Ten data points that will tell you that it's time to close your full service restaurant.

Ten data points that will tell you that it's time to close your full service restaurant

Restaurant Article

By Clifford Bramble

Data is an excellent tool for business owners to review on a day to day and week to week basis.  While many business owners simply look at the sales, they may be missing key points to view the financial health of their company.  That's where we help our clients. 

We have received many calls from restaurant owners throughout the country that are looking for help and are also asking if they should close their restaurant.  Here are ten internal data signs that will tell you if you should close.

1. Sales:  Your sales drive everything and the numbers do not lie.  So, if your sales have not bounced back from the February highs, it is a telling sign that your sales may not come back.
2. Covers:  At Hungry Hospitality, we like to keep a running average of covers on a day to day basis.  This tells us a lot about a company’s performance.  If your covers have not returned from February, and if they are still too low to help increase your sales, this is an indication that your guests may not be coming back, regardless on the time of the year.
3. Weekend sales:  If your weekend sales are more than 60% of your weekly sales, that tells us that your weekday business is hurting.  If your weekday sales continue to suffer, this is another indication of your new less than optimal performance.
4. Sales per man hour:  Many people ignore this number.  Not us, we like to watch this number.  If your sales per man hour are lower than they were in February and the number has not bounced back, you are not making enough sales per man hour to offset your labor.
5. Labor:  This is an easy one.  If your labor percentage and or dollars are higher than they ever have been, this is an indication of either over scheduling, or not enough sales.
6. Prime Costs:  If your prime costs are over 70%, you are close to burning more cash than wanted. 
7. Man hour per cover.  If you are spending two or more man hours per cover, this is another indication that your restaurant may not make it.
   
8. Comparing Sales to LY:  While this is a hard number to review, especially with the pandemic in place, it is a number that you can look at and compare if your sales are down and to what percentage the sales are down.  If you think that you cannot attain the loss percentage of sales within the next three months, it may be time to throw in the towel.
9. Large party: If you had more than 25% of your business in large parties, and the sales have not returned by now, those sales may be lost for the foreseeable future.
10. Cash burn: If you are burning more cash (on a percentage basis) than you ever have before, and your bank account is melting away, you have to ask yourself, when or how long before the sales return to stop the burning.