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Sunday, April 29, 2007

Estimating the Opportunity in Take-Out

Americans have less time for cooking hot meals mid-week and they are buying prepared foods from a variety of venues. Take-out dinners are available from restaurants, markets, delis, convenience stores, transit centers and company dining operations.

In New York, the offerings at both Grand Central Station and Penn Station are increasing from the traditional bakery items to include many gourmet dinner options. Union Station in Washington, DC has a complete food court with every popular cuisine represented. I often hit these spots on my Amtrak trips.

Here in my neighborhood, we discuss take-out and delivery options at poker games and parties. Our pool club lets the many local restaurants deliver to the tables around the pool each summer. More and more restaurants are building access lanes and special parking spots for customer pickups.

Does the proliferation of take-out dining help your food cost percentage? I'm not convinced the casual dining restaurants really sell as many appetizers and desserts to the take-out crowd. After dinner coffee and tea sales are zero. If you rely on strong sales of appetizers, desserts and non-alcoholic beverages to hit a decent food cost percentage, take-out activity may not help.

In theory, the take-out operation requires no wait staff. Production costs are comparable to those of meals consumed in the restaurant. Packaging materials, plastic utensils and condiments may raise cost of goods sold in a more visible manner. Very few restaurants treat cleaning chemicals (e.g. dishwasher soap), smallwares, china, flatware, glassware as a cost of sales.

Nevertheless, I strongly recommend promoting take-out sales. Careful accounting can help to isolate the activity and keep the numbers relevant.

Create a separate sales account for take-out activity. Set your POS systems to track this activity in a Take-Out revenue center. Service labor should be charged to all other revenue centers. Likewise, packaging materials and plastic utensils should be charged to the take-out revenue center. Food cost can be allocated based on sales. If your operation has theoretical cost accounting capability, this allocation can be very sophisticated. For example, coffee and tea could be entirely charged to in house food sales.

The best practices for take-out restaurant operations include restricting sales to menu items which travel well and can be easily reheated. Carefully test your side dishes using the travel test. One of my clients found his famous onion loaf was a greasy mess after a five minute car ride in an expensive container.

Pizzas, sandwiches, chinese food, salads, stews, sauces, rice, pasta, mashed potatoes, burritos, samosas, crudites, sliced meats, cheese plates, ribs, fried chicken and many more menu items travel well. Fresh baked items can travel successfully if the container prevents tipping over and damage due to pressure. Even cakes with frosting and pies with meringue may be taken home. Push the dessert sales when your take-out orders come in each night.

As long as your take-out sales cover the costs of food, production, packaging and order costs, your overall profit will improve. Don't rely on your traditional income statement to track this opportunity. Track the operation in a separate revenue center with separate budget targets. These new targets will provide answers for future decisions regarding new take-out windows and counters.

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