Who Is Killing The Restaurant Industry – Part 2 (The Suspects)

300SquareIt is with great sadness and regret that we note the passing of ANOTHER of Johannesburg’s restaurants… This week the Firehouse Steakmaster in Illovo joined a growing list of casualties in the industry and although cause of death has not yet been established, you can be certain that at least one of our suspects , if not all, were to blame.

Surely there must be warning signals? Failing health and increased risk… there must be signs you can look out for in your own business that can act as a warning and spur you into putting a program in action to save the business? Here are a number of RED FLAGS to look out for in your own establishment and PLEASE, if you recognise a few of them, take action now. Remember you can always sell a restaurant a little too early, you can’t sell it ONE SECOND TOO LATE!

Here are a list of RED FLAGS to look out for in your own restaurant…

  • Absence of a well organized and implemented accounting system.
  • Key operating expenses too high, relative to gross sales.
  • Menu items not accurately documented, costed and updated.
  • Food & beverage inventory levels not counted and costed at the end of each chosen period or recorded in your accounting software.
  • Food and beverage inventory levels too high relative to corresponding sales.
  • Daily & weekly financial operating data not collected, reviewed or acted upon.
  • Inaccurate posting of financial information to your accounting system.
  • Current liabilities sufficiently greater than current assets as to impair future ability to pay accounts.
  • Owner relying on online bank balance to determine available cash to pay bills.
  • Overall lack of understanding as to how to read and interpret period ending Financial Statements.

You will see from the above that very few rely on turnover or foot-count monitoring but on your ability to control the financial side of your restaurant. If you found your mouth beginning to get a little dry or your pulse start racing as you read through the list… SEEK HELP NOW! Of course the best time to start putting these things in place was last year BUT the second best time is now.

“To want to own a restaurant can be a strange and terrible affliction. What causes such a destructive urge in so many otherwise sensible people? Why would anyone who has worked hard, saved money, often been successful in other fields, want to pump their hard earned cash down a hole that statistically at least, will almost surely prove dry? Why venture into an industry with enormous fixed expenses (rent, electricity, gas, water, linen, maintenance, insurance, license fees, trash removal etc) with a notoriously transient and unstable workforce, and highly perishable inventory of assets? The chances of ever seeing a return on your investment are about one in five. What insidious spongiform bacteria so riddles the brain of men and women that they stand there on the tracks, watching the lights of the oncoming locomotive, knowing full well it will eventually run them over? After all these years in the business I still don’t know!”

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So wrote Anthony Bourdain in the now legendary Kitchen Confidential and it certainly makes a fine introduction to Chapter 2 – The Suspects. There are more suspects in this case than food critics at a free lunch! I have tired to narrow it down to SIX and over the next few chapters I shall state the case against each one and allow you the jury to make up your minds. Who can forget the board-game CLUEDO with it’s rooms, weapons and suspects and the plain brown envelope that sat in the middle of the board waiting to reveal the mystery.

Our Suspect Six are, in no particular order, as follows…

Was it The Landlord with his Lease in the Shopping Center?

Was it The Customer with No Spending Power in South Africa?

Was it The Supplier with No Concept Of How The Industry Functions behind his Desk?

Was it The Staff with Total Indifference in The Restaurant?

Was it The Franchisor with His Eye On The Joining Fee at the First Meeting?

Was it The Owner with No Clue Or Conception in La La Land?

I am certain there are others that have contributed along the way, from The Banks, through The Legislators to Previous Owners who sold their restaurants under false pretexts… the list goes on and on. But in order for a story to be everlasting it need not be never ending, so I shall restrict my story to Six.

And what of our poor victim, how is he fairing at the moment? He is on life support, meagerly  trying to eke out an existence until the December season or until the election or until the next world cup or until the government changes or doesn’t, until interest rates come down, until sentiment goes up, until… until… until…

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