Skip to main content

Secure Future Growth with Top 3 Financial Imperatives

Periods of economic instability can have a strong chilling effect on the restaurant industry. As operators are faced with more than one hurdle to overcome, from rising food costs to reduced guest visits, vital decisions must be made to determine how and where operators should spend their valuable resources for future growth.

When it comes to making these decisions, operators should be guided by three underlying rules: make the balance sheet your friend, deliver superior ROI and leverage technology. These three key cornerstones alone make up McCormick & Schmick's foundation for financial growth and are helping the national seafood operator lay the track to reach its goal of opening 100 locations.

Make the balance sheet your friend
Capital preservation is key. One of the biggest mistakes that operators make during a downturned economy is to spend money that they do not have. Instead, restaurants should focus on maximizing every dollar that comes through the door by emphasizing brand fundamentals and encouraging managers to focus first on easy productivity.

Look at things internally like quality, value, and broadband appeal, and pass on anything that doesn't meet those screens; this is not necessarily the right time to experiment with new procedures or ideas. The idea here is to avoid distractions and to focus on the execution of fundamentals by listening to what guests want, and then properly following through with it. For example, restaurants that sell more to existing guests tend to attract more loyal guests during periods of spending contraction.

Additionally, it is in an operator's best interest to look at different options and opportunities to save money and avoid unnecessary spending. Look under the rocks, there are a lot of costs that restaurants do not measure or manage as well they ought to. One option that operators can explore is to renegotiate contracts whenever possible. This is especially relevant now when it comes to negotiating leases to open new locations because there are a lot of great opportunities out there. Another option is to eliminate low-hanging fruit dollars, such as the cost of weekly mailings or anything else that is not necessary.

Superior ROI generators
Future growth cannot be secured through balance sheets alone. There are a lot of great ideas out there about how restaurants should be run but it is impossible to dedicate resources to all of them. A good way to narrow down the field is to look at all of these ideas and identify which ones have superior ROI or superior ROI potential. The key here is to focus on low risk, high return revenue generating opportunities that also offer flexibility. This may mean adding more capacity to existing locations or updating tired locations. Or it can mean the negotiation of additional concessions from landlords on maintenance changes, better signage or more favorable lease terms. The possibilities are endless and what is beneficial for one restaurant may not be for another, so be strategic in your planning. Only the superior ROI generators will pay off in the end.

Leverage technology
Last, but not least, it is essential that restaurants leverage technology because it will serve as the backbone to any operation. Operators do not need to be on the leading edge of technology, but should instead focus on solutions that provide a real-time view of profits and the cash position.

Financial metrics for example, are an extremely effective method for tracking sales, traffic, labor and more. This allows operators to measure the planned budget against actual sales and costs, and can also include the ability to do real-time A/P, weekly P&Ls and forecasting. Operators can even develop red flag reports that will outline the worst restaurants in the company to determine who is turning in a strong performance and who needs additional help to get back on track.

The ability to track marketing campaigns is another benefit that technology brings to the restaurant segment. At McCormick & Schmick's, management can track its marketing campaigns through an online reservation system. When management sees reservation spikes online, it can be measured against when certain ads come out. It is crucial to get rid of spending that does not yield results and then reallocate those marketing dollars somewhere else.

The key here is to challenge department heads to go out there and make sure that they are measuring every decision they make. Data changes quickly today, so operators have to be able to deal with a very fast changing environment and that is what technology allows restaurants to do.

Emanuel N. Hilario joined McCormick & Schmick's as the chief financial officer in April, 2004. Prior to joining McCormick & Schmick's, Mr. Hilario was the vice president of finance and CFO of Angelo and Maxie's, Inc. (F/K/A Chart House Enterprises, Inc.), a publicly traded full-service restaurant operator based in Chicago, Illinois, where he was employed since 2000.
This ad will auto-close in 10 seconds