‘31 August 2020’ the end of the discount period for diners?

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A dilemma facing many restaurateurs at the end of August would be whether to continue with any form of discounting following the end of the ‘Eat Out to Help Out’ scheme.

Under the scheme, the government pays half the cost of a meal eaten in August at a café, restaurant or pub on a Monday, Tuesday, or Wednesday, capped at £10, at participating venues.

As of 18 August, diners have enjoyed more than 35 million meals since the scheme began on 3 August.

Extending the discount scheme

The scheme is due to end on 31 August, however, restaurateurs will no doubt consider extending some form of discount, at their own cost, to continue the increased traffic into their establishments. This may not only allow for restaurants to generate great PR, but also creates the opportunity to obtain new customers from competing eateries. However, focus needs to remain on providing excellent customer service, generating profit and adhering to the COVID-19 government guidelines, rather than chasing turnover.

Effective forecasting

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Detailed profit and loss forecasting will be essential before any discounting decision is made. This will ensure there will still be sufficient profit margin for each part of the menu, after the discount, to cover all fixed costs. Actual results must then be compared to the forecast to see if the discounts need to be adjusted.

The forecast should also highlight whether any dishes need to be removed that are not making the desired profit and will focus the importance of reducing waste, portion control and stock management. Furthermore, this emphasises the need for careful planning, on knowing how much customers are spending, when they are spending this money and what they are spending on, in order that smarter buying decisions can be made and staffing levels and rotas are correct.

Cash flow forecasting will similarly need to be modelled to ensure the business has enough cash to support the restaurant during the extended discount period, as it is crucial to know how and when changes (however small) to sales, purchases and other general business costs will affect the bank balance.

Ideally, a three-way forecast will be prepared, a method of forecasting which links the profit and loss account, balance sheet and cashflow altogether, as there are balance sheet movements that have significant effects on a company’s cashflow, which do not appear in a company’s profit and loss.

Our Hospitality and Leisure team appreciate that running a restaurant can be enormously time consuming. Our team are experienced at supporting business with the preparation of three-way forecasts, allowing restaurants, cafés and pubs to prosper during these challenging times – giving customers an experience they will relish and want to repeat.

Posted in Blog, Hospitality & leisure