The New Year is a good time to get your restaurant’s financial affairs in order. As you look to gain greater control over your food costs, the formula you use needs to flex to suit your restaurant category and priorities. Does yours? You could start by calculating the cost of every dish on your menu, but you’ll likely get a more accurate cost of a dish against the overall cost of running your business if you use a target based on your cost of goods sold (COGS). Depending on the type of restaurant you run, that COGS will vary. While food costs tend to fall between 28 and 30 percent of total food sales, they skew higher for full-service restaurants, which sell higher-margin alcohol and include a premium for table service, according to the accountancy and business advisory network Baker Tilly. Orderly suggests several ideal COGS targets based on different restaurant profiles. Full-service restaurants should aim for a COGS in the low-to-mid 30s and may find room to trim costs if they manage their bar costs closely and also monitor market prices of fresh, local produce. Bakeries, on the other end of the spectrum, should have a COGS in the low 20s or below — the same goes for pizza restaurants. The challenge in these restaurants is managing food waste and playing close attention to inventory so you’re not over-ordering or buying ingredients at premium prices. Pizza restaurants have the added challenge of watching market prices of fresh ingredients but can manage that with lower labor costs and the addition of higher-margin items to the menu. Ethnic restaurants should target a COGS in the high 20s. While they benefit from less-expensive ingredients like noodles, pasta and rice, they may need to rely on more specialized suppliers of sauces and spices — that’s where they’re more likely to see costs spike. In general, the more specialty offerings you have, such as premium cuts of meat or hard-to-find toppings or other ingredients, the higher your COGS will rise. That’s okay — it’s just important to look for ways to balance those costs with careful inventory and supplier management, menu innovation (especially at the bar) and labor cost management. (Need help? Team Four can advise you in these areas.)
If you’re among the many restaurants transitioning to delivery service, your POS can help you reap rewards from the data you collect from each order — but make sure you track your progress in a way that helps you respond to patterns as opposed to one-off customer complaints. For example, Modern Restaurant Management advises you to turn to your POS to assess your results as a whole: Do you have one delivery driver who is consistently late? A line worker who often misses including requested condiments in orders? Or do your soup containers leak, generating regular complaints from customers? Which items are your most profitable and which are rarely ordered at all? Reviewing your POS for patterns tied to your food, personnel, packaging and service can help you see where adjustments are needed.
In 2019, one of the top trends Technomic forecasts for the restaurant industry is a deeper consumer demand for transparency — and not just about the food you serve. There is a growing expectation from consumers that you will be up front about your packaging, health and safety, corporate social responsibility, corporate performance and other aspects of business that demonstrate your values. Perfection isn’t critical: 85 percent of participants in a Cone Communications/Echo study said they are satisfied if a company is transparent about their practices even if those practices need improvement. The benefits of transparency can range from improved health and safety reports to simpler menus to improved connections with employees and the public. To enhance the transparency of your business in 2019, look at your shortcomings and find ways to be more open and clear about how you’re trying to solve each problem. For example, Mike Husman, a coach with the executive consulting firm The Entrepreneur’s Source, said a quick-service client who struggled with long wait times (and customer complaints about them) placed a timer in the restaurant to show its average serve times, which then decreased substantially. If you struggle with a foodborne illness outbreak, get approval from your lawyer to inform people about the problem and announce the steps you’re taking to fix it. When you share financial information, help people connect the dots: How do your employees’ actions translate to more sales and visits? How does your business spend the money it earns and where are your biggest expenses and investments? Even if your employees don’t have an actual stake in your business, approach them like they do by finding ways to gather and implement their input and show how they impact the organization.
Employee morale need a boost? The New Year is a good time to retool your management approach and set a motivating tone for the months ahead. The one-on-one meeting is an ideal place to have a back-and-forth about challenges, opportunities for the employee and the learning behind the feedback they’ve (hopefully) been receiving. Feedback about behavior that needs to be changed is better delivered on the spot, soon after it happens, while status updates are best shared in daily team huddles and scorecards posted in the restaurant. The restaurant consultant Mike Ganino shared this 25-minute framework with QSR for more effective one-on-ones: First, review action items from the previous week and catch up on personal life (7 minutes), then have employee set the agenda and share items to review and problem-solve together (15 minutes). Next, recognize good work/share important company news (3 minutes), and wrap up by reviewing commitments (yours and theirs), accountabilities and action items (5 minutes). You or the employee should post notes on those items in your digital meeting invitation or in another shared document you both use to track progress. If you find that the content of your meeting could have been delivered via email, it’s likely that your one-on-one needs some adjustment. Amid busy schedules, these meetings can be easy to overlook but, done well, they go far in helping you impart values, identify what drives an employee, and build engagement and trust.
Do you know how to determine your inventory’s magic number? If you can find your optimal inventory level it will help you set your ideal food cost percentage, all while helping you minimize waste and decrease the frequency of selling out of your most profitable menu items. Upserve suggests operators use this formula to determine how much they should be spending on inventory each day: Average monthly food sales x food cost percentage / days in the month.
Fish fraud continues to ramp up, and regulations for the industry still lag behind other industries — Oceana reports that more than 90 percent of the seafood consumed in the U.S. is imported but less than 1 percent is inspected by the government specifically for fraud. In the meantime, researchers are identifying ways to ensure that a fish represented as wild-caught actually is, and that its species and source are presented accurately too. Marine ecologist John Bruno told QSR that red snapper and shrimp are among the biggest offenders when it comes to fraud (Oceana research found that red snapper is far and away the most commonly mislabeled fish) and generic white fish is also ripe for fraud because it can often pass without raising suspicions. Bruno teaches a course about seafood forensics at the University of North Carolina, Chapel Hill, and leads a team that works with restaurant operators to extract DNA from fish tissue, sequence it and compare it to a database to determine if the vendor is trustworthy. The QSR report said operators who aren’t ready to fund such testing (Bruno’s team charges $20 to $30 per sample) can do well by asking suppliers for as much information about the fish’s origins as possible — suppliers of fraudulent fish often fall short in this area — and opting for suppliers that package and label their products thoroughly. Prioritizing strong relationships with local vendors helps too.
Delivery isn’t just for Friday-night dinner anymore. As restaurants accommodate consumer demand for off-premise dining options, they are experimenting with non-traditional day parts and occasions to boost the benefits of delivery to their bottom line. Three cases in point: Panera, Cinnabon and Applebee’s. Restaurant Business reports that Panera, one of the rare large brands that uses its own employees to deliver meals to customers, is expanding its small-delivery service to include breakfast (allowing it to better compete with McDonald’s and Starbucks, which offer delivery via third parties). Cinnabon and Applebee’s are venturing into occasion-based delivery, with Cinnabon adding gift boxes containing different-sized orders of its signature cinnamon rolls. Applebee’s, on the heels of Taco Bell offering delivery of its 12-taco party packs for the holiday party season, is offering delivery of catering packages and “Monday Night Football” food packages designed for groups. If single-meal delivery during your Friday dinner rush doesn’t make financial sense for you, what other delivery options might?
For a typical restaurant, 80 percent of food sales are generated by just 16 percent of menu items, according to Upserve. That leaves a lot of room for improvement. How does your restaurant measure up? If your menu needs a remodel, the sometimes-slow month of January could be prime time to refresh your offering and give guests a new reason to visit. First, identify the right mix of dishes. The Balance suggests you offer an assortment that includes the classic dishes that people look for when dining with you, along with some dishes that incorporate food trends. Next evaluate the food cost of those items so you’re in position to improve sales — now is the perfect time to tweak a dish that is popular but not profitable. Once you have your menu set, draft brief descriptions that clearly describe key ingredients and incorporate prices (as opposed to listing them in a column at the right). Your menu design should reflect the atmosphere and values of your restaurant, as well as steer guests to the items you’d most like to sell. Highlighting profitable items in boxes or placing them in among higher-priced items can help. If you are designing your menu yourself and need help, there are a number of templates (some free) that can assist. Upserve likes Canva’s library of stock images and layouts, Adobe Spark’s professional-looking results, and 99designs’ speed and ease of use — and also offers a free menu design builder that incorporates menu design psychology.
Quick-service and fast-casual restaurants are starting to look a lot different. As downloads of food delivery apps have skyrocketed (they’re up 380 percent from just three years ago, according to the data firm App Annie), restaurants are scaling back on their physical footprint. Skift Table reports that Dan Orkin, head of the U.S. restaurant division of CBRE, said many operators are adjusting to having fewer visitors and more delivery business by renegotiating leases and renovations. Many brands are looking to create separate entrances for delivery workers and pick-ups, scaling down their dining areas, or eliminating tables and chairs altogether for a kitchen-only space.
Data can unlock valuable information about your guests, of course. Now Uber Eats is demonstrating that data can also reveal demand for restaurants that don’t yet exist (but could, with a little help). Uber Eats is currently the fastest-growing food delivery app, serving 70 percent of the U.S. Much of that growth is due to the development of virtual restaurants — brick-and-mortar restaurants operating one or more restaurants that deliver food via Uber Eats and exist only on that platform. For example, Eater reports that the Dallas sushi chain SushiYaa, which operates five brick-and-mortar locations, houses about two dozen other virtual restaurants — all with their own separate menus that consumers can access on the Uber Eats platform. Uber Eats actually approached SushiYaa about the opportunity more than a year ago and suggested they start a virtual restaurant to meet rising consumer demand for poke. Uber Eats data indicated demand for the food was increasing and SushiYaa had the necessary ingredients for it already on hand. All that was required of the restaurant was a business name, menu and logo. Uber Eats then provided the tablet used for processing orders and sent a photographer to take photos of menu items. The process took less than two weeks to take fruition and has been a win for the restaurant, which can now use its existing space and labor force to serve a much larger volume of business.