Reasons Why Restaurants Turn To Financers To Thrive In The Industry
A restaurant owner, like any other business owner, comes across multiple challenges in their entrepreneurial journey. One of the primary problems restaurant owners often have to deal with, is the shortage of working capital. Some of the challenges, a restaurant owner faces, are culinary industry specific. Certain alterations in dining and advertising trends can lead to the downfall of even a long-established restaurant. Adequate funds or efficient inventory management can not reverse low gross sales, that might have occurred due to not keeping a pace with the evolving dining tastes, not understanding the consumer psyche of the target group and many other reasons. But, accurate accounting, organized inventory and waste reduction can help an entrepreneur to make marginal operations profitable and facilities remarkably cost effective. The primary issues that restaurant owners face are operating expenses, which are often too high compared to gross sales, improper, weak accounting and inability to review key financial statistics.
Due to intensive labor and food costs running from 60-70 percent of gross sales, restaurants often operate on a very thin profit margin. However, these percentages can be controlled by decreasing expenses, cutting labor costs, reducing portions or increasing the prices on the menu card. A restaurant faces financial hardships when variable labor and food costs exceed 70 percent. When employees are scheduled efficiently, ardent management can lower the labor costs. Strict control of portion size of the dishes often fetch considerable success to the restaurant franchises. Staff audits are also of great importance, when it comes to lowering the operation costs.
Restaurants often forget to count gift certificates as liabilities until redeemed. This leads to sales tax errors and restaurant owners end up ordering too much inventory. Hence, it is very important to post accounting information correctly and add all financial information without missing out on even a single one. Ideally, the typical inventory for a full-service restaurant should never go beyond a seven-day supply. One always needs to keep in mind that, excess inventory leads to issues like accidental losses, theft and many more. It becomes difficult to identify food losses or calculate food costs in harmony with sales, when the daily inventory records are not kept.
Inefficient Financial Report Review
Often considered as a management tool, daily and weekly financial reports need to be reviewed meticulously to understand when labor or food expenses are getting too high. This will help a restaurant owner identify unexplained losses made from food staples, understand when the meals cost of the employees are going high and how complementary meals and discounts can contribute to profitability. When entrepreneurs depend just on the bank balances, they do not consider payable accounts and fixed costs, which needs to be appropriately allocated each time a report is reviewed. Big restaurants, a lot of times, fail to update their portion costs regularly. This makes it difficult to keep a track of the price increases. Financial reports need to be compulsorily reviewed by qualified accountants or restaurant management software, in case the owner is not good with accounts.
If not tackled efficiently and on time, all the above issues eventually lead to a shortage of working capital. To smoothly run a restaurant and keep a decent profit margin, restaurant owners need to have a substantial financial resources, as food and other costs often increase unexpectedly. This is when finance providing institutions come in play. There are multiple restaurant financing options available, which are ideal for restaurant expansions and carrying out daily operations. Restaurant finances, typically, come in the form of loan or cash for equity. Bank loans are a traditional source of restaurant financing. But, these often turn out to be inconvenient for many borrowers, due to the requirement of security, collateral or a personal guarantee, long loan processing time and stringent approval criteria. On the other hand, there are alternative financing options like merchant cash advance, which is quite beneficial and convenient for restaurant businesses. Restaurant owners mostly require fast money to act quickly as well as aptly to the market shift and merchant cash advance lenders provide money with a very short time, as less as 24 hours. The application process of merchant cash advance loans are quite simple. This is what makes MCA loans ideal for restaurants who are in need of instant cash to grow exponentially and stay competitive simultaneously.