Stop Bleeding Money From Your Franchise

November 19, 2013

Working as an operations consultant allows me to see a lot of different ways that people use to scale their business. One of the most popular ways is franchising a business. Some people get the concept and run with it, while others struggle. Bringing money into your franchise is your number one priority, as it should be. But don’t let your focus on sales and incoming cash override your concentration on operational costs. Remember that the money you put into the business is nearly as important as the money your restaurant is earning. Below are some tips to help minimize profit loss, helping you take home more of that hard-earned cash.

Teach employees restaurant economics

Leadership and profitability expert Jim Sullivan, recommends beginning with educating all your employees on the economics of operating a restaurant business. The idea being that if they understand how the business works, their behavior is more likely to coincide with how you want them to perform on the job. For example, if a server is taught the importance of suggestive selling, he or she will more likely apply the profit-building technique when assisting patrons in choosing their meals.

Quantify waste for employees

Jim Sullivan also suggests educating and continually reminding employees of how waste can negatively affect the restaurant’s bottom line. He suggests placing ‘waste watching’ posters in work areas, prep areas and break areas. One idea is to post photos of commonly trashed, wasted or damaged items with their cost per unit displayed, such as the cost of straws, sugar or condiment packets, napkins, cutlery, etc.

Minimize Suppliers suggests limiting suppliers to reduce costs. The costs of suppliers can add up when you have many, as can the cost of deliveries. The site recommends shopping around for suppliers that offer more of what you need and let go of extra suppliers. Limiting the number of deliveries can also lower costs.

Replace Old Appliances

Are you using an outdated, power-guzzling appliance in your kitchen? If so, it’s time to spend some money to save a lot more money! Instead of scraping by with old machines that waste energy and break down often, invest in new, energy-saving appliances to reduce operating costs. Many states offer restaurants tax credits and other incentives for using energy efficient appliances and the savings often pay for itself within a year or two. Walk-in refrigeration systems are one of the most common culprits of hiking up energy bills. The solution is investing in a process refrigeration system, which maintains specific temperatures and keeps supplies fresh, but is more energy-efficient than walk-in systems.

Be green to save green

According to an article found on, Subway recently switched their light bulbs to energy efficient bulbs in all of their 2000 US franchise locations. An energy efficient light bulb can save up to $22 per bulb per year vs. a traditional bulb. The savings will add up over time! And of course, turn off the lights when they are not needed. Other environmentally-friendly tips from the writers of are to only run the dishwasher when it is completely full to cut down on water and energy usage as well as soap. Another tip to save money cleaning dishes is to soak them in a sink of hot water to loosen dried food instead of running water over them for a long period of time.

Did you know installing low flow faucets and toilets can reduce water waste by 20 to 40 percent? That ought to lower your annual water costs! And finally, turning down the thermostat just a little can save energy costs and your customers likely won’t even feel the difference.

Perhaps you are a franchise owner and have discovered your own methods or tips for reducing operational costs. Do you have any suggestions for your fellow restaurant franchisers? Please share them here!