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Optimize busy season profitability

Q: We’re coming into our busiest season. I know we can do more business during this time of year, how can we get more people through the restaurant to make the most of this opportunity? 

A: Engineer the menu for speed and profitability. In most restaurants +-80 percent of food sales come from +-20 percent of the food items sold. To determine what sells, run a Product Mix Report out of the POS, limit it to food sales and isolate the top 20 percent of items sold. Evaluate the remaining 80 percent of items and determine if there are any items that require intense prep or execution time on the line (“line killer”). Eliminate those items for busy season. Next, take the top 20 percent of items and determine if there are any line killers in the mix. If any exist, eliminate them or streamline processes on the line for speed and execution. This may take additional prep dollars, but the extra money spent will more than pay for itself with one more table turn. After isolating what is going to sell, determine the profitability on each item of the top 20 percent. Consider a small price increase and work with the team and vendors to decrease the cost of those recipes. Focus on the main cost structure of the dish, not every ingredient. Examine the center of the plate and the accompaniments. If the center of the plate is costly, reduce the cost of the accompaniments and vice versa. Many seasonal businesses are fortunate to have a massive opportunity with local and non-local tourists crowding their restaurants during certain times of the year. Some restaurants will generate 50 percent-plus from tourism and could drive more sales with the proper strategy.

Here are four ways to ensure higher sales and better profitability:

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Prevent loses in slower times of the year

Q: We’re a highly seasonal restaurant, and offseason sales are hard to generate each year. With the lull in business, I’m losing money because my labor cost is so high. How do I keep from laying my kitchen people off or substantially decreasing their hours?

A:
During the offseason, it’s a challenge to keep prime cost (cost of goods sold percentage plus fully loaded labor cost) close to 60 percent. With lower sales, labor as a percentage of sales grow due to fixed costs primarily from management and kitchen labor. In the kitchen, labor tends to be stair stepped and body based; front-of-the-house is closer to linear and adjustable to guest flow. With floor supervision, it’s much easier to phase front-of-the-house labor as a supervisor can easily fill a position in a crunch. Since work in the kitchen is technical in nature, phasing kitchen personnel is more difficult since it takes the supervisor off the floor and away from serving guests’ needs and managing the crew. This results in leaving more bodies in the kitchen with higher hourly wages than those in the front-of-the-house. In addition, kitchen labor has become increasing difficult to staff, so keeping your kitchen team is a priority.

Since there are only two components to prime cost, and labor in the offseason is going to increase as a percentage of sales, the equation push is cost of goods sold. This is the time to work diligently and experiment with your menu. Explore the following opportunities:

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Four Focus Areas to Improve Product Cost

Q: I’m interested in improving my margins this year.

I don’t want to overhaul my menu, and I think my prices are where they need to be. Where should I start on the cost side?

A:
The largest cost target on the restaurant P&L is prime cost, which is made up of cost of goods sold and fully loaded labor. Cost of goods sold is primarily made up of food cost and beverage cost. The discipline for running great costs in cost of goods is the same whether it’s food or beverage. It begins with the purchase and ends with the sale. Everywhere in between is ripe for improvement. Regardless of restaurant size, any business can be world class and improve margins by functioning tightly in the following areas:

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