The Restaurant Biz Blog

Is HR The Next Hot Topic In Restaurant Software And Services?

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As restauranteurs we have to do two things very well: find great product and serve it. Both of these tasks involve human interaction and that means managment duties, fortunately or unfortunately. Thankfully we have web-based support mechanisms like inventory management tools and labor scheduling functionality. The features of theses solutions create a lot of effeciencies, true. We get help configuring our businesses so we are notified when schedules are not consistent with our sales goals or if inventory is low. And although we are serviced by these tools, again thankfully, one question that digs deep into both of these matters is the human side... How do we know we are working with the right people?

Now, if someone had a perfect answer to finding the BEST vendor or MOST MOTIVATED employee then no one would ever be fired. Alas, there are solutions gaining ground to solving this ever persistent challenge. Yet, the challenge remains...

Two studies, one from academia and the other from professional management consultants, tallied up the "human resources" concerns in and about the restaurant industry.

In the study "Job Satisfaction, Life Satisfaction and Turnover Intent of Food Service Managers," Professor Richard Ghiselli of Purdue University's Hospitality Tourism and Management Department discovered working conditions impacted restaurant manager to the breaking point. Ghiselli uncoverd an exodus. By the time many restaurant managers reach their forties, they have probably left the industry.

And...

According to the 2005 Datassential Operator Survey, when “decoding the profit and loss puzzle for your restaurant customers, it’s important to keep in mind that labor is nearly as large an expense as the food itself.” In fact, hiring and retention has replaced food prices as the top worry for restauranteurs”, says Hudson Riehle, Senior Researcher at the National Restaurant Association.

Lastly, in the popular Fohboh.com blog, the situation is summarized very well. Imagine the following case:

Number of restaurants in chain: 100 restaurants
Average employees per restaurant: 75
Total employees (operating): 7,500
Turnover rate: 100%
New employees: 7,500
Cost per new employee: $2,500
Total potential cost annually: $18,750,000
Total cost per restaurant: $187,500
Projected sales per restaurant: $2.8mm
Estimated cost per restaurant: 6.7%
Cost per 1% of turnover: $187,500

So what's the answer? Like we started with, use web-based tools and stay tuned for enhancements to the WhenToManage suites of services. Secondly, take time to read these great posts by management experts in the restaurant industry. They talk not just about the technology side, but emotional part of our brains...

Recipe Costing for Profit

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In a previous blog post, I wrote an overview on recipe costing, since this is so important we are going to expand on this further.

When you ask a restaurant owner/chef about recipe costing, the usual answers are: "We don't have time to do that" or "By the time we get done it won't be accurate any more" or "How will that help, we're doing okay". All of these responses beg the questions: has the potential, ideal or theoretical cost been established? What is it? What method was used to determine the projected cost?

Proper recipe costing is a somewhat tedious and time-consuming task; however, when compared with the potential dollars lost through undetected high food cost, it is time and money well spent. Large restaurant operations frequently prepare budgets without thorough research into the various components that constitute the overall food cost.

Before attempting to cost out recipes, it is necessary to run yield tests not only on the center-of-the-plate items, i.e., meat, fish and poultry, but also the vegetables, starches, sauces and garnishes. It is important to note that when doing butcher tests and fish tests, not only is the net cost of product of interest, but so is the time necessary to do the preparation.

This is especially true if the chef or the sous chef or some other highly trained, highly paid individual is doing the butchering. That person's time, while not part of the food cost calculation, is part of the labor cost, and one must ask if that is the best use of time and talent. It is appropriate at that time to study the total cost of doing the butchering in-house vs. buying portion-controlled products, taking into consideration the ability to use the byproducts, quality control issues, consistency of yield and net cost of the plated product.

The time spent cutting meat, fish and poultry also has a direct relationship to the sales abstracts when preparing production charts for the kitchen staff to maximize utilization of labor hours. Too often, operators take shortcuts by attempting to cost recipes using the gross cost of ingredients, resulting in artificially low costs - and then wonder why they cannot achieve their cost objectives.

Costs must also be included for tabletop gratis items such as bread, butter, relish trays or any other complimentary items included with a given meal period function. Random checking of plated items must be done to determine if the production staff is adhering to established portion guidelines.

ESSENTIAL ELEMENTS - Key information needed for recipe costing:

• Date recipe was costed
• Meal period
• Recipe name
• Last update
• Yield
• Portion size
• Cost per portion
• Profit per portion
• Suggested selling price
• Food cost percentage at suggested selling price
• Ingredient description
• Purchase price
• Per unit
• Recipe unit of measure
• Cost per unit of measure
• Extended ingredient cost
• Total recipe cost
• Suggested selling price to achieve specific food cost goals, i.e., 25 percent, 30 percent, 35 percent
• Plating instructions
• Garnishes

Once each recipe is properly costed; a review of the sales is needed to determine how the mix of sales will affect the overall theoretical cost. Then each recipe's cost and selling price are entered into a spreadsheet, the only ongoing task is to enter the mix of sales for the period under review to determine the food cost potential for that period. This period can be by day-part, by day, by week or by month.

Any time the cost of recipe ingredients changes radically, recipes are added or deleted from the menu, special pricing is offered to clients or there is any other factor that could change the relationship among recipe costs, revenue and sales mix, you should calculate a new theoretical cost. You must remember that this "ideal" cost assumes there is no waste, over portioning, pilferage, spilled food, employee consumption of food, etc. In reality this does not exist in day-to-day operations; however, well-run operations frequently can maintain costs within one or two percentage points of potential through diligent cost-control systems.

Without the knowledge gained through recipe costing and the subsequent application of those individual costs to the sales mix to determine what costs should be. It would be nice to say that recipe costing would solve all the problems; however, it is only one piece of the puzzle, an important one, that constitutes the total picture of any well-run food and beverage operation.

Before any management team can determine what it wants its food costs to be in the future, it must determine what they are today and then decide the most prudent approach to achieving its food cost goal. At the same time it must continue to provide guests with perceived value for their catering dollar. Recipe costing is a necessary first step to that end.

There are also many inventory software solutions on the market today that can help automate this process and give you accurate and timely inventory costing reports.

Interested in learning about how we can help you manage your food costs? Join us for a demo of our inventory system.

Become a fan on our Facebook page or follow us on Twitter to keep updated on new product features, industry news, and tips on topics like inventory management.

Recipe Costing - Where Do I Begin?

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Recipe costing is one of the most important areas a restaurant must address and it's a time consuming process to do it correctly. You need to do this so you can accurately set menu pricing, know when to increase prices and when to eliminate the items off your menu. Price it too high and you may lose customers if they feel the value is not there. If you price it too low, the difference between your actual price and what you should be charging comes right off your bottom line.

Restaurant owners should know what their actual gross profit margins are on each food item they are selling. In order to know this, you will need to standardize your recipes. This means there will be no more guesswork and no more surprise food cost fluctuations. Standardized recipes mean greater consistency, better food cost, and more satisfied customers.

Now you are probably asking, "where do I start?" Start with your entrees, as they are usually your higher cost items. Be very specific about how the center of the plate choices go from the cases of raw ingredients and onto the plate going out to your dining room. Some questions to ask yourself:

• Do you portion by cooked weight, pre-cooked weight, portion control item, ladle or piece?
• Is there a portion control system in place to ensure consistency for both the guest and the accounting staff?
  

The entrees usually have a cost of goods sold higher than your actual food cost percentage. If you have a 35% food cost percentage, you may see the entrees coming in at 40%. The reason the entrees run higher than the food cost percentage is the beverages typically have portion costs far below the overall percentage. Sales of beverages are made in higher volumes than the sale of entrees. These profitable items will help to lower the overall cost percentage.

Chefs and kitchen managers will get involved once they see you are factoring sides, bread and butter, garnishes, etc. into the total cost of these entrees. They should have been correctly trained to price entrees to cover all these costs. In addition, they may be able to point out entrees with a high food cost percentage that can produce high gross margins. As you gain the support of the kitchen staff in your exercise, have them proceed to cost any side, starch, bread, roll, garnish and condiment needed to serve each entree.

Maintain a focus on the production and service of center of the plate items. You will find a high percentage of purchase volume is devoted to the raw ingredients needed to produce these entree items.

Once you have completed your entrees, then move on to your other menu items keeping the momentum so you will have costing for all of your menu items. Once this is done don't forget to maintain this information as new items are added or as recipes change, this is an ongoing process. There are many tools available to help with this process, from Excel spreadsheets to inventory software solutions, you need to determine will one is right for you. No matter which one you select, they must be able to do the following:

• Maintain an accurate inventory of all food products, prices and period ending totals
• Find a simple and easy to use method of accurately costing their recipes 
• Calculate the food cost percentage and gross margin of each item on their menu as well as the averages for each menu category, and 
• Determine the "theoretical or ideal food cost" of their menu and menu categories based on how many of each item they sell.

 
Related Articles

• How Do You Control Food Costs?
• Inventory Forecasting: You Can't Manage If You Don't Measure?
• How Does Food Waste and Theft Happen In A Restaurant?
• Top 3 Areas For Reducing Food Costs
  

Interested in learning about how we can help you manage your food costs? Join us for a demo of our inventory system.

Become a fan on our Facebook page or follow us on Twitter to keep updated on new product features, industry news, and tips on topics like inventory management.

Inventory Forecasting: You Can't Manage If You Don't Measure

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Last week I kicked off a series of articles on contolling food cost. I had the opportunity to work for one of the most respected CEO's in the restaurant industry who mastered the art of controlling costs. He was always saying, "You can't manage what you don't measure". It is an old management adage that is accurate today. Unless you measure something, you don't know if it is getting better or worse. You can't manage for improvement if you don't measure to see what is getting better and what isn't.

With inventory, you need to manage the uncertainties, the constraints, and complexities on a continuous basis. By doing this you will improve your inventory forecasting ability and accurately set inventory targets and pars.

The first thing to measure is your usage. Keep it simple and just look at a week and see how much you started with, add what was delivered, and then subtract what you have left. That's how much you use in a week. (Next week we'll talk about ways to dig a little deeper into what you should be using vs. what you are using.)

Now that we know how much we use, we can start to look at how much we need. One of the problems is the repetitive orders of the same products; you have undoubtedly asked yourself at what stock level you need to replenish your inventory. The goal is to reduce inventory levels without affecting you guests. The three main factors to consider when forecasting:

• The Lead Time - how long does it take for my delivery to come once it's ordered?
• Reorder Point - what's the level of inventory for each item, when I know I should order more?
• The Reorder Amount - how much should I get?

If you don't have a background in forecasting don't worry you can still learn to forecast. Keep track of the important factors, such as special events or the weather, holidays, advertising specials, etc. You need to track these by the day of week. Any special events in your surrounding area could impact business and should be noted.

The next step involves analyzing the variances. Highlight very low variances and very high variances. You want to improve the overall performance. Identify weaknesses and make adjustments in future forecasts. Try to imitate accurate forecasts. Find out what you did right on low variance predictions.

The key to building strong forecasts is a creating and keeping strong records, reviewing these records, which will enable you to improve your forecast. I never said this is going to be easy but don't stop, keep the process going and you will reap the rewards.

There are many tools available to help you forecast inventory, they can be as simple as an Excel spreadsheet or more sophisticated software solutions that master the art of inventory forecasting and ordering. You need to ask yourself which solution works best for you. But remember, the better tool will enable you to ensure you have enough product on hand at all times while reducing your inventory costs.

Interested in learning about how we can help you manage your food costs? Join us for a demo of our inventory system. 

Become a fan on our Facebook page or follow us on Twitter to keep updated on new product features, industry news, and tips on topics like inventory management.

How Do You Control Food Costs?

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The best restaurant managers in the food cost control game use a playbook designed to work in pressure situations.

If I were pressed for a single attribute these people share, I believe they focus on issues and activities that have a major positive impact. They constantly improve the environment and system to remove obstacles to success.

The best advice I can give anyone trying to improve results is simple. Buy less food and pay as little as possible. Do this without sacrificing quality.

In the early stages of a food cost control project, it's important to get a clear picture of the before. It may be more important than how the picture should look after completion. To establish goals, policies and reporting systems, you need to have a total understanding of the current cost control environment.

Remember the line from the movie City Slickers, where Jack Palance tells Billy Crystal to focus on "just one thing." His point, which is lost on Billy Crystal at the time - was that the "thing" is different for everyone. The secret is just to have something on which to dedicate yourself.

The same is true for food cost control, where to begin. Over the next few weeks we will be taking a look at some of the different ways to control food costs so check back with us next week when we will talk about "Forecasting".

Interested in learning about how we can help you manage your food costs? Join us for a demo of our inventory system. 

Become a fan on our Facebook page or follow us on Twitter to keep updated on new product features, industry news, and tips on topics like inventory management.