Proper product storage procedures are critical in controlling food service costs, as well as managing restaurant product quality and consistency. While not the most interesting of food cost control topics, any restaurant cost control efforts that fail to include proper storage procedures will fall short of their mark. To better understand both the importance and details of correct food service storage procedures, it is helpful to first outline their goals.
Firstly, a fundamental goal of storage procedures should be to ensure that product is safely maintained until it is ready for production. Fulfilling this responsibility means working with approved suppliers, maintaining proper receiving procedures, ensuring correct cooking and handling behaviors and observing recommended storage practices. Often times, these storage practices are overlooked by operators as a possible key contributing factor in the spread of food borne illness, and failure to understand the impact that this can have on product safety can lead to significant financial losses for a food service operator, not to mention the ethical issues associated with the negligent spread of food borne illnesses.
Secondly, storage procedures should also be designed in a manner that enables inventory visibility and control, ensuring that on-hand product can be accurately counted and ordered. Failure to command this inventory visibility can lead to improper orders, resulting in a surplus of inventory that can result in spoilage and employee pilferage. Improper orders can also lead to insufficient product levels that can cause poor guest service because of out-of-stock product, as well as increased product costs and inconsistency as operators attempt to acquire product, last minute, at grocery stores or neighboring restaurants. In either case, failure to maintain accurate inventory levels can have significant negative effects on a business, and the first step in avoiding this is to understand what product is on the shelves. Instituting storage practices can help provide this inventory visibility.
Thirdly, storage procedures should facilitate easy access to products by those responsible for production and service. By properly organizing storage areas, personnel will be able to more easily locate the correct product needed for shift execution. Improper organization can mean not only delays for staff seeking product, but often also results in employees removing the wrong product from storage, as they fail to locate either a previously opened container of product or the oldest product container on the shelves that should have been utilized first. If you want to test the level of organization within your storage areas, we recommend taking a stroll through the walk-in and dry storage to see if there are multiple opened containers of like product. To be fair, this is not always due to improper organization, but also because of improper staff training. In fact, it is much more common to find multiple opened containers of product utilized by front of the house staff, such as dressings and bags of grated parmesan, than those products utilized by kitchen employees—not that front of the house staff are less trained, but rather that their focus and training is geared more towards service, whereas kitchen staff are typically better trained on product management. Getting products organized and grouped together, however, is a first important step in modifying this behavior.
Fourthly, storage practices should seek to secure product to reduce theft and pilferage. According to the National Restaurant Association, 75% of inventory shortages are attributable to food service employees, which is roughly equivalent to four percent of food service revenue. This means there is over $25 billion in annual food service employee theft. According to the US Department of Commerce, seventy-five percent of employees steal from their place of business at least once, with half of them stealing repeatedly. So, even if you have the most trusted and experienced food service team at your operation, statistics indicate that it is important to have systems in place to monitor behaviors and reinforce ethical practices.
Fifthly, proper storage procedures should help reduce product spoilage, which can result in both increased costs and diminished quality. The manner in which product is stored has a direct correlation to shelf life and quality. Most operators are very selective about the quality of products that they purchase to ensure a proper fit with how the product is utilized within the operation, as well as to ensure the best guest experience. As there is a cost associated with ensuring a specific product quality, it is critical that storage procedures are able to maintain this quality until the product is utilized for production or served to the guest.
Now that we have identified the main goals associated with restaurant product storage, we will attempt to highlight what we believe to be food service industry storage "best practices" for optimizing food cost control. When identifying each best practice, we will attempt to explain how they can be achieved and how they help reach one or more of the previous outlined goals.
1. Keep storage areas clean
Maintaining clean storage areas is critical in promoting the service of safe food. Not only does maintaining clean storage areas help fight illness causing bacteria, but it also reinforces the importance of cleanliness and safety as a priority for the business among your staff. To achieve this goal, it is recommended that operators utilize daily and weekly cleaning schedules for all storage areas. A few ‘must-haves’ on any cleaning schedule would be the daily mopping of storage area floors, routine cleaning of storage shelving and walls and the changing out of drip pans used to collect any blood/liquid from stored or thawing product.
2. Put products away immediately after receiving them
The first opportunity for product quality loss is directly after receipt of the product. To help prevent this, it is critical that product is immediately stored in its proper location once it has been received. Failure to do so can cause those products requiring refrigeration or freezing to be exposed to ambient temperatures that can reduce product quality within a relatively short period of time. Further, as product thaws, it will more easily contaminate other products surrounding it, creating both safety and quality concerns. Finally, until product is safely stored in its proper location, there is an increased likelihood of pilferage or utilization of the new product for production needs, rather than staff going into storage to procure the correct product. The key to executing this best practice is to ensure adequate staffing on delivery days, as well as managing the times of delivery with your suppliers.
3. Follow health/safety guidelines for shelf storage, including keeping items off the floor and following recommended storage room temperatures.
Maintaining proper temperatures and ensuring that products are stored in a manner that prevents cross-contamination is critical in the safe storage or products. There are a number of resources that outline these procedures, including HACCP materials and the NRA's ServSafe program, as well as our safe food temperature chart which can be downloaded form our website. Temperature is typically the most influential factor in product quality and spoilage reduction. It is critical that storage units are maintained at optimal temperatures and, for refrigeration and freezer units, their gaskets are in good repair and that doors are not left open. Next to temperature, the most critical storage safety concern is ensuring that products are zoned in a manner to help prevent the cross contamination of potentially hazardous foods from spilling or dripping. The materials previously referenced can provide acceptable product zoning procedures to help reduce the effects and possibility of cross contamination, or you can download our refrigeration storage chart from our website.
4. Follow recommended storage “zones” to maintain optimal product quality.
Depending on the storage limitations of a particular business, operators may wish to store products in product-specific coolers, such as separate meat, produce, seafood or dairy coolers. While this is often not possible because of space and financial limitations, at least segregating these items within a shared cooler can help maintain product quality, as these products have varying optimal temperatures and can suffer from being stored too closely to other products that can influence their flavor—fresh fish stored near butter, for example. It should be noted that this is a refinement of the previous best practice. While there are product zones that should be established to ensure safe product and limit cross contamination, there are also products that require separate zones to maintain quality, even if there is not a food safety concern, as in the previous example of the neighboring butter and fish. Ensuring all product is properly sealed can help prevent this quality issue, as well.
5. Store product in labeled "zones"
It is highly recommended that operators label storage areas and shelving so that personnel know the correct “home” for each product. The most common brand of storage shelving, Metro, makes a label clip that can be attached to the shelving unit so that a label can be affixed. Regardless of the method used to label product zones, be sure that labels will adhere to the surface over a long period of time. Once shelves are labeled, it should be clear to personnel where product should be stored, and much easier to train staff on how to routinely organize storage areas. Labeling and zoning storage areas will also help ensure that safety and quality objectives are maintained, even by staff members not familiar with the reasoning behind the specific zoning.
6. Do not store products in the shipping box/case, if product is stored in smaller boxes within the shipping case.
Unless product is utilized for production solely by the case in which product was received, product should be stored in the smaller product pack units of each case. Doing so helps conserve space on shelves, enables personnel to quickly grab a container of product as needed and enables an operator to better see what products are on the shelves at any given time. For example, #10 cans of product should be stored out of the cardboard container in which they were received.
7. Do not store product in opened containers, cans or boxes.
Once product is opened, it should be removed from its original container and stored in one that can be sealed and labeled--such as a cambro or lexan-style container. Following this practice will help personnel easily identify open product that should be utilized first, as well as prevent the exposure of product that can lead to quality loss or cross contamination.
Operators should also consider transferring product to heavy-duty containers for those products received in packaging that is susceptible to damage, such as bulk bags of sugar, flour or rice. As these bags can become easily punctured or exposed to moisture, using large, plastic sealable storage bins for these, and similar, products is recommended.
8. Sufficient refrigerated storage to enable proper thawing of frozen product.
Properly thawing product is critical to ensuring that product safety and quality is maintained. In keeping with this, it is important that operators have sufficient space set aside in walk-in coolers to enable the safe thawing of product—often referred to as “pull thaw”. Further, it is highly recommended that “pull thaw” pars are set so that personnel know how much given product to pull from the freezer on a given day to ensure sufficient time for product to thaw before being required for production. It is also important that personnel use drip pans for thawing products so that product does not rest in liquid or blood, nor drip onto products below.
9. Properly cooling product before storage.
It is important that prepared, hot product be either brought to a safe temperature prior to storage, or stored in a manner that will enable the safe cooling of the product. This can be done through ice baths, blast chillers or breaking the hot product down into smaller pieces or batches. Regardless of the method used, it is important that hot, prepared items are cooled down and stored so that they do not remain in the temperature danger zone for more than four hours once placed into storage. More information and recommendations on this are available through the NRA’s ServSafe program or HACCP, or by downloading our food service safe temperature chart from our website.
10. Label all opened product with the date the product was opened, as well as the name of the item.
Once a product is opened, it is important that product is labeled with the name of the product and the date the product was opened. For those operators that want to go a step further, it is not a bad practice to also label the expiration date of the opened product based on established shelf lives. There are a number of ways to complete this, but one of the easiest is to purchase dissolvable “day dots” that your staff can use to label product, and will then dissolve in the dishwasher when the pan is washed. Labeling products will enable operators to follow through on established shelf lives.
11. Establish shelf lives for your products and post these charts for staff to reference.
Products will most likely need to have an unopened shelf life and an opened shelf life. Establishing product shelf lives is critical in ensuring the safest and highest quality products. Further, it is essential that these shelf lives are communicated to operational personnel. A good way to help with this is by creating shelf life charts that can be posted in various operational areas, especially those used for product preparation. In most cases, products will need to have two shelf lives: one for unopened containers and one for opened product. Many of these shelf lives can be obtained from your suppliers. Based on these charts, employees can label product they open with the expiration date to ensure adherence to these dates or, at a minimum, dated product can be compared to posted charts to check shelf life.
12. Date each box placed into storage with the receiving date.
Just as product that is opened should be "dated" to ensure it stays within established shelf lives, unopened containers of products should be labeled with their receiving date to ensure that they not only are used before their shelf life expires, but also to ensure proper product rotation is being observed and that ordering pars make sense based on the usage of particular products. The easiest way to complete this is by using a “price gun,” similar to those used in stores to affix prices to products. Making this process as easy as possible will increase the likelihood that staff consistently executes the standard.
13. Restrict access to storage areas to only those that require it.
Every operator must find the balance between restricting access to product and the need for personnel to quickly access this product during production. For example, operators may wish to restrict access to liquor storage to management only, but may find this policy difficult to adhere to on busy shifts. As a general principle, however, operators should try and restrict access to product to only those personnel that require the product. For costly product, operators may wish to limit access to management only--such as for liquor, steaks and some seafood. If separate coolers are not possible for high-cost product, we recommend the use of product cages that can be setup within storage areas. Again, Metro is a common manufacturer of product cages.
14. Utilize the proper storage equipment and containers.
Setting the right standards with your staff will only be effective if they have the right tools to execute the established standards. This means that operators should be sure to have sufficient storage containers and lids, thermometers for storage areas, sufficient cleaning suppliers, enough drip containers/pans so that they can be routinely changed out, labels for containers, date "gun" for new product, etc. Having sufficient supply of these products requires an investment, but will help ensure that your product is being stored in the safest manner possible to protect your product and guests. Further, there is no better way to reinforce negative behavior in your personnel than setting a standard and then not supplying the necessary tools to achieve the standard--it is almost guaranteed that the standard will never be met.
This may be a good place to note that it is important that the storage equipment designated for particular products needs to work with the storage zone designated for the particular product. To do this, it is helpful to establish the maximum par of each product, figure out the number of containers needed to store that level of product and to then ensure that the established zone has the necessary room for the containers.
15. Periodically organize storerooms to return products to the proper zone.
One of the most critical, routine practices in restaurant storage management is having personnel regularly assigned to spending thirty minutes in each storage area organizing the room according to the established product zones and standards, as described in this article. This practice will prevent storage areas from getting too disorganized over a series of busy shifts, and will again stress the importance to your staff regarding the organization of the storage areas, as well as creating a “sense of ownership.”
16. Store products in a neat and organized manner, with labels facing up and forward and product stored towards the front of the shelves.
It is important that product, in addition to being stored in zones, is stored in a neat and uniform manner. This should include labels facing up and forward, as well as product being stored to the front of the shelves, leaving room towards the back for new product that may be received in the future. Storing product in this manner makes it much easier to view what is on the shelves, as well as execute orders, inventories and receive new deliveries.
17. Rotate product upon receiving.
Another critical factor in ensuring fresh product is the rotation of product upon delivery. It is essential that older product be moved towards the front of each product zone, making room in the back for newer product. This practice will help ensure that older product is utilized first, a practice commonly referred to as FIFO—first in, first out. FIFO, of course, is also an accounting practice that values inventory using the same philosophy. Labeling product upon receipt is a good way to validate this practice. While product rotation is relatively easy for some items, you may find staff avoiding this practice on heavy, bulk freezer items that require the movement of significant product in order to store new product. It helps to ensure that product pars are properly set so there is only a limited amount of each product on hand, making the rotation process a bit easier.
Hopefully, we have been able to successfully outline storage best practices, as well as the reason for their importance. We began this article stating that the subject matter is not very interesting. This is not only true of articles about restaurant storage procedures, but about the practice itself. Often times, operators overlook the importance of dedicating staff and time to this critical function because there seems to be many more important operational areas to focus on. That being said, we hope that we have been able to convey why following these best practices is important for food service operations and how executing them is critical in any comprehensive food cost control program.
About the Author
Blogger Mohan Patel is a marketing grad student based in India. He is not affiliated with Aaron Allen or his consulting firm. He does however recommend him as a restaurant consultant to any company seeking restaurant marketing strategy and business improvement ideas.
Friday, July 9, 2010
Customer Service in the Age of Social Media
The protocol for fielding customer complaints and suggestions has fundamentally changed in the age of social media and social networking.Pizza Hut (@PizzaHut on Twitter) has sent 10 messages via their Twitter account since I sent them a Direct Message (DM) regarding an egregious customer service issue perpetrated by one of their Unit Managers. Initially, it puzzled me why a routine call-in order would be routed to a manager. Apparently frustrated by hearing similar complaints from other disgruntled customers through the night about their lack of core products and refusal to substitute, the manager hung up on me. Could it be that the nightly special may not be not-so-special? I never raised my voice, cursed, or acted belligerently. Unsuspectingly, I used the one word (substitution) that sent him over the edge. What is special about luring customers in with a promo, when you lack the products to make it? I simply inquired about their substitution (or lack of) policy since they couldn't honor the promotion.
I had a similar incident with this location before and had placed a complaint via the corporate website. I never received a response, even though I checked the box indicating I wanted to hear from someone. I placed a second complaint--still no response.
Pizza Hut has been recently getting some great restaurant industry coverage for their social media activity and embracing new technologies. They even received front page coverage for their successful launch of their iPhone app. Consequently, I figured their 20,000 follower Twitter account (which they use to send daily propaganda) would be more frequently checked and get a response. I figured this crack squad of in-touch marketers heading up social media may respond quicker and more favorably than the rest of the laagering, bulky machine. I even figured that they would check to see who I was and realize I had over 6,500 restaurant industry followers (primarily consisting of restaurant marketing executives, owners, operators, media, publicists, etc) and that in an effort to showcase their departments’ prowess, would dazzle me and my followers with a great response. Wow, I was wrong!
Turns out, rather than respond to my direct messages, the person running the @PizzaHut account decided to send out a flurry of media outreach messages. They even sent their messages to my media following...Interesting. For an organization as famed as Pizza Hut and as Social Media savvy as they are recognized, I would expect a better response.
The Lessons Learned: Our industry is completely ill-equipped to respond to customer complaints and suggestions via social media such as Facebook and Twitter.
The rules of crisis communication and customer service protocol are well established in the realm of the offline. However, Social Media did not exist as a category of Internet traffic less than 5 years ago. Now, it represents nearly 20% of global Internet traffic. It is clearly apparent that technology is growing faster than our industry is responding.
Any publicist worth their salt will tell you that you need a crisis communications plan in place to deal with the common crises faced by the restaurant industry. Any operations manager worth their salt will tell you that you need to respond quickly, competently and with sincere hospitality to customer complaints received via the store-level. Thanks to Social Media, word of mouth travels much faster and wider now than ever before. Positive and responsive protocols for handling complaints must be in place and used immediately. Sticking your head in the sand, hanging up on customers, or chasing them out the door is not an effective protocol, @PizzaHut.
Blogger Mohan Patel is a marketing grad student based in India. I am not affiliated with Aaron Allen or his consulting firm but recommend him as a restaurant consultant to any company seeking restaurant marketing strategy and business improvement ideas.
Restaurant Cost Cutting Tips
Blogger Mohan Patel is a marketing grad student based in India. I am not affiliated with Aaron Allen or his consulting firm but recommend him as a restaurant consultant to any company seeking restaurant marketing strategy and business improvement ideas.
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A penny saved is a penny earned and for every way there is to spend money on your restaurant, you can find as many ways to save money for your restaurant.
The recession of 2009 continues to siphon spirits from the beleaguered restaurant industry in 2010. After decades of positive consecutive sales growth, the restaurant industry has had two back-to-back years of overall sales declines. It’s clear that to survive, restaurateurs must implement both restaurant cost cutting and revenue-building programs.
Here are ten things you should do (followed by ten things you shouldn’t do) to save cut costs for your restaurant:
1. Sell, Sell, Sell – You can’t operate yourself to a profit. The top line cures all that ails you. A 2% increase in sales is equivalent to a 10% reduction in food costs. The surest way to quickly reduce costs is to build the top line revenue. Even though the industry is down, it is only down by a few percentage points. Meanwhile, some restaurant companies are down double digit percentages. What this says is some restaurant companies are way up. There are sales to be had, but in this market it won’t happen on its own. As the saying goes, “you eat what you kill”, so this is the time to get out there on the offense.
2. Reengineer – The tectonic plates of the restaurant industry have shifted irrevocably. There are still many billion dollar restaurant chains sitting on the fault lines thinking their woes are just temporary and due to the downturn. Fact is, the industry has changed and the pace of change is only speeding up. Fast Casual is growing much faster than the rate of the industry overall. That means there is cannibalization. Home Meal Replacement, which is at $70 billion annually, is the new battle ground between restaurants and grocery stores. Grocery stores steadily lost market share to the restaurant industry every year for decades and now they’ve had enough. They are fighting back and operating more like restaurants. The industry has begun to fragment and splinter and the winners are the ones who are specializing. Restaurant groups like Chili’s and TGIFriday’s meanwhile continue to operate on the systems and approaches of the restaurant industry of the 1980’s and 1990’s. We saw how that worked for the Bennigans (they went bankrupt). Many restaurant companies are holding on with sophisticated financing schemes, but their focus should be on reengineering for the future of the industry, not trying to force yesterday’s approaches to continue working. When you reengineer, you naturally cut costs as you find more efficient methods and approaches to doing business.
3. Invent – There’s nothing like a recession to get the industry dusting off tired old promotions. The happy hour and all sorts of other state-of-the-art-1989 programs are being re-introduced and, to the dismay of those pushing them, the results just aren’t there. Times have changed. It took the radio 38 years to reach a market audience of 50m people. It took the television 13 years to reach 50m. Facebook reached 50m in just 2 years. Meanwhile, tired restaurant chains are pushing happy hour promotions via mass media advertising and taking a “wait and see” approach with social media. Social media isn’t just for Millenials. Even if it were though, there are now more Millenials in America than Baby Boomers. Fact is, the rest of the world and other businesses/industries are having to speed up their rate of change and reduce cycle times. The real winners – companies like Apple – are winning through invention. We just experienced the worst financial period since the Great Depression yet Apple’s iPhone is the fastest selling product in history and sales only continued to climb in the recession. How did they do that without discounts? Invention. The more you innovate and invent, the less you have to discount.
4. Furlough – Make sure you keep your top people. Before you terminate any of the good ones, ask them to consider a furlough or reduced hours. The National Restaurant Association estimated that for each average hourly employee you hire, you spend $1500 training them. Meanwhile, many restaurants have a 100% or higher turnover rate of employees. If you have a staff of 100, that means $150,000 per year in training new employees! Since this ‘training’ cost is often just rolled in to payroll and not accounted for separately, many restaurant executives don’t know the true cost of their training programs. Retention is key (and so is a modern day approach to training systems, but that’s another article for another day).
5. Inventory Utilization – When I took over operations for a $4m Caribbean themed restaurant, I focused in on the bar. We generated nearly 30% of revenues from the bar and were running bar costs in the high 20’s (cost as a percentage of sales). When I studied our purchasing and inventory, I saw we had stacked up cases and cases of a product that wasn’t moving. Canadian Club had been running a promotion for their new Canadian Club Citrus and so they were giving bottles of it away with purchases of other faster-moving product. Our competitors up and down the beach had amassed mountains of this product too. They started trying to unload it with $2 shots. Then $1. Then $.50. No one bought it. They had never heard of Canadian Club Citrus and figured if they were selling it for $.50 it couldn’t be too good. So, I took a different approach. I invented a drink called the “Cayman Curse” and said we couldn’t tell you what goes in it or you will get the curse of the Cayman’s. We sold them for $8 and built appeal by putting dry ice in (which makes the drink smoke) and supporting it with a suggestive selling program. Results? It became our top seller. We started trading a bottle of Crown Royal with other restaurants for a case at a time of the product they weren’t moving. Our cost in the drink was so low that – coupled with the huge volume – it brought our overall bar costs down to 16% of revenue. That’s half what it was! Just one innovative idea and new approach to inventory utilization made a big impact on the bottom line. You don’t have to have a bar though, similar approaches can be taken with fish species, for example, and you’re not only reducing costs but taking pressure off other species.
6. Marketing – The average restaurant in the USA spends 3% of revenues on advertising and marketing. This is a variable and controllable cost that many cut from their budgets when the going gets tough. This is a good time to stop with the mass media advertising. No billboards, radio, television, bench, yellow pages or other antiquated approaches to connecting to your customers. However, it’s not a good time to stop marketing. Not in a recession. It is counter-intuitive, but now is the time to invest in marketing. You will find that some of the biggest swings in market share happen in a recession as some businesses stop marketing and others turn up the heat. The goal isn’t just to spend though, it’s to invest. Now is the time to invest in innovative new marketing programs like social media, mobile marketing and a host of other new approaches advocated throughout many of my other blog posts and articles found at www.aaronallen.com.
7. Ask your vendors for help – Landlords will give grace, broad-line distributors will give extended payment terms, and in general, your vendors want you to succeed. Your destinies are sort of intertwined in that regard – the better you do, the better they do. It is short sighted to price shop vendors in such a way that you bounce from deal-to-deal with no loyalty to a vendor. When you are loyal and ask for help, generally you get it. Often, those vendors that steal you away with a lower price are lacking on the service side and sometimes, the service you lose is worth more than the discount you gained.
8. Focus on Majors – The 80/20 rule should be applied to cutting costs. Many operators attempt to improve 100 areas at once. The key is to find key leverage points. One of my clients has food costs that have run as high as 47%. Every percentage point reduction in food costs is equivalent to $100,000 in net profit improvement. Our approach isn’t to tackle every one of the 350+ inventory SKU’s they have. Our approach is to focus on the top 5 SKU’s. Focus on the big stuff first. Work your way down your profit and loss statement or inventory working on no more than 5 items at a time.
9. Purchasing Cooperatives – We have introduced many of our clients to purchasing cooperatives. A cooperative is a buying group that gives independent operators and regional chains buying power like the mega chains. Whether you’re buying food or marketing, when you buy in bulk you always get a better deal and better service. If you don’t have the buying muscle you need, join or start a cooperative. We have seen one operation go from paying $48 for a bag-in-the-box of soda to paying $42 and less. That’s a 20% savings just for purchasing in a group. It adds up quickly when you’re pouring 100,000 gallons per year as they were.
10. Set a Good Example – You’ll notice many CEO’s these days setting examples for their other employees by tightening their own belt too. The CEO of General Motors worked for $1 per year. The CEO of Land O’ Lakes (a $12b company) fly’s only coach like his employees. The CEO of Wal-Mart stays in 3 star hotels and often shares a room with another executive. When the head of the company demonstrates a willingness to put the company above his own comfort, it trickles down to the rest of the company and inspires them to do the same. You can’t show up to work in a brand new Mercedes though and expect your employees to think cash is tight.
Here are then things you shouldn’t do when looking for restaurant cost cutting ideas:
1. Lower Quality – Whatever you do, don’t trade your reputation for a short-term and incremental decrease in your costs. Customer can tell when a restaurant lowers quality. One restaurant I used to love stopped putting pancetta and fresh parmesan on their Cesar Salad. They may have saved a few pennies, but I stopped going. The Cesar was the best I’d had in the US but it wasn’t the same without the original ingredients. I spent $200 a week or more at that restaurant – I’ll bet their switch didn’t make up for loosing even one customer with that kind of frequency.
2. Skimp – Another trick we see implemented in hard times is to skimp. Let’s say you have a pizza restaurant and the manager gets a bonus for maintaining a 32% food cost. What happens next week if he misses his bonus because he ran a 34% food cost? Yep, you guessed it, the next week he comes in at 30%. Now, the owner may be happy because it balanced out, and the manager is happy because he got the bonus, but the reality is there were customers that last week that got fewer mushrooms and less cheese on their pizza. They notice the skimping and go to a competitor. You lose more in life time customer value with customer defect than gained by cheating them by skimping.
3. Overstock – When the recession hit, manufacturing took a dive as businesses began depleting existing inventory rather than ordering new inventory. Par-levels were reduced to get more in line with reduced demand. When you get your inventory levels in check with demand, you perform at a healthier level in terms of cash flow and liquidity. This is a balancing act though. If you run inventory down too low, you run the risk of running out. Your inventory levels are important to keep an eye on when you’re cutting costs.
4. Close Too Early – When you close early, it can become a self-fulfilling prophecy. No matter what, you’re last hour will be slower than your peak hour. When you close earlier and earlier, you will notice a shorter peak period. You may feel you are saving a few hundred dollars by closing, but here again you come out worse off in the long-run. As I write this I am in Seaside, Florida (www.seasidefl.com). The local restaurant keeps closing before 9PM. Last night the kitchen closed at 8:25 and earlier this week the restaurant closed by 7:30 (they don’t even open until 5:30 PM). The overhead of having a sprawling restaurant on the Gulf of Mexico is fixed. When you close too early, you train your customers to expect you to be closed and to circumvent you altogether the next time they think of going out. You end up converting them to your competitors and, for the few hundred dollars you saved closing early, you lose untold thousands in ‘life time value’ of the customers who defect to your competitors that maintain later hours.
5. Destroy Morale – It is impossible for you alone to cut your costs. You have to have the support of an entire network of people from vendors to employees. If you beat them up too hard, you may get your short-term results at the cost of your long-term partners. No one wants to work for a tyrant and they’re even less likely to go out of their way to save you money if they fell stepped on for the benefit of corporate profit.
6. Cut Maintenance – Maintenance seems to be another of those areas that gets cut when times are lean. Even if it means borrowing money, you can’t cut maintenance. When lights get burned out and not replaced, bathrooms fall in to disrepair, hood systems get clogged, fryer oil is replaced less often – when these things happen you run the risk of causing long-term and expensive damage to your equipment, your staff and your customer perceptions.
7. Carry Dead Weight – Cull through your ranks. Evaluate who is with you based on tenure, seniority or nepotism and who is there because they are loyal, committed and high-performance contributors. Turnover of staff is costly, but keeping bad employees and dead weight can be even more costly.
8. Fragment or Splinter – You can find a cheaper price on nearly any individual item you stock or service you hire. When you start fragmenting your purchasing across several vendors, you lose leverage and often get hit with hidden costs you weren’t expecting (such as delivery costs, accounting work, unredeemed rebates, etc).
9. Be Penny-Wise and Pound-Foolish – This goes hand in hand with many of the other suggestions above, but keep in mind the negative impact that can happen in terms of reduced focus or decreased morale with penny-wise approaches. For instance, getting rid of free coffee for staff may save a bit of money each week, but have a demoralizing affect on the staff. Don’t let the pressure lead you astray from your values and the moral principles your brand stands on.
10. Spend more time in the back-office than the front of house – A downturn can cause stress, depression, anxiety and frustration. These emotions can wear you down and sap your happiness and passion. If you feel this start to happen, get a break. When you worry and get run down, it will invariably impact staff morale and the levels of hospitality your restaurant delivers which will only make matters worse. Remember, you’re in the hospitality business. Yes, it’s a business and that means tending to the numbers, but it can’t be done at the loss of the customer experience and levels of passion, professionalism and hospitality you deliver.
The recession has forced every business to look at their spending more closely. Even the world’s largest governments are facing shortfalls and having to make hard choices. Use this time as an opportunity for innovative new approaches though, not just penny-pinching. As the saying goes, “Necessity is the mother of all invention”. Be thankful for the downturn – if you use it correctly, it will force you in to newer and better ways of doing things.
I hope you have found this article helpful. Please share your comments and suggestions on other ideas you have for restaurant cost cutting using the reply form below. We’d love to hear from you and share your insights with other readers.
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A penny saved is a penny earned and for every way there is to spend money on your restaurant, you can find as many ways to save money for your restaurant.
The recession of 2009 continues to siphon spirits from the beleaguered restaurant industry in 2010. After decades of positive consecutive sales growth, the restaurant industry has had two back-to-back years of overall sales declines. It’s clear that to survive, restaurateurs must implement both restaurant cost cutting and revenue-building programs.
Here are ten things you should do (followed by ten things you shouldn’t do) to save cut costs for your restaurant:
1. Sell, Sell, Sell – You can’t operate yourself to a profit. The top line cures all that ails you. A 2% increase in sales is equivalent to a 10% reduction in food costs. The surest way to quickly reduce costs is to build the top line revenue. Even though the industry is down, it is only down by a few percentage points. Meanwhile, some restaurant companies are down double digit percentages. What this says is some restaurant companies are way up. There are sales to be had, but in this market it won’t happen on its own. As the saying goes, “you eat what you kill”, so this is the time to get out there on the offense.
2. Reengineer – The tectonic plates of the restaurant industry have shifted irrevocably. There are still many billion dollar restaurant chains sitting on the fault lines thinking their woes are just temporary and due to the downturn. Fact is, the industry has changed and the pace of change is only speeding up. Fast Casual is growing much faster than the rate of the industry overall. That means there is cannibalization. Home Meal Replacement, which is at $70 billion annually, is the new battle ground between restaurants and grocery stores. Grocery stores steadily lost market share to the restaurant industry every year for decades and now they’ve had enough. They are fighting back and operating more like restaurants. The industry has begun to fragment and splinter and the winners are the ones who are specializing. Restaurant groups like Chili’s and TGIFriday’s meanwhile continue to operate on the systems and approaches of the restaurant industry of the 1980’s and 1990’s. We saw how that worked for the Bennigans (they went bankrupt). Many restaurant companies are holding on with sophisticated financing schemes, but their focus should be on reengineering for the future of the industry, not trying to force yesterday’s approaches to continue working. When you reengineer, you naturally cut costs as you find more efficient methods and approaches to doing business.
3. Invent – There’s nothing like a recession to get the industry dusting off tired old promotions. The happy hour and all sorts of other state-of-the-art-1989 programs are being re-introduced and, to the dismay of those pushing them, the results just aren’t there. Times have changed. It took the radio 38 years to reach a market audience of 50m people. It took the television 13 years to reach 50m. Facebook reached 50m in just 2 years. Meanwhile, tired restaurant chains are pushing happy hour promotions via mass media advertising and taking a “wait and see” approach with social media. Social media isn’t just for Millenials. Even if it were though, there are now more Millenials in America than Baby Boomers. Fact is, the rest of the world and other businesses/industries are having to speed up their rate of change and reduce cycle times. The real winners – companies like Apple – are winning through invention. We just experienced the worst financial period since the Great Depression yet Apple’s iPhone is the fastest selling product in history and sales only continued to climb in the recession. How did they do that without discounts? Invention. The more you innovate and invent, the less you have to discount.
4. Furlough – Make sure you keep your top people. Before you terminate any of the good ones, ask them to consider a furlough or reduced hours. The National Restaurant Association estimated that for each average hourly employee you hire, you spend $1500 training them. Meanwhile, many restaurants have a 100% or higher turnover rate of employees. If you have a staff of 100, that means $150,000 per year in training new employees! Since this ‘training’ cost is often just rolled in to payroll and not accounted for separately, many restaurant executives don’t know the true cost of their training programs. Retention is key (and so is a modern day approach to training systems, but that’s another article for another day).
5. Inventory Utilization – When I took over operations for a $4m Caribbean themed restaurant, I focused in on the bar. We generated nearly 30% of revenues from the bar and were running bar costs in the high 20’s (cost as a percentage of sales). When I studied our purchasing and inventory, I saw we had stacked up cases and cases of a product that wasn’t moving. Canadian Club had been running a promotion for their new Canadian Club Citrus and so they were giving bottles of it away with purchases of other faster-moving product. Our competitors up and down the beach had amassed mountains of this product too. They started trying to unload it with $2 shots. Then $1. Then $.50. No one bought it. They had never heard of Canadian Club Citrus and figured if they were selling it for $.50 it couldn’t be too good. So, I took a different approach. I invented a drink called the “Cayman Curse” and said we couldn’t tell you what goes in it or you will get the curse of the Cayman’s. We sold them for $8 and built appeal by putting dry ice in (which makes the drink smoke) and supporting it with a suggestive selling program. Results? It became our top seller. We started trading a bottle of Crown Royal with other restaurants for a case at a time of the product they weren’t moving. Our cost in the drink was so low that – coupled with the huge volume – it brought our overall bar costs down to 16% of revenue. That’s half what it was! Just one innovative idea and new approach to inventory utilization made a big impact on the bottom line. You don’t have to have a bar though, similar approaches can be taken with fish species, for example, and you’re not only reducing costs but taking pressure off other species.
6. Marketing – The average restaurant in the USA spends 3% of revenues on advertising and marketing. This is a variable and controllable cost that many cut from their budgets when the going gets tough. This is a good time to stop with the mass media advertising. No billboards, radio, television, bench, yellow pages or other antiquated approaches to connecting to your customers. However, it’s not a good time to stop marketing. Not in a recession. It is counter-intuitive, but now is the time to invest in marketing. You will find that some of the biggest swings in market share happen in a recession as some businesses stop marketing and others turn up the heat. The goal isn’t just to spend though, it’s to invest. Now is the time to invest in innovative new marketing programs like social media, mobile marketing and a host of other new approaches advocated throughout many of my other blog posts and articles found at www.aaronallen.com.
7. Ask your vendors for help – Landlords will give grace, broad-line distributors will give extended payment terms, and in general, your vendors want you to succeed. Your destinies are sort of intertwined in that regard – the better you do, the better they do. It is short sighted to price shop vendors in such a way that you bounce from deal-to-deal with no loyalty to a vendor. When you are loyal and ask for help, generally you get it. Often, those vendors that steal you away with a lower price are lacking on the service side and sometimes, the service you lose is worth more than the discount you gained.
8. Focus on Majors – The 80/20 rule should be applied to cutting costs. Many operators attempt to improve 100 areas at once. The key is to find key leverage points. One of my clients has food costs that have run as high as 47%. Every percentage point reduction in food costs is equivalent to $100,000 in net profit improvement. Our approach isn’t to tackle every one of the 350+ inventory SKU’s they have. Our approach is to focus on the top 5 SKU’s. Focus on the big stuff first. Work your way down your profit and loss statement or inventory working on no more than 5 items at a time.
9. Purchasing Cooperatives – We have introduced many of our clients to purchasing cooperatives. A cooperative is a buying group that gives independent operators and regional chains buying power like the mega chains. Whether you’re buying food or marketing, when you buy in bulk you always get a better deal and better service. If you don’t have the buying muscle you need, join or start a cooperative. We have seen one operation go from paying $48 for a bag-in-the-box of soda to paying $42 and less. That’s a 20% savings just for purchasing in a group. It adds up quickly when you’re pouring 100,000 gallons per year as they were.
10. Set a Good Example – You’ll notice many CEO’s these days setting examples for their other employees by tightening their own belt too. The CEO of General Motors worked for $1 per year. The CEO of Land O’ Lakes (a $12b company) fly’s only coach like his employees. The CEO of Wal-Mart stays in 3 star hotels and often shares a room with another executive. When the head of the company demonstrates a willingness to put the company above his own comfort, it trickles down to the rest of the company and inspires them to do the same. You can’t show up to work in a brand new Mercedes though and expect your employees to think cash is tight.
Here are then things you shouldn’t do when looking for restaurant cost cutting ideas:
1. Lower Quality – Whatever you do, don’t trade your reputation for a short-term and incremental decrease in your costs. Customer can tell when a restaurant lowers quality. One restaurant I used to love stopped putting pancetta and fresh parmesan on their Cesar Salad. They may have saved a few pennies, but I stopped going. The Cesar was the best I’d had in the US but it wasn’t the same without the original ingredients. I spent $200 a week or more at that restaurant – I’ll bet their switch didn’t make up for loosing even one customer with that kind of frequency.
2. Skimp – Another trick we see implemented in hard times is to skimp. Let’s say you have a pizza restaurant and the manager gets a bonus for maintaining a 32% food cost. What happens next week if he misses his bonus because he ran a 34% food cost? Yep, you guessed it, the next week he comes in at 30%. Now, the owner may be happy because it balanced out, and the manager is happy because he got the bonus, but the reality is there were customers that last week that got fewer mushrooms and less cheese on their pizza. They notice the skimping and go to a competitor. You lose more in life time customer value with customer defect than gained by cheating them by skimping.
3. Overstock – When the recession hit, manufacturing took a dive as businesses began depleting existing inventory rather than ordering new inventory. Par-levels were reduced to get more in line with reduced demand. When you get your inventory levels in check with demand, you perform at a healthier level in terms of cash flow and liquidity. This is a balancing act though. If you run inventory down too low, you run the risk of running out. Your inventory levels are important to keep an eye on when you’re cutting costs.
4. Close Too Early – When you close early, it can become a self-fulfilling prophecy. No matter what, you’re last hour will be slower than your peak hour. When you close earlier and earlier, you will notice a shorter peak period. You may feel you are saving a few hundred dollars by closing, but here again you come out worse off in the long-run. As I write this I am in Seaside, Florida (www.seasidefl.com). The local restaurant keeps closing before 9PM. Last night the kitchen closed at 8:25 and earlier this week the restaurant closed by 7:30 (they don’t even open until 5:30 PM). The overhead of having a sprawling restaurant on the Gulf of Mexico is fixed. When you close too early, you train your customers to expect you to be closed and to circumvent you altogether the next time they think of going out. You end up converting them to your competitors and, for the few hundred dollars you saved closing early, you lose untold thousands in ‘life time value’ of the customers who defect to your competitors that maintain later hours.
5. Destroy Morale – It is impossible for you alone to cut your costs. You have to have the support of an entire network of people from vendors to employees. If you beat them up too hard, you may get your short-term results at the cost of your long-term partners. No one wants to work for a tyrant and they’re even less likely to go out of their way to save you money if they fell stepped on for the benefit of corporate profit.
6. Cut Maintenance – Maintenance seems to be another of those areas that gets cut when times are lean. Even if it means borrowing money, you can’t cut maintenance. When lights get burned out and not replaced, bathrooms fall in to disrepair, hood systems get clogged, fryer oil is replaced less often – when these things happen you run the risk of causing long-term and expensive damage to your equipment, your staff and your customer perceptions.
7. Carry Dead Weight – Cull through your ranks. Evaluate who is with you based on tenure, seniority or nepotism and who is there because they are loyal, committed and high-performance contributors. Turnover of staff is costly, but keeping bad employees and dead weight can be even more costly.
8. Fragment or Splinter – You can find a cheaper price on nearly any individual item you stock or service you hire. When you start fragmenting your purchasing across several vendors, you lose leverage and often get hit with hidden costs you weren’t expecting (such as delivery costs, accounting work, unredeemed rebates, etc).
9. Be Penny-Wise and Pound-Foolish – This goes hand in hand with many of the other suggestions above, but keep in mind the negative impact that can happen in terms of reduced focus or decreased morale with penny-wise approaches. For instance, getting rid of free coffee for staff may save a bit of money each week, but have a demoralizing affect on the staff. Don’t let the pressure lead you astray from your values and the moral principles your brand stands on.
10. Spend more time in the back-office than the front of house – A downturn can cause stress, depression, anxiety and frustration. These emotions can wear you down and sap your happiness and passion. If you feel this start to happen, get a break. When you worry and get run down, it will invariably impact staff morale and the levels of hospitality your restaurant delivers which will only make matters worse. Remember, you’re in the hospitality business. Yes, it’s a business and that means tending to the numbers, but it can’t be done at the loss of the customer experience and levels of passion, professionalism and hospitality you deliver.
The recession has forced every business to look at their spending more closely. Even the world’s largest governments are facing shortfalls and having to make hard choices. Use this time as an opportunity for innovative new approaches though, not just penny-pinching. As the saying goes, “Necessity is the mother of all invention”. Be thankful for the downturn – if you use it correctly, it will force you in to newer and better ways of doing things.
I hope you have found this article helpful. Please share your comments and suggestions on other ideas you have for restaurant cost cutting using the reply form below. We’d love to hear from you and share your insights with other readers.
Wednesday, July 7, 2010
Culinary Anthropology Tips
According to the famous saying, "We are what we eat." A culinary anthropologist takes a deeper look at what a person eats, ways of food preparation, how the food is presented, where and when the food is consumed, distributed and stored. Developed in the response to food intolerance, food allergies and food related diseases, a culinary anthropology degree was designed to prepare producing chefs with the knowledge of how best to prepare nutritious food. This course helps in developing sensory evaluation methods, innovate food items and introduce nutritional diagnostic skills among students.
If you want to make high profits out of your restaurant business, look for candidates with a culinary anthropology degree. These degrees are very helpful in polishing skills of the professionals to meet the latest needs of restaurant industry. Candidates with culinary anthropology degree can be picked for different job positions like restaurant manager, chefs, and food servicing managers. Along with comprehensive knowledge about international cuisines, culinary anthropology also helps individuals develop managerial skills. By hiring these professionals for your business, you can keep the worry of imparting restaurant training at bay. They have all the required skills to start up and promote your restaurant business in the best possible way. With a degree in culinary anthropology, your staff members, especially chefs, can learn a lot of things that can take your restaurant to higher levels of success. You will not have to fret about attracting clients, as these trained professionals can help in increasing the visibility of your business.
Food is the most important thing in any restaurant business, so a chef must be acquainted with different ingredients and proportion in which they are used for maintaining usual recipe offered to the clients. If your customer likes an appetizer and returns to have it again, he would look for same taste as before. If you do not have a trained chef at your restaurant, your clients can get disappointed and turned off with different tastes every time he visits you. Culinary anthropology degree imparts knowledge about different ingredients to a person.
With culinary anthropology, your chef can gain experience in storing, receiving, inventory and purchasing too. These skills are invaluable for any restaurant. Culinary anthropology graduates have great leadership skills too. A chef should possess the necessary skills to take charge of the kitchen while delegating work to pother chefs. If not, there can be delays in providing food to clients and create chaos in the restaurant too. Culinary anthropology courses focus on leadership skills, as they are not only important in the kitchen but also in daily interactions. Chefs should have interpersonal skills and great communication skills.
There are a lot of things that are required of a chef for a successful restaurant business. Being the backbone of any restaurant should be equipped with necessary skills that can be provided with culinary anthropology degree. If your wish to make your restaurant really popular among the target audience makes sure that you hire your chef and other managers with a degree culinary anthropology. By hiring trained, degreed professionals, you can be sure that you have selected a strong backbone for your restaurant and almost guarantee the success of your business.
About the Author
Blogger Mohan Patel is a marketing grad student based in India. He is not affiliated with Aaron Allen or his consulting firm but recommends him as a restaurant speaker.
Source: http://www.goarticles.com/cgi-bin/showa.cgi?C=3059861
If you want to make high profits out of your restaurant business, look for candidates with a culinary anthropology degree. These degrees are very helpful in polishing skills of the professionals to meet the latest needs of restaurant industry. Candidates with culinary anthropology degree can be picked for different job positions like restaurant manager, chefs, and food servicing managers. Along with comprehensive knowledge about international cuisines, culinary anthropology also helps individuals develop managerial skills. By hiring these professionals for your business, you can keep the worry of imparting restaurant training at bay. They have all the required skills to start up and promote your restaurant business in the best possible way. With a degree in culinary anthropology, your staff members, especially chefs, can learn a lot of things that can take your restaurant to higher levels of success. You will not have to fret about attracting clients, as these trained professionals can help in increasing the visibility of your business.
Food is the most important thing in any restaurant business, so a chef must be acquainted with different ingredients and proportion in which they are used for maintaining usual recipe offered to the clients. If your customer likes an appetizer and returns to have it again, he would look for same taste as before. If you do not have a trained chef at your restaurant, your clients can get disappointed and turned off with different tastes every time he visits you. Culinary anthropology degree imparts knowledge about different ingredients to a person.
With culinary anthropology, your chef can gain experience in storing, receiving, inventory and purchasing too. These skills are invaluable for any restaurant. Culinary anthropology graduates have great leadership skills too. A chef should possess the necessary skills to take charge of the kitchen while delegating work to pother chefs. If not, there can be delays in providing food to clients and create chaos in the restaurant too. Culinary anthropology courses focus on leadership skills, as they are not only important in the kitchen but also in daily interactions. Chefs should have interpersonal skills and great communication skills.
There are a lot of things that are required of a chef for a successful restaurant business. Being the backbone of any restaurant should be equipped with necessary skills that can be provided with culinary anthropology degree. If your wish to make your restaurant really popular among the target audience makes sure that you hire your chef and other managers with a degree culinary anthropology. By hiring trained, degreed professionals, you can be sure that you have selected a strong backbone for your restaurant and almost guarantee the success of your business.
About the Author
Blogger Mohan Patel is a marketing grad student based in India. He is not affiliated with Aaron Allen or his consulting firm but recommends him as a restaurant speaker.
Source: http://www.goarticles.com/cgi-bin/showa.cgi?C=3059861
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