Restaurateurs face a potential storm in trading conditions for 2018. Higher wage costs, rising food prices, a possible reduction in the supply of labour due to Brexit and the potential for consumer spending to be curbed as interest rates rise all point to a challenging future. Chris Thompson from our financial partners, Wellers Accountants reveals the five key areas that restaurateurs must focus on for 2018 to overcome the challenging times ahead.

Conditions may be tough however, they have actually been witnessed many times before. The rise and fall of independent hospitality establishments does tend to mirror the UK’s economic fortunes. In fact, history shows us that the most competently run businesses have been the ones that survive the storm and thrive in better times. What then can proprietors do to achieve this?

Part of the key to success lies in implementing good restaurant management practices aimed at the long-term health and growth of the business. This means fine balancing tight control of the finances with a focussed investment in your people.

Here are 5 areas to consider:

1. Staff training and development

Many hospitality businesses historically have recruited already trained staff with an existing skill set to help them fill gaps. It meant they turned to a glut of EU migrant labour, which proved very cost effective. Unfortunately, Britain’s likely eventual exit from the EU means restaurateurs may no longer be able to rely on this source for employees.

Instead operators will likely have to recruit British based people and invest in their training and development. Historically through the trade hasn’t done this, resulting in low levels of productivity. Given Brexit and the rising cost of operating a payroll, there may no longer be a choice.

Simply put, operators now need to do more for their employees so as to get more out of them to drive turnover and profitability. To achieve that you’ll need to invest in upskilling staff through training. Many will see this as a cost but that doesn’t have to be the case. Consider carefully how to implement training so that your employees can help transform the menu with new dishes or help cross selling to grow the top line for example.

Invest in your employees and they will in turn recognise your efforts to help them, which will give them a sense of identity and loyalty to your business. As part of this perhaps consider a development plan for each member of staff to encourage them to progress their career and thus help enable you get the best out of them.

2. Retention through communication with your team

An absolutely vital means to keeping your best people is to communicate with them regularly. Staff meetings are often derided and seen as a waste of time. However, when implemented well, nothing could be further from the truth. In fact surveys show that communication with staff is a vital ingredient for any business. The key is to organise them properly and ensure your employees use it as an opportunity to express their opinions.

Get this right and they will form an essential element of your staff relations by keeping your team informed and making them feel involved in decision making. Furthermore, they will provide a valuable channel for sourcing ideas and suggestions to improve the efficiency of your operations and the customer service experience.

3. Handle tips and gratuities correctly

The tronc scheme and how it is handled has proven a real historical problem for restaurants and the hospitality trade in general. You only have to think back to some of the negative press that embarrassed the likes of Cafe Rouge, Prezzo, Strada, Pizza Express, ASK, Zizzi and Côte for their alleged practices of taking some of the tips at the expense of their employees.

We find restaurants make many common mistakes when administering gratuities because they either don’t know or, misinterpret the rules. Tips and service charges are handled through a Tronch Scheme, the purpose of which is to distribute such proceeds to employees. The main point is this has to be done independently of you as the employer!

The rules around Tronc Schemes have seen many legislative changes over the years meaning it’s easy to fall foul of them. Therefore make sure all tips and service charges collected, be that cash or credit card transactions, are shared amongst all staff on an agreed basis. An exceptional meal experience is after all the product of both front and back of house.

4. Cash management

Monitoring the cash position of your business is essential and something you should do on a regular basis. To understand your cashflow and working capital requirements means you need a back-office finance function that provides you with regular management reporting. As a guide your reports should contain the following:

  • A historical analysis of your cash flow
  • An examination of budget versus actual spend
  • Cash flow forecasts
  • An assessment as to the strength of your balance sheet
  • Commentary regarding all of the above

Ultimately operating a hospitality business requires careful financial management, particularly of your margins. If you don’t already have it, be sure to purchase software that can produce instant reports on gross margins and labour costs from your till systems.

5. Control systems

Similar to cash management you also want to monitor the following regularly and carefully:

  • Internal/external stock taking
  • Wastage
  • Cashing up process and recording of cash expenditure
  • Purchasing authorisation and delivery check process
  • Staff rota
  • The interaction of till systems with accounting software and online booking systems


While there are no guarantees of success, get the above in place and you’ll be well on the path to a well run, efficient and effective restaurant operation. Ultimately business is about survival of the fittest!

Chris Thompson is marketing manager at Wellers Accountants.