How to Increase Restaurant and Bar Revenue Without More Customers

Speaker A: If you're trying to market your way out of a revenue dip, you might be solving the wrong problem. Today we're going to talk about check averages, how to use them as a benchmark and go over what you can implement this week to bring more revenue in the door by raising your check averages. I think it's really important to start this conversation by saying life is tough right now. We have inflation that has slowed in some cases, but now we're seeing gas prices go up, we're seeing some food prices go up. We have customers that are not looking to spend more money necessarily. People are going out less now. What do we know with Gen Z in particular? They go out less, but they spend more when they go out. Getting someone to come in the door more or getting more guests in the door is a lot more difficult right now than getting every guest to spend a dollar or two on more. And if you can get every guest to spend just a little bit more, it's going to drastically change what's going on for your business. Now. I, uh, think a lot about when I bought a bar for the first time. It was 2011. It was right after the 2008 bubble. It's when commercial real estate and businesses were not doing well. And even though the economy in 2011 was not great, I was able to grow through it. And I grew through it, uh, partially by increasing my customer base, but largely by increasing my guest check averages. And so here's the thing. When you have someone in your establishment, they are already there, they're already gonna spend money. And if your check average is, say 20 bucks and you get two more dollars out of them on average, that's, uh, a 10% increase in revenue with no marketing spend without really doing anything other than a little bit of training and setting your team up to say the right thing and then maybe a little bit of menu design. And a lot of times when we look at revenue and growth again, we're only assuming we need to get more people in the door, rather than thinking, can I get the people that are already here to spend more money? And something that was true in 2011 that's also true today is that we're seeing a bit of a, uh, lot, I should say, of a K shaped economy. Those folks that are doing well are doing increasingly better. Those folks that are not doing well are doing increasingly worse and spending less money. So we know the folks that are going out on a regular basis generally have money to spend. And we also know, like I mentioned earlier with Gen Z, when people go out, they tend to spend more money. They're okay with that. They know they're going to spend money. And so we need to do what we can rather than trying to drive expensive traffic into our businesses to just get a little bit more out of what we already have, because again, it's basically free. So now when we talk about check averages, there are two ways that we frequently look at check averages, and that's as an average check or as a guest check average. Now, I always like to go to guest check average because that's going to normalize across all your checks. If you think about a check average, the math is total revenue divided by total number of transactions. Now, some of those transactions are going to be one person sitting at the bar. Some of those transactions are going to be a six top that came in. Obviously, we're not really comparing apples to apples. So if we can look at it at the guest level, we're going to get a more accurate picture of what we make per. But in seat right, somebody comes in, two people come in. We know that our guest check average is 20 bucks. We can anticipate $46 people come in. Again, $20 guest check average, we can assume that that table is going to bring us about 120 bucks. If we're just looking at check average, we're saying, okay, well, our check average is $48, and if it's one person, it's going to be a lot less than that. If it's eight people, it's going to be a lot more than that. We really don't know. But we know on average we're making $48. Either way is good. Oftentimes with bars, what we're going to end up measuring early is check averages. Because to get guess check averages correct, you have to train your team to always use seat counts when they're ringing in tables. And not everyone does that. Either way works. But if your team isn't putting things and putting in the number of guests and ringing things to seats, then you may need to do some training to get that guest check average in order to have a more usable data set. Now, the other thing to consider when we're looking at check averages, let's break them up by day, let's break them up by hour. Let's understand where people are spending the most and where they're spending the least. You know, frequently what I see when I'm looking at different bars data is that during the week, especially if you have food, people come in for dinner, they spend more time they spend more money versus say Friday night when they're having two, three, four drinks and they're out the door. Especially if you're in a high density bar area, you might get people that are coming in for a drink or two and then going to the bar next to you. Now that works great from a revenue perspective, but we're going to see a lower check average during those periods. And oftentimes, and this may sound weird, but oftentimes if we focus on where the check average is always already the highest, we can actually get it higher. Easier than trying to get that one and done or two and done late night guest to spend more. So when we look at check average, what is this signaling? Well, it's going to reflect some on your menu, but it's really telling you about your guest journey and why I like to say the guest journey is because there are basically three quiet killers that are going to drag that check average down and prevent it from going higher. The first one is if your servers are not giving a second round prompt early enough. So if a guest drinks their glass, their cocktail, whatever it is, their wine, their beer, and that glass is empty now they're thinking, do I want to stay for another one or not. We can avoid that. If your menu does not have upsell architecture built in, nothing guiding to kind of a good, better best situation, then you don't have price anchoring and that's going to drive down your guest check average. And if there's no stay trigger, people are going to close tabs early. Now a lot of times you don't notice these because sales look good and revenue goes up when you do more marketing. But again, what we're talking about here is trying to get just a little bit more out of everybody that comes in the door. That really helps improve your bottom line without adding any cost. So how can we benchmark this? Well, first of all, if you go search the Internet, I put out numbers like this too. But you will see a lot of people say, here's a good guess, check average. And to some extent those Internet KPIs, those benchmarks, those industry averages are BS. Now we can look at them as kind of a general guide, but every bar is different. Maybe you sell food, maybe you don't. Maybe you're a high end whiskey bar and you're selling to some guests, you know, 250, $300 drinks. Maybe you're a neighborhood dive bar and you're selling mostly well to college students. So there's a huge difference here in what we can expect. But what matters here, and I said this last week, when we're talking about prime cost, it's not about beating those people around you. It's about beating yourself. So we want to look for our check average to go up quarter over quarter, even if we're not increasing prices. And the best way for us to understand our guest check average is to look at our top 20% of our transactions. And those checks are kind of going to establish our ceiling, if you will. And we want our average to be within 30 to 40% of that ceiling. So if. And these are bad numbers, but easy math. If your guest check average is 100 bucks, or if your ceiling is around 100 bucks, that top 20% of your orders is all, give or take, you know, 90 to $110. But that's right at 100. And you want your average check then to be about 70. Or if we drop those numbers down, say your average order is between or your high end, your top 20% is between 19 and 21%, giving us a 20% or $20 average, I should say 70% of that's going to be 14 bucks. So we want to be, you know, around that $14 range as our target. But obviously, this is going to be different for every establishment. And the real easy way to do this, if you don't want to do the simple math and want to dive in a little bit further, plot it all on a bell curve. Uh, bell curves show equal distribution. Generally, we see it's called a bell curve because there's a hump in the middle of that curve where the majority of your people are spending. And then it'll go down as you go to the side showing a tail on each end that shows your low end and your high end of your range. So you can put this on a bell curve and look at it. You can just do some simple math where you're going, okay, what's 70, 80% of this number? You can just pull numbers and eyeball it. But obviously the bell curve is going to be the most accurate. The 70, 80% estimate is going to be second. And then just eyeballing it or using your gut, that's going to be third most accurate. But all these works. So I want to give you two moves that you can implement in the next 48 hours that can move that bell curve. Move that average in your guest check just a little bit higher. The first one is, uh, your second round prompt. And this is huge. This goes back to what I said earlier about when a guest's drink is empty, they start to consider, what am I doing next? What's the next thing in my life I need to go do? And so we never want to let that drink get empty. You should train your servers to always prompt for the next round when the glass is about two thirds empty. So make sure they still have some to drink, and then sell them that next drink. That way they're not thinking, hey, I'm done with my drink. Should I leave? They're thinking, oh, I'm having a great time. I'm in the middle. I drink. Of course I want another one. That's what we're going for. Now, it can be a very simple thing for your servers to say, hey, do you want another round? Hey, I see you're running a little low there. You guys seem to be having a great time. Can I get you another drink? You can do short sentences, you can do long sentences. It's really not so much about what you say or how you say it. Now, obviously, you have some brand standards for how your servers communicate with guests. That's different. But it's not so much about what you say or how you say it. It's about the timing of it. And the proper timing is always when there's one third of the drink left or the drink is 2/3 empty. You need to be working on selling that next round. And this is super low friction. It gives a great guest experience. People, people don't see it, uh, as an issue, and if they don't want one, they'll tell you. But it's going to push that check average up a little bit because you're going to sell another round to more tables. Now, the second move, and this is going to menu design. So this is a little bit more intense than just saying, hey, sell people another round when their drinks a third full, is to make sure you have an anchor item on your menu. And anchor items cannot be overstated in how well they work. They absolutely are always work. And think about it. You go on a website, you're looking for a package. Almost every SaaS company does this. You'll see good, better, best. You know, here's our $20 a month. Here's our $50 a month, here's a hundred dollars a month. Now, when it comes to cocktails, we don't really want to do good, better, best. Everything we should put out should be great. But what we would want to do is cheaper, bridge price, expensive. And so if your average price cocktail on your cocktail menu is 14 to $16, you need one on there, that's 20. If your average price is 10 to 14, you need one on there, THAT'S 18. You want one cocktail doesn't have to be more than one, but one that is way more expensive, that makes everything else look cheap and that's going to push people to think, oh well, $14 isn't expensive. But if $14 is the most expensive drink on your cocktail list, they're going to look at that and go, well, I'm not spending 14 bucks. That's the most expensive thing they have. I don't need that. But by putting one on at 18, that $14 now looks like a deal. Bottom line I want you to get from today, Guest check average matters. You need to push that a little bit higher, especially in the economic uncertainty we're in, especially given the K shape of economy. Especially given that people are going out less but spending more. By adding a little bit to your guest check average, you can increase your bottom line without spending any extra cost. So take a look at your guest check average. Dig in it today and figure out ways to work with your team to push it up just a little bit so that you can get results and get through what is, quite frankly, right now, ah, a challenging time in the industry. That about wraps it up for today. If you enjoyed today's insights, make sure you like subscribe and leave a review. If you are ready to take your bar to the next level, schedule a strategy session with me by clicking the link in the show notes below. Until next time, have a great day and we will talk again later.