Fine-Dining Restaurants' Money Drain


To successfully juggle the many challenges of operating a restaurant, it's vital to pay closer attention to the back office.

Fine-dining customers today are hungry for more than just food—they want an experience, and they want it at a good value. While many fine-dining restaurants perfect the secret sauce, it is not without its obstacles. Many of these restaurants come to fruition through investors willing to give ample funding, and even then, it’s a risky endeavor. To maintain a competitive edge amidst constantly changing customer preferences, a tight operations process needs to be put in place to enable agility and success.

According to the National Restaurant Association, restaurant industry sales are expected to hit a record high of $709.2 billion in 2015. In the first four months of 2015 alone, restaurant sales were up 9 percent according to the Census Bureau, which tracks official retail sales numbers. Along with casual-dining franchises, fine-dining restaurants are growing in number and competition.

Similar to restaurant chains, the management of fine-dining establishments must juggle various challenges, such as making timely payments to food and liquor vendors, managing a complex invoicing process, keeping an accurate projection of food costs, and correctly assessing inventory. To successfully oversee these processes, fine-dining restaurants must be particularly attentive to the back office and how to orchestrate these moving parts. To execute this, many restaurants have started automating their Accounts Payable (AP) to efficiently process invoices and payments. Through automation, providers ensure ease of use, accuracy, efficiency, and valuable ROI in through savings in back office processes.

However, there are downsides to AP automation that restaurants should consider. In some cases, AP automation solutions don’t deliver what’s promised during implementation—sticking restaurants with unexpected costs. To keep savings high, restaurants should remember that their business is unique to other businesses, so a one-size-fits-all approach won’t cut it. It’s key to assess how business is currently being conducted and augment processes according to tailored recommendations. In all of our work with more than 100 restaurants, we’ve never seen a single one with a positive ROI on investment in AP automation.

Understanding that fine-dining restaurants deal with a more unique and complicated operations processes the following processes should be closely considered to not only automate, but innovate:

  • Keeping track of inventory: The best chefs leading fine-dining restaurants wear more than just the chef hat—they understand the nuts and bolts of the business process as well. Controlling food cost is key, and while determining what food might please the palate, chefs must be attuned to a cost-balanced menu as it grows and changes seasonally. Additionally, the large number of items purchased through many vendors further complicates the invoicing process. This can make tracking food a complex process which highly impacts the bottom line if not monitored closely.

  • Controlling high invoice volumes: Fine-dining restaurants have three to four times as much invoice volume compared to popular chain restaurants. With unique menus and greater investment in the environment and experience, various vendors are often being used. Duplicate or missed invoices are costly mistakes that are easily remedied through a more automated solution.

  • Streamlining the payroll process: Moreso than casual-dining establishments, fine-dining restaurants require a larger staff to serve their customers, and often there is high turnover. Many restaurants choose to outsource their payroll functions, but it’s important that payroll processing most efficiently provides accurate data, processes new hires and terminations, coordinates timely paycheck delivery, and keeps current with rules and regulations. Additionally, managers should be able to answer employee questions when necessary and quickly resolve issues as they arise.

While restaurants may have some of these processes automated already, a more holistic approach is advised. Fine-dining restaurants should take a step back to consider the business as a whole, and take ownership of the costs they can control. It may mean the difference between success and failure in a competitive market.

The opinions of contributors are their own. Publication of their writing does not imply endorsement by FSR magazine or Journalistic Inc.

David Schnitt

David Schnitt is President and CEO of IQ BackOffice, a leading global accounting and human resources outsourcing company headquartered in El Segundo, California. An industry expert on outsourcing trends and the evolution of the virtual business, Schnitt has years of experience working with restaurant clients of all sizes.

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