5 Hidden Reasons Why Your Restaurant Is Losing Money

The restaurant business is one of the most competitive industries to survive in. According to recent statistics, one in three restaurants don’t survive their first year. And among those that manage to stay open, only a minority operate profitably.

Contrary to popular belief, restaurants are a fairly complex business with many different moving parts. Even restaurants that offer great food and 5-star customer service can find themselves losing money.

When it comes to running a profitable restaurant, delicious food is just one small part of the equation.

If you’re a restaurant owner failing to meet your bottom line despite having a great kitchen, there are likely holes in your operation that you’re overlooking.

Here are 5 hidden reasons why your restaurant is losing money:

Hidden Reason #1: Failure to Automate

In today’s tech-centric world, most manual restaurant tasks can be automated in order to cut down on time and avoid human error.

Oftentimes, your restaurant is losing money because you’re not taking full advantage of automation.

A prime example of this is monitoring and replenishing your food inventory. If you depend on a manager to manually take inventory and reorder missing ingredients, you’re prone to have days when you’re missing items and can’t fulfill certain customer orders.

Instead, automate your inventory and reorder process so your kitchen is always fully stocked, every order can be fulfilled, and you don’t lose money.

Hidden Reason #2: You Haven’t Integrated Your Tech

Without integrating your restaurant’s various tech platforms, your data is scattered around multiple systems.

For example, your restaurant has a separate system and tablet for every food delivery app; or you use software to calculate employee payroll, but plan employee shifts on paper (you can use one system for both).

When your restaurant’s data is scattered, there are more opportunities for revenue to be missed, lost, stolen, or unaccounted for.

Hidden Reason #3: Poor Food Management

Poor food management doesn’t mean your restaurant’s food isn’t good. It means you’re ordering too much food that eventually goes to waste.

You can improve your restaurant’s food management in two ways. One, you can automate your inventory and reordering process so you only order ingredients when you need them. Secondly, you can use a management system to get better data and predictive analytics on how much food you need to order week to week.  

Hidden Reason #4: Poorly Organized Staff and Processes

A well-oiled restaurant operation requires processes that enable clear and effective communication between your customers, your servers, and the kitchen.

Without well-structured processes in place, communication easily breaks down, mistakes are made, service is slowed, customers are unhappy, and your restaurant loses money.

If your restaurant is experiencing frequent service interruptions or mistakes, consider bringing in a restaurant consultant to help improve your processes and train your staff.

Hidden Reason #5: Outdated POS System or Inadequate Employee Training

But if you have an outdated system or fail to adequately train your employees to use your new system, revenue problems can snowball and wreak havoc on your restaurant.

Common issues of an outdated POS system include food item inconsistencies and frequent outages.

Food item inconsistencies make reporting and accounting harder for your restaurant. For example, an outdated POS system may count “chicken parmesan” and “chkn parm” as two different items even though they’re the same dish.

When used correctly, restaurant POS software systems greatly enhance kitchen operational efficiency, table management workflow, and the productivity of your staff.

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