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Training should be high on your agenda

Training is a process in order to change a person’s attitude, knowledge, skills and behavior. The term training also refers to the acquisition of knowledge, skills and competencies as a result of the teaching of vocational or practical skills and knowledge that relate to specific useful competencies.

There are general guidelines to follow when training. In most situations, trainers should follow the following five steps on how to Train a restaurant employee.

1. Explain the procedure/what is going to happen: - This should happen before the shift to provide the trainee with an idea of what he/she will see. If possible, the explanation should occur directly before the event.

2. Show the procedure: - When you show the trainee the procedure, the trainer should continue to explain each step (if possible). This step may require several repetitions before moving on to step # 3. Be sure to make time for questions.

3. Have the Trainee practice: - At this point, the trainer should remain close by to observe the employee, initially the trainer should be looking for accuracy, not speed. This step should involve several repetitions. Even if the trainee appears to have executed the task on the first try, he/she needs to practice to develop a habitual pattern.

4. Provide feedback: - Providing feedback is not always easy, but is an extremely important part of the learning process. The trainer must be honest, pointing out any areas of opportunity in a constructive manner. Be sure that your feedback is:

  • Honest
  • Fair
  • Clear
  • Based on direct observation
  • Descriptive, not judgemental
  • Respectful
  • Private

5. Repeat Step # 3: - Once feedback has been provided, the trainee should practice again. Continue with step # 3 and # 4, until you feel the trainee has mastered the task. While the trainee performs the task, the trainer should periodically ask questions to ensure comprehension.

Being a trainer is not easy, especially since all trainees are different. Each one has a different learning style. Some will learn best by reading, some by listening, and some only through hands on exercises. Most people will not know how they learn best. As a trainer, it is important that you are able to recognize this and adjust your training accordingly. You may have to try many different avenues before you find the one that works. Just remember to be patient and trust your instincts.

 

  • Introduce one thing at a time
  • Break the information down into small, understandable chunks
  • Start at the beginning and build from there
  • Put it in context
  • Go slowly
  • Explain it, show it, document it
  • Repeat, Repeat, Repeat
  • Allow time for questions
  • Pay attention to verbal and non-verbal behavior
  • Discuss resources and support for newly learned information
  • Make yourself available after “learning” has taken place
  • Follow up to determine how learning is going

A trainer should pride him/herself for the greatness of all the employees he/she trained.

 

Staff Development & Training

To be able to compete in the restaurant industry it is important to hire the best qualify people and provide them with the best possible training and development. The Key is hiring people with passion for hospitality and unique personality is a plus. Continious improvement with quartely assessment, monthly, weekly or daily one on one's will also increase the staff level of productivity and ownership.

  • Recruiting & hiring staff
  • Developing effective training program
  • Implementing daily shift meetings
  • Conducting one on one meetings with staff
  • Goal setting with each department's opera tions
  • Conducting performance evaluations
  • Initiating systems to oversee service operations that ensure quality & consistency

10 Things (Pet Peeves) That Frustrates Restaurant Server

1 out of 10 working American has worked in a restaurant at one point, so the majority of the general public should have restaurant etiquette, understand the do's and don't, and respect the job of a restaurant server and bartender. However customers tend to behave differently when they are at a restaurant for whatever reason.

Here are 10 things (pet peeves) that frustrates restaurant server.

1. The filthy rich people who have the black American Express notoriously tip 10%


2. The over-sampler. Customers that want to sample every wine by the glass before choosing. That is reasonably acceptable at the bar, despite the loss to the restaurant. At a table, it forces the server to spend too much time trying to accommodate one table at the expense of others.


3. When they ask for recommendations and as I’m mid explanation of the 1st recommendation they interrupt me and ask me about a certain dish. If you wanted to know about that dish then just ask me about that dish.


4. When they don’t understand that there isn’t room to add one more person to a table.


5. Diners who ask for water and then do not even drink it.


6. Diners who have no idea who their server was.


7. (Disclaimer, this one came from a female server) I cringe at the sight of a herd of women sitting at my table. Without fail the majority of women don’t tip well and must have the bill broken up precisely by what each person ate/drank. Man up ladies! Break the stereotype!


8. When customers completely modify the menu items.


9. When customers don’t communicate about them needing to leave in an hour and you end up coursing their meal.


10. I hate it when after I check if a table is enjoying their dish and/or beverage they first say they are enjoying it and then tell me after they hated it … are they expecting it to be comped?

 

. What Is Good Customer Service?

Good customer service is a process that requires active, willing and competent participation of all staff. It involves listening and understanding the customers. Technical competence and interpersonal competence are two different things. The former gives you the ability to serve the client while the latter gives you the ability to make the client feel served.

The most important customer service skill is achieving the best interaction and communication skills. This includes verbal and body languages. The three most important body language reaction basics when you are serving buyers are smile, maintain eye contact and lean forward with interest.

The four major components of good customer services are:

1. Acknowledge and receive the person warmly.

2. Determine their needs or expectations.

3. Identify cause of action and do it.

4. Provide support and follow-up.

Now that you know the major components of good service, let's find out the elements of acknowledging a customer. First of all, focus, concentrate and pay attention to the person. Secondly, greet them with a friendly, hospitable statement and anticipate their needs by active listening & questioning. It also helps to show empathy for their expectations. Once you have understood the customer's needs and expectations, you may use your knowledge of the product/service and positive body language to respond to their needs. If for one reason of or another you are unable to help them, refer them to the correct people / departments.

How can you determine a person's needs?

You can determine a person's needs by using good listening skills or by using good questioning skills.

Dealing with Upset Customers is one of the most difficult things in customer service. It's no wonder many companies fail at it. If an upset buyer walks up to you react with sympathy and empathy and then clarify with questions what exactly the problem is. Once you have understood the situation, respond promptly with the appropriate answer or action.

Why is Calming Upset Customers so Important?

• So as to solve problems together with them.

• So that they come back and hopefully tell their friends about your business!

• To communicate and interact effectively.

• To prevent more serious problems.

• To keep the customers happy.

• To build and maintain the company's good name and reputation.

• To keep them from telling others about the problem.

As a business owner, it is only natural to wonder what upset customers want from you. Basically, they want to be taken seriously and to be treated with respect. In addition to the respect, they also want to get action without delay and also get compensation or repayment. Unfortunately, there's also a certain class of customers who won't rest until the member of staff who wronged them is reprimanded. However, the most important thing is to clear up the problem so that it is not repeated and to consult the customer in decision-making.

Note that 95% of buyers who complain are more likely to come back if the complaint is well received and resolved quickly. In addition, the most important rule in customer service is "the customer is always right". Why? Because they are using their money to buy your products or services and you need them to buy your products/services tomorrow.

 

3 Things that draw people to a Restaurants

In 2009 there were 13,548 restaurants in the state of Virginia alone, according to National restaurant Association (NRA). The U.S restaurant industry sales are projected to exceed over $600 billion this year. With all that being said, the restaurant industry generates jobs and lots of money every year, but yet 27% of restaurant startup failed after the first year according to researcher at Cornell University and Michigan State University. There are too many restaurants to compete with and your brand has to stand out for you to draw people. Here are 3 things that people to restaurants.

1. Value: - Value simply attracts people in your restaurant and makes it tougher for your competition.

2. Location: - location includes visibility, accessibility and great signage to draw people in a restaurant

3. Word of Mouth: - This is generally considered the best means of “advertising”. Customers spreading information and recommendation to other customers about a restaurant, increase the restaurants credibility immensely.

The other side of this coin is how to bring people back to your restaurant once they are drawn in. First time customers could become a life time customers if their expectations are highly exceeded. Remember that’s regular customers keep business alive. Here are 3 things that bring people back to your restaurant:-

1. Quality: - Quality of food and service is how customers measure restaurants against the competition in the marketplace. Quality can’t be compromised because it will cost you in the future. Maintain high level of quality and customers will simply come back.

2. Consistency: - Customers love getting the same thing all the time, the same way they had it the first time that makes them love it. Someone once said “if I go to this particular restaurant I know exactly what kind of food and service I’m getting because they are consistent”.

3. Hospitality: - Hospitality is the relationship created with your customers to choose you against the competition. Hospitality is a relationship, not a transaction. Customers who felt cared for and appreciated will always come back.

The key to every restaurants success is what draws people in (Value) and what brings them back (Quality).

 

9 Qualities that make an effective Restaurant Trainer

An effective trainer possesses many different skills. Of course, he/she must have the knowledge, but knowledge alone does not make a great trainer. He/she must desire, enthusiasm and people skills to communicate with others. Here are the 9 Qualities that make an effective Restaurant trainer:-

1. Knowledge: - of the job, the product, the people. As a trainer you are a resource to all employees. This means that you are not only committed to their learning, but yours as well. The restaurant industry is one of constant change and improvement. A trainer must stay abreast of these changes, as well as understand them. You are expected to have extensive product knowledge, though you are not expected to know everything. If you come across a question that you cannot answer, you should know where to go to find the answer.

2. Enthusiasm: - Enthusiasm is key to the success of a training program. Without it, you are not putting your best foot forward. What the trainer is saying is not as important as how it is being said and what is being said with body language. If the trainer is not excited about the company and the training, the trainee will not be.

3. Patience: - Remember your first day on the job? Remember how nervous and overwhelmed you might have been? Do you remember everything that was told to you on that day? Of course not! There will be times when you have to repeat yourself over and over again. That's okay - it's part of the training process. We must be patient with new employees and peers if all are to help them learn.

4. Positive Attitude: - A trainer must be able to maintain a positive attitude in any situation. As we all know, the restaurant industry is a very dynamic industry and we often have to handle these problems on the fly. A trainer must be able to handle these situations with grace and be able to see the positive attributes of each trainee.

5. Communication Skills: - Communication skills are imperative for a positive, successful training experience. An effective trainer must be able to communicate clearly, concisely and accurately. In addition to conveying information, the trainer must be able to put the trainee at ease. Communicating also means listening. Listening for questions, concerns, and ideas. It is also important to be able to "listen" between the lines for body language, indirect comments and other "hints or clues" that indicate what trainee is experiencing.

6. Organization: - Being a successful trainer is founded in organization. Because there are so many components of the training program, trainers must be able to keep track of schedules, content, and trainers/trainees...all while performing their jobs! The trainer’s level of organization also impacts the trainee's perception of the company and their level of organization.

7. Appearance: - Every Restaurant should strive to have a clean, professional appearance - both in their physical surroundings and in their employees - at all times. The trainers must not only adhere to the professional uniform and grooming standards, he/she must serve as a role model by which others can measure their own appearance.

8. Professionalism: - The term "Professionalism" is determined by many factors. The way you speak, perform your job, carry yourself, and relate with others reflects your personal standards. A professional trainer remembers that he/she serves a role model at all times, whether he/she is training or not. Professionals treat themselves and others with respects and dignity and handle him/herself appropriately in good and bad situations.

9. Teamwork: - The success of any restaurant does not rest with any one individual. As a team, you are only as strong as your weakest member. Your commitment to your guests creates a common goal for you to strive for together. Your trainers must create an atmosphere of teamwork and cooperation, existing even after the trainee graduates.

 

5 ways to motivate & inspire Restaurant employees to enhance guest experience.

There are many highs and lows in the restaurants industry, the daily grind and hard work of employees could drain them mentally and physically. Part of a restaurant manager’s accountability is to motivate and inspire his or her staff to deliver extraordinary service to ever guest, and to provide exceptional experience. Every employee in the restaurant from the Host staff to the dishwasher has a share responsibility to impact the guest experience. Here are 5 ways to motivate and inspire your employees to enhance guest experience.

1. Pre Shift Meeting: - This is the time to educate the staff about current events, menu items, steps of service and opportunities from previous shifts. Also entertain the staff by reading positive dining comments from yelps or other sources, praise employees that has guest compliment, the line cook with the best ticket times or zero re-cooks. During this meeting you can spot employees who are prepared and motivated for the shift, check their moods if they look tired or not engaged then have a separate conversation with them before they start their shift. You can bench them if they aren’t ready to play.

2. Server Productivity report: - Restaurant employees want to know how they are performing just like other industries. I find it useful and motivating for servers and bartenders to be inspired to do more when they know how much they contribute in the sales of the restaurant. There is a sense of ownership and pride in them knowing how many bottles of wine, appetizers, desserts, liquor and beer they’ve sold in a quarter. By posting this information every month servers and bartenders will be highly motivated to do more, servers can also use the report to view how they are measure against their peers. The employees with consistent high sales in wines or appetizers can share their selling techniques to help other servers improve.

3. Fun Contest:- Create a monthly or quarterly contest that will inspire the employees to perform at a high level. The contest should be fun and rewarding for the restaurant and the staff. A smart measurable creative contest such as sell 1000 bottles of wine in a period, first figure out how many wine sold last year same period or same year previous period and set a goal from there. The guest will benefit from the contest because having a bottle of wine on their table puts them in a different class of diners and is economical. The staffs learn more about wine varietals’ and characteristics which will boost their confidence. You can always create a contest for the host, food runner and even Kitchen staff.

4.Restaurant Knowledge: - Highly successful restaurant employees acquire a great deal of knowledge, the familiarities, facts and information they have helps them provide extraordinary service to make the guest experience memorable. Nowadays guest are more educated about customer service than they were 30 years ago, customers can easily notice a non confident server versus a confident server. In this day an age of social media customer awareness is at a new height, new standards of services have been created and the bar is raised. Knowledge is “justified true belief.”

5. Management Support: - Restaurant employees tend to be a bit sensitive, so it is imperative for management to be there to support the staff when needed. During the busy hours operation manager floor presents is critical to the guest experience to make sure employees are assisted in getting a bottle of wine, table visit for a guest opportunity or connection, deleting an item from a check or a server might have a question about ticket times. Manager support and floor presence inspires employees, reduce their frustrations, get them out of the “weed” and keep them engaged and present to the guest.

 

Lessons Restaurant Operators learned from the last Recession.

 

The recent recession sparked a slew of changes at restaurants as fine-dining went casual, casual concepts added value, and eateries learned to do more with less. As recent stock market slides have economists raising the specter of another downturn, have the lessons learned recently prepared restaurants to cope better this time around?

Markets continued to fall Monday as investors reacted to a historic downgrade of the U.S. credit rating, sparking concerns that the economy is headed into another recession before many have recovered from the last one. Nobody wants to think another recession is on the horizon, but economists began broaching the possibility in earnest after last week’s massive market slide.

The last time around, restaurants closed; others moved from fine dining to less-pricey casual concepts; casual chains drove traffic by focusing on deals, which customers only recently stopped expecting; and the industry saw the rise of Groupon and other daily-deal websites, which drove bargain-hunting traffic without always leading to long-term business gains.

Even before markets slid last week, restaurant companies were struggling with balancing still-tight consumer budgets with margin-squeezing higher commodity costs. Many were in the process of raising at least some menu prices. Given that, it’s likely many restaurants and chains would have much less wiggle room to offer recession-era promotions this time around.

Some chains are already feeling the fallout from higher prices. Last month, P.F. Chang’s China Bistro said sales were down at its flagship restaurant and Pei Wei Asian Diner. The company said it was cutting its forecast for the rest of the year, as guests shied from spending after menu prices increased 2% this year, Reuters reported. Time will tell whether other chains that are increasing menu prices — including Chipotle Mexican Grill, which said in June that it would raise prices for the first time in three years — see a similar drop.

Restaurants have had several years of learning how to do more with less, and it’s likely those lessons will help if tougher times return. In addition to finding ways to cut costs and increase productivity, restaurants also have had time since the last recession to define value propositions that prove popular with recovery-era consumers who are still wary about spending. In a Fast Casual story this summer, Food IQ President Phil Daniels wrote about a value proposition that has emerged since the recession, driving high-end concepts into more casual territory and spurring quickservice and fast-casual concepts to add more premium items.

So, what lessons have restaurant companies learned from the recession, and how will they guide eateries should we have to live through another?

 

Food Costs Rising as Coke, Chipotle Pass on Commodity Gains

Food prices in the U.S. may be rising faster than the government forecast as companies including Coca-Cola Co. (KO), Safeway Inc. and Chipotle Mexican Grill Inc. (CMG) pass higher commodity costs on to consumers.

Rallies in meat, grain and dairy products since February may mean the increase in food costs will surpass the 3 percent to 4 percent that the U.S. Department of Agriculture predicts, said Christopher Hurt, an agricultural economist at Purdue University in West Lafayette, Indiana. The USDA today left its forecast for this year’s gains unchanged and said 2012 prices will increase 2.5 to 3.5 percent.

“Food inflation will continue to increase through this summer to this fall,” Hurt said July 19 in a speech in Washington. “We can’t replenish supplies until a new crop comes in, and that puts a lot of basic pressure on food prices.”

Costs for groceries and restaurant meals rose 3.7 percent in the 12 months through June, government data show. During the period, rice, wheat, corn, soybean and milk futures touched the highest levels since at least 2008. Yum! Brands Inc., owner of the KFC and Pizza Hut restaurant chains, said July 13 that U.S. commodity costs this year would rise as much as 7 percent, after previously predicting a 6 percent increase.

Corn futures rose 76 percent in the 12 months through July 22, wheat jumped 16 percent, raw sugar advanced 71 percent, and rice was up 65 percent. Cattle and hog futures climbed at least 21 percent.

Coca-Cola Prices

Coca-Cola, the world’s largest soft-drink maker, said July 19 it will raise North American drink prices 3 percent to 4 percent in the second half of 2011, after 1 percent to 2 percent increases in the second quarter. The Atlanta-based company cited higher costs for raw materials, including fruit, metal and oil used to make plastic packaging.

Futures for orange juice traded in New York, which is used in Coca-Cola’s Minute Maid beverages, were up 37 percent in the past year through July 22 as inventories declined. Coke, which also uses corn as a sweetener, is trying to stay ahead of inflation by managing retail costs, Gary Fayard, the chief financial officer, said in an earnings conference call July 19.

PepsiCo Inc., a Coke competitor and the world’s biggest snack-food maker, said last week that profit will increase more slowly than projected, partly because of commodity costs. Spending on raw materials will rise at the high end of its forecast of $1.4 billion to $1.6 billion this year, from a base of $18 billion, Hugh Johnston, the chief financial officer of Purchase, New York-based PepsiCo, said in a conference call.

Covering Inflation

“We will try to cover as much of the commodity inflation as we can,” Chief Executive Officer Indra Nooyi said.

Chipotle Mexican Grill, a Denver-based burrito chain whose share price has more than doubled in the past year, reported July 19 that second-quarter profit was less than analysts estimated as commodity costs rose. Chief Financial Officer Jack Hartung said costs for avocados, dairy and meat are rising and he expects food inflation of about 5 percent this year.

Food inflation was “stronger than expected” at Pleasanton, California-based Safeway supermarkets, with prices rising 2 percent in the second quarter, Chairman and Chief Executive Officer Steven Burd said July 21 on a conference call with analysts.

Damping Effect

Food and fuel increases have hurt demand, “and that’s particularly true for that segment of our shoppers that believe we’re still in a recession, which is the largest segment” of customers at Safeway, the fourth-largest U.S. supermarket chain by sales, he said.

Inflation may be able to stay within the USDA’s range should crop inventories improve, said Mark Waller, a grain economist at Texas A&M University in College Station, Texas. Adverse weather and oil prices, which have averaged just under $100 a barrel this year, could quickly send food costs higher, he said.

“There’s an awful lot of uncertainty because of where we are in the crop cycle,” Waller said by telephone last week, noting that the Midwest heat wave may decrease production. “With the late planting of some crops and the really dry conditions, crop production is vulnerable over the next 60 days to any additional problems.”

Food prices measured by the Bureau of Labor Statistics rose 0.2 percent in June. The USDA left all of its estimates for different food categories unchanged in today’s report, except for processed fruits and vegetables, reducing its estimated increase by 1.5one-and-a-half percentage points to a range of 1.5 percent to 2.5 percent.

 

 

 

 

 

 

 

 

 

 

Tablet based systems

Cut Costs on Staff - With digital menus, your waiters are capable of handling at least twice as many tables at a time since they will be primarily focused on serving rather than taking orders. Having fewer waiters on staff already saves tens of thousands of dollars yearly.

No Menu Costs
Save on what would otherwise be spent on reprinting menus at your local print shop every time you change a price or add an item. Now you can update your Android or iPad menus within seconds. There’s no need to write “market price” when you can simply update the market price every day in seconds.

POS Solution - POS system costs are reduced 50% than most major POS systems on the market, few of which offer digital menu integration or realtime reservations.

Learn About Your Food - With customers reviewing each specific dish after their meals, you can be instantly conscious of your customer’s preferences by improving or eliminating unpopular dishes to prevent losing your customers. Feature your top-rated dishes more prominently, so that new customers know what to order when first dining at your restaurant, and are more likely to come back.

Unlimited Exposure - Your customers could recommend your restaurant to their Facebook friends immediately after their meals with the touch of a button, directly from our menus. They can also text their friends a recommendation using their smartphones on your app. Word-of-mouth is the most effective form of advertising in the food industry. With social media capabilities, the good word about your restaurant can travel quicker than ever thanks to digital menus and their wide appeal.

Quicker Turnaround Time - Since the ordering and paying processes are expedited, customers will spend less time at their tables. This means shorter lines for hungry, waiting customers and more sales for you.

Customer/Staff Interaction - Customers can order food, send special instructions to the chef, request a waiter’s attention, and pay directly from their digital menu. Also, you can use your iPad menus to collect customer data in order to stay in touch with them long after their meal, or to offer coupons or other special promotions through your network.

"Wow" factor - The most obvious benefits of touch screen tablets is that are both attractive and interactive. Studies show that customers are likely to order 20% more food using a digital menu than they would with a paper menu. Enticing high resolution images of every dish with details about ingredients and preparation not only provides customers with more information about what they’re eating, but they are salivation-inducing. Throw in the ability to browse the internet, use apps, and play games with your kids during your meal, and you’ll notice a huge jump in customer satisfaction. Simply put: now menus are fun to use

The Guest

I Am Your Guest

 

You often accuse me of carrying a chip on my shoulder, but I suspect this is because you do not entirely understand me. Isn't it normal to expect satisfaction for one's money spent? Ignore my wants and I will no longer appear in your restaurant. Satisfy those wants and I will become increasingly loyal. Add a little extra personal attention and a friendly touch and I will become a walking advertisement for you.

When I criticize your food and service to anyone who will listen, which I may do whenever I am displeased, take heed. I am not dreaming up displeasure. It lies in something I perceive you have failed to do to make my eating experience as enjoyable as I have anticipated. Eliminate that perception or you will lose my friends and me as well. I insist on the right to dine leisurely or eat in haste according to my mood.

I refuse to be rushed as I abhor waiting. This is an important privilege that my money buys. If I am not spending big money this particular time, just remember, if you treat me right I will return with a larger appetite, more money and probably with my friends.

I am much more sophisticated these days than I was just a few years ago. I've grown accustomed to better things and my needs are more complex. I'm perfectly willing to spend, but I insist on quality to match prices. I am above all, a human being. I am especially sensitive when I am spending money. I can't stand to be snubbed, ignored or looked down upon.

Whatever my personal habits may be, you can be sure that I'm a real nut on cleanliness in restaurants. Where food is concerned I demand the strictest sanitation measures. I want my meals handled and served by the neatest of people and in sparkling clean dishes. If I see dirty fingernails, cracked dishes or soiled table clothes you won't see me again.

You must prove to me again and again that I have made a wise choice in selecting your restaurant above others. You must convince me repeatedly that being a restaurant guest is a desirable thing in the first place. I can, after all, eat at home. So, you must provide something extra in food and service. Something so superior it will beckon me from my own table to yours.

 

Do we understand each other?

 

Distributor Prime Agreement Negotiation Considerations

 "Sarge Knows"

When it comes to food and beverage procurement strategy, it is highly

recommended that a restaurant, hotel or food service operation consider

establishing a distributor prime agreement to mange their food service distribution

costs. The typical distributor prime agreement will require eighty percent of

purchases to be made from the prime vendor, along with other contractual

considerations that seek to address supplier costs. By working with a food service

distributor to address these costs, mutual benefit can be achieved that will result in

lower costs for the food service operator. Once executed, distributor prime

agreements enable food service operators to focus their efforts on running the

business, rather than constantly bidding out products and tracking price

fluctuations. Further, a distributor prime agreement will typically improve overall

operational and product consistency. There are a number of critical considerations,

however, that should be addressed during the negotiation of any food service

distributor prime agreement.

 

Pricing Structure

 

Obviously, one of the most important considerations in negotiating a food service

distributor program is establishing an advantageous pricing structure. There are

two common distributor prime agreement pricing strategies: "cost plus fixed price"

and "cost plus percentage."

Under the fixed price model, the distributor adds a fixed amount to each product

purchased. For example, if an operator negotiated a $2.30 per case mark up, then

each case would be marked up by this amount over the distributor's cost. In other

words, if an operator bought a case of canned tomatoes that cost the distributor

$20.00, then the invoiced price to the operator would be $22.30. This is a very

common pricing structure for national food service chain distributor master

agreements, but is much more rare in street level food service programs.

Sometimes, a distributor prime agreement will incorporate both pricing models;

fixed price for price‐stable products and percentage mark up for those products

with volatile pricing. Whenever possible, Food Buyers Network recommends that

operators try and negotiate a cost plus fixed price agreement. Having a fixed cost

agreement has the benefit of not resulting in increased distribution costs when

product prices trend upwards. Further, a cost plus percentage prime agreement

creates an incentive for the distributor to sell more expensive products to a food

service operator than what is necessary.

When negotiating a fixed price contract, it is important to determine the average

price per case so that the effects of the proposed agreement can be better

understood. Calculating the average price per case can be easily achieved by

dividing the total amount spent on food for a previous quarter and dividing it by the

number of cases received during that time period. For example, if a restaurant

spent $500,000 in food during the prior quarter, and the number of cases purchased

during this period were 20,000, then the average price per case would be $25.

Calculating the average price per case will provide a better understanding of any

proposed fixed price mark up. If in the above example a distributor proposed a

$2.50 fixed price mark up, then this would translate into an average 10% mark up.

Unfortunately, it is not always as cut and dry when determining these figures. If a

prime agreement establishes varied mark ups by product category, then the

previous analysis would need to be calculated by category, rather than total spend.

Once the average mark up percentage is established for each category, it is relatively

easy to calculate the overall percentage mark up by looking at the category blend.

 

Mark Up versus Margin

 

While a percentage mark‐up is the difference between the product cost and the

invoice price, the margin is the percentage difference between the invoice price and

the profit. This may seem very confusing, but the example below will illustrate this

critical difference.

 

Exhibit 1.

Mark‐Up Contract

 

Markup Percentage = Gross Profit Margin/Unit Cost

Cost Mark up Invoice Price

$40.00 15% $46.00 ($6.00 gross profit margin)

 

Margin Contract

 

Gross Margin Percentage = Gross Profit Margin/Sales Price

Cost Margin Invoice Price

$40.00 15% $47.06 ($7.06 gross profit margin)

As Exhibit 1 indicates, a 15% mark‐up contract will be $1.06 cheaper per case for a

$40.00 product than a 15% margin contract. When negotiating and reviewing

distributor prime agreement contract bids, it is critical to understand whether a

contract is based on a mark‐up or margin. For example, a distributor 15% margin

contract may seem better than a 16% mark‐up because of the lower percentage, but,

in fact, the 16% mark‐up contract is the better option. Not understanding this

distinction can result in a 2‐3% loss in profitability.

 

Defining Cost

 

Once the pricing structure is determined, the next big hurdle is defining cost. In

almost all cases, a distributor prime agreement will define cost as the distributor's

cost before deducting any off‐invoice discounts they receive. These off‐invoice

discounts are allowances that distributors receive from the manufacturer for the

specific products purchased by the food service customer. These allowances, or

rebates, are "off‐invoice" so that all cost plus contracts are not based on the

distributor net cost after the allowances are deducted, but rather on the larger

invoiced cost of the products. To help further ensure that operators do not claim

stake to these allowances, Sysco has renamed these allowances "earned income" to

dissuade operators from attempting to tap into this revenue stream.

In some cases, operators will be able to negotiate a prime agreement that defines

cost as the net product cost after these allowances have been deducted, but this is

very rare for restaurant street level agreements. Because of the impact that these

back end allowances can have on distributor profitability, prime agreements will

also typically state that operators are not eligible to take advantage of supplier

rebate programs. This is because the rebate allowance earned under these supplier

programs will typically reduce the supplier allowance received by the distributor.

Operators can typically get such a clause removed from a prime agreement during

the negotiation process, however.

 

Market Basket

 

Determining only the prime agreement pricing structure is not sufficient when

evaluating the overall strength of a particular distributor prime agreement contract.

Two competing prime agreements that have the same mark up and the same cost

definition will not result in the same product pricing. Each distributor is able to

negotiate different manufacturer pricing based on their overall product purchasing

volume. Because of this, certain distributors may be strong in some categories and

week in others, based on the specific purchasing profiles of their food service

customers. Therefore, it is important to ensure that a potential supplier is

positioned best in the market for the specific product needs of an restaurant or food

service operation.

 

The best way to determine this is by requiring a market basket report during the

negotiation process. A market basket report will look at your top twenty to thirty

products and provide the theoretical pricing under the proposed contract for a

historical time period (usually the last complete month). It is important to ensure

that each distributor submitting contract bids completes the market basket for the

same historical time period so that accurate pricing comparisons can be done. Using

these reports, operators can compare the value of competing contracts, as well as

compare the contracts to past pricing.

 

Drop Size Thresholds

 

Negotiating a valuable prime agreement is only possible when a food service

operator considers the food service distributor costs, as well. By lowering supplier

costs, operators are able to achieve additional value. One of the most effective ways

that an operator can reduce distributor costs is by managing the delivery drop size.

This often means that an operator will agree to order less frequently to increase the

amount of each delivery. In other words, a restaurant that was ordering three days

a week prior to the prime agreement may agree to limit deliveries to only two days a

week. Further, it is common for a prime agreement to create drop size bracket

incentives which lower the mark up of products based on the drop size of each

delivery.

Supplier Deviated Prices

 

It is absolutely critical that any prime agreement provide a restaurant or food

service operation with the right to negotiate pricing directly with manufacturers,

and that any negotiated manufacturer pricing will be respected by the distributor

and invoiced as deviated prices. By negotiating pricing directly with suppliers,

operators are able to get product pricing on key products that is often better than

the distributor cost (before backing out the off‐invoice allowances). Because these

deviated prices often reduce or eliminate the off‐invoice allowances that a

distributor receives from the manufacturer, a standard prime agreement will not

allow this practice unless an operator negotiates for it.

 

Audit Privileges & Data Rights

 

It is important that any distributor prime agreement include audit privileges by the

restaurant or food service operator. In a standard audit privilege clause, an

operator will be able to provide notice to the distributor that they wish to audit the

cost of specific products to ensure that the restaurant is being billed properly.

Often, the distributor will provide a limit to the number of products that can be

audited.

 

As technology advances in the food service industry continue to be made, it is

important to include a data rights clause that will require a distributor to provide

your purchasing data to any third party that you engage to audit your invoices. By automatically auditing each invoice line item to ensure proper billing. To enable this process, distributors must provide the purchasing data via an EDI feed to the third party contract monitoring company. Even if you are not sure whether you will utilize such services, it is important to include this clause in the contract so that you have the flexibility to use such services in the future.

 

Term/Out Clause

 

It is our recommendation that every prime agreement have a thirty or sixty day out

clause that enables the termination of the agreement for any reason. That being

said, you may be able to get a better contract with out such a clause. If you are

willing to lock in for a period of time without the option of switching distributors,

our advice would be to negotiate the best agreement you can with the out clause in

place, and then ask for a better deal at the end if you agree to strike the clause.

 

Payment Terms

 

Understanding the cost of extending credit to a restaurant needs to be taken into

consideration by the food service operator. Agreeing to shorter payment terms will

typically result in the ability to achieve a reduced mark up on your products.

Further, it is recommended that an operator negotiate an incentive for payments

made quicker than the contracted payment terms call for. For example, a contract

that requires the payment of invoices within thirty days should have an incentive

clause that reduces the mark up should the business pay specific invoices within

fourteen days. Having this incentive enables a business the flexibility to pay faster

when cash flow allows and reduce the cost.

 

Special Orders & Slotting

 

The prime agreement should require the distributor to stock particular products

required by a restaurant that are not normally stocked in the distributor warehouse.

Typically, there will be minimum usage requirements that an operator will need to

abide by for such products. Twenty cases per month is a typical threshold.

 

Substitutions

 

It is recommended that the distributor prime agreement address the substitution

policy for products that are out of stock. Typically, operators will require

notification prior to delivery of substituted products when the cost of the product

exceeds a set threshold, such as two percent. Further, it is not uncommon to set an

acceptable threshold for how often products can be substituted.

 

Overlooked Numbers Cost You Money


As an Assistant Manager of a full-service restaurant and bar, I was taught how to complete the standard Cost of Goods Sold calculation, the same calculation every new manager is shown: Beginning inventory plus purchases equals total available. Total available minus ending inventory equals total product used. Total product used divided by sales equals Cost of Goods Sold percentage.

That was easy to master, but I had a challenge. As I climbed the ranks of management into an operations role, my kitchen managers were creating good numbers on paper, but our bank account did not reflect those positive numbers. And I learned quickly that profits on paper do not pay the bills; CASH PAYS THE BILLS.

I learned to look deeper into the Cost of Goods Sold calculations to take back control of the checking account and improve the bottom line.

Looking Deeper

The basic Cost of Goods Sold calculation is where most management stops. I discovered that there was more analysis to be done when we were rewarding managers for achieving numbers, yet we didn't necessarily have the dollars in the bank to reward them with. Let me share with you four additional numbers you must look at that allow you to drill down deeper into the numbers. They are Average Inventory, Inventory Turns, Change in Inventory and Budget Variance.

 

A. Average Inventory. This is the average dollar value in inventory you carry any day during a given period. This is vital to being able to measure how efficient your managers are with product and your bank account. Why? I will shed some light on that next.

B. Inventory Turns. This is how many times the dry storage and walk-in shelves were stripped clear of product and then re-stocked. In real-world terms, when we refer to an inventory turn, we are really referring to the number of times the dollar value on the shelves turns. The benefit is that this number measures how efficient a store is with its cash and inventory.

C. Change in Inventory. This is how efficiently your store has been ordering product. This number is important, just as inventory turns are, because it clearly represents how much cash you have either freed up or tied up on your shelves.

D. Budget Variance: These numbers show how close your store came to achieving its goals. Without a target you will be unable to quantify performance. These numbers will allow you to better interpret how your store performed in a given period.

In Figure 1, below, I will show you how all of these numbers can come together to give you a crystal ball to see how you are doing. Then you can eliminate circumstances where you can be taken advantage of and recognize opportunities to put cash back into the bank.

Cost of Goods Sold - Food Cost Example

 

Beginning Inv.

 $              3,580.21

 

Purchases

 $            22,522.33

 

Sub-Total

 $            26,102.54

 

Ending Inv.

 $              6,803.01

 

Used

 $            19,299.53

 

Sales

 $            63,045.48

 

F.C. %

                   30.61%

 

Last F.C %

                   29.78%

 

+ / - %

                     0.83%

 

 

 

 

 

 

 

 $      5,191.61

 Average Inventory

 

               3.72

 Inventory Turns

 

 

 

 

 $      3,222.80

 Change in Inventory

 

 

 

 

 $    18,913.64

 Budgeted

30.00%

 $    19,299.53

 Actual

30.61%

 $       (385.89)

 Budget Variance

-0.61%

Figure 1

 

 

You can see that four additional calculations have been added to bring new facts to light. These facts will demonstrate how at first glance we might think that the Kitchen Manager is doing a great job and may be entitled to a bonus, but looking deeper shows that the KM has made it difficult to make payroll and should not receive that bonus.

We can see from the standard calculation that the KM has come pretty close to hitting the targeted food cost percentage budgeted for. He has achieved a 30.61% vs. the budgeted 30%. The KM might even say, "I'm only .61% off budget." And at first you might say, "You're right, it's not a big deal." But let's look at the numbers deeper.

While the food cost percentage was close to our target and is very close to last month's food cost percentage, our inventory turns are not hitting the minimum 4 to 6 turns desired. This means we have too much food on our shelves. Our change in inventory shows that we added $3,222.80 in product to our shelves. That might mean the difference in making payroll. Remember, cash pays the bills, profits don't! Then we see that .61% means that we wasted $385.89 worth of product. So due to poor management of our restaurant and this controllable expense, we had a negative impact of $3,608.77 in our bank account. And without looking at the four additional numbers, we might have rewarded our KM - even though he actually mismanaged our money.

The Facts

You should have learned that the standard Cost of Goods Sold calculation alone, while important, can get you into trouble with a false sense of well being. A light bulb should have gone off in your head. You should no longer stop with the standard calculation. From here on out, you know what to look for and will be able to take steps to not only make your numbers, but increase your operating efficiency to create a larger bank account, from which you can pay your bills or maybe even yourself.


 

Ideal Food Cost Best Practice

Almost every restaurant and food service operator in the country shares a similar monthly routine—the completion of a product inventory and the subsequent generation of a food cost percentage.  This process not only enables the creation of a restaurant profit and loss statement that illustrates the financial health of the business, but can also uncover emerging operational performance issues.  Unfortunately, not as common among restaurant operators is the routine generation of a theoretical food cost that can supplement an actual food cost percentage by providing a food cost target, or baseline.  This article will examine the practice and benefits of routinely generating an ideal food cost as part of a holistic approach to food cost control management.

If you stood on the floor of Chicago’s McCormick Place during the National Restaurant Association show and polled attendees to uncover the universal ideal food cost, you would probably get a myriad of responses, quickly discovering that there is no universal ideal food cost consensus.    This, of course, is because a theoretical food cost, also known as an ideal food cost, is determined by the particular performance characteristics of a business; specifically, the menu pricing, product costs and menu sales mix of a given restaurant.  Not only is it impossible to pinpoint an industry-wide universal ideal food cost, but it is also equally impossible to determine a restaurant-specific, consistent ideal food cost percentage.  If this were not the case, the process of evaluating actual monthly food cost figures would be quite easy, as one could simply compare the actual food cost to the restaurant’s established ideal food cost policy.  Achieving this, however, would require an operator to establish their desired ideal food cost percentage and then price every menu item accordingly.  Stated differently, every item sold would need to have the same mark-up margin that would produce the ideal food cost percentage goal.  This is both an unrealistic and undesirable pricing strategy, as it does not take into consideration market pressures, competition and menu item contribution profit.  Further, it would also require the constant re-pricing of menu items to compensate for the slightest shift in specific menu item product costs.  Since doing so is obviously not advantageous or realistic, it should be understood that a particular restaurant’s ideal food cost will continuously fluctuate, and that routine re-calculation of the ideal food cost must occur if an accurate performance evaluation of the actual food cost is to be established.  Armed with the increased knowledge and visibility provided by this information, an operator can efficiently target cost control efforts in the proper direction. Specifically, a significant variance between these two numbers will indicate a behavioral and performance issue, while a slim variance will indicate a change in the product costs or menu item sales mix.

Rather than routinely generating an ideal food cost percentage to serve as a baseline, as previously described, restaurant managers and operators often look at historical food cost percentage trends to evaluate current monthly food cost performance.  While using historical data to generate actionable trending information is highly valuable in both food cost control and restaurant profit and loss management, it can also lead to misleading results if this practice is not supplemented by the use of a theoretical food cost.    While historical data does serve as an indicator of food cost performance, this indicator can be misleading, as using historical data as a benchmark, or ideal target, does not address a possible shift in the product cost, menu pricing or menu sales mix, as we previously illustrated.  If any of these variables change, then using a past food cost percentage, as a measure of current employee food cost control performance, would be misleading.  It would, likewise, be just as misleading to use the same information to write off an increase in the actual food cost percentage as simply a result of rising product costs.  

In addition to using historical trends, managers will often also rely on their operational experience, awareness and knowledge when evaluating an actual food cost percentage.  While operational familiarity is critical in uncovering restaurant cost control issues, our experience has shown that there are too many variables involved for gut-reaction management to be effective in gauging food cost control performance.  The algorithm used to determine an ideal food cost looks at three variables, each of which is determined by a multitude of factors.  Quite frankly, attempting to determine the cause of a rising, or lowering, food cost percentage without the baseline provided by a theoretical food cost is, at best, an educated guess.

It is worth noting that a rising food cost percentage is not always cause for alarm.  If both actual and ideal food costs trend upward, then further investigation may uncover that this upward trend is due to a shift in the menu sales mix, rather than product cost increases or behavioral issues.    Because products with a higher food cost percentage often have a higher contribution profit, a rising food cost due to a shift in the menu sales mix could be a positive trend, as it may result in higher profits.  For example, while a significant increase in the number of lobster or filet mignon dishes sold may increase the overall food cost percentage, it may also result in increased bottom line profit, as these items provide higher contribution profits despite their higher food cost percentages.  Uncovering such intricacies, however, is very difficult if ideal food costs are not calculated and used as a baseline when evaluating current food cost.  Imagine the time wasted and the morale issues created if an operator reacted negatively to a rising food cost that was simply the result of different guest choices, creating additional profit for the business.  This issue is very common among businesses that have frequently changing menu offerings and product mixes, such as hotels, caterers and conference centers.

The actual process of calculating a theoretical food cost is not overly complicated and can be routinely executed with some minor preparatory work.  The first step in creating an ideal food cost is to collect the data necessary to complete the theoretical food cost equation; specifically, the menu item recipe costs, menu item prices and menu item sales mix.  For most operators and restaurant managers, the menu item prices and menu item sales mix information is relatively easy to acquire, as almost all restaurant POS computer systems offer a detailed reporting of menu items sold.  Menu item recipe costs, however, are not always as easy to come by.  Access to this data requires routine recipe costing that includes the ongoing maintenance and updating of menu item recipe cards.  It is important to note that calculating an ideal food cost using menu item costs that are outdated will produce significantly skewed results that may not reflect the true ideal food cost.  While completing and maintaining recipe cards does require a time investment, it is absolutely critical to complete recipe costing to ensure that menu item cost trends are tracked.  Once all of this data is collected, calculating the ideal food cost is easy.  The theoretical food cost formula is simply the total ideal food expense, divided by total ideal revenue, which is easily calculated using the data previously mentioned. 

As a final note, operators should be realistic in their attempt to execute this critical food cost control practice.  Determining a perfectly accurate ideal food cost is very time-intensive, as it is necessary to cost every single item sold.  As you can imagine, this would be a very difficult process, as an operator would need to track and cost every side-item, add-on and special order sold during a given period.  Fortunately, a highly accurate ideal food cost can be generated by focusing efforts solely on the items listed on the menu, including frequent specials. While not completely accurate, the aggregate volume of these items will rarely be affected by the ideal food cost of those items that you did not track.  Just keep in mind that the ideal revenue figure that is used in the calculation is the ideal revenue of only the items being tracked, and not the total food revenue, as one would find on a restaurant income statement.  The end result of this process is an ideal food cost that is sufficiently accurate to gauge food cost performance, without spending too much time on calculating an exact number.

Hopefully, this has effectively communicated the need to routinely calculate theoretical food costs as part of a larger food cost control management program. 

 

Email Marketing Tactics to Boost Restaurant Sales


Restaurants of all types and sizes can use email marketing to reach out to their clientele on a regular basis. Not only is email marketing cost effective, but it is also flexible to schedule, has the ability to be personalized, and provides restaurants with results they can see and measure. Here are some tactics restaurants can follow to optimize their email marketing strategies in an effort to increase restaurant sales.

Lasting Impact
When a restaurant sends an email, it should not just be words on the screen; it needs to be visually stimulating and exciting to create a lasting impact. Restaurants want individuals to remember their email. The headline has to be attention-getting. If the email is about a new offer, write it in the headline, “Get 40 percent off your next meal!” If someone reads that, they are going to want to know how to get it. Keep the copy short and to the point – use bullet points if need be.

Relevant
It is extremely important to keep the information relevant. Fact – people don’t have long attention spans and they don’t have time to read over things that are of no importance to them. For example, if your restaurant is having new summer specials, send out information about it in May, not in July when summer is almost halfway over. To keep items relevant, ask for some information from the customer, like their birthday and their location. If you own a chain restaurant and the one in San Antonio, Texas is having a special deal for Alamo Day, don’t send that email to other customers around the US as it is not relevant to them.

Provide Value
The recipient of your email is looking for value. They do not want to simply read a general update of your restaurant – they want to know about events, discounts, and great promotions. In one email, a restaurant could provide discounts for a meal and tell recipients to stay tuned for new dishes and promotions. It is not so much to let people know about the new promotions or deals but let them know how it can benefit them. Maybe the new food options being introduced are healthier meals – let them know what the healthier options are and why they should come try them.

Beware of Email Frequency
No one likes to be inundated with daily emails from a restaurant. They are very likely to label those emails as “spam” and not check them anymore. At the same time, however, they do not want to wait months before finding out the next promotion. Email frequency needs to be gauged to ensure just the right impact. The best rule of thumb is to send customers emails at a regular interval but not so much that they will seek to take their name off the email list – for restaurants this seems to be 1-2/month or even weekly for certain concepts.

Include Social Media
Do not forget to mention in all emails that recipients can check out the restaurant on different social networking websites, including Facebook and Twitter. By becoming a Facebook friend of Twitter follower, individuals are provided with additional information about the restaurant and it will further deepen the relationship. As well, it is another great way to promote!

Be Smart Phone / Mobile Friendly
As more individuals are on the go, they check their emails on their mobile smart phone devices, including iPhone, Blackberry, and Android. Restaurants must ensure their emails are mobile friendly. Many traditional email formats do not translate well to the small screens of mobile devices. While the email must always maintain a sense of appeal, it must also be legible so it can be properly displayed on all screens. Furthermore, if the restaurant places any links into the email, these links must also be mobile friendly. The worst thing to happen is to send links that cannot be opened on mobile devices.

Include the Opt-in Link in Every Email
Most people think why should they put the opt-in link for those who have already subscribed to the restaurant’s emails. It might seem silly but there is some common sense behind this tactic. Customers will forward restaurant emails to their friends who they think would be interested in the news you are sending, whether it is about new items on the menu or a new promotional deal. These people may not be subscribed to your email. After they read the content and see the offer, they may want to subscribe to the email as well. A great place to include the opt-in link would be a “P.S” at the bottom.

Email marketing has great potential to provide restaurants with fast response. It is an opportunistic medium that allows restaurants to directly engage their customers. When executed correctly, email marketing can net restaurants increased profits and a solid return on investment.

 

10 Ways to Build Check Averages and Profitability


There are a number of financial metrics restaurateurs need to track to maintain profitability; however, many seem to be obsessed with "check average": the average amount of money spent by each guest in one visit. Your check average certainly tells part of the story, but it might not give you a clear indicator of your profitability.

"You can have the biggest check averages in town and still go bankrupt.

You want to present all of your offerings to all of your guests. You don't want to leave any money on the table. I am a believer in pushing restaurant profits and a believer in managing check average, but I think it's self-destructive for anyone to solely concentrate on increasing the average guest check."

Both are absolutely correct. You need to find ways to increase sales. Upselling and suggestive selling are crucial to maximizing total revenue per shift. You need to be strategic in your sales, promoting the items that make the greatest contribution to your income. Above all, you need to price and promote your on- and off-menu offerings to leave the customer with the sense that he received value. Successful operators have to plan ways to increase check averages while increasing sales of the most profitable items. It's a juggling act, to be sure, but one that you'll have to master to win in this business.

Tell us you have an $80 check average, and we might be impressed. Tell us you have a 35 percent gross margin on sales and we're smiling. In addition, tell us that 60 percent of your customers dine with you at least once per month, and you get a gold star.

A Useful Metric -- Up to a Point

Every operation should have a target check average, and work at building it incrementally. If the average guest spends $26, and you serve 83 guests on an average night, you see the effect of boosting the average even by a few dollars.

Once you know your check average, it only makes sense to want to increase it. Bigger checks mean more success, right? Not necessarily. By way of example, he relates the real-life experience of a friend who owns a convenience store. Milk is one of the most common items bought at a convenience store, so his friend had to stock it and yet the legally set price for milk made it a barely profitable item for the store. So his friend buried the milk at the bottom of a cooler in the back of the store so that en route to the milk the customers had to see everything else the store had to offer. "My friend could have sold a thousand dollars of milk a week and still gone out of business.

Careful price point selection is a fundamental issue for every business, and yours is no exception. A customer may buy a $7 appetizer, but balk at the same offering at $9. "So, back to the average check question; does a restaurateur lower the price, sell more product and keep people happy or, alternatively, keep the margin up, sell less, keep costs in line? Each and every day, every operator is faced head on with this question, and it's how one responds to this that makes the difference between a full and empty restaurant,

No doubt, average guest check is important; it's a number every operator should know. I prefer looking at its cousin. I urge restaurants to have guests spend as much money as possible, but, Instead of the dollar amount, make the checks be as profitable as possible. What we concentrate on is the average gross profit dollar per person and making sure that's as high as possible,.

 
 

So when it comes to increasing check averages, proceed with caution. The same technique that adds a few dollars to each check may have repercussions. For example, if you are a special-occasion restaurant, is it worth your image to charge 50 cents more for crumpled blue cheese on a salad? If all your competition offers free iced tea refills, is it smart for you to charge for them? Bill Marvin, aka The Restaurant Doctor, says, "If the guests aren't happy, you are in big trouble. If the people leaving your restaurant are not thrilled, who cares what your check average is?"

Increase check averages while gaining profitability while creating happy customers. That's quite a challenge, but here are 10 ways for you to try. All may not work in every establishment, but these will get you started on the balancing act of more revenue with more profit.

1 - Offer house cocktails. Blushing Geisha, Leapin' Lizzard Margarita, Oscar's Wild Martini. These are all fun signature drinks. Crabby Bill's in Florida offers four signature cocktails: The Crab Trap, The Crabby Rita, Blue Lattitudes and Day at the Beach. From a marketing perspective, a signature cocktail makes your place unique and fun. From a business perspective, the nature of a signature cocktail justifies a higher price. Drinks, both alcoholic and soft drinks, are highly profitable. You do not want to lose a $5- to $8-per-person sale to a club soda or water if you can avoid it.

2 - Take a hard look at your children's menu. Kids' meals can be profit centers because they can incorporate premade items with low food and labor costs. That said, you can lose kid menu sales very easily, since children can share off their parent's meals. The objections you have to overcome are twofold: "same-old, same-old," and nutrition. There are only so many times that little Billy is going to want the same-old chicken fingers or hot dog. Also, parents don't want their kids to fill up on fatty, low-nutrition fare. If you are committed to being family-friendly, your children's menu cannot be an afterthought. Is it possible to jazz up the menu with more appealing offerings? Cost-out your proteins. A child-sized steak or shrimp platter might be more cost-effective than you realized. You might also be able to charge more for the same offerings with more tempting menu descriptions. Make it easy for healthy substitutions (e.g., milk for soda, veggies for fries). This is a good opportunity to re-evaluate your children's menu to make sure it's a healthy profit center for you.

3 - Move the cappuccino away from the bar. Consider the labor and opportunity cost of everything you serve. For example, you never provide table soft drink service from the bar guns. It can create a wait at the bar that can lose more profitable alcoholic beverage sales. By the same token, you should take the espresso/cappuccino machine away from the bartender and move it to a location accessible to the servers. Many servers believe it is too time-consuming to go to a busy bartender and wait for a cup of cappuccino. If a server knows he or she can make their own cappuccinos with far less time and effort, that server will be more likely to recommend a special coffee instead of just the regular brew. Newer cappuccino machines make servers' getting their own coffee quick and easy. That's a $4 coffee versus a $2 coffee for very little effort.

4 - Have a separate dessert menu. It's always a good idea to plant the dessert seed in your guests' minds early. That can be accomplished when the guest is being seated. A server can add something such as, "Make sure you save room for one of our fabulous desserts. I love our Brownie Sundae." Then when it's time to order desserts, a separate menu will spotlight the desserts (and special coffees and after-dinner drinks) while making it simpler on your servers. It's easy for a guest to say "no" to a rattled-off list, "We have cheesecake, ice cream and I think I saw some pie back there, too," but harder to resist detailed descriptions of delicious dessert offerings.

5 - Make sure everything is rung up. Profitability goes down the drain if your server makes the sale, but then doesn't charge for it. The most common item that doesn't get rung up is drinks. "It's very common for a server to overlook ringing up an iced tea or soda,. Make sure your servers know your refill policy and adhere to it. Some places give free refills while others charge for a separate beverage. And like many other decisions, there's no right one when it comes to refills. That's a call you make based on your operation.

6 - Check the prices of your soft drinks. It's always a good idea to know what your local area restaurants charge for all kinds of offerings. "It seems as if many independents may be underpricing their soft drinks relative to the average price in their local market." He suggests operators check what their competition charges. One study shows that the average refill rate is 1.8 times when using a 16-ounce glass, so adding a free refill adds about a dime to the cost of each sale. "Compare your soft drink prices to other restaurants in your area. Getting your price points more in line with what your market will bear may be the easiest new money you've ever made.

7 - Maximize food sales in your bar/lounge area. For many, it is more enjoyable to eat in a bar than drink in a restaurant. Some solo diners prefer to eat at the bar rather than to sit in a dining room at a table by themselves. That's why it makes sense to have menus, silverware, condiments and promoted specials available for your drinking guests. Guests eating at your bar should have the same menu choices as those in the dining room. Why limit bar guests to free peanuts when you could sell them an entire meal? Or even some appetizers? And if they don't eat on the first visit, you will have planted the seed for them to consider eating in your place on their next visit. I worked with an operator who had terrific monthly sales, but it was mostly liquor. He asked this operator whether he wanted to be a restaurant that serves liquor or a bar that serves food. "A bar that serves food is always more fun so we totally gutted his food concept to put in more bar-appropriate food,.

8 - Bundle meal parts together. Bundling is a win-win for the restaurant and for your guest. Bundling may consist of an appetizer/salad/entrée combo or salad/entrée/dessert combo. You add to the dollar amount of each check while your guests maximize their dollars spent. "Diners will not be surprised by the dollar value, and they can knowingly order within their budget,.

9 - Sell more through education. As an alternative to increasing check averages with suggestive selling, is having servers informally educate the table on the different offerings. Instead of the sing-songy, do-you-want-fries-with-that approach, I suggest the server sell through education. The server could ask, "Have you ever tried an Australian wine?" or say, "If you're thinking of ordering steaks let me tell you about ours…" or "The chef recommends the lobster tortellini because….". In explaining your specialties, you will sell the more expensive item."

For your servers to educate your guests, you have to educate them. Profitable operators are constantly teaching and educating their servers since the more comfortable they feel in their knowledge, the more enthusiastic they are with the guests.

10 - Do the most with your menu. "The importance of a correctly engineered menu can't be overemphasized, and it takes time and money to do that. A menu is the No. 1 piece of selling material that every guest will see." Entire books have been written about menu construction, but here's one tip: A University of Illinois study showed that descriptive menu wording increases sales 27 percent over plain-Jane wording. For example "Succulent Italian seafood fillet" sells more than "Seafood fillet.

The researchers found three kinds of descriptive menu labels most effective in increasing sales: geographic, nostalgic and sensory. Labels that evoked the foods and flavors of specific regions, such as "Iowa pork chops" or "Southwestern Tex-Mex salad," created positive responses. So did labels that triggered happy memories of bygone days and family traditions. Examples included "Nana's favorite chicken soup" and "ye old potato bread." Finally, descriptions such as "snappy" carrots and "buttery" pasta that referred to the texture, taste or smell of a menu item were found to be successful sellers.

In this study, not only did customers purchase the descriptive items more frequently, they also rated them as being of higher quality and better value than did customers who ate items with unvarnished labels. That's how powerful a menu can be.

Repeat Business is Crucial

Operators have to understand that guests dine on a budget, and servers who sell products that exceed the dining budget may experience reduced income in the form of tips, and the restaurant will experience reduced visitations from the guest. "Ensuring that your guests come back repeatedly is much more important than increasing their check average for just one visit,.

However, "It is about time we started putting our energies toward building guest loyalty, not the check average


 

Calculating Your Check Average

Calculating your check average is simple. Take your total amount of sales and divide it by the number of diners. Count everything sold in your restaurant, including T-shirts, if applicable. "Your check average includes liquor, beer, wine, even cigars; everything that involves revenue, and not just food." (Of course, you do not calculate taxes into your check average.)

 

Training - Creating Personal Change

We're not just our thoughts, we are our habits. And creating effective staff habits is a baseline goal of all well-run hospitality businesses. This post covers the basics that any trainer should be skilled enough to execute. The two key take-aways are that every training must be a closed-loop process, because without providing feedback, learning may not happen; and that the trainer must be able to observe both attitudes and behaviors in the trainee. The person you're training is a whole person.

Training is a process in order to change a person’s attitude, knowledge, skills and behavior. The term training also refers to the acquisition of knowledge, skills, and competencies as a result of the teaching of vocational or practical skills and knowledge that relate to specific useful competencies.

There are general guidelines to follow when training. In most situations, trainers should follow the following five steps on how to train a restaurant employee.

1. Explain the procedure/what is going to happen: - This should happen before the shift to provide the trainee with an idea of what he/she will see. If possible, the explanation should occur directly before the event.

2. Show the procedure: - When you show the trainee the procedure, the trainer should continue to explain each step (if possible). This step may require several repetitions before moving on to step # 3. Be sure to make time for questions.

3. Have the trainee practice: - At this point, the trainer should remain close by to observe the employee, initially the trainer should be looking for accuracy, not speed. This step should involve several repetitions. Even if the trainee appears to have executed the task on the first try, he/she needs to practice to develop a habitual pattern.

4. Provide feedback: - Providing feedback is not always easy, but is an extremely important part of the learning process. The trainer must be honest, pointing out any areas of opportunity in a constructive manner. Be sure that your feedback is:

  • Honest
  • Fair
  • Clear
  • Based on direct observation
  • Descriptive, not judgemental
  • Respectful
  • Private

5. Repeat Step # 3: - Once feedback has been provided, the trainee should practice again. Continue with step #3 and #4, until you feel the trainee has mastered the task. While the trainee performs the task, the trainer should periodically ask questions to ensure comprehension.

Being a trainer is not easy, especially since all trainees are different. Each one has a different learning style. Some will learn best by reading, some by listening, and some only through hands-on exercises. Most people will not know how they learn best. As a trainer, it is important that you are able to recognize this and adjust your training accordingly. You may have to try many different avenues before you find the one that works. Just remember to be patient and trust your instincts.

  • Introduce one thing at a time
  • Break the information down into small, understandable chunks
  • Start at the beginning and build from there
  • Put it in context
  • Go slowly
  • Explain it, show it, document it
  • Repeat, Repeat, Repeat
  • Allow time for questions
  • Pay attention to verbal and non-verbal behavior
  • Discuss resources and support for newly learned information
  • Make yourself available after “learning” has taken place
  • Follow up to determine how learning is going

A trainer should pride him/herself for the greatness of all the employees he/she trained.

Chef as Accountant - Part 2

Last time, we looked at food cost basics, starting with defining them and how to measure them. It's an important topic, not just for the blossoming accountant in you, but because, fundamentally, food cost management and inventory turnover serve as models for thinking about your longterm success: trimming costs, growing revenues, and maintaining the quality you care about.

Your Menu Should Leverage Your Kitchen's Strengths

The first step in controlling your food costs occurs when you write your menu. It is obviously of paramount importance to write a menu that offers a sufficient variety of choices at the right price and style for your restaurant. The menu items should leverage the strengths of your kitchen staff and avoid their weaknesses, while always being practical in terms of equipment and space.

Not as obvious, but very important to food costs: The ingredients required to make the menu items should work together to ensure maximum usage and no waste.

If one of your dishes has finely julienned red peppers in it, consider having a red pepper coulis made from the ribs, tops and bottoms of the peppers somewhere else on the menu. Scraps from onion rings can go into the stockpot, along with a lot of other things that will do your food more good than if they go into the garbage. (There are some exceptions, such as any member of the cabbage family -- don't go overboard.)

If you cure your own salmon, make a mousse or spread from the scraps. If you have enough scraps to put a salmon mousse appetizer on your menu, great. If not, you can always give away salmon mousse bruschetta when your guests first sit down, and start their meal off on the right foot at no real cost, or put the bruschetta on another plate as garnish. Even seemingly miniscule scraps from the preparation of one dish might be sufficient to be a garnish in one of your soups. Trimmings from cuts of beef can go into a bolognese sauce.

Even if it takes you a week to accumulate enough scraps to run a special for one day, do it. At the very least, if you can't figure out how to get a byproduct from one menu item somewhere else on the menu in another form, serve it for a family meal and save some money and create goodwill that way. For this concept to work, your kitchen has to be organized enough to make sure that scraps from one station are saved and moved into the hands of another station that will turn them into mise en place. Cooperation and organization, of course, are always good habits to develop and encourage in any kitchen.

Getting the Right Amount of Everything You Need

The next step on the way to good food cost control is purchasing. The goal of purchasing is to get the right amount of everything you need, when you need it, with the correct specifications, at the best price available with an acceptable level of service. All purchases should be menu-driven. The purchasing agent should work closely with the chef and manager, assuming they're not all the same person, to determine what, when and how much of everything to order.

A list of all food items, including pertinent specifications, preferred vendors and price history should be written (spreadsheets are handy for this). Pertinent information should include brand names, grades and specific cuts of meat (use the North American Meat Processors Association "Meat Buyers Guide"), type and size of container, the unit (e.g., pounds, each, gallon) each price is quoted for and any other information important to your situation.

This list will also come in handy when you're figuring out food costs for individual dishes. Par stocks should be determined and a physical inventory, even if it's a quick one, should be done before any order is placed. Ordering something you don't need is as sloppy and expensive as not ordering what you do need. It's usually advisable to have more than one vendor for each type of product (meat, dairy, dry goods, seafood…) to keep them interested and competitive.

However, especially if you're a small operation, it might be better to give most of your business to fewer purveyors so that you can be a more significant account to them. This is, of course, only for as long as they treat you as if you're significant. Watch prices like a hawk and always be aware of the timeliness of deliveries. Also realize that being organized and paying your bills on time go a long way in getting the best service out of any vendor. 


Chef as Accountant - Part I

More than ever, the restaurant business is one of tight margins, and one of the most important fundamental margins that must be understood, controlled and manicured is food cost. Along with alcohol sales, food sales are one of the two main profit centers of just about any restaurant. In some cases it's the only profit center.

When you count so much on food sales to generate enough gross profit to cover payroll, rent, insurance, costs of goods sold, repairs, marketing, utilities, administration, taxes and fees (I could keep going, but I don't want to sound pessimistic), and still have something left over to take home, you really want to be as effective as possible with how you handle your food costs. While the gist of it is "buy low, sell high," there's more to it than that. Let's look at the process from start to finish, and particularly the role of the chef or kitchen manager in keeping these costs in line.

Food Cost Defined

First, let's define what we mean by "food cost." Technically, we're referring to the costs of goods sold -- in this case food, expressed as a percentage of what we sell it for. Let's say we've figured out that the food on a certain plate costs us $5, and we sell it for $20. We divide our cost of the food by the selling price and come up with 0.25, or 25 percent (5/20 = 0.25). This means we have a "food cost" of 25 percent for that plate.

While knowing the food cost for each menu item is important, it's also important to know your overall food cost. To arrive at this figure for a certain period -- a month is typical -- first do an opening inventory of all food. Add to the value of this inventory the cost of any food purchased during the period in question.

Do a closing inventory at the end of the period and subtract its value from the sum of the opening inventory and purchases (this will tell you how much product was used). Now divide the cost of the food used by your food sales for that same period, and you'll have your overall food cost percent, the same as you had for an individual dish earlier, but on a bigger scale. Some operators subtract the cost of family meals, promotions and waste from the food cost, but care should be taken with this practice as it may end up being more deceptive than helpful.

Before we discuss how to control this cost, I'd like to bring up two important points that restaurateurs sometimes miss. The first point is stated in my favorite definition of cost control: the elimination of any expenses that won't diminish the quality of goods or services as perceived by the customer.

If, to reduce your food costs to a predetermined point, you lose customers either because your quality goes down or your portions become unacceptable, you lose. Keeping a higher percentage of a lower number (of sales) may be OK, but there's a good chance it's not.

You have to be careful to control your costs in ways that won't cost you customers. Another concept to watch out for can be summed up in the old adage, "You can't spend percents, and you can only spend dollars." Here's an example of what I mean. Let's say one of your chicken entrées costs you $4 and you sell it for $16. That would mean its food cost was 25 percent (4/16 = 0.25). Let's say your rack of lamb entrée costs you $12 and you sell it for $32. The lamb dish would then have a food cost of 37.5 percent (12/32 = 0.375).

If you only looked at the food cost percent, you'd think you would be better off selling the chicken. After all, 25 percent food cost is better than 37.5 percent, right? But consider how much money you make with each dish. With the chicken, you're taking in $12 (16-4 = 12), but with the lamb, you're taking in $20 (32-12 = 20). The lesson here is, while food cost percents are very important, don't forget to always see the bigger picture. Higher-cost items frequently will have a lower markup than lower-cost items, but might still be more profitable. You'll see the same scenario play out frequently on your wine list. 

Next time, let's take a look at how to use the menu, your concept, and common ingredients to lower your food costs. A couple of good strategies can make a big difference.


The Incredible Shrinking Restaurant

Commodity pricing is the norm for the food service industry. Lettuce is $12.00 a case one week, $26.00 the next. The Yellowtail Tuna you special ordered at $6.00 a pound comes in at $6.50--did anyone catch it?

Foam cups are a petroleum-based product, and they mirror pump prices. If you live in New York, like many of our clients, you don't see the pump often, but I live in New Jersey, and as I write this, I'm wagering that foam cups are expensive enough to be the foundation for a small country's currency.

The bus boy you have checking in deliveries is best friends with the driver of the produce company. The waitresses and cooks get together for cookouts at least once a week and rave about the filets. The chef spends all morning getting the lunch specials prepared, punched into the POS and prepping the wait staff----yet makes up a price off the top of his head.

When food cost goes up, the GM blindly throws darts for a couple of days and then it's back to business as usual. Food Service Directors agonize over whether or not to feed a tenth grade student who has forgotten his/her lunch money -- yet will serve 10,000 lunches and not know if the cost of the Type A lunch is 65 cents or 85 cents.

My name is Robert Sloop, CEO of Kaizen Management LLC. We are a food service software systems provider, consultant and integrator for both retail and institutional food service. In my thirty years as CFO of some of the most renown multi-concept organizations and implementing food service-restaurant software systems and providing back office solutions for restaurants, I am amazed at how much money is left on the table every day--and I'm not talking about tips.

What I am talking about is SHRINKAGE. Shrinkage is LOST PROFITS. In the hospitality industry this number in dollars often exceeds the net-net profit of the operation.

Shrinkage, by definition, is the difference between what you used today in your operation and what you should have used based on your plan. In a perfect world you would get paid for everything you used and your employees would ensure that the customer only received what he or she paid for. No mistakes, no over-portioning, no spoilage, no theft, no short weight deliveries. In short, food service nirvana.

Shrinkage robs owners and operators of what is rightfully theirs. The median shrinkage we have found in operations is 8.4% of sales. That amounts to $84,000.00 per year in a million dollar operation. More than enough to pay someone to do nothing but find out the who, what, when, where and how shrinkage is occurring. Failure to control shrinkage often results in a "business closed" sign for retail restaurants or "food service management contracts" in institutions.

Finding this $84,000.00 is not for the undisciplined. It's not for the folks that ended up right here, right now who are looking for something for nothing. If you did an Internet search for "free or cheap inventory, menu and/or restaurant software," please hit the "Back" button and shop elsewhere. 

  1. Your tables are filled every day and you have a 30-minute wait on the weekend. A short week for you is 80 hours and there still isn't enough money to pay the bills. (But all your customers shook your hand and told you what a great meal they had!)
  2. You bought one of those “cheap” restaurant software packages that "did it all" yet, despite diligently entering data 10 hours per week, your numbers don't add up. You've wasted your time.  (Was it REALLY cheap?)
  3. Your owner told you to search the Internet to find him a "silver bullet" -- a software package that did it all, including taking out the garbage, for under $500. And it has to include training and support. (“Silver bullets” only work in Werewolf movies.)

Finding this lost profit is a lot of hard work up front. What we  offer is a whole lot more than menu planning or inventory control or restaurant software. More than software, we offer a system and finance model that is proven successful.

The system is based on a control approach, and our current software of choice is called Compeat. If you are interested in protecting your investment and taking home more money at the end of those long, arduous days, you deserve to have a conversation with Kaizen. 


Welcome to the Kaizen Management Blog.

The restaurant industry has relied for too long on old models. For investors, tying a restaurant to real estate no longer makes sense. For restaurateurs, controls, incentives, and budgeting must be tighter than ever, even though the economy is making attempts to get back on its knees. The reason is simple: with new mandates, increased competition, and more opportunities to exploit outside of the four walls of the restaurant, chef/owners need more flexibility and focus. 

Look to this blog to learn more about our point of view on transforming the industry with new approaches to capital, management, branding, and social engagement. 

Yours,

Robert Sloop,

Kaizen Management LLC