Marketing insights: December 2014

It’s not how much money you make that counts…it’s how much you keep. – Your Grandmother

It’s not how much money you make that counts…it’s how much you keep. – Your Grandmother

If you’re like most restaurant operators, you work incredibly long hours to realize a fairly small profit margin. Increasing your profitability means you must control the costs that make up the lion’s share of your operating costs. For most restaurants, food and labour costs consume 50 to 75 per cent of sales. This makes it easy to dig in and look for ways to minimize waste. It’s generally accepted that a food cost of up to 35 per cent of sales is standard for mid-scale/casual dining and anything above that level is a signal that some belt-tightening is in order. Consider the power of even small gains in food cost control. If a restaurant has weekly sales of $5,000 and food cost represents 40 per cent of those sales, that’s $2,000 of food cost.  Take that number down to 30 per cent and $500 of glorious profit has been added to the bottom line.

The most important thing you can do towards controlling your food costs is to keep an accurate and up-to-date inventory. Ideally, you should check your inventory weekly. Weigh, measure and tag everything and assign it a cost based on what you paid for it. It’s best to have one manager weigh everything and log it onto a master sheet with costs and then another manager double-check it. One week later, add in purchases made during that week minus the items logged into your point-of-sale system. You’ll also need to include any “freebies” given because of guest complaints, staff meals and other non-revenue-generating offerings. Last week’s inventory + this week’s purchases – food sold = the theoretical value of your current inventory. Now, conduct another inventory count and see what the dollar value of what’s in your pantry actually is. Ideally, it will match or come close to your theoretical inventory. If it doesn’t, then you’ll need to look at why.

Look first to your order-entry systems. Does each item coming from the kitchen require a printed order? If yes, then you’re on your way to having a solid tracking system. If orders don’t require a paper trail then consider creating a “no chit, no food” policy. If you’re comfortable that all food going out of the kitchen is being entered into your POS system, then the next step is to review what’s being given away because of customer complaints, mistakes and any promotional activity. Ensure that front of house understands the importance of ringing in everything and of noting any refunds processed because of a mistake or complaint. While nobody wants to believe that employees are playing fast and loose with the profits, theft is an area that significantly impacts food costs. The National Restaurant Association has indicated that internal employee theft represents 75 per cent of inventory shortages (about four per cent of total restaurant sales) and is responsible for the most significant loss to employers. This includes those raw ingredients that back of house may take home because they reason they’re “only going to spoil” or consider them “leftovers.” One way to monitor quality issues is to implement a customer service process where any customer who complains or is given food for free because of a reported quality issue is contacted with an apology and followup to find out why they didn’t like the food.

If you can verify your restaurant’s food quality is suffering, it becomes a back-of-house issue requiring an examination of training and process. What is your waste? Is lack of training responsible for some blown batches? Are you eking every ounce of opportunity from your ingredients? The “snout-to-tail” movement isn’t just about tree-huggers wanting the whole animal honoured – it’s fundamentally about not wasting food. Scraps of dough from pizza crust can find new life as breadsticks or pizza scrap garlic buttons. Consider for a moment that the extremely popular Timbit sold by Tim Hortons was inspired by doughnut holes made from the scraps of dough left over after doughnut rings
are formed.

Look at your menu and balance it in terms of profitability. That pasta dish is no doubt much more profitable than that aged beef entrée. How can you sell more of those entrées that drive profit margin? Partner with the front-of-house team to identify ways to increase sales of profitable items to help subsidize the menu items that have smaller margins. 

Our grandmothers understood the importance of minimizing waste. Vegetables and fruits starting to soften ended up in soups or cobblers. Stale bread became the most scrumptious bread pudding. Next time you see food headed for the trash bin – challenge yourself to think of ways to give it a new purpose. Saving the planet and your business can go hand in hand beautifully. Grandma would approve.   

Michelle Brisebois is a marketing professional with experience in the food, pharmaceutical and financial services industries. She specializes in brand strategies.