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.
Obstacles can be a significant constraint to performance and can create reasons for employees to resign, customers to leave, and profits to diminish, with owners and managers contrarily disregarding the constant remedy opportunities employees offer them. Although my focus of profession is hospitality, the fact of the matter is that obstacles are in every company. It does not matter the type of business you own or manage, as obstacles are present and can even hinder your culture if they are not recognized as limiting the service abilities of your staff.
Obstacles can be anything, but in foodservice they can be preparation limitations in a poorly designed kitchen, a coffee machine that has only one working heating element, an ice machine that continually breaks down, or a walk-in refrigerator that has no room to even walk in. Add them all up in your business and then look at performance issues. These common types of obstacles prevent employees from being effective in their role to the owner or manager, but are not always considered when an employee is being charged with poor performance. The obstacles that are occurring in your business may transition to interference's against your employees, conceivably resulting in a complaining employee, poor service, and unhappy customers.
Time after time the expectations we place on employees are jammed by obstacles that encumber their role in service. In almost all instances the burden of poor service falls on the employee when in fact the owner or manager can be directly at fault for these instances. How often has an employee informed an employer that a door causing concern needs fixing, or there is not enough silverware in stock to accommodate a party, or shelving is not sufficient to properly manage inventory, or a piece of equipment is in disrepair but everyone must use it. Many employers just say deal with it, and go on with their misunderstanding of why their business has slowed, or staff has left. Address these circumstances and perhaps a different outcome can prevail.
My contentions that employers do not consider conditions that may prevent an employee from performing to the level of expectations is real and common, and in my view a direct reflection on the performance of the manager or owner. When employees decide to leave for reasons like poor working conditions, management must consider the obstacles in their business that if addressed, could have prevented these failures. Eliminating obstacles that directly affect employee performance can result in better service, gratified staff, and reduced turnover.
Solutions to obstacle are not always easy, and there is generally a monetary value to result an obstacle. However, when your business thrives on service and you have areas in your shop that are preventing your team in their performance, fixing obstacles becomes more valuable to your bottom line then the commonplace action of inaction.
Today I want you to walk through your business and observe, and accordingly, ask a question to your employee’s specific to what is preventing them from doing their work. If you can, really pay attention to what you see or hear, and perhaps fix your obstacles. While this may not be the only reason for performance issues, it goes a long way with employee appreciation.
THE STORIES OF HOSPITALITY