A Restaurant is The Best Practical Example to Understand How Business Makes Profits
Understand the fundamentals of business and profits from the core
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Introduction
I want you to answer a question with very little, or absolutely no thought. Just read the question and think about the first answer that your subconscious mind throws at you.
The question is…
How does any business make a profit?
If the answer that your mind gave you is anything on the lines of, “by providing a product/ service” or “by creating profitable transactions”, while those answers are correct, but they’re also extremely rudimentary.
Let’s double click on this question and let’s try to understand a nuanced answer to that question, shall we?
For the sake of this note, I’ll choose a restaurant as an example, but be rest assured, this same logic applies to almost every business.
How do restaurants (actually) make a profit
Imagine you’re having a meal at a restaurant with a few friends, and the overall order of the table is, one pizza, a few peach iced teas, one regular portion of plain/salted french fries, one large portion of peri peri fries, jalapeno poppers, one portion of pink pasta, and one garlic bread with cheese.
Seems like a normal order for 4-6 friends, right?
But now let’s analyse an indicative list of things that the restaurant has to get right.
01 - Having the right pizza base, the sauces, cheese, and toppings for the pizza
02 - Having the right kind of fries in enough quantity for those portions of fries and the chef has to ensure that the salted and peri peri portion sizes don’t get mixed.
03 - Skilled chefs who can make a balanced pasta dish without overdoing the cream/ tomato sauce
04 - Making sure that the jalapeno poppers stay in the fryer for just the right amount of time
05 - Having a different loaf of bread for garlic bread, and the right kind of cheese, and the equipment to make the garlic bread crisp and tasty
06 - Having a semi-skilled drink mixer/ bartender to make the iced tea just right.
07 - Not to forget appropriate amount of plates/ cutlery for every person on the table, and the entire restaurant
08 - Being well staffed, having the right ambiance, the right kind of crowd to ensure that all tables get serviced and get a good experience.
09 - Delivering on service and taste so that the reviews/ ratings on social media remain positive.
As I mentioned, this is just an indicative list. The training that the staff needs, the support team, the admin team, the investment that goes into building the kitchen, the licenses needed… The factors that a restaurateur has to ensure are a lot longer than what meets the eye.
However, the understanding that I want you to take away from this note is simple. The only way to make a profit (and stay profitable) is to create a brand (personal/ business) wherein you’re giving so many varied and minute specialised services/ deliverables to your client (the boss/ the company/ the customer of your business/ the stakeholders).
A venture will only turn profitable when it manages to provide unique value consistently to the company/ customer/ set of customers.
Higher the value, higher the revenue/ salary, higher the bottomline.
Conclusion
Hope this note has helped you realign your thoughts about the restaurant business.
The restaurant business has always been one of those businesses, wherein the audience/ people keep thinking, “Oh! This is such an easy/ profitable business to be in.” What you don’t realise is that for every penny that a restaurant earns, the entire team has to function like a well orchestrated performance and delight the guest every time. Achieving that is anything but easy.
If you’re a business owner or someone who’s planning to start a business and you need help to build a profitable funnel, you need to ensure that your offer is irresistible for your target audience.
If you need help designing an irresistible offer for your brand/ business and you’d like me to work with you on a 1:1 consulting basis, feel free to reach out to me and let’s connect.Your Thoughts!
If you’ve reached till this point of the post, I’m sure you must have some thoughts/ feelings/ opinions about what you’ve just read.
I’m done sharing what’s on my mind, and now is your turn to share your POV.
Tell me how you are processing the information that you’ve just read?
Do you agree with my thoughts?
Do you think I missed something important?
Do you disagree with something in particular?
Let’s continue this conversation (or ask your questions about the post) in the comments below.
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Prompt used to create the image for the note
P.S.: Image made on Meta AI using the prompt, “Imagine a scene of a packed and a busy restauarant where all the guests and the staff have a warm smile on their faces”