The average profit margin for franchise restaurants has increased over the past five years. However, operators in the industry are subject to intense price-based competition from other restaurants as well as prepared meals at grocery stores, coffee shops, and the newer threat of ghost restaurants. Franchise restaurants also have to deal with a rising minimum wage in most parts across Canada.
Despite these challenges, franchise restaurant owners can take some steps to improve the bottom line.
Here are 5 areas to focus on when looking to improve profitability
Sales and profitability are critical for any business, but so is managing cash flow. Getting it right can help reduce interest payments, government penalties, and improve the supplier relationship.
There are a number of services that may be better handled by someone else, allowing employees to focus their time on growing the business. This may include bookkeeping, payroll, accounting, IT services, and human resources.
Acquiring additional units may multiply income. Identifying opportunities for multi-branded locations may help to ride out seasonality or other ups and downs.
Look for opportunities to offer catering to small businesses in the area, sports or other team sponsorships, or hosting special events at your restaurant.
There are a number of ways to control costs, such as minimizing food waste and spoilage. There may also be applicable government tax incentives at the federal, provincial, and municipal level.
There may be times when business is slow and it can make sense to open late or close early, reducing labour costs without having a significant impact on revenues. It’s important to measure customer traffic to determine periods of time when you need fewer or more staff, or when staying open doesn’t contribute to the bottom line.
BDO can help
Improving profitability is a must for every company, including franchise restaurant business owners.
Contact our Franchising professionals to find out how we can help.