let’s go look at labor. Now we go line by line by line, position by position by position, and we start to notice where our challenges are. Now I could implement the restaurant payroll guardian and give my managers the tools because I have a budget. I can not only give them how many dollars they have to spend next week to schedule, but how many hours. And then with a simple schedule variance report, I can make sure that they’re scheduling on budget. That change alone can have a one to three-point impact. And for some operators, I’ve seen it as high as seven plus points. Because what we’re doing is we’re just wasting money. What do I mean by that? In the restaurant business, it is easy to fall victim to fixing a problem with your checkbook. Food cost is high. Nobody looks and finds that there’s a problem. Instead, we write a check and buy more food. Labor cost is high. Oh, and our ticket times are slow. And we feel like we can’t keep up with our prep. And your kitchen professional says to you, hey, we need to add another cook. We need to add another prep cook. We need to add another dishwasher. And we do. Instead of finding the efficiency problem, instead of training the new system, instead of doing what’s necessary to become profitable, all we do is write another check. And so by opening our checkbook, we fix the problem. Often with labor, what we’ve done is we’ve lowered the bar, made it so easy, that labor looks difficult, but the reality is we’ve just lowered the standard. And by paying attention to your labor, by training people properly, by implementing the right systems, all of a sudden you find the efficiencies. And in many cases, we can take that labor money that we’re saving on the line employees and add another manager to actually save even more money and run a better operation because we have leadership on every shift.

So you’re saying operators often throw money at problems instead of fixing the root cause and labor is where that’s most visible. They add staff instead of fixing process. What does a realistic timeline look like for an operator to move from crisis mode through food cost through labor and actually reach financial stability.

I will tell you it’s going to be a different path for every operator because some people owe their broadline distributor 50,000, 75, $100,000 and they’re feeling a lot of pressure. Some people owe their landlord 3 months rent that they’ve fallen behind because the economy has really kicked them in the gut. Everybody’s got a different situation. Some people just need to find a couple point change and it’s going to change their world. So It’s going to be different for everyone, but I can tell you to change a culture takes time. Let me chase a squirrel real quickly. At one point in time early on in my career as a restaurant coach, I have tried to get a TV show, one of those change your life restaurant TV shows. I actually made it to the final interview. And the only reason why I’m not on a show today is the Food Network decided not to go with the new show. I was brought in after two people were already picked and they lost one of the talent and I interviewed to be the second piece of that talent. And I was excited. But I can tell you that while I was excited, I know that it was kind of a BS kind of thing. Why? All the restaurant turnaround shows say they change a restaurant in three days. And that’s . It takes six months to a year to change your company culture. So I would tell you at bare minimum, to truly see the change in not only your financial situation, but more importantly your culture, is going to be at minimum a six month commitment. I’d love to tell you there’s a magic pill. And I’m not telling you that you’re not going to see savings in two, three months. But to truly bake in the systems, to truly change your restaurant’s behavior, to change your company culture, that takes time. That is going to be a six month to a year process. And oh, by the way, it’s never finished. There’s no finish line where we go, we’re done. It’s been a year. You’re going to be two, three, 4, five years, always working on improving your business and becoming better.

Right. So those quick wins in two or three months keep people motivated. But the real cultural shift that sticks is 6 months to a year minimum and honestly, never truly finished. Given that timeline and the pressure operators are under right now, what’s the biggest mistake you see people make when they actually do try to implement this discipline?

The biggest mistake they make is they want to fix it all overnight. You can’t. You cannot. We started this conversation talking about finding the one thing you need to change, the one thing you get off your plate. That’s kind of the process. We find the one thing, and when that’s in place, we find the next thing. And when that’s in place, we find the next thing. And when that’s in place, now, some of us can speed that up to two or three projects or systems at a time because we’ve got enough help. I may have a really strong kitchen manager or chef. I’ve got a strong general manager. I’ve got a strong front of house assistant manager. And everybody’s kind of taking on their own lane and we’re getting more done. But if you take on more than two or three major changes in your business, it’s very difficult for it to stick because it’s too overwhelming. You have so much change going on that nobody can solidify it and make sure it’s being done on a routine basis. It doesn’t become a part of culture, more importantly, how you operate your business. And I will tell you the major way you know that it’s working versus not. When it’s not working, you’ve got employees, managers, line employees, who are lowing the standard all the time. Because through managers not protecting the standard, they’ve taught people they can get away with things. Show up late, we don’t care about timekeeping. That’s an option. Oh, don’t use the key item tracker. You know, food cost protection, that’s not important. We don’t have to worry about the financials. It’s a suggestion. we start to teach people by what we don’t do, or more importantly, what we allow. And so all of a sudden, my good employees have to decide to lower the standard or quit or leave. So when we start protecting the standard and we start showing people that this is what we’re going to do, understand that it’s difficult. You’re going to lose some who you thought were good people, and you’re going to bring in new people who don’t tell you that’s not how we used to do things. And it’s this slow, arduous process of doing one thing at a time, changing the company culture, making sure people do it. And the key to doing that is not overwhelming your team. One, two, maybe three things at a time, 3 initiatives. Any more than that, it’s not going to stick.

So the trap is trying to boil the ocean and the antidote is ruthless focus. One to three things, Max. Protect the standard relentlessly and accept that some people will leave because the bar just got higher. This is our last one, David. For an operator listening to this who’s genuinely at the edge right now, sales down, costs up, staff turnover through the roof, what’s the one thing you tell them to do first thing Monday morning?

The first thing you do Monday morning is put yourself in a place that you can be alone and focused. Don’t look at your phone, put it down. Don’t look at your e-mail, shut it down. Grab an old school yellow pad of paper and a pen. and start writing down those things that are challenges you today. What are those challenges? Nan, I want you to look at them and I want you to mark them down that are they important or are they urgent? Everything’s important. Like that’s the hard part. As a restaurant owner, if you need it done, you want to get it done. It’s obviously important. But there’s important and there’s urgent. And those things that are urgent are going to have the biggest impact on your business over the next three to six months. So when you look at it, you go, if I don’t do this one thing on the list, what fundamentally will happen to my business if I don’t do it? Will I lose thousands upon thousands of dollars? Will I turn over guests? Will I turn over employees? Will it be just a huge negative effect on my business? Well, then that becomes urgent. But if I look at it and go, if I don’t do this in the next six months, I’m kind of be where I am right today, but it’s not going to have a major impact, then I can put that aside. Because again, as an operator, as a restaurant owner, everything’s important. What we want to do is get that list of what’s urgent, then look at those things and pick the one thing over the next 30 days you are going to make sure it gets done. If you can do that and then train it, make it visible, right, make sure that the behavior changes, hold people accountable by coaching and then ultimately protecting the standard, my goodness, I cannot tell you how good you’re going to feel and how much easier it is to do the next thing, the next thing and the next thing. It starts with you having clarity on where you need to start in your business.
That’s a powerful closing clarity first, then ruthless prioritization. then execution with protection. David, thanks for doing this. is brilliant stuff for any operator who’s ready to actually do the work.
Thank you, Claude. It’s been a pleasure.

Cheers, David. Really enjoyed it. You’ve given them a proper roadmap here.

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. For more restaurant resources or to get in contact with me, connect with me at davidscottpeters.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 ***.