In this Web-only exclusive for el Restaurante Mexicano, Anand Gala, president and CEO of Gala Corp., offers tips on adjusting budgets and optimizing costs to achieve success. Privately owned Gala operates 27 restaurants, including three Del Tacos in the Phoenix area.
ERM: New restaurants opening all the time, paired with the slowdown in consumer spending, mean restaurant owners must keep their operations running like clockwork to stand a chance in this competitive industry. What signs indicate the restaurant could be in a state of distress?
GALA: There are many factors to consider, but the top ones I've noticed are neglected maintenance of the restaurant and surrounding property, lack of qualified managers or high staff turnover rate, low guest traffic during peak dining times, chronically late payments to vendors and staff, and eroded quality of food and service. One or even two of these issues can usually be explained but the presence of three or more at once is grounds for evaluation as soon as possible.
ERM: Is it ever too late to right problems like these? What course of action should one take to do so?
GALA: It's never too late to save your business, but more problems to fix means a longer time before results are seen. I suggest determining the restaurant's optimal performance first and reviewing past profit and loss statements. This data is especially useful for multi-unit operators, as they can compare sales volumes and find where locations with similar revenues should be in both best and worst case scenarios.
Next, compare optimal performance to actual performance to determine where the gaps are and review your sales, traffic and cost trends to plan for where business is going. For example, if your analysis shows business could go down a certain percentage, adjust your budgets and forecast to compensate for the change.
ERM: What about optimizing prime costs like food and labor? Fees for vendors and landlords can also add up. Is there any way to renegotiate contracts?
GALA: Many operators struggle with these aspects the most, which is why it's often necessary to bring in outside assistance. There are many systems out there, but I've found that systems with full suites of business solutions that move beyond basic food costs, like e*Restaurant by Altametrics, are the most effective. They don't just show where a restaurant is wasting food and overstaffing, but also offer suggestions on how to order and re-staff to save money and positively impact the business's bottom line.
As for vendors and landlords, now is possibly the best time to renegotiate. Since many businesses are cutting back, vendors and landlords are willing to do anything in their power to keep a good client or tenant happy rather than seek out new business. If you're currently using XYZ Linens, contact ABC Linens about their pricing and then bid the two companies against one another to get the best price.
ERM: When can operators expect to see results?
GALA: As I said before, the speed at which the business rebounds is dependent on the restaurant's initial state. I own nearly 30 restaurants throughout California and Arizona, half of which were underperforming locations when I purchased them from their original owners, and change didn't happen overnight. That took time. But a ballpark estimate is within three to six months.
ERM: Any other advice to share?
GALA: It's important to never lose sight of the business you're in. Break it down to the basics of food and service and realize both have to be at the top of their game if you expect to stay in business. Customers are looking for the best food and service they can get, not one or the other; they'll vote with their dollars. I find focusing on QSCF&V (quality, service, cleanliness, friendliness and value) is an easy and effective way to keep customers happy and your restaurant in top form.
Headquartered in Los Alamitos, Calif., Gala Corp. develops and operates hospitality and foodservice assets, and provides management services to multi-unit restaurant ownership groups and investment groups. For more information, contact Anand Gala at 800-653-3517 or by e-mail at agala@galacorp.com.