THE STORIES OF HOSPITALITY
THE STORIES OF HOSPITALITY
The All-Electric Commercial Kitchen
Electric kitchens? Yes, if you are looking to open a restaurant, I say that this may be the time to consider an all-electric commercial kitchen, especially with the high costs of hood exhaust systems, return air, Ansel Fire Suppression Systems, gas and air relay cutoffs, inspection and permitting waits and requirements, and other excessively high costs to open and run a commercial kitchen using gas. The upfront costs to open a restaurant are exorbitant.
Don’t be mistaken, electric cooking in a commercial environment is an entirely different way of production, and adjusting to this way of cooking takes consideration. The available equipment to decide upon varies, however, there are excellent electric fryers or air fryers, pizza ovens, flat-top grills, induction elements for sauteing, conventional convection, and fast cooking microwave combi-convection ovens to select from.
To consider this path means your menu must be simplified with a transition away from the traditional, however, there are great foods to be had in the process. And, while there are no more flames, you may have a lot less grease.
Take chicken wings or pizza for that matter. These are both mainstream items for bars and restaurants, and they can be cooked to perfection in only a matter of a few minutes. Each item created has the potential for the same perfection every time, due to regulated timers and crafty recipe building. The search for quality products that cook well when using electricity is part of the challenge.
LHC just completed a design and implementation of an all-electric kitchen in Middletown New York at an indoor amusement center. While the kinks to our menu and use of the equipment by the new cooks have some getting used to, the decision to build this kitchen has the owners ecstatic. Previously, the patrons would purchase their food from a neighboring restaurant, the staff would go pick this up for their guests, and who do you think footed the bill for this and cleanup and disposal?
The Electric Menu
Think Simplicity in the Beginning.
Let’s start with simple menu items that are easy to prepare and cook. Nachos, pizza, hot dogs, fries, and chicken wings are all great bar food items that can give you the ease of preparation and rapid cooking times. From there, you can develop your menu to afford casseroles, stuffed proteins, and other main course dishes. The important thing is the ease and quickness of preparation and simplicity in cooking. Some meals will require one step of cooking while others will require two or three steps to the cooking process. Many items are already programmed into the microwave convection ovens, however, I have found that adjusting these presets is often necessary.
Equipment & Electricity
The equipment you select must be mapped out just like a normal kitchen. First, the menu ideas should be considered, and an accompanying piece of equipment would coincide with this. For instance, French Fries or Chicken Wings would require a microwave/convection combination oven, whereas, a pizza can be cooked similarly or in a tabletop pizza oven that can reach 800 degrees. Pizza in a combination oven, however, can turn out less crisp if not regulated properly. The importance here is to know the equipment best suited for your needs and results.
Many of these units will require various electrical connections like 120V, 208/240V single or three-phase, where some are interchangeable with breakers but expect 20-50 amp breakers to be needed. I suggest, hiring a qualified electrical technician. For code requirements.
The bottom line is, that commercial electric kitchens may be our answer to significantly cutting buildout costs.
Without clarity, you may think this phrase is pretentious and absurd. I had the nerve to say this to my club’s treasurer years ago, then he immediately threw me out of the office. Really, this happened.
I have a philosophy behind this assertion.
While people react passionately to food, there must be a united establishment behind the affair.
I tried to explain this to the treasurer, as I could call any member and they would get on the phone within moments. You may say your membership does the same, however, this club’s memberships were doctors and executives associated with a leading medical school and numerous well-known hospitals. Try to reach your doctor with a quick phone call or call the office of the president or the dean and see how quickly you are talking to the leadership. In my case, I was able to talk almost immediately to doctors, presidents, the dean, and many executive members within moments, or they would call me right back. This was the relationship, and without hesitation, I can say this was power. Not power in the sense of control, or oversight, or strength over another, but acknowledgment from providing quality, and services, and comfort, and especially loyalty. This was loyalty to the position and the role behind the responsibility, and the membership responded with the same gift of respect. They did not perform this way because they had to, but willingly for they knew the value and wanted this relationship to be maintained.
I say food is power when this ability is compounded by many exceptional factors. The membership in this club was respected by me. Every member was regarded with the organization of knowing their likes, their needs, and their wants, oftentimes even before they knew what they wanted. Called by name upon arrival, seated immediately and oftentimes their favorite table, and offering their favorites while keeping them delighted with surprises as often as possible. The compounding of concerns to service and attention to details is especially important to success, yet the engagement of this commitment is oftentimes invisible or inconceivable in foodservice.
The consideration of treating people exceptionally, both guests and employees, is generally a common denominator in the club industry, but not in restaurants. However, this mindset may be needed in the transitioning of restaurant services in 2021 and beyond. The contemplation of a dramatic change is upon us, and without this consideration, we may see a further collapse of restaurants. Beware, a back-to-business-as-usual concept will be a cause for disappointment.
The understanding behind food is power is when an owner or manager realizes and provides the unquestionable realities that are required for success. If you harness an incredible atmosphere, encourage creativity, employ people that pass along this passion, and offer it unconditionally to your members and guests you will create an outcome that will attract business, and everyone will reap the pleasures that you have to offer.
We have the power to change people’s lives, albeit only for a moment.
You make sacrifices, you treat people well, you perform the role with heart and caring, and you change people’s lives. Hospitality is about power, but the kind that is given, not received.
By the way, the club’s treasurer was the Senior Associate Dean Director of Finance and whenever he was too busy to talk to me, I would return with hot fresh chocolate chip cookies, and he would always wave me in. True story.
Jim Lopolito, President
Lopolito Hospitality Consultants
THE DILEMMA OF HOSPITALITY TEAMS AND SALARIES IN 2021
When we compare satisfied employees with good pay the hospitality industry has been in a condition of instability and this began prior to 2020. While a solution has encompassed different directions but never resulted, the dilemma is being further plagued by an unexpected new competitor paying all our staff, and they are paying them a higher wage.
Rates of pay have been a hot topic for some time now, however, the burden upon businesses satisfying salary expectations has been further complicated in 2020 and now 2021. Front of House and Back of House staff have been talking better pay for years. With the current unemployment benefits going until September 2021, it will be difficult to get employees to return to work. The new unemployment benefits are offering the customary amounts plus an added three hundred dollars in supplemental pay. This means $500 to $800 a week salary for sitting home. Will we see staff return to a job that has many hours of stressful work, often difficult conditions, sometimes low morale and poor treatment, and less pay, or will this cause workers to stay home?
While I applaud the much-needed money for many families, how must we react to keep our businesses open and staffed?
Hospitality staff have been running to other jobs outside the industry for some time and even more so after COVID canceled their jobs. Many social posts by foodservice employees and especially chefs are all talking and telling each other about the difficult work environment with less available workers by their side. They are sharing discussions about better jobs and reasons to not return. The industry is a killer when it comes to hours worked for the often talked about unrealistic workload to pay received. Changes have been occurring to better the level of income; however, it may be a little late. While passionate staff will hopefully remain, it is more difficult to keep required staff levels, and turnover is only going to increase in the months ahead.
The options to bring staff back may be limited right now, and do not believe that this is going away any time soon. Staff is running to other industries than food services and they are taking their friends with them. If you do not settle upon a way to secure your team, and soon as summer is coming, you may be left holding up the business with limited staff. As the owner or manager, you will do a lot more than you expected or can accomplish.
We are in a serious position with staffing our restaurants, our private clubs, our café’s, and our catering businesses unless we can come up with solutions.
In addition, low levels of staff and high turnover associate with guest dissatisfaction. We all know the outcomes of poor service and lower quality food output. From losing customers to paying the price in online posts that kill business, now is the time to step up with a plan.
What can you do short term?
1) Enlist good quality ad-hoc staff on the busy days and pay them well so that they will work the days offset from unemployment benefits. If they can pick up a Friday, Saturday, or Sunday at a good rate, and perhaps still receive a good portion of their unemployment benefits, this is a win for both.
2) Reboot your menu with lower-cost items with less prep and cooking needs to reduce staff requirements. Pay the people you have a higher wage to keep them. While not for every category, this may suit smaller locations over the short term of 2021.
3) You made it through the 2020 season and want to meet the demand of added revenue from the locations nearby that may have closed. Put this to the test and increase your rates of pay, add between 10-50 cents per menu item, concentrate on other cost reductions, and teach your team what items have the highest potential for profits. Keep in mind that the higher-cost items may yield the most profits. Sell profits.
4) Purchase the restaurant next door that closed during COVID. Utilize this addition to maximize your staff needs and your preparation needs. IE: all prep is done at one location, the staff has more hours available and work security with two locations, transfer product between locations as necessary to improve utilization, use one location as a commissary kitchen (Ghost Kitchen), etc.
5) Sell safety over food and service. Guests are more interested in how safe they will be over how good your food or service is. Tell guests what you are doing and Sell Safety to get them in the door.
Whatever you come up with, business as usual is not coming back anytime soon. You cannot wait until things settle down because too much has changed.
The way you did business in the past is gone for now. Step up and plan.
Jim Lopolito, President
Lopolito Hospitality Consultants, Corp. (LHC) is a New York based consulting firm that offers Recovery Facilitation, Startup Development, Feasibility Studies, and Forward-Thinking Solutions alongside Operational and Management Practices to businesses in the hospitality industry.
The Consideration of Ghost Kitchens
If you do not know what a Ghost Kitchen is you are paying too much attention to running your hospitality business and not enough time to look at other avenues of revenue to remain solvent. Being tied to operations can cause inaction to other opportunities and can prevent revenue growth, and this year more than ever adjustments to daily developments have consumed management. While a Ghost Kitchen may not be for you, as they can certainly fail if not properly planned, let’s study the possibility of more revenue out of your existing kitchen or perhaps at another location.
The Do’s and Don’ts in Considering a Ghost Kitchen “GK”
While a Ghost Kitchen is not for everyone, if you have the capability for additional output from your existing kitchen this may be something to consider. Even if you do not believe it, the COVID era has brought on opportunity like no other to the restaurant industry. If you plan right, you can gain some of the lost revenue through the closed locations in your area.
Looking past the difficulties, rethink what is going on right now in your kitchen and decide if other possibilities can be realized.
Do You Have?
1) A double line setup?
a. Two sets of kitchens.
b. Two sets of equipment.
c. A section of kitchen and equipment not being used.
2) An unused room that may be adjacent to the wall that occupies the existing hood?
3) Enough prep area, additional space, and storage to accommodate two or more concepts separately?
4) Enough daily downtime to offer alternative cooking preparations, simultaneously or not?
5) A team that has various cuisines experience?
While the GK idea has been around for a while, the COVID era has opened the door as the perfect time for this concept to be further evaluated. Also called the delivery kitchen and other names, and with the numerous restaurants unfortunately closing, this opens the path for new business to be established right away at your location. Look around to notice how many of your neighborhood restaurants are now closed. While this is really unfortunate, it’s also an opportunity.
1) What are some of the successful cuisines in your area that are now gone?
2) How much revenue is now available for you to pick up from these closed locations?
You need to be asking yourself these and other questions right now. Yeah, we all feel bad about our neighbors and this is really unfortunate, but you also need to survive, don’t you? Stop thinking that it is the end and you are unable to compete, and start planning for next year right now.
We can safely assume that your revenue of the past has some time for rebounding, so taking this time to add services might work out just fine. However, be warned, I believe that this is a short-lived concept that only the best will succeed with over time. This must be planned, designed, fully incorporated into current operations, or unless you can provide another location. This is not just a prototype even if you believe you will only do this for a year. You must go full barrel and it must be heavily marketed. You must have significant delivery capacity in your area and the ability to produce great food that travels well to succeed. (Think hamburgers that arrive well done when ordered medium-rare. If only we could consume the fact that food keeps cooking during delivery)
You may even close your dining room and go full out GK if you want, but I would not advise losing current revenue just yet. However, this is just like opening a new business, so the planning is similar and so are the licensing requirements. You can also forgo the dining room. Yes, the dining room and bar do not exist in the GK scenario, just the kitchen, and storage. You could also outsource the portion of the kitchen and charge rent; however, this can become troublesome as a partnership so think this through beforehand, as I am not recommending this strategy. Do it right and do it yourself.
How can you decide if a GK is for you?
1) You need more revenue, or else.
a. If you are contemplating closing and have no other revenue sources.
2) You have the capability to create another one or two concepts internally.
a. Discuss other concepts with your team and create a small delivery menu.
b. Can you offer another cuisine alongside your current offerings, staff, and same equipment, or does this need to be accommodated off-times or from another kitchen?
3) You have the room in the kitchen and the equipment to support additional volume.
a. You have great cooks with multiple cuisine knowledge.
b. You are in a delivery stable location.
c. This is a no brainer. If your equipment is standing still, use it.
4) You have an additional space that may even be adjacent to the wall that occupies the existing hood.
a. Costs to tie-in to an existing hood and the location of gas lines in the adjacent wall can save you renovation money. Make sure the hood can accept the additional capacity, or add a higher capacity fan, and the gas measurements hold up for the additional equipment.
b. You will still have to obtain building permits just like anything else.
c. You will need to register and license the new concept.
5) You have use of your own delivery staff or outsourced services from food delivery organizations.
a. Remember, this is a delivery-only service you are building, although pick-up can be offered.
6) There is a small restaurant next door that closed. Can you revive this as a stand-alone Ghost Kitchen?
You began your first restaurant and you may even have more than one now. Consider this an extension operating simultaneously or at random intervals consistently. If you do not want to encumber your current location but have the funds to open another restaurant, think GK instead. Additionally, consider opening a GK at an offbeat location behind a warehouse, still within delivery opportunities, with low rent, and just build a kitchen operation.
Whatever you go GK or not, don’t sit still. Now is the time to start planning your growth. Whether this is a Ghost Kitchen or another restaurant, get to work. The time to plan could not be better.
Jim Lopolito, President
Lopolito Hospitality Consultants
While there is no immediate regulation demanding implementation for new business procedures does this mean you wait for what is to come? The writing for change is on the wall so should you implement new ideas now or wait until you are told to do so?
Jim Lopolito says, implementing a necessities strategy with thoughtful considerations and conscious marketing ahead of regulation means you are doing something practical and smart.
Within our current environment, businesses will be asked to implement new procedures in order to meet the safety and concerns of the general public. Some systems will be regulated government demands, while others will be sensible to the expectations of your clientele and just a good idea. Waiting only means you will be behind those that think ahead.
How do you know for sure if you should implement a procedure? Before implementing change, you may want to consider whether the idea or method you are considering meets some important protocols. If you are just running with an idea you think sounds practical but not well thought out, you may only be wasting everyone's time.
Here are a few steps to follow in making the judgment either way.
Does the idea fill the 5 needs to implement?
1) Rationale: Is the idea or method required or necessary and address a problem? If yes, go to 2. If not, spend time with something that is required or necessary.
2) Feasible: Does your solution fully address the "risk to persons" or offer a solution theoretical? If yes, go to 3. If not, how can you adjust it to fully meet the risk or solution expectation?
3) Achievable: Can you currently provide this from your business just on the bases of in-house considerations within the standards, occupancy, staffing capabilities, space restraints, equipment on hand, etc., or will you have to make changes? If achievable, go to 4. If changes necessary, consider what this will entail before going forward.
4) Deliverable: Can you provide, without failure, unwavering delivery with over-performance each instance to expectations? If yes, go to 5. If no, reconsider your approach or look at alternatives that will achieve this consideration.
5) Government-regulated: Does it meet or exceed any Government Regulations. If yes, implement it. If not, is it required to meet regulations and if not, should you still implement for the common good? If it does not meet regulation, reconsider alternative methods to meet these guidelines.
If you are unable to fill the demand of the 5 steps, you may be paying more attention to something that is unnecessary and may go nowhere. Instead, concentrate on what gets you to where you need to be and not to have more in the way to do.
Jim Lopolito, President, Lopolito Hospitality Consultants, Corp.
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An in-depth look into what you cannot control and what you should control. In this material, I embrace diverse methodologies in expense behaviors.
The proficiency required to understand and control expenses is not as simple as it may seem. Revenue and expense, purchasing and inventory management, profit and loss, and many other factors are all tied together with an enduring management oversight behavior supported by knowledge and understanding of the industry. Becoming stagnant or comfortable in this arena is a dangerous cloud to hang over you.
The likelihood, however, is that you do not have control over your expenses. Not really anyway. To help your restaurant management team cope with this challenge, what follows may offer a better understanding of exactly what this means with an encouraging ability to improve.
Consider this methodology: "You need to know where your numbers are going before you get there."We all know that the controlling of restaurant expenses is a mix of; observing daily activities, market price research, purchasing effectiveness, having cost control procedures in place, effective use of restaurant POS system reports, and many other factors. However, at the heart of this understanding is a misunderstood and almost impossible ability to achieve the goal of full control. You may not have a full understanding of controlling expenses without the consideration and inclusion of what is not in your control.
Here is a menu pricing control consideration: One effective method in controlling fluctuation in market costs would be to adjust each effected recipe cost and corresponding menu price as they occur accordingly. While this solution offers balance on profit concerns, imagine the work involved or how your customers would feel if you changed menu prices every time your costs changed. However, even if you actually performed this function, this attempt is skewed and diluted because your menu sales mix changes each day.
Control Over Expenses Is A Perceived Outcome
The control of restaurant expenses is a delusional byproduct of the sanities of management in their perceived ability to perform this function.What this means is relatively straightforward. If you believe you have a handle on your restaurant expenses, you may actually not.
In understanding expenses, you must determine or realize what you cannot control, and then do your best with processes and procedures toward what you do have control over. This is important because there are expenses in the business that are a byproduct of operations that are out of your control, and if you are not aware of how this impacts upon your business, you may be misinterpreting your reporting.
For instance, your menu is a fixed piece of business material as it does not generally change every day. You purchase a fish on your menu for $5 a pound today and the initial set menu price is $15, or 33% food cost based on only these two factors. Tomorrow the same fish cost you $6 a pound at a 40% food cost, but you do not change your menu price so you are losing 7% for each sale in this transaction because the original pricing for the menu was based on the $5 per pound. Do you monitor these occurrences and account for this loss in your reports? Most likely you do not. You might just follow a pattern that often occurs in the industry where you tell the chef that they have to do a better job in lowering the food cost. Oftentimes, this is difficult because the chef is ordering what is on the menu, and does not control market prices.
Here are five examples where you do not have full control of expenses.
· Daily Vendor Pricing Fluctuations: The pricing and product quality and quantities from vendors change regularly. Control over these fluctuations may include how much you order and from which vendor, but if you must purchase the product because it is on your menu, you do not have much choice over the price. However, in addition to the selection of the item and pricing there can also be a difference in quality or counts/weights on the items in the selection process, thus also affecting the finished product costs.
· Daily Vendor Pricing Fluctuations: Track purchase price fluctuations on all products as a variance report. This can be performed daily or during inventory procedures, whereas, FIFO accounting can be used to offer a variance of amounts ordered against price differences during the month. The differences can be averaged, if necessary, in month to month price variations to assist with decisions and adjust recipe costs and menu prices.
· Daily Menu Mix: Even with suggestive selling, the overall selection process is by the guest. This selection in turn moves the outcome of your profit and loss for the day. The daily menu mix also affects other factors like usage and spoilage, so the ability to maintain some control is through effective ordering procedures, effective selling techniques, and effective preparation and menu product usage, however, to purchase and prepare the exact amount in controlling these factors is extremely difficult to manage.
· Daily Menu Mix: Each day will offer a different revenue and profit outcome, and one reason for this is because you do not sell the same amounts of the same items every day. If you know the differences in profit from each item (known as contribution margin) you can track your efficiency and use this to train staff on selling the higher profit items. This is also very useful as part of menu engineering and the placement of items on the menu itself.
· Daily Loss of Product: While everyone tries to control breakage, loss of product, drops on the floor, spoilage, theft, and other similar loss of product factors, the control of these costs is essentially fate. Security of product can assist with some of these values; however, the best you can do is to be careful and proactive in addressing these circumstances and to record their value on profits.
· Daily Loss of Product: You must track breakage, loss of product, drops on the floor, spoilage, theft, and other similar loss. You may be surprised at how these add up to loss of profits, and you should document this information in your reports.
· Daily Returns and Adjustments: The control on returns and adjustments is basically in the hands of your guests. You can do your best to put out a good product, but not everyone is going to like what you produce. There are many factors like; returns, misfires, unknown free meals provided by employees, or spillage, and these examples all have additional expenses and are not controlled by the business. Recoding them is your best defense on understanding how this is affecting profits.
· Daily Returns and Adjustments: Each item on the menu should have a recipe and cost. End of day reports should include; voids, comps, discounts, refunds, and any other report that you use to offer additional expense for the day. Every item should have a cost factor attached to it and you should track the amount you lost in revenue as a result of the lost or free offered product. If you comp a drink with a cost of $2, you didn’t just lose the $2. You also lose the difference in revenue from the lost sale from what you comp.
· Laws Affecting Costs: Businesses are unable to control the wage laws and this is just one area of government control where you have no control. Taxes, labor laws and other factors must all be considered. You can try everything in your power to reduce salaries and cut these costs, but in the end, you have to place the people in positions to get the job done, and pay the price dictated by government influence.
· Laws Affecting Costs: No business can control the new wage laws and you can only do your best to adjust how you perform operational practices to achieve your best performance.
You can only do your best to control costs that are within your ability, but in the end the total control you have is really out of your hands.
Controlling The Expenses You Can Control
Controlling expenses begins with having a practice in place to regulate the outcome of your processes. Proactive procedures help with outcomes ahead, whereas, reactive procedures leave you behind. Without effective procedures and monitoring your outcome becomes ambiguous.
Without knowledge-based behavior that supports future business performance with positive influencing of your results, you are just reacting to daily activities.
The practice of expense control falls under the methodology and implementation of an Expenditure Behavior Management “EBM” process to influence your progress and results. EBM is an awareness driven decision-making practice in controlling business expenditures with an understanding of how the decisions you make today affect current and future operations as a whole. EBM methodology uses a proactive approach to addressing expenses.
Just because you pay attention to your expenses does not mean you are doing everything you can. Everyday decisions can generate a constant toward loss from procedures in the business that has become overlooked or have become common behavioral practices. For instance, the common practice in evaluating end-of-month reports with implementing next month's cost controls or spending adjustments are old school and an afterthought process. This method fails in having current cost controls considerations in place, therefore continuing to perform this monthly ritual will only result in forever gone profits, or an Expense Loss condition.
Expense Loss is the variance between money that is currently unsystematically expensed on product, services, or equipment and the achievable amount of expense reduction that is possible or interpreted through a review and fiscally applied methods of spending behavior and forward-thinking decisions. Having the knowledge of the variance between amounts you are spending now and the amount you could reduce this by, or procedures implemented that affect a cost reduction if you implemented them differently, is paramount.
The Cost Side and the Lost Side of Spending Behavior.
There are two considerations when understanding expense behavior. These are the Cost Side and Lost Side to spending behavior:
A common viewpoint by managers in the spending decision process is the “cost side spending behavior” mentality. The Cost Side Spending Behavior is: What will this cost me in making this decision?
When observing expenditures the cost side viewpoint most often presents a one-time decision that did not include forward considerations or continuous monitoring practices and is counterproductive to an effective EBM process. You become complacent into the thought that you made the decision on an amount of money to spend that feels right. There is no need to revisit this, especially if you are comfortable with your decision and the same expense is expected to come up again.
In these situations, you and your managers may no longer question the cost of the item or service provided by a vendor no matter how much further reduction may be available in the marketplace, (knowingly or unknowingly) or how much you may be losing in Expense Loss by following this cost side methodology. Everyone is on board with the cost from the vendor and no further determinations are necessary. This behavior may continue until revenue drops below costs and a red flag goes up. Cost side spending behavior is a reactive based behavior pattern.
In contrast there is the “lost side spending behavior.” The Lost Side Spending Behavior is: The specific amount determined or interpreted as overspent and gone from your profits signaling a proactive sequence the next time this expense occurs.
The end determination is to evaluate what your additional profits can be when considering alternatives to your decisions, and is a segment in the Expense Loss and EBM methodology. The goal is to get you to look closely at the amounts lost from purchasing and procedural decisions and add them up. Look at your operations as a whole in service standards, cleanliness and appearance, purchases, receiving procedures, inventory management, or anything else your company deals with in its entirety. View how each decision you make in each of the categories of your business may be participating to generating profits, or not, and where the Expense Loss condition exists in each category.
Looking at expenses with a lost side mentality keeps you informed and attentive to future decisions that will not follow the same outcome. Lost side spending behavior is a preemptive knowledge-based behavior pattern.
Keep in mind that a procedural decision may include you having no procedure in place for a particular situation and how this lack of attention may be affecting expenses.
Examples of Expense Loss
· At the bar: Consider that a ¼ ounce over pour on one drink from a $30 bottle of alcohol is 22 cents each occurrence. Over an annual basis of 10,000 drinks poured with a ¼ ounce over pour creates a $2,200 loss. Now add in the 2500 ounces lost in this scenario that could have made 406 more drinks using a 1.5 ounce pour at $8 a drink, (406 x $8) or $3,248, and you have a total Expense Loss of $5,448 for the year. Using this example you can understand that understanding expenses at the bar is essential, but you also need to know Potential Pouring Costs PPC, Actual Pouring Costs APC, recipe creation and costing, and understand spillage, theft, and other occurrences at the bar.
At the bar, you can make a table to compare your Bottle Cost with Price Per Ounce and Loss to better understand the situation. Here is an example diagram that does not account for loss of revenue that results from over-pouring, which is the additional thing to consider.
· In the kitchen: Waste management, over prepping, and not accounting for yields are just a few of the costly expenses associated with BOH operations. There are purchasing procedures, receiving procedures, and inventory management that are different than FOH operations, and to misunderstand these procedures is extremely costly to a business. Many operations concentrate on FOH revenue and sales and neglect the effectiveness of proper procedures that can reduce costs and add significant profits in the process. ·
· Reporting: Another factor in expense is when a restaurant relies on food cost percentages as the determining factor of how well the chef is attending to expenses, whereas, this alone should not be relied upon. The gauge should be a combination of:
1) Food costs percentages.
2) Daily menu mix.
3) Contribution margin considerations.
After you consider these factors collectively to associate the actual outcome of the day, share them with your team. Knowing contribution margins, for instance, tells you what to sell for the highest profit, and if service staff does not have this information, the chef cannot be fully to blame.
The management of restaurant expenses is not an easy process to fully understand or control. The incorporation of so many factors contributes to your success or to your failure. There can be many reasons that contribute to poor results in a business and to fully understand expenses and how to control them as the leading contributor to restaurant success.
Do your due diligence, and train your restaurant staff about restaurant expenses as much as possible. Having a grasp on expenses can add significantly to your profits, and the more likely that you will succeed.
The damaging impact of COVID-19 upon the food industry is here and the aftermath may be a long road of corrections. There could be an upside with the replenishment of fish in our seas and better air quality, but joblessness and business closures are far from a good story. We will also have to expect wasted foods from farms and fisheries, and the decline in food available causing rising prices.
While current standings indicate pre-market food prices sharply falling, I would not expect this to continue or be an after effect for the end consumer. In fact, I believe we should all get ready to pay more sooner than later.
According to the American Farm Bureau Federation, Price forecasts for most agricultural products are bleak. In the past month, dairy prices have dropped 26-36%, corn futures have dropped by 14%, soybean futures are down 8% and cotton futures have plummeted 31%. Hog futures are down by 31%. Despite a rise in retail prices in some areas, the prices paid to cattle ranchers have fallen 25%. 1
Farming, shipping, manufacturing, and other supply chain routing needs are not being met because demand is significantly down. With schools closed, restaurants diminished and other foodservice almost nonexistent, the quantity usage value from increased home shopping stockpiling is not equivalent or even close to the demand required to support typically available supplies.
The common food chain is Farm to Farm Production and then to First Line Handlers or Manufacturers. From here we go to Wholesale and Logistics to Retail Food and Food Service Sectors and then to the Consumer. While there is some Farm to Service Sector, this is comparatively minimal. All of these avenues and services have been disrupted, and the residual effects will be brutal upon the hospitality Industry.
An avenue that has helped but certainly not the solution. Hundreds of people have been going to Galilee to buy seafood right off the boat. As of Thursday, March 26th, the catch of the day by commercial fishermen in the Port of Galilee were sold out.
However, "Restaurants are closed, seafood markets are closed, so they're basically telling their fishermen stay tied to the dock until things change," said Fred Mattera, with the Commercial Fisheries Center of Rhode Island. 2
The industry is suffering, and this will continue long after we return to any routine if this word is even possible. With food sitting dormant ready to pick in fields and fishing boats tied to their docks, how do you prepare for what is about to transpire in the industry?
There are a few considerations to ponder:
1) Do not expect a spending spree just because an “all clear” is signaled. I predict a slow start to spending by all, thus further implying a negative impact upon food purchases and supplies or the return to normal.
2) Supply chain disruptions, from the farms and fishing trawlers to beyond in the sequence of manufacturing and delivery with many unknowns. Be prepared for shortages and quality issues.
3) While current analysis shows price drops in agricultural products, the disruption has a predictable effect upon prices and food inflation should be expected. While the American Farm Bureau Federation forecasts indicate price drops, March 25, 2020, Consumer Price Index (CPI) All Food has remained steady at 1.5 to 2.5. However, I say be prepared and expect an increase in your expenses.
4) Will the current backlog of foods and increased prices create a commodity in a frozen product? I say yes.
Nick Muto, a fisherman out of Saquatucket in Harwich, MA, who catches monkfish and skate is amongst the many who have had to reduce their fishing effort. Muto was clear about the scale of the problem at this point. “It’s bigger than people going to the store and buying a piece of fish at this point – you’re talking about millions of pounds of fish and now there has become a backlog of product…we’re approaching critical mass here very quickly,” said Muto. There is only so much freezer space available for holding product, and we may soon be in a situation where we’re wasting a valuable source of protein. 3
If you are a club, restaurant, caterer, or other foodservice entity and you expect to fully reopen, good for you, However, if right now all you are doing is providing pickup and delivery or trying to stay afloat with other methods, you must also begin preparing your business for what is to come.
1) If you are planning to operate the same way you always did, think again or get ready for possible disappointment. Do not assume just because your business was good that it will resume to normal. Routine is not what I would anticipate right away.
2) Be prepared to slowly rev up operations and not be fully staffed from the start. I know that you want to get everyone back to work, but allow this to advance as business grows over the weeks, or plan as if you are a new restaurant opening.
3) Reorganize your marketing. You must be ready to advertise that you are open and ready for business. Do not stop the delivery and pickup process in place. I anticipate this may continue for some time as we get accustomed to our well-being.
4) Consider reducing your menu items, preparation needs, and keep inventories reduced to essentials. This will support better cash flows and support efforts in rapidly changing supply, quality issues, and pricing fluctuations. If you plan accordingly this process will save you money and keep cash reserves higher. Even if most products are available from the start I believe there will be interruptions along the way from product loss that has not affected the market yet. Also, be prepared to purchase more frozen than normal or the need to adjust recipes.
5) Estimate inventory levels carefully to utilize in stock foods first. Any product that has remained in-hand that can be utilized does not require a cash outlay.
6) You need to become efficient. All of your item recipes will have to be cost reevaluated. If you assume that small changes in prices do not largely affect menu price you are misinformed and you can lose a lot of money. Purchases must be carefully evaluated for portion costs and savings. There has never been a more important time to be efficient in purchases, inventory, preparation, yield management, and recipe cost evaluations.
And then there is the ultimate thought of restructuring your business entirely. Here is an opportunity for you to become something you need to be, as a result of not overcoming the impact COVID-19 dealt you. This transition could become a commissary or "Ghost Kitchen," a reduction in your services like becoming a buffet restaurant from tablecloth service, or a different store entirely. Now is the time to consider where you were and how much time and investment you had previously, or how much money you were making, or not.
Begin to evaluate your business as soon as possible. The longer you wait the less prepared you will be in the coming weeks to reopen efficiently. Whatever you do, don’t just wait to see what is going to occur. Plan, be ready, survive, assist others, stay healthy, maintain, and be prepared for when it is time to reopen.
Jim is currently providing free consulting sessions in April 2020 during COVID-19.
By Jim Lopolito, President of Lopolito Hospitality Consultants, Corp. (LHC), a leading New York-based consulting firm that provides forward-thinking reviews and solutions nationwide to businesses in the hospitality industry. Advisory services are available to restaurants, country clubs, caterers, and other foodservice businesses with solutions to Concept, Design, Renovation, Operational Development, Training, Property and Facility Oversight, Golf and Pool Operations. The company also offers Executive Search and Interim Management Services.
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The Paycheck Protection Program was touted as protection to your business. Although there is a small percentage of these loans that actually reached restaurants and similar food service businesses, there are downfalls to prepare for with the program.
The current unemployment benefits program is supporting both regular benefit income, along with a $600 added supplement. This supplement, for as long as this continues, will act to discourage a return to employment influence.
Employees are far less likely to be encouraged to return to employment under these pay programs.Use the following thoughts in preparation for your company’s near future planning.
With or without receiving the PPP loan funds, businesses will run into a brick wall hiring back employees. In most cases, you will be offering to pay less than the unemployment benefits staff is receiving by not working. Unemployment benefits with the extra $600 per week are considerably higher than most foodservice personnel are currently earning. With PPP and the 8 weeks spend guideline it will be difficult to bring back all employees during this timeframe, therefore you will be required to pay back the loans in two years. This will further burden your businesses' cash flow.
With this consideration;
1) As long as the unemployment benefits include the extra $600 per week hospitality companies will have difficulty in getting staff to return if offering usual wages.
2) Companies that attempt to use 75% of the PPP loan mandate to pay wages will encounter two scenarios.
a) Staff will not return to work because they are earning more with unemployment, therefore the company will fall short of the 100% hire back requirement.
b) Companies that do achieve the 100% hire back requirement will complete the 8 weeks and not have enough business to support keeping 100% staff on payroll, therefore laying them off again.
3) Companies will begin considering alternate methods of payroll if they need staff, therefore supplementing the unemployment income.
Other factors to consider;
Overall, if you are not planning your business scenarios for the coming months you will find yourself cut short of your potential along with a higher risk of failure ahead of you.