Harvest America CUES BLOG

My town leaders, bless their hearts, try to figure out ways to strum up cash flow for small businesses. A tip of the chef’s toque for the good old college try. It’s early spring, mud season as it is commonly called, and they are putting in a Yeoman’s effort at organizing another restaurant week. All good intentions – they want to create full or partially full dining rooms for restaurants in need. Here’s the kicker: It cost each restaurant $900 to participate in the week (I guess to cover town wide promotion expenses) and every restaurant must agree to deep discount pricing for guests. If you are not in the restaurant business, then maybe this sounds reasonable. Cafés and Bistros should be able to dip into a cache of “extra” money to pay for the entrance fee and since it is thought that restaurants make significant profits from the food they sell, then those deep discounts will be easy to swallow. Right?

So, here’s point number one: there is no cache of extra money, and the average restaurant makes just a few pennies profit on the dollar if they do everything right – so those discounts will likely mean that menu items will be sold at a loss just to play along with the promotion and support town efforts. 

This misconception about restaurants and profit reaches beyond the guest, the media, and town or city leadership. Even employees who work in restaurants are generally unaware how slim the margins are. In small private entrepreneurships it is common for owner/operators to not take a steady salary so they might meet payroll or pay a vendor for recent deliveries.  Sure, if all goes well, they might be able to squirrel away some extra profit from a very busy summer and fall season, but that is there to help keep the doors open through the shoulder seasons.  Hell, if it wasn’t for government assistance, many, if not most of those single proprietorship restaurants would have closed for good. They hang on by the skin of their teeth and do so, oftentimes, because they love what they do, and don’t want to let their employees down.

Add to that the supply chain issues now, minimum order requirements from vendors, pressure to significantly raise wages just to attract a core crew, landlord lease increases, and the investments made to improve the safety of operations during Covid, and it’s hard to understand how anyone is able to find a way to open their doors and welcome guests.

Restaurant week is just one example. Restaurants will continue to support your little league teams, offer donated meals for your fundraisers, sell lunches to your local Rotary at a loss, volunteer to help when community members are in need, and take it on the chin when some point out their mistakes to thousands of readers on Yelp and Trip Advisor.  This is who we are, we are in the service business. Restaurants will be there when you need to celebrate and when you need to gather to mourn a loss – this is what we are there for and we relish the opportunity. But the restaurant business is far from the most profitable option for entrepreneurs, and we could use a little understanding and support as well. The average restaurant can expect to make 5-7% profit, again, if everything goes well and we minimize the mistakes that are inevitable. There is no cache of money to turn to, and the prices we charge are not based on greed, but necessity. Please don’t ask us to take it on the chin. If we have any extra it would be our preference to give it to our employees, offer a steady paycheck to the owner/operator, and maybe fix or replace equipment that is beyond its useful life.

We play an important role in the communities where we reside. We are, in many cases, the heart of a village, town, or neighborhood.  This is the position we like, the place where we want to conduct business and break bread with our friends and visitors. We want to make a respectable living, but there are few aspirations of wealth – our reward is feeling good about the product we produce, the service we offer, and the joy that can be passed on to those who chose to dine with us.

There is no utilities week where fuel oil, electric, and gas companies are asked to discount their rates. Cities and towns do not offer to discount taxes for a week to create a great vibe in a community or attract new residents, and your local hospital is not inclined to run a sale on operations, physicals, and bloodwork. Thanks for the thought, but restaurants just don’t have the flexibility either. If you want to help, then become a regular customer yourself. Visit your neighborhood restaurants often, pay full price, bring a friend or two, and when we do things right – say thanks, tip well, and please post a nice comment on social media. We would love that.

PLAN BETTER – TRAIN HARDER

Harvest America Ventures, LLC

Restaurant Consulting

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