How to save a failing restaurant: what to fix first

If you searched for how to save a failing restaurant, you're probably not having a great month. Maybe a few. Sales are soft, the P&L keeps coming back thinner than it should, and you're doing more of the work yourself to keep the doors open.

First, the word "failing" is too strong for most of the restaurants I see. What's usually happening is that the numbers moved and the operation hasn't caught up yet. That's fixable more often than people think, and the fixes are less dramatic than you'd expect.

This piece covers what you can start on this week, on your own. If you want the full picture of how I run a turnaround with an owner, the week-by-week plan, where the money usually hides and what it costs, read my restaurant turnaround guide.

Start with the facts, not the feeling

When things are tight, every decision feels urgent, and it's tempting to cut whatever is easiest. Drop a server. Switch to a cheaper product. Run a discount to get people in the door. Some of those might be right. Most of the time they're guesses, and guesses cost money you don't have.

Before you change anything, get four numbers for the last four weeks:

• Net sales, after comps, discounts and voids
• Food and beverage cost of goods sold, which is beginning inventory plus purchases minus ending inventory, not just what you bought
• Total labor, including salaried managers, payroll taxes and benefits
• Cash on hand versus what's due in the next 30 days: rent, payroll, vendors, loans and taxes

Food, beverage and labor together are your prime cost. It's the biggest controllable number in the building, and it's where most of the room to work is. If you're not sure how to calculate it, my guide to restaurant prime cost walks through the math.

Get the cash picture on one page

Profit and cash aren't the same thing, and in a tough stretch cash is what keeps the lights on. Write out every dollar you expect to come in and go out, week by week, for the next six to eight weeks. It doesn't need to be fancy. A legal pad works.

This does two things. It shows you exactly when the tight weeks are, so they don't sneak up on you. And it lets you have honest conversations early: with your landlord, your suppliers, your lender. People are a lot more flexible when you call them before a payment is late than after. I'm not a lawyer or an accountant, so for anything involving taxes, loans or your lease, bring yours in early too.

Rebuild the schedule from a forecast

Labor is usually where the fastest relief is, and where the most damage happens when it's cut wrong.

Most schedules in a slow stretch are still built for busier weeks. Same template, same shifts, fewer guests. The fix isn't cutting across the board. It's building next week's schedule from what you actually expect to sell, by day and by daypart.

Pull your POS sales by hour for the last few weeks. Look at where you're overstaffed relative to sales, usually the shoulders of each shift and the slow days. Tighten clock-in and clock-out rules so people aren't on the clock 20 minutes before they're needed. Watch overtime.

What you don't want is a Friday dinner so short-staffed that service falls apart. When service slips in a tough stretch, sales slip further. Protect the busy shifts. Trim the slow ones.

Find the food cost leaks

Food cost rarely jumps because of one thing. It's a handful of small leaks:

• Portions. Put a scale and the right scoops on the line for your top sellers. Write down what each plate should weigh. Check it during service.
• Waste. Start a simple waste log at close. Just write down what gets thrown out and why. Within two weeks you'll see patterns, usually over-prep on slow days.
• Invoices. Check what was delivered and what you were charged against what you ordered and what you were quoted. Collect credits for shorts and substitutions.
• Prices. If ingredient costs went up and your menu prices didn't, the gap comes straight out of margin.

For the full breakdown, see restaurant food cost percentage.

Look hard at the menu

A long menu in a slow stretch is expensive. Every item means inventory on the shelf, prep labor and waste when it doesn't sell.

Pull your product mix report for the last 90 days. For each item, look at how many you sold and what each one contributes after food cost. You'll usually find a few items that sell a lot and make little, and a few that make good money but rarely get ordered. Reprice the first group carefully. Move the second group to better spots on the menu. Cut the items that do neither.

While you're in the POS, check for modifiers priced at zero and delivery menus priced the same as dine-in. Those are small leaks that add up.

Make someone own each number

Here's the part most owners skip, and it's the part that matters most. Every fix above fades within a few weeks if nobody checks on it.

Set a weekly manager meeting. Same day, same time, same agenda: last week's numbers, last week's commitments, this week's commitments. Every task gets one name and one date. Then follow up. Most commitments don't fail. They get forgotten.

When your managers see the score every week, they start playing to it. That's when a restaurant stops drifting.

Be honest with your team, too. They can usually tell when things are tight, and silence breeds rumors. You don't need to share every number. Tell them what you're working on and what you need from them.

Know when to bring in help

You can do a lot of this on your own, and plenty of owners do. But a tough stretch is also when you have the least time to step back and see the whole picture. You're in the building every day, so the problems that have been there for months stop looking like problems.

An outside operator helps in three ways: an independent read on where the money is actually going, a plan ranked by what each fix is worth, and someone who shows up every week to make sure the changes stick.

That's how I approach a turnaround. It starts with a $3,500 Restaurant Operations Audit, run fast and focused on cash and prime cost. Most owners then continue with a Fractional COO retainer at $5,000/month, three-month minimum, then month-to-month. The audit fee is credited toward a retainer signed within 30 days. Full details are on the pricing page.

Read the restaurant turnaround guide for the full week-by-week plan. Or, if you'd rather talk it through, book a free consult. I respond within one business day, everything stays confidential, and you'll leave the call with a clearer picture of where to start.