Business and Operations
Comp and circumstance
By Michelle Brisebois
Are you giving away the “farm to table?” Restaurant margins aren’t that huge to begin with and when a restaurant doesn’t get paid for the food they make, it chips away at what little buffer is there.
Giving away meals for free or “comping” (short for providing complimentary meals) is a common practice. According to research by Paytronix Systems, meals prepared and not paid for typically account for three to five per cent of sales. At best – as a marketing expense – comping can be used to court media influencers and VIPs. It also can be a way of fostering employee engagement to let team members eat for free while working or dining when they are off the clock. Removing an item from a bill can sometimes be a way of retaining a customer who is unhappy with their food or service. It happens to the best of us and is a reasonable response to an honest mistake. The underbelly of comping, however, includes giving away potential revenue when a little structure and process around when and how to comp could rescue the bottom line.
THE HONOURABLE COMP: MARKETING DEVELOPMENT AND EMPLOYEE ENGAGEMENT
Sampling is an effective way to drive sales. You may wish to provide each table with a sample of a new menu item or beverage as a way to get them interested. Food writers have always been a group to court, but in this age of social media food bloggers with strong followings are especially worthy of enticing to your establishment. As long as there is a process for vetting who is worthy, it’s likely money well spent. Make sure only certain managers can approve who qualifies as an influencer worth courting and then ensure the visit is controlled in terms of where they are seated and who serves them. You don’t want the experience to fall flat even if the food is great. Make sure the menu items are documented as being promotional in nature so they can be accounted for properly. One of the biggest mistakes restaurants make in their accounting practices is to include promotional meals in their cost of sales. The policy should be: No sale, no cost of sale. The costs must be captured elsewhere for final accounting purposes. Accounting for your promo items as sales will overstate your revenue and have an impact on your taxation, so be sure to keep it clean on your books.
Many restaurants offer their employees a free meal either during their shift or as a perk when they come in to dine by themselves or with friends and family. It’s a lovely gesture either way but can really add up for a whole team over time. Many restaurants will make the employee meal in a large batch to be left in the staff room for team members to help themselves. This may be cost effective but it may cause more harm than good. If your team is eating cold bulk pasta or pizza, they may appreciate the thought. But it’s not really increasing engagement. It would be better to allow them to order from a selection of items from the menu and simply charge them the cost of the item to make sure you’re not out of pocket. Allowing them to eat from their choice of menu items can be easier on the kitchen team operationally and it doubles as product training. Employees will appreciate receiving the meal at cost and understand your business rationale. It’s always more compelling to customers for servers to personally endorse a menu item they’ve eaten and enjoyed.
If a meal is comped because a customer is dissatisfied, that may be unfortunate but it is still an honourable use of the promo line. Mistakes happen, but there are ways to catch those mistakes before they cost you dearly. Make sure the server checks in with the customer shortly after dropping the plates and again about halfway through the meal. It’s harder for a customer who’s admitted the meal tastes fine to suddenly decide at the end that it wasn’t and expect a comp. Most people are honest but there are some who take advantage. Ensure the reason for removing the item from the bill is noted in the POS. This will allow you to track any problems. If you have gift cards, talk to your provider about creating a special pre-paid card specifically for promotional activity. This allows you to more easily track what’s given out and to have it automatically accounted for appropriately on your financials.
Of course, there are some who take advantage. Those of you who focus on delivery probably have tender pain points around the complaints that come from food consumed off-premises. Checking in with the customer during the dining experience is difficult. Consider how technology may help here. If your customers give you their mobile numbers, you can use cost-effective texting services to automatically send a quick message a few minutes after receipt of food. The message could say, “Just checking in to see how you’re enjoying the food.” The customer can respond with a one-letter confirmation to say Y or N for good or not. Conversational e-commerce is the wave of the future and tools like iAdvize now integrate with Facebook Messenger to allow customer follow up with a live person instead of a chatbot.
THE DISHONOURABLE COMP: ‘EVERYBODY’S A FRIEND OR FAMILY’
The hospitality industry is close-knit and there’s lots of cross-pollination of staff and information. This can create a situation where former employees are still given their staff privileges even after they’ve gone to work elsewhere. Employees may send their family members in expecting them to receive a discount or free meal. Your business could end up taking a big hit if this practice isn’t clearly defined and monitored. Decide if employees will get a discount to dine with guests, clarify how many guests will also receive the discount and define how often each month they can take advantage of it. Make it formal policy that the employee be present at the dining occasion for guests to receive the discount. As with all other promotional activity, track the transactions to understand what percentage of your business they represent.
Make sure you set a budget for your promotional activity including complimentary meals. Start with three to five per cent of sales and track it to see where your baseline sits. Taking that number down even a couple of percentage points can really shore up the bottom line.
The bottom line: honour the food by making sure it feeds both the people and the profit.
Michelle Brisebois is a marketing consultant specializing in e-commerce and digital content strategy and retail/in-store activation. Michelle has worked in the food, pharmaceutical, financial services and wine industries. She can be reached at email@example.com.