The Restaurant Biz Blog

Ever Heard: We Don't Know, What We Don't Know?

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We don't know what we don't know? Wonder what that actually means? Ask someone on the street as we did and you'll get several answers:

• Kevin, restaurant owner: it means you don't know where the "whats" are, as in "what if"
• John, college student: it means you can't know, because you don't know
• Travis, electrician: reminds me of working on historical buildings where I seem to never know what to know

In our minds, it means you don't know about the upcoming, upcoming. You were not as prepared as you could've been; or, not for that one little "thing". Likely, impossible to understand, report, gather intelligence on everything in advance, but what you know now often helps you to know then.

That's why doctors recommend a yearly check up, so they can help you know more about your health. Car lube/oil change establishments, make sure you're on a schedule so they can know your car. In the restaurant and retail industry, we must do the same: know more, by knowing often. The question is what should we monitor; so we, um, know at all.

To start, it is all about accurate and quality financial (labor and inventory) data. As restaurant operators, we MUST do two things well: get food in, and get it out. So the most important aspects of our business must be monitored closely. Below are few reporting and accounting best practices from RestaurantOwner.com, a great resource by the way.

• Daily recording of sales and receipts
• Detailed cost-recording of purchase invoices
• Weekly food and labor cost reporting
• Counting and computing inventory on a weekly (or monthly) basis
• Tracking key inventory item usage on a daily (or weekly) basis
• Managing time and attendance and accounting for labor expenses 
• Having a monthly financial profit and loss statement
• And more... But we can help you there... 

Interestingly, of this list there are three that really drove success to operators.

• Monthly financial profit and loss statement...
  • 73% of operators that received monthly financial statements reported being profitable.
  • Only 49% of (resturant survey) respondents that received just quarterly or annual statements were profitable. 
• Weekly food and labor cost reporting... 
  • 75% of operators that received weekly food and labor costs were profitable.
  • Only 60% of respondents that didn't get weekly reports were profitable.
• Counting and computing inventory on a weekly or monthly basis...
  • 72% of operators that do an inventory at least monthly were profitable.
  • Only 58% of operators that don't compute inventory values are profitable.

The bottom line is limiting, through the use of great data, that ever-present phrase, post disaster, or: we didn't know what we didn't know...

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.

How Great is Your Customer Service?

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When guests come to your restaurant, you should treat them as if they are friends visiting your home. Treating your guests with care and providing an exceptional place for them to enjoy a meal is part of the reason they will come back to your restaurant again. They also expect quality in every aspect of the restaurant. Guests are looking for a value in the things they see, taste and touch, and so providing them with exceptional quality will certainly leave a good taste in their mouths; here are a few tips.

Food Quality

Food and beverages are probably the biggest indicator of quality that a customer notices. Food quality is not only important to the customers' impressions of the overall restaurant experience, but it is important for the their health, as well. Guests' health should never be compromised. Although not all restaurants can boast the best quality food in town, they can still take measures to ensure that food is stored and prepared safely. Take the following considerations when assuring food quality in your restaurant:

• Be sure to follow proper first-in, first-out (FIFO) rotation with all food products.
• Properly label and date all food products.
• Never serve food that has expired.
• Prepare products safely, avoiding cross-contamination with dangerous bacteria or cross contact with allergens.
• Wash hands before and after handling food products.
• Prepare and serve foods at proper, safe temperatures.
  

Quality Atmosphere

When guests enter your restaurant, they should feel as though they are in a special, comfortable place. Try these suggestions to create a superior ambience in your restaurant:

• Consider your concept, and be sure the strength of the light suits the tone you wish to portray to your guests.
• Make sure the volume of your music is audible but not distracting. Music should help create the ambience rather than overwhelm it.
• Decorate your restaurant with a special, unique theme or focal point.
  
• Even a quick-service restaurant needs to demonstrate a high standard of cleanliness for customers to feel good about the quality of food.
  
• Maintain a comfortable inside temperature in your building. 70°F is usually acceptable. Minimize drafts or hot spots from lights as much as possible.

Memorable Service

Perhaps even more important than food quality is the service the customers experience from the time they enter the restaurant until the time they walk out the doors. Although restaurants thrive because of sales, the sale should never be put before the customer's needs.

How to Speak with Customers

In any restaurant or food service environment, speaking to customers should always involve the utmost respect and courtesy. This goes for all workers, from drive-thru attendants to servers at fine dining establishments. This is rather idealistic. However, restaurant workers should follow these general guidelines when speaking with customers:

• Use respectful titles, such as "sir" and "ma'am."
  
• Be optimistic, and speak with a smile.
• Never interrupt or talk over guests' conversations if you can help it,
• Know your menu so you can speak intelligently to educate guests.
• Listen with respect and care to what the customer has to say.
• Be sure you ask questions to clarify a customer's order if there is any confusion.
• Be honest and straightforward with customers at all times, especially if there is a problem.

How to Serve and Clear Food

Serving etiquette varies depending on the restaurant serving type. The restaurant types where this matters the most are upscale or fine dining restaurants. Managers should train their servers in proper table etiquette if they are unsure of how to proceed in a serving or clearing situation. The following tips describe the basics:

• Service order is usually an important standard upheld in fine dining restaurants or formal banquets. In these dining establishments, it is appropriate to serve the guest of honor first, then the female guests and then the males. In less formal restaurants, it is acceptable to simply serve women before men.
• Servers should serve and clear food from the diner's left side. Some formal restaurants advise serving with the left hand for these tasks. Serving from the left is best since most diners are right-handed. Politely excuse yourself if you find that you are interrupting or reaching.
  
• Serve or pour beverages from the diner's right side since that is usually where the glasses are set on the table.
• Serving food, servers and food runners should not call out entrées to see whom at the table claims the dishes. Servers and food runners should have a system to identify which plates correspond to which guest without having to mimic an auction house.
• Good service extends beyond the meal to the entire length of time the party is inside the restaurant.
• Unless otherwise requested, clear all plates and empty glasses at the same time, and before presenting the check.

Caring for Upset Customers

Now and again there are bound to be problems. A customer may be dissatisfied with his meal or may find the quality to be below his standards. Sometimes guests will find the need to vent anger or annoyance before the problem can be resolved. Be sure to train servers the proper ways to handle customer complaints. The manager should also visit the customer to ensure the resolution met their expectation. Retaining upset customers can be a challenge. When you put in the effort and respect to recover distressed customers, you may be able to convince them to return to your establishment in the future.

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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.

Top 3 Areas for Reducing Food Costs

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This is a follow-up to a series of articles I've been posting on controlling food costs in your restaurant.  The focus and time required to manage cost can seem daunting, so this week I just wanted to list a few key areas you can start with and can grow from there.  Next week we will be talking about recipe costing.    

The Kitchen:

• Reward staff when food costs are met
• Implement a meal plan, which allows your staff to eat at discounted prices to keep them from sneaking food here and there.
• Use spatulas to scrape every drop out of bowls and cans.
• Include portioning in your advanced prep instructions. Busy cooks may not have time to portion properly during a rush.
• Keep your knives sharp.
• Use the correct size of dish for each menu item to avoid the temptation to over-portion in order to make the plate look full.
• Inspect your garbage cans for food waste. If waste seems excessive, spend time training your staff to reduce the amount of food thrown away.

Planning Your Menu & Specials:

• Plan your specials to use ingredients you purchased on discount or items you would like to move out of your inventory.
• Use trim items from meal preparation to make soup or appetizers.
• When creating your plates, assign larger portions to items that have lower food cost and keep high-priced items to more manageable sizes.
• Use ingredients in several dishes so you can order in bulk. But beware of overstocking, as this may result in spoilage.
• Is your dishwasher throwing a lot of food away? If so, consider reducing your portions.

Ordering Food:

• When possible, buy fresh produce locally, direct from the grower.
• Stock enough supplies to avoid trips to the local discount or grocery store.
• Regularly schedule requests for quotes from both your current suppliers and new suppliers. Always get at least 3 quotes.

• 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

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 Does Food Waste and Theft Happen In A Restaurant?

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Whether you run a quick service or a fine-dining restaurant, the amount of money you make depends to a degree on how well you manage your inventory. Food cost is often a restaurant's largest single expense in the overall cost of running a restaurant.

It's common for restaurants to lose money through poor inventory management. Start-ups are particularly exposed to this cash drain, since they often do not have their financial control systems secured. But even the most well-managed, well-established restaurants have ongoing challenges with waste and theft.

Consider all the challenges of dealing with food. Your have a lot of inventory items and most of it is perishable with a limited shelf life. Failure to use a product within its shelf life results in throwing it into the trash and there go some of your hard-earned profits.

The more people involved in taking "raw" inventory and converting it to the delivered product, the more difficult it is to control loss, waste and misuse of inventory. The typical restaurant has dozens if not hundreds of raw and partially prepared food products in storage. You're stocking lots of desirable products to which many people have access. Depending on size, nature, volume and recipes in your business, there's a good chance that you'll have between 200 and 500 different raw food products in your storage rooms that are of value to everyone. The more products you have, the more challenging it is to control their use. The more of anything you have, the less likely one or two items will be immediately missed.

Manual counts, stock rotation, and portion control can help you control costs and ensure consistency. You will see the results in your profits at the end of the day. Whether you are using manual methods or examining your inventory in detail with software, when your employees see that you're keeping close watch on inventory, waste naturally decreases. Letting your staff know that you are tracking inventory carefully can have other benefits as well.

Adjusting for waste
Does your staff keep track when food is burned or spilled? To account for inventory properly, you will need to adjust stock levels whenever there is waste in the kitchen. You may want to have your staff report mishaps to the manager on duty and adjust for waste as it happens. Or you may prefer to use a waste worksheet in the kitchen and enter the adjustments into the software daily or weekly.

Stocking
Review your stocking procedures to avoid spoilage: organize your storage in such a way that products don't stay hidden in the back. Crowded, messy areas act like black holes for missing product and make it difficult to conduct counts. Make sure stored food is properly wrapped, covered, and labeled with a date so that it can be used before it spoils. Have a rotation policy in place for your stock. Food that comes first should be used first. Have your staff stock new items at the back of the fridge or freezer.

Counting
Regular physical stock counts are necessary for the smooth running of your inventory program. Physical counts are essential because they determine your actual usage. Conduct a daily inventory of 8 to 10 key food items. Spot inventory checks should be done in full view of employees as well, which keep the staff mindful that a theft would be hard to pull off. How often should you count? The recommended inventory period is one week, certain items you may want to count daily. This takes time but its time well spent especially if you suspect theft.

So ask yourself you if you are doing the following and if not it's a good place to start.

• Do you have consistent recipes for all your menu items?
• Are you portion-controlling your most costly items?
• Are you keeping no more than a week's stock on hand and systematically rotating perishable product to limit waste?
• Are you doing a physical inventory at least once a week?
• How much money do you have tied up in inventory? To limit waste and spoilage, industry consultants recommend keeping no more than a week's worth of stock on hand.

 
Related Articles

• How Do You Control Food Costs?
• Inventory Forecasting: You Can't Manage If You Don't Measure

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.

Top 5 things restaurants should be doing online

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