David Scott Peters is a restaurant expert, speaker, coach and trainer for independent restaurant owners. He is the developer of SMART Systems Pro, an online restaurant management software program helping the independent restaurant owners remain competitive and profitable in an industry boxed in by the big chain restaurants. Learn more about he can help you and your restaurant at www.TheRestaurantExpert.com.
Register now to attend David Scott Peters’ Pro Workshop at the 2017 Nightclub & Bar Conference and Trade Show. Entitled “Take Back Your Budget: The Key to Your Profitability,” this Pro Workshop is highly recommended for owners and operators.
Here are five easy-to-implement systems that will help you stabilize your cash flow and help your business increase profits over the long run.
1. Raise prices. Instinct says to buy cheaper product rather than increase prices. However, people who eat and drink in your business on a regular basis have come to expect a certain level of quality. If you start offering lesser quality ingredients, it will be noticed, and you’ll pay the price in the long run. And you don’t have to raise prices by much to have an impact, as long as you’re implementing changes in other areas.
2. Purchase smarter. This is a two-parter:
- Order a descending dollar report from your vendor to review what you spent the most money on down to the least amount of money. This isn’t necessarily in volume, but in price per item. It’s not that I ordered 10 cases, it’s that I spent $1,000 — which could have been one case. Based on these figures, you can try to find like or better products at cheaper prices, which can have a huge impact on your business. For example, you can take something you usually spend $3,000 a month on and get it down to $2,500. I’ve had members cut their spending by 5, 7, even 10 percent.
- Second, get a prime vendor agreement. Rather than order small amounts of product from a large number of food distributors, you’re better off to order most, if not all, of your product from one distributor. Yes, you might be getting a killer deal on cheese from one vendor, but in the meantime, you’re getting railed in your janitorial and paper items from another.
3. Recipe costing cards. Create a recipe costing card for every item on your menu – including your bar drinks. Include everything down to the single piece of lettuce. Making these cards and training everyone to use them eliminates waste and over-portioning. Plus, it provides a great training tool.
4. Menu engineering. If you have them at your disposal, run a few reports through your POS system. Look at your item-by-item sales mix report and your key item report. These will tell you what items are ordered most often and how much they cost you to make. Combine your recipe costing cards with your POS reports, and you’ll see the dogs on your menu. The dogs are the ones that don’t sell, or the ones that do sell, but cost you money to sell. Encourage people to purchase the higher priced items on your menu, i.e., your house specialty drinks.
5. Waste sheets. Waste includes a poorly mixed drink that is sent back, food that spoiled because it was buried in the back of the walk-in and wasn’t rotated properly, and serving portions that are too large, including over-pouring on the alcohol (this ties in to the importance of recipe costing cards). The waste sheet includes what the item was, that it was wasted, why it was wasted, and how much that cost. Some people also like to put how much money it would have been worth if you had sold it. Keep track of what gets wasted, and you’ll see a drop in waste. It’s an automatic drop in your food cost.
These five suggestions focus purely on cost of goods sold. That’s just one area within your business. There are margins all over where you can have an impact. Imagine the possibilities.