Q: As we start a new year I’m looking at trends in many different areas. I’m curious, what are the major issues in the financial areas?

A: Every year starts fresh with new ideas, energy, hope, interest and challenges. As we begin a new year, the restaurant industry has a rare opportunity to address and fix some issues.

Wages will continue to increase restaurants will address in three ways

The average impact of minimum wage increases statewide is an estimated +-$20,000 per million in sales. Automatic service charges may take the place of the traditional tipping model. There has been an abundance of press coverage regarding service charges. Early data suggests this model is being accepted but only in certain geographical areas. Secondly, surcharges are finding their way onto guest checks. This is a small percentage charge applied to the overall guest check while leaving the option to tip in place. Some operators have had success, others have not, it depends on the guest base sensitively to price point. Lastly, increased menu prices may be used to combat higher wages. This is a simple way to improve the bottom-line while offsetting higher costs. The important thing to remember is the public voted for higher wages, you can respond to it.

Staffing will be more difficult-kitchen wages are going to continue to grow

The labor market for kitchen employees is tight. This will continue in 2017. Expect wages in the kitchen to be in the upper teens per hour or early $20s for cooks, if they can be found. To combat this, work with your vendors to find competitively priced product that use less prep labor. Blend excess prep labor with line cook labor and work with less bodies. With the ability to find kitchen employees continuing to be challenging, using fewer bodies while making sure they make more money is great strategy. Provide overtime where appropriate and be the employer of choice.

Sales building will be managed more aggressively-non revenue producing staff will be reduced

Restaurateurs have traditionally used hosts, bussers, and bar backs to support revenue producing positions such as servers and bartenders. It is important in 2017 that each position in the front of the house produce revenue or have the ability to do so. Increasing check average while increasing the speed of table turns is imperative to generating revenue and reducing labor cost. Emphasize sales building and speed at the same time. Check with your POS providers about solutions for pay at the table to assist with closing tickets, becoming chip compliant and helping reduce a few minutes of wasted time per table.

Food cost will continue to trend lower-more value to the guest will be offered with higher menu prices

 

The food consumer price index forecast for 2017 is expected to increase a nominal 1.0 percent in 2017 following a year expecting to be lower by around (1.0 percent) in 2016. While this appears to be good news on the surface, the gap between food at home pricing and food away from home will widen. To manage the pricing gap, add more value to each plate while increasing prices to match consumer price/value quotient.

With every new year comes new opportunity. While costs are increasing, 2017 offers a rare opportunity to reinvent price/value perception while increasing pricing, expected by voters, to address both increasing wages and higher profitability.

For a more information on improving profitability and driving sales, contact AMP Services at rbraa@ampservices.com. Rick Braa is the founder of AMP Services, a seattle restaurant accounting and consulting firm specializing in helping companies grow profitability.