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Tuesday, October 09, 2007

Volume Hides Mistakes?

There is an adage in the restaurant industry which states: Volume hides mistakes. I prefer to take the statement and twist it a little. What are these hidden costs? Why does volume hide them so well? Is there a benefit to eliminating these profit killers?

Hidden costs often involve food consumption unexplained by menu analysis. Finding the food consumed without regard for the number of covers or the menu choices made each day is our goal. When do these costs become visible?

Hidden costs stick out on low volume weeks. When there is no volume to hide them you can identify and eliminate these problems. Embrace your slow weeks and use them to improve the operation.

The core staff will often be on duty during your slower business periods. These workers will most likely consume food while on the job and they may also consume food off the premises. It's a mistake to credit your food cost for employee meals. Rather than issuing a credit, I'd recommend including the employee meals in your food cost percentage. If you credit these meals, you will miss a control opportunity.

Some operators see huge swings when their volume drops. The biggest moves I've seen are from the high 20s to low 40s. If your food cost percentage is 28% at peak volume and 42% at your low point, you use 50% more food per portion served to a customer. Careful analysis of employee food consumption can help identify major problems.

Imagine someone is robbing a case of shrimp each week. The impact of this activity would clearly be greater when volume drops. Your big volume weeks will offer cover for these thieves. Try not to offer additional cover by creating overly generous employee meal credits in your calculations.

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