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10 Ways to Build Check Averages and Profitability


There are a number of financial metrics restaurateurs need to track to maintain profitability; however, many seem to be obsessed with "check average": the average amount of money spent by each guest in one visit. Your check average certainly tells part of the story, but it might not give you a clear indicator of your profitability.

"You can have the biggest check averages in town and still go bankrupt.

You want to present all of your offerings to all of your guests. You don't want to leave any money on the table. I am a believer in pushing restaurant profits and a believer in managing check average, but I think it's self-destructive for anyone to solely concentrate on increasing the average guest check."

Both are absolutely correct. You need to find ways to increase sales. Upselling and suggestive selling are crucial to maximizing total revenue per shift. You need to be strategic in your sales, promoting the items that make the greatest contribution to your income. Above all, you need to price and promote your on- and off-menu offerings to leave the customer with the sense that he received value. Successful operators have to plan ways to increase check averages while increasing sales of the most profitable items. It's a juggling act, to be sure, but one that you'll have to master to win in this business.

Tell us you have an $80 check average, and we might be impressed. Tell us you have a 35 percent gross margin on sales and we're smiling. In addition, tell us that 60 percent of your customers dine with you at least once per month, and you get a gold star.

A Useful Metric -- Up to a Point

Every operation should have a target check average, and work at building it incrementally. If the average guest spends $26, and you serve 83 guests on an average night, you see the effect of boosting the average even by a few dollars.

Once you know your check average, it only makes sense to want to increase it. Bigger checks mean more success, right? Not necessarily. By way of example, he relates the real-life experience of a friend who owns a convenience store. Milk is one of the most common items bought at a convenience store, so his friend had to stock it and yet the legally set price for milk made it a barely profitable item for the store. So his friend buried the milk at the bottom of a cooler in the back of the store so that en route to the milk the customers had to see everything else the store had to offer. "My friend could have sold a thousand dollars of milk a week and still gone out of business.

Careful price point selection is a fundamental issue for every business, and yours is no exception. A customer may buy a $7 appetizer, but balk at the same offering at $9. "So, back to the average check question; does a restaurateur lower the price, sell more product and keep people happy or, alternatively, keep the margin up, sell less, keep costs in line? Each and every day, every operator is faced head on with this question, and it's how one responds to this that makes the difference between a full and empty restaurant,

No doubt, average guest check is important; it's a number every operator should know. I prefer looking at its cousin. I urge restaurants to have guests spend as much money as possible, but, Instead of the dollar amount, make the checks be as profitable as possible. What we concentrate on is the average gross profit dollar per person and making sure that's as high as possible,.

 
 

So when it comes to increasing check averages, proceed with caution. The same technique that adds a few dollars to each check may have repercussions. For example, if you are a special-occasion restaurant, is it worth your image to charge 50 cents more for crumpled blue cheese on a salad? If all your competition offers free iced tea refills, is it smart for you to charge for them? Bill Marvin, aka The Restaurant Doctor, says, "If the guests aren't happy, you are in big trouble. If the people leaving your restaurant are not thrilled, who cares what your check average is?"

Increase check averages while gaining profitability while creating happy customers. That's quite a challenge, but here are 10 ways for you to try. All may not work in every establishment, but these will get you started on the balancing act of more revenue with more profit.

1 - Offer house cocktails. Blushing Geisha, Leapin' Lizzard Margarita, Oscar's Wild Martini. These are all fun signature drinks. Crabby Bill's in Florida offers four signature cocktails: The Crab Trap, The Crabby Rita, Blue Lattitudes and Day at the Beach. From a marketing perspective, a signature cocktail makes your place unique and fun. From a business perspective, the nature of a signature cocktail justifies a higher price. Drinks, both alcoholic and soft drinks, are highly profitable. You do not want to lose a $5- to $8-per-person sale to a club soda or water if you can avoid it.

2 - Take a hard look at your children's menu. Kids' meals can be profit centers because they can incorporate premade items with low food and labor costs. That said, you can lose kid menu sales very easily, since children can share off their parent's meals. The objections you have to overcome are twofold: "same-old, same-old," and nutrition. There are only so many times that little Billy is going to want the same-old chicken fingers or hot dog. Also, parents don't want their kids to fill up on fatty, low-nutrition fare. If you are committed to being family-friendly, your children's menu cannot be an afterthought. Is it possible to jazz up the menu with more appealing offerings? Cost-out your proteins. A child-sized steak or shrimp platter might be more cost-effective than you realized. You might also be able to charge more for the same offerings with more tempting menu descriptions. Make it easy for healthy substitutions (e.g., milk for soda, veggies for fries). This is a good opportunity to re-evaluate your children's menu to make sure it's a healthy profit center for you.

3 - Move the cappuccino away from the bar. Consider the labor and opportunity cost of everything you serve. For example, you never provide table soft drink service from the bar guns. It can create a wait at the bar that can lose more profitable alcoholic beverage sales. By the same token, you should take the espresso/cappuccino machine away from the bartender and move it to a location accessible to the servers. Many servers believe it is too time-consuming to go to a busy bartender and wait for a cup of cappuccino. If a server knows he or she can make their own cappuccinos with far less time and effort, that server will be more likely to recommend a special coffee instead of just the regular brew. Newer cappuccino machines make servers' getting their own coffee quick and easy. That's a $4 coffee versus a $2 coffee for very little effort.

4 - Have a separate dessert menu. It's always a good idea to plant the dessert seed in your guests' minds early. That can be accomplished when the guest is being seated. A server can add something such as, "Make sure you save room for one of our fabulous desserts. I love our Brownie Sundae." Then when it's time to order desserts, a separate menu will spotlight the desserts (and special coffees and after-dinner drinks) while making it simpler on your servers. It's easy for a guest to say "no" to a rattled-off list, "We have cheesecake, ice cream and I think I saw some pie back there, too," but harder to resist detailed descriptions of delicious dessert offerings.

5 - Make sure everything is rung up. Profitability goes down the drain if your server makes the sale, but then doesn't charge for it. The most common item that doesn't get rung up is drinks. "It's very common for a server to overlook ringing up an iced tea or soda,. Make sure your servers know your refill policy and adhere to it. Some places give free refills while others charge for a separate beverage. And like many other decisions, there's no right one when it comes to refills. That's a call you make based on your operation.

6 - Check the prices of your soft drinks. It's always a good idea to know what your local area restaurants charge for all kinds of offerings. "It seems as if many independents may be underpricing their soft drinks relative to the average price in their local market." He suggests operators check what their competition charges. One study shows that the average refill rate is 1.8 times when using a 16-ounce glass, so adding a free refill adds about a dime to the cost of each sale. "Compare your soft drink prices to other restaurants in your area. Getting your price points more in line with what your market will bear may be the easiest new money you've ever made.

7 - Maximize food sales in your bar/lounge area. For many, it is more enjoyable to eat in a bar than drink in a restaurant. Some solo diners prefer to eat at the bar rather than to sit in a dining room at a table by themselves. That's why it makes sense to have menus, silverware, condiments and promoted specials available for your drinking guests. Guests eating at your bar should have the same menu choices as those in the dining room. Why limit bar guests to free peanuts when you could sell them an entire meal? Or even some appetizers? And if they don't eat on the first visit, you will have planted the seed for them to consider eating in your place on their next visit. I worked with an operator who had terrific monthly sales, but it was mostly liquor. He asked this operator whether he wanted to be a restaurant that serves liquor or a bar that serves food. "A bar that serves food is always more fun so we totally gutted his food concept to put in more bar-appropriate food,.

8 - Bundle meal parts together. Bundling is a win-win for the restaurant and for your guest. Bundling may consist of an appetizer/salad/entrée combo or salad/entrée/dessert combo. You add to the dollar amount of each check while your guests maximize their dollars spent. "Diners will not be surprised by the dollar value, and they can knowingly order within their budget,.

9 - Sell more through education. As an alternative to increasing check averages with suggestive selling, is having servers informally educate the table on the different offerings. Instead of the sing-songy, do-you-want-fries-with-that approach, I suggest the server sell through education. The server could ask, "Have you ever tried an Australian wine?" or say, "If you're thinking of ordering steaks let me tell you about ours…" or "The chef recommends the lobster tortellini because….". In explaining your specialties, you will sell the more expensive item."

For your servers to educate your guests, you have to educate them. Profitable operators are constantly teaching and educating their servers since the more comfortable they feel in their knowledge, the more enthusiastic they are with the guests.

10 - Do the most with your menu. "The importance of a correctly engineered menu can't be overemphasized, and it takes time and money to do that. A menu is the No. 1 piece of selling material that every guest will see." Entire books have been written about menu construction, but here's one tip: A University of Illinois study showed that descriptive menu wording increases sales 27 percent over plain-Jane wording. For example "Succulent Italian seafood fillet" sells more than "Seafood fillet.

The researchers found three kinds of descriptive menu labels most effective in increasing sales: geographic, nostalgic and sensory. Labels that evoked the foods and flavors of specific regions, such as "Iowa pork chops" or "Southwestern Tex-Mex salad," created positive responses. So did labels that triggered happy memories of bygone days and family traditions. Examples included "Nana's favorite chicken soup" and "ye old potato bread." Finally, descriptions such as "snappy" carrots and "buttery" pasta that referred to the texture, taste or smell of a menu item were found to be successful sellers.

In this study, not only did customers purchase the descriptive items more frequently, they also rated them as being of higher quality and better value than did customers who ate items with unvarnished labels. That's how powerful a menu can be.

Repeat Business is Crucial

Operators have to understand that guests dine on a budget, and servers who sell products that exceed the dining budget may experience reduced income in the form of tips, and the restaurant will experience reduced visitations from the guest. "Ensuring that your guests come back repeatedly is much more important than increasing their check average for just one visit,.

However, "It is about time we started putting our energies toward building guest loyalty, not the check average


 

Calculating Your Check Average

Calculating your check average is simple. Take your total amount of sales and divide it by the number of diners. Count everything sold in your restaurant, including T-shirts, if applicable. "Your check average includes liquor, beer, wine, even cigars; everything that involves revenue, and not just food." (Of course, you do not calculate taxes into your check average.)

 

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