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:
- Develop or find blind items. These items are special, unique and rare. Comparison in the market is difficult as they are not mainstream. In the kitchen, these can be items that take longer prepare than what would otherwise be possible in the busier season, but have a better cost of goods, examples might include slow roasted meats, new pastas and more complicated recipes. They key is to manage productivity of kitchen staff while working on items that can reduce food cost. on the beverage side, barrel aged cocktails, boozy shakes, inexpensive, but delicious wines, and fun, high margin, non-alcoholic drinks are the opportunity. These drinks may take more effort to develop and launch, but the margin can be terrific.
- Optimize products on the menu. Use the money you have to spend on labor to get more out of it. Ensure every item can be crossed utilized in other dishes, and eliminate solo items or develop other recipes in which they can be used. Eliminate all pre-cut items including grated cheese. Measure yield and quality on each item, and make sure the product is meeting specification. For example, meats can be more or less fatty. As the business grows, the vendor may use less quality product as it experiences turnover at the sales rep level.
- Increase the check average by simultaneously increasing food and / or beverage spend and perceived value. Break out the food spend and the beverage spend for the guest check average. If the average spend on food is $15, for example, then develop programs to increase that spend toward $20. Since labor is relatively sunk in the offseason, use the kitchen to prepare more dishes per guest if necessary. Bundling this time of year is a good idea. For as many complaints as there are about programs such as Seattle Restaurant Week, the overwhelming data is the amount spent on food by the guest increases. McDonald’s increased their average customer transaction when they bundled meals because they captured a burger, fries and a drink rather than two of the three. The result was higher value perception from the customer and higher sales for the company. For beverages, run contests to increase the overall number of beverage items served. This is the time of year every guest should experience the highest level of beverage service not the lowest.
The offseason can be challenging. It is also the season for experimentation and optimization. Be sure to focus labor dollars on running an exceptional restaurant that includes a dynamic menu, premium product and high value perception.
For more information on improving profitability and driving performance, contact AMP Services at [email protected]. Rick Braa is the co-founder of AMP Services, an accounting and consulting firm specializing in helping companies grow profitability.