Control Restaurant Expenses: Common Myths About Restaurant Costs Debunked | Poster POS
Do you believe your restaurant costs are under control? They may actually not be. Let Jim Lopolito, president of a restaurant consulting company, clear up common misconceptions about restaurant expenses.
How to control and reduce restaurant expenses: Get rid of misbeliefs and stop your restaurant from losing money.
Stop your restaurant from losing money.
Restaurant cost control: Get rid of misbeliefs and stop your restaurant from losing money.
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. To help your restaurant management team cope with this challenge, we invited Jim Lopolito, President of a New York based restaurant consulting company, to share his knowledge on our blog.
If you’d like to establish control over your restaurant operating expenses, read on, and use Jim’s tips to know where your numbers are going before you get there.
Control over restaurant expenses is a perceived outcome.
We all know that the controlling of restaurant monthly 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 idea, there is a misunderstood and almost impossible ability to achieve the goal of full control.
The control of restaurant costs is a delusional byproduct from 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 fact, you won’t have a full understanding in controlling expenses without the consideration and inclusion of what is not in your control. Let’s illustrate this idea with an example related to menu prices that are influenced by costs of ingredients in the market.
In theory, you could try to control fluctuation in market costs through adjusting each affected recipe cost and corresponding menu price as they occur. While this solution offers balance on profit concerns, imagine how your customers would feel if you changed menu prices every time your costs changed. On top of that, even if you actually do this, your attempt is skewed and diluted because your menu sales mix changes every day.
In understanding different categories of expenses you must determine what you cannot control. Then, do your best with processes and procedures toward what you do have control over. This is important because there are restaurant operating costs 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 that doesn’t change every day. Let’s assume that today you can purchase fish for $5 a pound and you decide to set a $15 menu price for this item. You’ll expect 33% food cost based on only these two factors. Tomorrow the same fish can cost you $6 a pound and you’ll have a 40% food cost, but you do not change your menu price so you’ll be 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 such cases and account for this loss in your reports?
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.
Non-controllable restaurant costs breakdown and ways to cope with them.
You can only do your best to control costs that are within your ability, but in the end, the total control is really out of your hands. Let's look at some common non-controllable expenses.
Daily vendor pricing fluctuations.
The price and product from vendors changes regularly. These fluctuations can change average operating costs for a restaurant. You can try to minimize their influence by regulating how much you order and from which vendor. However, if you have to purchase the product because it is on your menu anyway, you have no choice over the price. In addition, you may have to select products based on quality or counts, which also affects your final costs.
Track purchase price fluctuations on all products as a variance report. This can be performed during inventory procedures, whereas, FIFO accounting can be used to offer a variance of amounts ordered against price differences during the month. The differences in month to month price variations can assist with decisions to 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. You can maintain some control through effective ordering procedures, selling techniques, preparation methods, and economic product usage. However, purchasing and preparing the exact amounts of food to control these factors is extremely difficult.
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.
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.
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, free meals provided by employees, or spillage. Those are examples of additional expenses that are not controlled by the business. Recording them is the only way for you to know how they affect your profits.
Each item on the menu should have a recipe and cost. End of day reports should include; voids, comps, discounts, refunds, and any other information that you need to calculate additional expenses 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 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
Admit that no business can control the wage laws that have been affecting businesses. 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 these costs, but in the end, you’ll have to fill every position in your restaurant to get the job done and pay the price set by the government.
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.
Now that you have recognized non-controllable expenses in restaurant business how can we use this to your advantage? Know that they exist and have a percentage or dollar adjustment allocated within reports based on your history.
Controllable restaurant expenses breakdown and ways to minimize them
Your restaurant controllable expenses require you to have 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 conscious knowledge-based management you are just reacting to what happens to you and have minimum ability to influence your results.
Try to implement Expenditure Behavior Management (EBM) methodology to influence your progress and results. EBM is an awareness driven decision making practice in controlling business expenditures. This methodology helps you address your expenses proactively. It would let you understand how the decisions you make today affect current and future operations as a whole.
If you pay attention to your expenses, it doesn’t mean you are doing everything you can. Your business may experience constant loss from inefficient procedures that hadn’t been optimized before they became common behavioral practice. For instance, many restaurant owners have an old school approach to evaluating end-of-month reports, and then implement adjustments. This method fails to While implementing next month's cost controls or spending adjustments managers often fail to consider current cost controls already they have in place. Therefore this monthly ritual results only in forever gone profits, and puts you them in an Expense Loss condition.
Expense Loss is the variance between money you unsystematically spend on product, services, or equipment and the achievable amount of money you can save by changing your spending behavior along with forward thinking procedures. Knowing the variance between the amount of money you are spending and the amount of money you can save, or the difference in how your decisions affect future outcomes, is paramount.
Cost Side and Lost Side spending behavior
Cost Side Spending Behavior mentality is quite common among restaurant managers. When making decisions on spending money they ask themselves: ‘What will this cost me?’ This approach is counterproductive to an effective EBM because it makes people think that they make a one-time decision on an amount of money to spend that feels right. Further, it seems to them that there is no need to revisit this, especially if they are comfortable with their decision and the same expense is expected to come up again. Such spending behavior belongs to behavior patterns of a reactive type.
For example, following the cost side methodology, after you sign a contract with a vendor you no longer question the cost of the item or service provided by them no matter how much further reduction may be available in the market. You don’t ask yourself how much you may be losing in Expense Loss. 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.
A Lost Side Spending Behavior mentality is the alternative. Managers who have this mentality see particular amounts of money as overspends reducing their profits. They take those overspends as a signal to be proactive next time this kind of expense occurs. Looking at expenses with a lost side mentality keeps managers informed and attentive to future decisions that will not follow the same outcome. Such spending behavior belongs to behavior patterns of a preemptive knowledge-based type.
For example, to start following the lost side methodology, you should look closely at the amounts lost from your purchasing and procedural decisions and sum 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. Try to see how each decision you made in each aspect of your business has contributed to your profit and where the Expense Loss condition exists.
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.
Expense loss you may have at the bar and at 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. Misunderstanding of these procedures can be extremely costly to a business.
For example, running a bar, you need to know your Potential Pour Costs (PPC), Actual Pour Costs (APC), and understand recipe creation, costing, spillage, theft, etc. Consider that a 1⁄4 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 1⁄4 ounce over pour creates a $2,200 loss. Now add in the 2500 ¼ ounces lost in this scenario that could have made 416 more drinks using a 1.5 ounce pour at $8 a drink, (416 x $8) or $3,333, and you have a total Expense Loss of $5,533 for the year.
If you want to know how well your chef is managing expenses at the kitchen, you should follow any over prepping, waste, and the use of yield calculations management. Instead of relying only on food cost as a gauge, use the following three factors together to understand actual restaurant expenses for each day:
After you consider those factors, share your insights with the rest of the team. If your staff doesn’t have this information, the chef cannot be fully to blame.
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 an additional thing to consider.
It’s difficult to make your restaurant expenses breakdown and get complete control over them as there are so many factors that contribute to your success or to your failure. Do your due diligence to learn or be trained about restaurant fixed costs and variable costs for a restaurant as much as possible. Having a grasp on your expenses can add significantly to your profits, and the more likelihood that you will succeed.
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 food service 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.
President of Lopolito Hospitality Consultants, a leading New York based consulting firm that provides forward-thinking reviews and solutions nationwide to businesses in the hospitality industry.
How to stop your restaurant from losing money
If you believe you have a handle on your restaurant expenses, you may actually not. To have the right understanding of how much money you spend, you should take into account controllable and noncontrollable costs in your restaurant and be aware of your own spending behavior patterns. Learn what Jim Lopolito, President of a New York based restaurant consulting company, brings to the attention of restaurant owners when advising them on reducing their operating costs.
What type of spending behavior do you and your management team have and how do you cope with controllable and noncontrollable restaurant expenses?
Learn what @Jim Lopolito, President of a New York based restaurant consulting company, brings to the attention of restaurant owners when advising them on reducing their operating costs.
If you believe you have a handle on your restaurant expenses, you may actually not. Learn what @Jim Lopolito advises to take into account.
Private clubs are a rare breed of business operations with success requiring harmony across all borders of the amenities. There can be many differences among the spectrum of clubs, but inside each one there must be synergy among membership, employees, and services to succeed and prosper following the principles of its creation. This synergy has constant pressures and a survival tactic of pliability is essential.
Along the long road of tradition, differences among the growth of individual member groupings have always served fine along a singular path of conformity. The rogue member would quickly be placed on the manifest of unhealthy agitations, and swift to find their place back or quarantined for decision consequences. Be obligated of the dress code and do not disregard tradition, for these are the codes of the club.
Allocation of responsibility demands a close relationship between a Board of Directors or similar, and a management team usually led by a General Manager and other managers with departmental headings. These are the people that hold up the standards of the brand and influence the direction and the purpose. These essentials are passed down through the ranks of the teams that serve under the crest of the club. To lose sight of club history, rules, and similarities among the association can fall the brand so tightly entwined. And here we have the dilemma to survive.
Conformity brings comfort among the statuses of the club member and the way of the past; however, tradition has met a wall of change in family matters, informality, and the competition of the locality that was not a past concern. Staying afloat in a sea of boulders glazing the surface requires a helm that is solid with leadership, focused on direction, engaged in current and future concerns, fluid in financial understanding and law, and undeniably offered training to all who serve the member. This structure, of course, must be maintained on a regular basis or fall the reign.
Today has changed somewhat, however. Those leading must be allowed to adapt to the uprising of new wants and cares. No longer can a club require, or expect, strict adherence to the rules, as these must be softened, adapted, and an allowance to change must be perceived as part of the new traditions. Can parting from the brand be met with success?
The new club leadership must all work together on a rope fastened with elasticity. Traditionalism must be met with a water-based palette of paint to blend ideas and combine standards. There can be close similarities that remain to the customs of the past, as the brand is the offering to club introduction in the first place. Henceforth, clear your mind of what your brand means but instead what it can become, as tradition always follows the road of the past.
𝑰𝒏 𝒂𝒏 𝒆𝒇𝒇𝒐𝒓𝒕 𝒕𝒐 𝒓𝒆𝒅𝒖𝒄𝒆 𝒃𝒖𝒔𝒊𝒏𝒆𝒔𝒔 𝒄𝒐𝒔𝒕𝒔 𝒑𝒆𝒐𝒑𝒍𝒆 𝒕𝒓𝒚 𝒂𝒍𝒍 𝒔𝒐𝒓𝒕𝒔 𝒐𝒇 𝒕𝒉𝒊𝒏𝒈𝒔, 𝒂𝒏𝒅 𝒐𝒇𝒕𝒆𝒏 𝒕𝒊𝒎𝒆𝒔 𝒕𝒉𝒆𝒓𝒆 𝒊𝒔 𝒏𝒐 𝒄𝒐𝒏𝒔𝒊𝒅𝒆𝒓𝒂𝒕𝒊𝒐𝒏 𝒇𝒐𝒓 𝒘𝒉𝒂𝒕 𝒊𝒔 𝒂𝒄𝒕𝒖𝒂𝒍𝒍𝒚 𝒈𝒐𝒊𝒏𝒈 𝒐𝒏 𝒂𝒏𝒅 𝒕𝒉𝒆 𝒘𝒓𝒐𝒏𝒈 𝒄𝒐𝒔𝒕𝒔 𝒂𝒓𝒆 𝒄𝒖𝒕.
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.
The theory of Expense Loss occurs when behavior is disorganized and money is expensed without regard to the benefits of considering alternatives, along with possible long term consequences of decisions made. Consider the fact that any money you expense unnecessarily is lost and this lost expense reduces your profits.
Attempts to reduce spending is nothing new, however the design of my term “Expense Loss” takes a new twist into reducing expenses by using the specific amount that is determined to be overspent (Overspent: the difference between what was spent and what should have been spent) as the focus in the understanding to improve profits.
A common standpoint in the spending decision process is the “cost side” (what will this item will cost me in making this decision) instead of the “lost side” (the amount calculated as overspent). When going through a spending decision process you should ask yourself what your lesser expense can be by considering alternatives and forward-thinking to your decision, which is not a calculation many look at. The viewpoint of Expense loss is; what is the amount determined lost as a result of decisions that are reducing profits, whether monetary or operational and has this become a constant to loss due to procedures in the business that have become common behavioral practice.
Very often reasons for lost profits occur because staff, manager, or owner is busy concentrating on building and running the business and the payment of invoices, making quick decisions, and doing business, as usual, becomes routine without a thought to other options. Failure to maintain a constant review and evaluation of expenses will always have a negative effect on profits and result in Expense Loss, and very possibly and ultimately loss of your business.
If you are in a business that expenses money on equipment, maintenance, repairs, sell-able product, food and beverage, fertilizer, chemicals, water, oil, electricity, and other material goods, and you are not concentrating on Expense Loss, you are wasting money unnecessarily. Expense Loss is about understanding overspending practices that may be occurring and resolving these issues and adding more profits to your company.
𝐄𝐱𝐩𝐞𝐧𝐬𝐞 𝐋𝐨𝐬𝐬 𝐡𝐚𝐬 𝐂𝐨𝐩𝐲𝐫𝐢𝐠𝐡𝐭 𝐍𝐮𝐦𝐛𝐞𝐫 𝐓𝐗 𝟖-𝟕𝟖𝟐-𝟒𝟑𝟔
𝑨𝒍𝒔𝒐 𝑹𝒆𝒂𝒅 𝑬𝒙𝒑𝒆𝒏𝒅𝒊𝒕𝒖𝒓𝒆 𝑩𝒆𝒉𝒂𝒗𝒊𝒐𝒓 𝑴𝒂𝒏𝒂𝒈𝒆𝒎𝒆𝒏𝒕: https://www.linkedin.com/pulse/expenditure-behavior-management-jim-lopolito-1c
𝑾𝒂𝒕𝒄𝒉 "𝑬𝒙𝒑𝒆𝒏𝒔𝒆 𝑳𝒐𝒔𝒔" 𝑽𝒊𝒅𝒆𝒐: https://youtu.be/Bvy1XazC3g0
Jim Lopolito is President of Lopolito Hospitality Consultants, Corp. (LHC). LHC is a New York based consulting firm that provides forward-thinking review and solutions to businesses in the hospitality industry. Concentrations in advisory services are available to restaurants, golf and country clubs, caterers, and other foodservice businesses. Jim Lopolito, President of LHC is also an active consultant with Cayuga Hospitality Consultants (CHC). Being an active member with CHC further enhance LHC’s portfolio offerings. Write something about yourself. No need to be fancy, just an overview.
The other day I was talking with Vito, the owner of a local Italian Deli in my home town. We were discussing a business that I recently reviewed and Vito said to me “what you put into your business is what you get out of it."
I was telling him about a restaurant I was recently hired to review for why the business was losing money. Upon completion, the owner received a very detailed evaluation offering over 10 different perspectives covering the good and the not so good of his business. The material was written to focus on the most significant reasons why the business is not profiting, which was the main concern by the owner.
What I found.
The final evaluation offered a plan to reduce payroll, which included the owner taking over the scheduling responsibility from the manager and accepting responsibilities in the workload to reduce costs. I suggested a competitive vendor and saved him over 60% on the costs of the vegetables they were purchasing. I helped create new menu items with higher profit margins, and an afternoon combination concept. We cost out many of the recipes so that they knew how each item sold contributed to profits, which also disclosed they were regularly pushing the lower profit items. I highly recommended controls placed on the keys.
What you can expect when there is no implementation or follow through.
What my friend Vito said to me could not have been said better, and this story reflects common issues that are observed in restaurants and throughout the hospitality industry. If you do not become invested into the success of your business, there is only one person in the mirror you can complain to.
The answer to this question unlocks a common practice in the industry that all too often creates a revolving door. If you are like many restaurant owners and managers you hire who you think is the best person from a quick ad and as fast as you can, or from a referral, without a true consideration to the position needs. You have a business to run and you cannot waste time looking for a replacement for a key position.
You may have started your business with a concept in mind and a chef at the helm that helped create the food and flavors that drives your concept. What about the GM that has been with you over the years and added value to your customer’s experience. Now they left, and hopefully not at the same time.
The dilemmas that can unfold in your business when a leader leaves are difficult to measure, but certainly something you need to consider during your next hiring phase. With turnover you can begin to lose the connection there was between the leaders, the food, the service, the relationship with the concept, and you can lose the connection with your customers.
Searching for and selecting executive leadership is not a quick pick solution and not something you should try on your own. Most owners and managers hire the wrong people, and this is mainly due to their emotional connection with the business and the need to fill a position quickly. You can lose customers, staff, and in the end your business with a wrong decision to these key positions.
Poor procedural practices common during hiring processes can include:
1. Copying other ads you see online.
2. Buying only one or two ads from a budgeted amount and within two or three weeks and a few interviews the replacement is decided upon.
3. Selecting leaders out of a bunch of resumes from an ad that is designed overnight and created under pressure without regard to the true sense of the job.
4. Using only a referral process to make the decision.
In most situations you are making your decision based on a selection of candidates over a few weeks. This is a betting situation that the proper candidate is available during the same few weeks and the moment you are advertising and interviewing. Feeling lucky?
Can the correct replacement for your specific business, design, concept, customer expectations, quality and level of food and service, and staff training needs really be available during this short moment of time you are looking?
Many ads are created haphazardly and with little thought to the actual needs of the position. You will be very lucky if you locate and keep the candidate you selected using these quick solution methods and all holds true the person matches the actual needs of the business.
Take for example these segments pulled from actual online ads for GM’s and Executive Chef’s.
-Prior GM experience required
-Only Motivated individuals need respond
-Applicants must be self-motivated & self-managing
-Previous experience necessary
-Serious candidates only
-Must Be a Team Player
-Must be able to work well with others
Insignificant sections like these in an ad offer nothing to create the ideal results necessary. A candidate will not tell you they are not motivated. They will not admit that they are not a team player. They will not say they are not serious about the position. Aren’t all GM and Chef positions “hands-on”? You might as well say “you have to work hard at this job”, which actually makes more sense to place in the ad.
A well-designed ad should have solid attributes.
1. Are you able to supervise and create schedules for 30 staff?
2. Are you familiar with Sous Vide?
3. Are you familiar with the cuisine?
4. Are you able to create new authentic recipes with weekly specials based on our concept?
5. What is the farthest distance you are willing to travel from your home to work?
6. Will you work up to 65 hours weekly or all hours necessary?
7. What is your salary expectations based on distance and workload?
8. Are you willing to work the dining room floor and interact with all guests and provide solutions to issues that arise?
You place an ad for a very important position and expect that the right person, the one that you will call your next leader, is in the mix of the resumes you receive within the next two or three weeks. Can you rely upon this? There is a lot of hope resting on this method, which all too often fails in the long run and creates turnover.
How can you make better decisions and garner better results?
1) Make sure your ad for a key position is well written and contains specific wording on what the position candidate actually performs on a daily basis, take your time, and do not use cookie cutter descriptions.
2) Think of ways to extend the time-frame of hire, improving your chances of success. The longer you run your search the chances of receiving worthwhile candidates that fit the position increases.
3) Use a reliable service to assist you with key employee hires. Any good service will provide guarantees on the hire, so consider this during your decision process.
If you proactively plan out the process of your hiring needs and lengthen the interviewing time-frame you will have better results.
Formulating a Return on Investment (ROI) advertising plan in your restaurant must be an ongoing method for managing your hospitality business. However, establishing accurate recipe ingredient costs and sharing profitable menu items information with your team is an essential component for the outcome to have positive results and sustainable deliverables. While there are elasticity issues, nearby competition, and your principal clientele to consider in menu pricing, having a price on your menu you know is correct can help bring in more profits especially when everyone on your team is on board and knows how to react to your promotions successfully.
1: Pricing Based on the Competition
If your competitors have lower menu pricing and you kneejerk react to reduce your pricing accordingly the results can be devastating, especially if your food and beverage costs are higher. Alternatively, the raising of your prices along with your competition or just to generate more profits can equally hurt your business when public opinion differs upon each establishment and you become overpriced as a result. All too often foodservice businesses use competitors menu prices around them to price their own menus, and this is such a bad idea. If you have no idea what your product is worth in cost, value, and perceptually, you cannot price your food and beverage just to keep in line with the location down the block. Prices placed on menus that are random make no sense at all and not having knowledge of your costs and the comparison between each menu item profitability can restrict business growth and can certainly reduce profits.
2: Selling Blind on Social Media
With the rise and simplicity of social media usage restaurateurs often perform their own advertising strategies using Instagram and Facebook to lure in new customers with pretty pictures of their food & beverages and they forgo the necessity of proper planning or considering the downsides of their actions when the lack thereof is occurring. Social media has become saturated by every food service establishment, and this form of marketing without forward thinking strategies and in-house staff preparations will only lead to profit loss disappointment.
Blind Practices Include:
3: Staff Knowledge not Aligned with Marketing Efforts
Misdirected promotional strategies combined with lack of knowledge by staff all too often can gain short term customers but can end in a loss of profits on items sold. Because of Menu Mix (MM), Cost of Goods Sold (COGS), and other factors management has no ROI strategy to understand if their efforts are delivering. Very often customers see the pictures and visit the location one time never to return because the service orientation and training was not supportive of the marketing efforts. End of month reports indicate a rise in customers or higher check averages only to result in lower profits because the specials sold or the popular menu items recommended by staff were lower profit producers.
Higher check averages does not mean higher profits unless the items sold are higher contribution margin contributors from their alternative menu items, which is a menu mix strategy.
MM and COGS analysis is necessary knowledge to promote or suggest the selling of higher profit menu items. Owners that I encounter often do not know what items on their menus produce the highest contribution to profits; therefore, promotion of these items on social media fails them when low profit producers are sold over other higher profit menu offerings. Owners are asking management to explain profit reductions only to hear excuses that have nothing to do with the real truth. If you do not know the reasons why you have low profits and possibly losing your business you can start by knowing your costs.
4: Not Training Front of House Team
Pricing out ingredient costs is one essential method to having reports that can be understood and evaluated. After you have established all your costs and menu prices you need to place the higher contributors on your menu where they will sell more often. Then you have to train your team on selling the higher contributors whenever possible. If you follow these basic steps you will receive higher profits and have an upper hand with your social media and marketing efforts, and on your competition.
1. Price out all menu items and know the true menu stars that add the most to profits.
2. Offer this information to FOH staff so that they can promote intelligently.
3. Feel confident that advertising efforts are generating the results desired when everyone is knowledgeable, ready for the promotion and on board with the efforts.
5: Selling Based off Food Cost and Not Contribution Margin
A full itemized report of your entire menu is necessary to know how much each recipe generates in profits. Each day of sales will result with a different menu sales mix and varying profits based on the items sold each day. This is important to know because you want to know what items need to sell more often to improve profits, and this must be clearly delivered to your service team. A Chicken Saltimbocca meal may have a lower 32% food cost but only generate a $10.00 contribution to profits; whereas, the Prime Rib has a higher 40% food cost and generated $17.00 to profits. All too often food cost is the measurement management uses to discuss profits with the chef; however it is the contribution margin amount that is more essential in the management toolbox.
Use of Social Media benefits a well-organized company using effective employee training and cost measuring methods placed ahead of random advertising. Having a full understanding of recipe costs, providing staff with the essential tools they need to sell your most profitable items and placing higher contributors to profits in locations on the menu that generate more interest is critical in the establishment of a profitable business.