Restaurant Social Media
Change
Change is good. But in our industry today, you better change or find another career.
Costs have spiraled out of control. Restaurant operators better look at every item on their P&L and ask, "Am I as efficient as I can possibly be in this area?" If you have any doubt, your probably wasting money. And in the restaurant business, he who hesitates today will be out of business tomorrow. Its that simple.
Let's start with labor. Forget about the "normal" industry percentages. They're meaningless. Operators need to look at every person working in their operation and make sure they are first, absolutely necessary and second, good at what they do. Recently I saved valuable hours in my restaurant by replacing one worker with a faster, more efficient worker. He does five days worth of food prep in three days. That's called productivity. Another move I made was to bump my day shift's start time from 8 AM to 9 AM. A simple move but it saved me six hours a day, seven days a week. That's a total of 42 hours a week at $9 per hour. Over the course of a year it will save me close to $20,000. You need to do this. You need to look at every person on your payroll and make sure they are productive and necessary. I'm projecting to save over $100,000 in payroll this year and you can too.
Food cost is another killer. If you're an independent restaurant you need to shop around - hard. If you don't know how to use an Excel spreadsheet, you could be missing out on saving tens of thousands of dollars a year. The only way to ensure you're buying product at the lowest price available is to chart multiple suppliers on a spreadsheet and see who has the lowest price - weekly. Some items can't be shopped due to quality concerns but for branded items its a no-brainer. If you don't ask vendors to systematically compete on price for the items you buy, you're leaving a ton of profitable dollars on the table. They will kick and scream, but they will sell to you - at lower prices. I've been doing this for years and still buy from the same suppliers. Once they know you're a spreadsheet freak, they go for volume to build their commission. Chains have the power to negotiate directly with manufacturers, independents don't. Case closed.
Utilities have become a major expense of restaurants. Change over to energy efficient light bulbs. If your flourescent ballasts are out-dated, replace them. Investigate solar panels. I'm still researching this but I know the savings are there. Plus, you can market to your customers that you've "gone green" and they'll love you for it.
I've got to go back to work. Its getting busy. More to come later.
The Truth
Costs have spiraled out of control. Restaurant operators better look at every item on their P&L and ask, "Am I as efficient as I can possibly be in this area?" If you have any doubt, your probably wasting money. And in the restaurant business, he who hesitates today will be out of business tomorrow. Its that simple.
Let's start with labor. Forget about the "normal" industry percentages. They're meaningless. Operators need to look at every person working in their operation and make sure they are first, absolutely necessary and second, good at what they do. Recently I saved valuable hours in my restaurant by replacing one worker with a faster, more efficient worker. He does five days worth of food prep in three days. That's called productivity. Another move I made was to bump my day shift's start time from 8 AM to 9 AM. A simple move but it saved me six hours a day, seven days a week. That's a total of 42 hours a week at $9 per hour. Over the course of a year it will save me close to $20,000. You need to do this. You need to look at every person on your payroll and make sure they are productive and necessary. I'm projecting to save over $100,000 in payroll this year and you can too.
Food cost is another killer. If you're an independent restaurant you need to shop around - hard. If you don't know how to use an Excel spreadsheet, you could be missing out on saving tens of thousands of dollars a year. The only way to ensure you're buying product at the lowest price available is to chart multiple suppliers on a spreadsheet and see who has the lowest price - weekly. Some items can't be shopped due to quality concerns but for branded items its a no-brainer. If you don't ask vendors to systematically compete on price for the items you buy, you're leaving a ton of profitable dollars on the table. They will kick and scream, but they will sell to you - at lower prices. I've been doing this for years and still buy from the same suppliers. Once they know you're a spreadsheet freak, they go for volume to build their commission. Chains have the power to negotiate directly with manufacturers, independents don't. Case closed.
Utilities have become a major expense of restaurants. Change over to energy efficient light bulbs. If your flourescent ballasts are out-dated, replace them. Investigate solar panels. I'm still researching this but I know the savings are there. Plus, you can market to your customers that you've "gone green" and they'll love you for it.
I've got to go back to work. Its getting busy. More to come later.
The Truth
Comment
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Comment by Randy Caparoso on March 9, 2008 at 12:24pm -
Exactly, Matt.. well said. Goes back to what we're all trying to say: it's now what you do, it's how you do it. When you do things with more skill, and more focus on what you stand for, you're going to be more productive, and things like cost control all fall right into place. In that sense, Meyer's book definitely has something to say to all of us...
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Comment by Matt Urdan on March 9, 2008 at 11:31am -
While in principle I agree with The Truth's views expressed in this post--which covers many detailed and complex issues, it gives me pause to think that he is operating under principles of scarcity versus principles of abundance. Yes, you can squeeze labor dollars. Yes, you can squeeze food cost. Yes, you can squeeze utilities. And you should always be looking at these numbers and find the correct mix for your business. But his post reads like recent Political Ads asking who is ready to pick up the phone in the White House at 3 am?
If you want your business to be around for the long whole and to be able to withstand economic downturns, you have to operate with abundant thought and keep doing the things that helped your business succeed while times were good. Staff your restaurant for the business you want to have (within reason). If you cut staff so much your service suffers or you burn out your existing staff because of too many demands for productivity, you're going to find you'll cannibalize your own business to some degree.
Danny Meyer, CEO of the Union Square Restaurant Group, in his book "Setting The Table" describes how an abundant outlook played to his restaurants advantage following 9/11 in New York when no one was going out to eat and business was down substantially in the city for well over a year.
Yes, Danny Meyer cut some costs in terms of menu options that were offered, but he reached out to the community, opened the doors of his restaurant and gave more a way; and when people started dining out again they remembered his gestures and patronized his establishments where they received the most warm and genunine hospitality.
The restaurant industry is in a state of change. The economy is uncertain. Same Store Sales everywhere are decreasing. But rather than locking the key to the liquor cabinet in a safe deposit box, restaurants have to emphasize great service, maintain their place in their communities, continue to support charitable efforts, do local store marketing and become places of refuge for those out there struggling--including the restaurant's staff. Dictating to your staff that they're going to have to start doing double the work in less time to keep their jobs is not the way to go. Always encouraging an increase in productivity is important, but for you to be able to provide the greatest experiences to your guests, you your staff to be happy and content and positive--not fearful that they're about to lose hours or be replaced by more productive workers.
Cheers!
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Comment by Randy Caparoso on March 8, 2008 at 3:14pm
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Yeah, we're definitely on the same page. One thing I learned in my years in the business, though: there's no substitute for experience. New servers and BOH staff start off inefficient, but if they have the talent and work ethic, and you give them time (one, two to three years), they are indispensible.
In fact, I find it's hard to hire someone who can double efficiency right off the bat. It's more of a matter of training, getting them the tools, and then giving them the time to develop.
I'm more FOH, so I can say this: for a position like a hostess (reservations, seating, greeting, face and personality, etc.), the difference between a smart one with training and experience and the latest pretty face who just started is as large as ten to thirty extra covers a night. In a $40/cover restaurant, that's between $140,000 and $400,000 more revenue per year. I'm not saying this always happens, but I've had hostesses like this who've pretty much fit this description. Sure, after two, three years you need to pay them as much as $12/hour, and shower them with favors like a free appetizer or drink every night (I never do this for servers and SAs). But in the scheme of things, "taking care" of a good hostess makes all the sense in the world.
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Comment by The Truth on March 8, 2008 at 2:18pm -
I agree with your Randy! Quality can't be compromised. That's why I stated, "Some items can't be shopped due to quality concerns but for branded items its a no-brainer." For example, I rarely shop my produce or fresh fish. Too risky on the quality. I may zero in on a brand of 21/25 Shrimp and shop that but the fresh stuff is handled with care. But I'll shop hard on stuff like Hellman's Mayo, Heinz Ketchup and other branded items. Paper goods and restaurant supplies are easy ones to shop.
As far as labor, you gotta be tough. I know it sucks but back-of-the-house must be run as tight as possible. I'll pay a great worker top dollar but I'm going to make sure the hours are critical ones. As for waitstaff, $2.35 per hour (in NJ) allows you to never skimp on servers. I agree, service can't be compromised.
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Comment by Randy Caparoso on March 8, 2008 at 2:08pm
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Yes, you certainly talk the "Truth." But conversely, I've seen many of restaurant who do exactly what you say, and even more so, and as a result their food is crappy because their ingredients are lowest common denominator (purchased for cost, not quality), the staff is rushed and sloppy, they can't keep competent staff because the good ones can't get enough hours or don't feel appreciate, and they care more about cost and spreadsheets than the people who work there or what the guests truly want and need.
Somewhere in between is a happy medium. When it comes to the kitchen, I personally believe it's more important to know what you're doing with your food than expending all your energy identifying the absolute best prices. There is more revenue lost through waste, spoilage and poor menu planning than pure costing.
Regarding marketing: I agree with you, Truth, that the most important thing is what you do every day or night; the quality of your work. This is a far more effective way of growing your business than than marketing and PR. In fact, even if you have great PR and marketing, it won't mean a damned thing if the guests come in and receive a a poor experience. What you do with the guests you have is far more important than trying to corral guests you don't yet have.
Finally, last but not least, the human experience: there's a lot to be said for "shopping around" -- be it for vendors who get you what you need, or employees who are more efficient. But there's also a lot to be said for establishing strong, personal, give-and-receive relationships with vendors, employees, and especially the surrounding community. To a large extent, this means demonstrating your loyalty to, say, a farmer who works hard to get you the microgreens you want by buying his stuff even when the cost temporarily fluctuates or the quality is not quite the same as it was when the weather was kinder. Or showing empathy and patience with an employee who suddenly disappoints you, although he/she has performed in exemplary fashion for years and years, coming in when needed in cases of emergency, and always on time or working overtime when necessary.
As soon as you don't get your supply, your prices, or even acceptable performances one day, you shouldn't throw these people out just because you're suddenly disappointed! I believe restaurants definitely run a lot on karma: if you treat the people around you inhumanely, then it definitely comes around to the guests... and they eventually stop coming to you. After all, what are successful restaurants but those who get the human experience right?
If you want to receive, you have to give. I'm not saying that you need to accept lower quality or incompetence. I'm saying that you maintain the highest standards of quality and competence, and go out of your way to embrace the people who do these things for you year-in and year-out, even when times are tough or when things go wrong.
Enough philosophy, back to work!
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Comment by The Truth on March 8, 2008 at 1:32pm
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Yes. Rebates are the real prize here. So many independents leave these on the table. I use a company to track mine based on invoices from three major suppliers. The send me quarterly checks after taking a cut. Occasionally I can get a rebate directly from a manufacturer but it takes some digging.
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Comment by The Truth on March 8, 2008 at 1:03pm
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GPO purchasing can work for small operators but if competition is not present cost of goods will slowly rise, even with a GPO. Remember, the GPO administrator generally makes money on a percentage of the group sales. If the volume goes up the admin makes more money. If you are a medium to higher volume indepentent your best bet is to spreadsheet your vendors for the best prices. I've seen GPO pricing that is 15% higher on average than MY prices to my two restaurants. How can that be? Simple. There's no competition on a weekly basis to keep the vendors honest. That's the Truth - and the vendors know it.
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Comment by The Truth on March 8, 2008 at 12:56pm
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The absolute best 'marketing' a restaurant can is deliver great food in a comfortable environment with excellent service. This will keep them coming back all the time. I agree SOME marketing is a good idea but if you get them in and can't deliver on the above, its a matter of time before you fail. Cut and contain costs + deliver a great product = success.
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