Restaurant Reality Newsletter - Feb 2024

I believe that the last issue of my Restaurant Reality Newsletter left off with me gasping. A busy December provided relief but the demands for cash were merciless. I spent most of December worry about January, which drove my ultra-busy wife and staff crazy. Over the last three months I had taken some drastic measures to reorganize the staffing plan in the hope of bringing labor in line. This morning I woke up to an optimal labor report that fully reflected my efforts. No fat. Not an ounce. Yet yesterday’s labor amounted to 37% of sales, at least 5% higher than is sustainable. Labor for all of January is 10 points higher yet. This is a tough business. Let me break it down for you.

Labor

The kitchen (BOH) labor yesterday was a little over $1,000, just under 18% of almost $6,000 in sales. Our two salaried leaders, Head Chef Ethan and Chef de Cuisine Cassady got to work early and stayed late. Ryan came in and made bread, pasta and helped with prep. There was no dishwasher for lunch and Carlos worked the line. Both Ethan and Cassady were on the line with Kobe working pantry for dinner. The service staff (FOH) was similarly lean; one lunch server with a host during the day and a bartender, three servers, a host and a runner for dinner, where 73 guests were served. Our reputation for service does not stand if we scrimp on this labor. Wages for FOH added another $750, 13% of sales, with all but one of these at minimum wage of $15.45 per hour. Admin and management labor piled on another $350, adding 6% of revenue to the budget.

So, this morning I congratulated Janet on the report, acknowledging that she had tightened the screws on BOH labor to the snapping point. Add another $1,000 in sales to the day and we would be home free! Easier said than done.

Serving 73 guests on a Thursday night should be enough. There were seats available in the dining room and at the bar, but at a glance the restaurant was full and vibrant. I am baffled how the half-full or near-empty restaurants I visit keep their doors open. I figure they know something I don’t. Maybe they know how to keep it simple.

It Is Not Revenue… sort of

I wrote another newsletter that I never sent, telling the story of Hank. Hank was Executive Chef at a well-known local restaurant that did $8 million per year in sales… and lost money. For us, business in 2023 (March through December, we were remodeling the first two months) was up almost 30% over the same period in 2022. I thought all we had to do was increase revenue!

Bethany’s Table does not offer fine dining. I’m not sure there is a restaurant in Portland that does, though several of them dress up their tables prettier than ours. We offer fine dining service, though servers do not follow scripts and emphasize genuine hospitality. The scratch kitchen consistently serves beautifully plated and tasty meals that compare favorably with the best of the Northwest, though the plates might be too bountiful for the “specialness” of fine dining, the cuisine is certainly fine. Stacking the facts, we learn that we are doing the work of fine dining, just not getting paid for it; nor do we want to be. Janet wants to feed her neighbors and strives for pricing that makes that possible. Something needs to give.

Next Steps

Merchant Processing Fees: In the short term we have decided to have customers pay their own credit card fees. I have fought this for months. It stuck in my craw. But Janet and I got away for a week early in the month to ponder our goals and strategy for 2024. We had just reviewed the monthly debit for the December’s credit card usage totaling almost $7,500. The monthly cost is almost as much as our rent! Twelve months of that adds up to $90,000.

We decided that the experience we provide is worth asking people to pay their own transaction costs. Starting the first of February, the check receipts will list the cash price plus an amount with 3.5% added should you wish to use a credit card for payment. We believe our core customers inherently understand the challenges we face and are willing to help us make ends meet. Some folks will feel grumpy about it and they might make other choices in the future. That $90,000 figure sitting on the bottom line makes up for a lot of lost business (about $1 million worth) at current margins. Something has to give.

Pasta: As I mentioned earlier, Janet likes to feed the people. We did manage a couple of price increases last year as we struggled with inflating costs and we didn’t get any (vocal) pushback. We have spent over $20,000 on equipment for making and cooking pasta and the six or seven pasta menu items are less prep-intensive even considering the unique pan sauces. We are able to maintain those meals at an affordable price point. Pasta bowls to-go (and maybe artisan pizza) out of the Marketplace may be an answer. For now, we will provide more emphasis on our pasta offerings and grow that reputation. With the affordability box checked with pasta, we can unleash some kitchen creativity on a tightened-up list of special dinner entrees.

Folks like to follow our business and I hope that those of you that dream of owning a restaurant are paying attention. It’s a great life but a hard way to make a living, and seemingly getting harder. We feel so fortunate to have our location, reputation and customers. Stay with us as we wend our way into clear air. Your feedback and input is always welcome. Have a great 2024! And do make your Valentine’s Day special. Join us as Janet unleashes her next grand adventure. See the details here.