Q: When I step back and take a look at my business, I know I need to spend more time analyzing sales information. Where do I start?

A: The most underutilized tool in the restaurant industry is the Point of Sale System (POS). Reams of paper are used daily in support of a healthy business, but those wonderful reports are underused in decision making to move the business forward. Analyze POS reports from both a macro and micro level, and use various time parameters such as hours, days, weeks, months and year over year. To begin, focus on the macro level reports, specifically the following:

Food and beverage sales percentage

This key factor shows the percentage of sales in both categories. Typically, a higher percentage of beverage sales results in a more profitable business. Case in point, bars generally make more money than restaurants. Why? Not only does beverage cost typically have a better cost-of-goods than food, but it takes less labor to produce and sell a beverage than it does for food. A great target is to run 30% of sales or better from beverage. Study beverage sales to ensure each item is being rung up, as well. The number one area of theft in a restaurant is beverage sales. More items are given away or not rung up in this area than any other profit center.

Percentage of the menu from fresh sheet (specials) and hard menu (core)

This ratio shows the percentage of the fresh sheet of the sales categories. To use this ratio effectively to reduce cost and increase margin, engineer the fresh sheet five cost points lower than your core menu, while maintaining approximately the same average or better menu price in each category. For example, if the average menu item in the appetizer section is $9.00 and 30% cost, then offer a special priced at $9.00 or more and 25% cost. Using this technique will drop the average food or beverage cost by 1.5% and add a significant gross margin toward the bottom line. In addition, work with vendors months ahead to maximize seasonal pricing and drive a better cost.

Sales and Labor by hour of the day

Studying sales and labor hour by hour will show the ebb and flow of sales and labor usage throughout the day, and will expose how labor is scheduled against sales production. This is one of the most enlightening reports available. Labor dollars should be scheduled as close to sales production as possible. For example, if a significant amount of sales dollars are earned between noon and 1 p.m., schedule prep production closer to lunch so the prep cooks can help the line through the rush. In the front, schedule more servers through the rush than before and after it. Most restaurants are too concerned about servers working enough hours to justify the commute to work. As a tipped employee, servers can earn a high hourly rate and be quite content.

Category sales as a percentage of the day part

It’s surprising how many restaurant owners can’t answer a few simple questions off the top of their heads. Try it.  What percentage of your food menu are appetizer sales, side dish sales and dessert sales? The POS report will show appetizers, side dishes, entrees and dessert sales. On the beverage side, it will show the different types of beverage sold such as beer, wine, liquor and non-alcoholic beverages. To continue the analysis, drill down further to see what types of liquor are selling; rum, vodka, whiskey, etc. in order to gain additional insight into guest preferences.  Set a goal to increase appetizer, side and dessert sales by 10% in each category. Simply making the options available to every guest every time will increase sales and enhance the guest experience.

To maximize profitability in any restaurant it is important to have a number of levers to move up and down. Proper analysis will define those levers and proper management will move them in the desired direction. Using the Point of Sale system reports to highlight trends and shifts in consumer behavior can be the best use of time working on your business rather than in it.

For a more information on improving profitability and driving performance, contact AMP Services at rbraa@ampservices.com. Rick Braa is the co-founder of AMP Services, an accounting and consulting firm that specializes in helping companies grow profitability.