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Monday, February 27, 2006

Cultural Evolution

There are many influences which help to define a company's culture. When the company is involved in food service, the cultural themes often have a major impact on profit. I have visited operations where cleanliness was a dominant theme. From the entrance, to the dining room, kitchen, restrooms and even the loading dock and dumpsters, everything looks sanitary and safe.

My grandmother had two major criteria for restaurant selection: a full parking lot and clean restrooms. When we were out shopping, she would look for busy places to go for dinner. Once inside, she would ask where the restrooms were located before being seated. We never stayed for dinner if the place failed inspection.

Some operators never want to run out of food. They tend to buy too much and produce far more than required. Other operators are worried about selection. They focus on menu monotony. When their stamp of approval hits a menu revision, it's sure to be loaded with new items.

My favorite managers create a culture which rewards consistency. As a restaurant patron, I highly prefer operations with consistent standards. It is not uncommon to find the "consistency theme" in a restaurant with the "never run out" philosophy as well. If you consistently find your garbage cans loaded with spoiled produce and unused prep items, I have some straightforward advice. Do not try to change the culture through a complete makeover.

Find out how food is ordered and how prep requirements are calculated. Often, you'll hear the chef likes a 10% cushion or a 5% safety factor. Institute a policy change in stages. In stage one, change the slack to 80% of the previous factor (i.e. 8% vs. 10%). I like a 2.5% safety factor for most operations. Improved forecasts should reduce the need for higher figures.

Anyone who has seen the managers work the chalkboards at the Chesnut Hill Legal Seafood location can appreciate the alternative philosophy which encourages stockouts: "If it isn't fresh, it isn't Legal." We had countless meals there and brought plenty of out-of-towners. Spoiled fish was never a concern. Legal Seafood is not a client of mine but I imagine they abhor waste and spoilage.

Friday, February 24, 2006

Don't Destroy Your Stars

One of the absolute and totally rigid laws of effective food cost control almost never to be challenged: Do NOT alter your signature recipes with lower quality alternatives strictly to create a lower cost.

After years of new and improved commercials, corporate brand managers watched the results of the New Coke campaign. My friend (a huge Coke fan) wrote to Coca Cola. To Coke's credit, they brought back the old formula.

A great article "If A Little Cost Cutting Is Good, Then Can A Little More Be Bad??" was presented in the February 2004 Newsletter of the Operations Management Center. The article demonstrates the key difference between value enhancement and cost cutting as a strategy.

Tuesday, February 21, 2006

The Art and Science of Receiving

When I think of great receiving controls, I tend to remember our top client site from my days at Boatel. The move from the old green sheets with columns for food categories, vendor information and dates to Lotus 123 spreadsheets was huge. I quickly learned the Lotus commands for lookups, data queries and string manipulation.

I entered two years of inventory history into a comparative spreadsheet. Frankly, the results did not justify the effort. There were consistency issues, lots of additions written on the back of each sheet, pricing problems and little usable data.

As I visit accounts, I see where people have taken the time to create pie charts on inventory value by category. There's nothing very exciting about the final inventory value in most cases.

All the action is in the purchasing history. Did we get hosed by a meat supplier? Why did we buy so many perishable salad ingredients on a down week? Could we have used some of our excess freezer stock more effectively? Now these are high impact issues.

Once the receiving system was in place (see Traveling Accounts Payable Clerk post), I created a weekly recap by category of the purchases by day. After entering several months of receiving history, trends started to emerge. I would look for unusual circumstances, pull the invoices and try to explain the strategy for the week. Whenever I could not come up with a decent explanation for a particular purchase, I would review the activity with our regional General Manager.

It's essential to talk about great decisions as well as poor decisions. Repeating great decisions will produce more profit and avoiding costly repeats will save money. I still like a two year history for most analyses.

Quality issues are at the heart of receiving and proper inspection is required for any commodity item. You do not have to open each jar of branded mayonnaise. However, you should open the produce boxes, the meat cases and all seafood containers. Weight is a big factor. It's good to make scales readily available. Now let's get sensory.

I used to enjoy watching receiving at a deli in New York famous for smoked fish. All of my New York clients serving smoked fish menu items used the same three top smoke houses. In addition to the big 3, many smaller specialists have high quality smoked fish. It takes training to discern great, top of the heap, creme de la creme smoked salmon or sturgeon. The process at this client was a ritual.

The delivery man would be directed over to the far end of the deli. There he would take a side of the salmon out for inspection. This fish was then smelled (deeply), stroked, prodded gently and finally tasted. Did the smoker over salt the fish? Is the texture too soft? Maybe the taste is too smoky. Normally, the answers to each question was perfect saltiness, buttery texture and just a hint of smoke. These are top quality suppliers. However, I did see rejections. Too much salt was often the reason.

These guys were true artisans. When I would visit an account which paid zero attention to the occasional purchase of smoked fish from the same suppliers, the difference was enormous. Many of the others simply purchased sliced smoked fish by the pound. You never see these guys highly ranked in Zagat's survey in the deli category.

Thursday, February 16, 2006

Forecasting 502 - Complex Operations

The way I like to approach a forecast of covers in a multi-outlet operation is somewhat different than the revenue center approach. As always, I spend the most forecasting time on busy, high opportunity days. These busy days are challenging from a staffing, prep and equipment perspective. Let's start by defining the absolute maximum capacity.

We'll go back to our data archive. This time we are looking for the top 10% days of total sales in the previous year. Locate these 36 days and get the sales totals by outlet for each. If your operation has 5 restaurants, room service, several banquet rooms and off premise activity, you would have 8 sales figures. The data would contain statistics on date, dow, major event(s), total sales and a column for each of the revenue centers.

Look for trends. Were your busiest days Mother's Day and Valentine's Day? Were they Memorial Day, Fourth of July and Labor Day? Were they some of your best Friday's? Maybe you had some great Sunday Brunch days. Do these occur during weeks with a Monday holiday? Find the busiest days and see why the volume soared.

Build your forecast for the current year using these numbers as a starting point. If you have rooms to sell, it's likely you we're fully booked on most of these 36 days. Add the rooms occupied percentage to the analysis. You can find other days not in the top 10% of sales which had similar occupancy numbers. Were there any of these high occupancy days NOT in the top 25%? What went wrong? Did you have to fill rooms with less profitable customers?

Now try to put some color in this black and white photo. Who are these customers filling the dining areas on the busiest days? Try to profile them with as many attributes as possible. Continue the profiling exercise with the days when you had a big group and disappointing sales. Pay particular attention to convention and seminar groups.

The final field in the table is the food cost percentage achieved during the week* associated with each of these days. Probably, your best weeks were anchored by a great sales day.

The purpose of this exercise is to get an edge on your local competition. Just looking at room counts and BEOs isn't enough. Customer profiles need to be closely watched. You'll avoid some over staffed days with too much prepared food and too little sales.

* Note: If you do not calculate food cost percentages weekly, use purchases divided by sales.

Wednesday, February 15, 2006

Profitable Breakfast Buffets

From a strict percentage perspective, breakfast buffets can improve results. Many business traveler hotel concepts offer breakfast buffets. Since morning guests are in a hurry, the buffets serve two purposes: fast service and selection.

If you reward your breakfast guests with a well planned buffet, they will tell others. As a frequent traveler, I compare notes with fellow road warriors when we meet.

It's completely possible to achieve a 25% food cost or lower with a quality, basic breakfast buffet at the $10 price point. You may want to add a few extra special items and charge $12. For the weekday client, this should be done carefully. Destination resorts can (and should) offer a higher quality breakfast buffet at a premium price.

The beauty of breakfast buffets lies in the probability of selection and the ability to offer a similar layout daily. The urgency factor may be used to promote lunch buffets in business districts. However, it's tough to offer the same entrees each day. Lunch customers want variety.

Dinner buffets are a gamble in most business districts. The expense account crowd is often out for steak or seafood. Breakfast buffets are less risky and can improve overall food cost percentage.

Monday, February 13, 2006

Traveling Accounts Payable Clerk

Shortly after finding the lost truckload of eggs ( see Who is Fred Hardy? post), I went to our sites to strengthen receiving controls. At one account, a pile of old bills was hidden beneath the telephone book. Manilla folders loaded with unpaid invoices were everywhere.

Starting in Western Colorado, I setup a new set of controls for handling receiving, inspection and documention. Even today, it's important to balance automation with proper documentation. Many of the controls we used then would help most operators.

For the office, buy a set of six plastic baskets and label them MEAT/FISH, PRODUCE, DAIRY, GROCERIES, PAPER/CHEMICALS, OTHER. Set up a spreadsheet or column pad with Supplier, Invoice Number, Date and the categories on the basket. Use a separate spreadsheet for each week. If you handle alcoholic beverages, make a column for BEER, WINE and LIQUOR.

On the receiving dock, get a large basket and label it TODAY'S DELIVERIES. All shipping documents will be temporarily stored in the basket. You'll also need a clipboard (no spreadsheet this time). On the clipboard, you'll need a sheet with columns SUPPLIER, INVOICE, AMOUNT, RECEIVED BY. Feel free to add other columns but make sure there is a RECEIVED BY column.

For each delivery, the responsible person should examine every item for specification, price, quantity and condition. All rejected goods should be clearly marked and initialed. The person observing the delivery needs to sign off on the invoice and on the sheet. They should fill in the basic information on the clipboard log. At the end of the receiving period, they should total the amounts on the log and in the invoice bin. The adding machine tape for each should be initialed and included in the invoice basket. All of the paper work should go to the office the same day.

The office person should feed the category baskets with the invoices. Check each invoice for the appropriate signature and notations before the account distribution. If there are any invoices with no signature, have the manager of the receiving person sign off on the invoice. They will need to go to the storage area and make sure the goods were received. Make a note of the Supplier and the delivery person if possible.

For each basket, run an adding machine tape. Initial the tape and mark it with the category. Finally, make a summary tape totaling all categories. The total should agree with the receiving dock total. Investigate all discrepancies, credits, missing numbers, etc.

Now you can complete the spreadsheet or column sheet for the day. Print or copy the sheet and staple all initialed tapes to the document.

Our office manager Barb always called me the Traveling Accounts Payable Clerk because I started every site visit checking the files for this information. After achieving a food cost 20% below budget ($4.80 per manday vs. $6.00), my boss had me visit every site with substandard numbers.

Saturday, February 11, 2006

Stay Focused

If you find your company distracted by minor issues, try to restore a focus. Focus on profitable activities, customers, menu items and the key ingredients used in their production. Distractions abound. It’s easy to get lost discussing certain items with no conclusion.

The top distractions I see all the time include employee meals, food used at the bar, wine and liquor used in the kitchen and management comps. While these issues should be discussed, they shouldn’t be the center of attention.

A common consensus figure for employee meals seems to average $3.00 per shift. If you let your employees consume more, you’re above par.

The cost of lemons, limes, Tabasco sauce, olives and cocktail onions often account for a fraction of a percent. Vodka, sherry, red and white wine tend to offset a good part of the expense. It’s a good idea to track these items. It’s a mistake to completely ignore these items. Put the issue in perspective.

Any food and beverage comps should be treated as a method of payment. Give the chef credit for the total “sold” and budget a specific number for promotions each month. Make sure there is a specific purpose for each comp.

Tuesday, February 07, 2006

Profile 2-Short Buffet Lines

When I think of buffets, Las Vegas always comes to mind first. My early trips to the city were from Colorado and we would arrive after midnight in a van. Typically, we would checkin to the hotel and then hit one of the countless buffets available at all hours.

One common sight, regardless of the time, was a 3 to 5 minute line to access the buffet. The dining areas were not always packed but there were always lines to start. We never encountered a Las Vegas buffet with really long lines since we went at off-peak times. The service areas were always well stocked. Our food value was exceptional (sometimes incredible).

In contrast, I have been to countless poorly attended buffets in the real world. These buffet events have a common profile: a short line (or nonexistent), empty pans, cold food (when it should be hot) and a poorly managed dining room. It's difficult for me to pay for this type of food service. I always ask if it's possible to order a la carte. Unless there is nothing else for miles, I won't stay if the a la carte option is refused.

As I sit eating my burger or club sandwich, I will count the patrons. Then I take an inventory of the serving line and I estimate the entire cost. In many cases, I will have the time to place my order, receive my meal, finish and settle the check with very little replenishment activity on the buffet stations. If there has been replenishment, I add a guess to my overall estimate.

I would expect the operators will transfer untouched cold food into the walkin at the end of the buffet. Perhaps, they will store some pans from the hot line for the next day. I try to envision how much extra food will be prepared the next day given my observation. My goal is a two day total cost estimate.

For sales, I include the observed count plus an estimate of patrons served during my absence. I double this sum and multiply by the price per patron. The estimated cost is always over 50% of the estimated revenue.

After sitting in on many staff meetings at client offices, I pay strict attention to any discussion of buffets. There is a high correlation between bad food cost percentages and slow buffets.

If you don't expect a decent turnout on specific days, I'd suggest a la carte service only.

Wednesday, February 01, 2006

Buffets and POS Investment

One of the biggest selling items on many hotel, restaurant and club menus is Sunday Brunch. Often, the POS system will rank the brunch as the top item and it's common to see it garner a hefty percentage of total weekly sales. If your operation fits this profile, you need to take it farther.

Create a POS menu item for all buffet components. Setup every pan as a modifier menu item in the Sunday Brunch group on the POS. Instruct the dining room manager to ring up each pan sent to the buffet line at the start of brunch. As pans require replenishment, the manager should continue to ring them up on the POS. Make a policy of no pans leaving the kitchen unless the order prints on the POS printer.

Why bother with this level of control? Your food cost will improve. Fewer weekly cost variances will be blamed on the brunch consumption.

It's now possible to cost each pan and accurately calculate brunch buffet consumption. The total cost divided by brunch sales may be compared to your overall food cost percentage. Forecasts may be improved to include both cover count and pan count estimates. Spoilage will decline through careful study of the entire picture.

After several brunches have been analyzed, patterns will develop. These hidden patterns will provide profit improvement opportunities. You'll find certain buffet layouts produce better results.

Let's face it, there is a big investment in the POS system. Get a better return on that investment during your busy times.

Restaurant Data Pros

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