Cafe’s have been operating on extremely tight profit margins for a long time, and the current state of the industry hasn’t made that situation any easier. One of the things you can do to maximise the profitability of your business is to carry out a regular Sales and Savings audit to find ways you can make more and spend less.
Start by setting goals and targets and sharing them with your team. They might be daily, weekly or average transaction value (ATV) sales targets, upsell goals or targets for the reduction of wastage or wages.
There are only 4 ways to increase revenue…
- Sell more to the customers you already have
- Get more new customers through the door
- Increase frequency of customer visits
- Raise your prices.
Start with the customers you already have and work on getting them to spend more, come back more often and tell their friends about you.
Train your team to be a sales team. Make sure they know the menu well and which companion items to offer with each dish. Teach them how to upsell as both a tool for sales growth and customer engagement. Selling doesn’t have to be pushy – your team should be proud to offer more of your range to your customers. A strong ‘second coffee’ culture is the easiest one to start with. You can use this Companion Sales Guide Template to give your team the information it needs, and this Second Coffee Scoresheet to keep a tally and reward your best sellers.
Put some energy into retail sales. Retail beans are the easiest and most obvious. Put some display bags front and centre by your till. Add them to the menu and spread the word via your social media channels. Even better if you have your own branded beans!
Explore other new revenue streams. A lot of venues will have brought on delivery and ramped up takeaway. Can you add in some other retail items? Ready made meals? Think about what you’re already using or making e.g. dukkah, sourdough loaves, chutney, eggs etc. Cafes with a strong, loyal customer base and great branding should consider creating merchandise, like t-shirts of coffee mugs.
Some of these ideas that many venues introduced early on in the restricted trading phase you may not have introduced at the time, as you didn’t have time and were scrambling to stay on top of the rapidly changing circumstances, but now that the market is more used to these ideas and things have settled down a bit, you might want to consider adding them in now.
Find out more about what your customers want and how to serve them better by doing a survey. Implementing the ideas a survey reveals should increase ATV as well as customer retention and return frequency.
Improve in-store signage, promotion and merchandising. Clear simple signage and compelling, well positioned displays. Make sure everything has a clear price tag. Use table talkers to promote deals, specials and new revenue streams.
Create bundle deals that increase average spend, like a coffee and muffin deal or a meal with a drink, that adds value rather than simply discounting your products. Getting into a consistent rhythm with regular deals means that customers are more likely to get used to these offerings and remember them.
Make the most of what you’ve got, like doing a deal on end of day stocks left in the cabinet in the afternoons to minimise wastage and get something rather than the nothing you’d get if you threw it away. Create and cost these deals, inform staff, tell your customers and keep a tally and/or wastage record so that you find the ideal stock level to minimise stock on hand.
Start a loyalty program to encourage return customer visits. There are a bunch of apps that will make this easy for you, and some are built into or available as add-ons to POS systems or pre-ordering apps. Bear in mind that some of these apps don’t give you access to your data, which is not ideal so try and find one that does.
Raise your prices. Profit margins were already slim before this all started, and intense competition kept prices low. Now’s the time, if ever there was one, to increase prices to more realistically reflect what your products cost to produce, and the more in the industry that do it, the better. Try increasing overall menu prices by 5% in tandem with sales data, finalised costings and a menu refresh.
If you have been holding back on increasing your coffee price and are currently priced at less than market standard, then think about increasing your prices too.
Find compatible partner businesses in the local area that you can work with to co-promote and increase revenue for each other.
Revisit your marketing plan if you have one, or create one if you don’t. Start by focusing on the free channels available to you like social media, business listings and review sites, and create a strategy around it to make it more effective.
If you don’t have a mailing list, now is the time to start one. Ask people checking in to your venue if they would like to receive updates and special deals via your email newsletter.
Really the best marketing you can do right now is to provide a quality customer experience. Word of mouth is the most powerful advertising. Encourage customers to recommend you, check-in on social media, write a positive review or testimonial, or give you 5 stars.
There are lots of ways to save money if you look, and finding efficiencies in the way you do things can be one of the best ways to do that.
Recost your menu to ensure that your food costs percentages are in line with your profitability formula goals. There are lots of recipe costing apps and programs out there, such as CookKeepBook or MenuCoster and certain POS systems like Kounta have costing capability built in or plug-in modules available, but at the very least you can use a simple costing sheet to work what you should be charging for each dish, especially if you have a small menu. Don’t forget to add packaging, cutlery, condiments etc into your costings where relevant.
Ensure that your kitchen team is not over-portioning, as this could be costing you a lot of money. If you haven’t already, create portioning guides and recipe cards with presentation images, to keep costs in line and ensure consistency across service periods with different team members
Streamline your menu, using POS data and food costing info to create a more profitable menu overall. It’s said that the optimum number of items on a menu is 7, so try and keep in between 5-9 items in each menu area to maximise profitability.
Minimise wage costs by keeping it tight and having clear expectations of team members, rostering in 15 minute increments if you have to . Ensure you have systems such as open, close and cleaning checklists in place to make the staff’s jobs easier and to get the most out of their time.
Trim your opening hours. Many will have been operating on reduced opening hours during recent times, which may have revealed that you don’t necessarily have to go back to your old ways.
Carry out some barista training with a focus on maximising speed and efficiency while minimising waste. Efficiencies skim preparation time, give you room to grow and foster a more desirable way of getting the most out of your team.
Likewise, carry out some kitchen training around portion control and wastage minimisation and make sure the systems are in place to support that
In keeping with the old adage “What gets measured gets managed”, implement a wastage log for both kitchen and front of house. Start today!
Review workstation setup and workflows to ensure your team is operating as efficiently as possible in the space.
Reduce your selection of cabinet foods to minimise wastage and stock on hand, keeping in mind that you’ll need a plan for what you can use to make a less empty cabinet still look great, such as baskets of fruit or bottled items with a long shelf life.
Reduce stock levels of pantry items, and create specials to use up old stock.
Have you found there are some things you didn’t need during the lockdowns? Consider whether you even need to start them back up
Do you still need newspapers? Think about getting rid of them or minimise them and put in some books and magazines instead. We did this at one of our cafes and it was a great success. It may seem like a small thing, but even 4 newspapers a day at $2 = $2920 extra in your pocket in a year.
Invest in technologies that increase efficiencies (apps) and reduce time and wastage (Puqpress, Juggler systems).
Carry out a supplier review, something you should do every 6 months or so. Renegotiate with current suppliers, or change to a new supplier who will offer you a better deal.