6 Tips for Controlling Labour Costs in the Restaurant Industry

Labour costs are one of the most important costs of running a successful restaurant. How do we determine its effect on business?

An effective gauge is the labour cost percentage: divide the amount owed for payroll with the amount earned in sales. The goal of any restaurant should be to keep this percentage below twenty percent, as anything more than that is too costly.

Here are six tips to keep that number from approaching anything unreasonable.

1) Cross-Training Staff

Cross-training your staff is an essential tool in combating unhealthy labour costs. By preparing workers to handle other jobs that need filling as necessary, the restaurant is able to better focus on keeping the number of workers needed in a given day low. When the prep cooks are able to operate the grill and the hosts can act as back-up servers, you eliminate the need for a specialized, diverse staff. The beauty of cross-training is that it maintains the same level of production quality your restaurant is known for without bleeding money on unnecessary labour.

2) Regular Audits

While cross-training your staff, it might be a good idea to also perform regular audits on their performance. By observing how each member of your staff operates during a given work-day, you can better assess their time management, as well as how to construct your schedule around certain parts of the day that are “down-times.”

3) Hourly Wages

Although restaurants normally operate on fixed wages, extra staff on busy nights should be shifted to hourly wage rates. As simple as it may sound, it will drastically improve the effect labour costs have on payroll when workers are only taking in a variable amount based on how much they’re actually needed on those intense work nights.

4) Adaptable Schedule

Along the same lines as monitoring staff performance for “down-times,” it’s also a good idea to regularly change the schedule as needed. Instead of relying on fixed work schedules, an adaptable schedule allows you to react accordingly to shifts in projected sales, as well as other important business concerns.

5) Resist the Urge to Panic Hire

“Panic hiring” is the temptation to hire the best from a pool of applicants with, at best, limited quality. It might seem like a good idea when your crew is overworked and undermanned, but consider the long term effects before making a hasty decision.

For one thing, it won’t do anything to directly address the labour cost problem, as you’ll be spending more to keep new recruits under your employ. The logistics of training them is another problem. If your crew is already overworked, adding an extra employee with no training will do nothing to increase your efficiency.

6) Over-Staffing

Just as it might be tempting to hire extra employees when the situation seems desperate, care should also be given when scheduling too many people for one night. Only schedule as many people as necessary, don’t attempt to account for any unforeseen consequences as that’s ineffective managing and will only increase labour costs in the end. Ultimately, this one shouldn’t be a concern if you’ve been following our other tips as outlined. 

How do you control labour costs in your restaurant? Leave a comment below.

For more info on Ideal Software’s Inventory Management system follow the link IdealStockControl

7 Tips for Handling Customer Complaints in your Restaurant

If you are going to work in the food service industry one thing you are bound to be faced with are customer complaints.As the old saying goes, “. . . you can’t please all the people all the time”. Eventually no matter how good the food or how good the service someone is going to be unhappy. This doesn’t have to be a major event and it doesn’t have to ruin your day. By following these seven simple suggestions, the majority of customer complaints can be handled to the satisfaction of all concerned.

1) Be Patient

You may or may not believe the customer is always right but the customer is always the customer. They pay the bills and provide your income. Right or wrong they deserve to have you listen patiently to what they have to say.

2) Be Courteous

Regardless of how the customer acts, short of physical violence there is no excuse for behaving in a less than courteous manner. This can be very difficult, especially if the customer becomes abusive but remember that other people including other customers will more than likely be observers to everything you say and do. Be sure they only have good things to say and that no one can lay any blame on your actions if the situation should escalate.

3) Listen Attentively

In a great majority of situations a customer will be satisfied just knowing that you care enough to take an active interest in what they are saying. Give them your full attention. Don’t look away, don’t look bored and don’t act like you have somewhere else “important” to be. Whether you feel it or not, make the customer feel like the centre of your world.

4) Don't Contradict

A customer with a complaint may not always have a valid complaint. Displaced aggression or perceived slights can often lead to a complaining customer. Contradicting them or trying to inject reality into the situation will only make matters worse. Never expect unreasonable people to act reasonably.

5) Apologise and Ask for a Solution

Kind words and perceived remorse on the part of the establishment makes a customer feel cared for and will greatly reduce any emotional energy the complainer may be carrying. Rather than trying to figure out what the customer wants, it is often much quicker and simpler to ask the customer what will make them happy.

6) Give

Always give more than is required. If the customer wants their meal to be complimentary, give it and offer their next meal to be free as well.

7) Give Up

At some point you find a customer that is just not a nice person. There is nothing you can do or say that is going to make them happy. Sad, but it is a fact of life, some people aren’t happy and have no intention of being happy. With these people the best you can do is simply ask them to leave. Don’t worry about them giving you a bad name. These people either don’t have friends to tell or their friends are like them and you don’t need the headaches. 

Now it’s your turn. What has been your experience in your restaurant and how was it handled? Leave a comment below.

For more info on Ideal Software’s Inventory Management system for controlling restaurant food cost IdealStockControl 

13 Food Cost Tips in 2013

It’s not cheap to run a restaurant, but food is one of the biggest costs associated with it. It is therefore of utmost importance to keep your food costs within an acceptable percentage to avoid financial hardship and prevent having to pass on the costs to your customers. Here are 13 tips on how you can achieve this:

1) Take Inventory Regularly

Making note consistently and regularly of your food and supply inventories will enable you to maintain better control of the overall use and the costs that come with it. This is particularly important for high-cost products like meat and alcoholic beverages.

2) Price Your Menu Items Accordingly

It is important that you charge a reasonable amount of money for the items on your menu. If you do this, customers will be more likely to return or recommend you to their friends and family, helping you to maintain a generous profit. Charging too little will give you a high turnover but very little profit.

3) Control Portion Sizes

It cannot be stressed enough that you should make sure to serve foods in reasonable portions. Over-filling plates means customers are likely not to finish the food, and that excess food ends up being wasted.

4) Follow Proper Food Handling Procedures

Make sure that you keep all foods at their recommended temperatures and cook them properly to prevent contamination and avoid waste.

5) Reconsider Garnishes

Garnishes may look good but aren’t usually eaten. Choose garnishes that are less expensive or avoid using them entirely.

6) Record Food Waste

On a chart, write down foods that were made improperly, spilled or thrown out. This helps you keep better track of inventory and makes it easier to monitor costs.

7) Be Consistent

Making inventory purchases consistently helps you to keep your costs steady and keeps you well-supplied.

8) Build Supplier Relationships

Building a rapport with your supplier’s means that they’ll become familiar with your regular orders and you’ll have a better idea of the cost. Regular communication can also help you find out about food quality issues or price changes.

9) Teach Employees to Care

Once employees see how your profits can affect their paychecks, they’re more likely to take waste, portioning and food quality seriously.

10) Buy Local and In-Season

Purchasing locally produced, in-season goods doesn’t just support the local economy. It can also save you money on your bottom line by avoiding the massive costs of cross-country or international shipping.

11) Shop Around

If you don’t like the prices of one supplier, it’s good to look around for a better deal. Buying wholesale whenever possible can also help.

12) Avoid All You Can Eat

While the availability of unlimited food for a flat rate can draw in customers, it can also result in a massive amount of waste.

13) Set Menu Limits

It’s great to have exotic or classy menu items. However, offering them all the time can significantly increase your costs. Consider offering pricier items only on certain days of the week.

Do you have any other food cost tips for us all? Leave a comment below.

Let us help you control your food cost with Ideal Software’s Inventory Management System,IdealStockControl. Contact us Now!

November 2012 Issue of Ideal Software's Niche Notes, our FoodService industry newsletter.

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Portion Control and Food Cost

Portion control is an essential element of food cost and quality control. It reduces food waste, ensures a consistent and quality product, expedites food preparation and service, and has a big impact on food cost.

Any extra food added to the customer’s plate is money coming out of your bottom line.

While an extra ounce of soup or a handful of cheese may seem insignificant, these amounts added up per dish over an extended period of time are costing you thousands per year in additional food cost. Excessive portions also contribute to food waste, both in terms of plates coming back half-full and over-ordering of stock; that is your profit going into the garbage every day.

The best way to get a handle on food cost is to keep an open dialogue with all of your staff, assess if and where waste is occurring, and have a mechanism in place to ensure that each portion is consistent in every dish that leaves your kitchen.

Assessment:

When you create your menu, you should also allocate portions for each menu item and price them accordingly. The general rule of thumb is that each dish on the menu should cost 30 – 40% of the selling price in order to cover expenses and make a profit. Lack of consistent portions makes it impossible to assess the true cost per item. Talk to your servers and your dishwashers. They can provide information about what is coming back to the kitchen. If certain dishes are constantly coming back half-eaten perhaps you need to rethink that particular dish and alter it or eliminate it from the menu altogether, or adjust your portion sizes.

Prevention:

A successful restaurant is a team effort, and it is important that all of your staff are on the same page and have the necessary equipment to ensure product quality.

- Provide pictures of each plated item illustrating the correct portion sizes and plating.

- Provide a chart that lists the correct portion of each item in all food preparation areas.

- Pre-portion condiments, sides, and sauces.

- Order pre-portioned stock where practical and make sure that all bulk items are portioned out and appropriately labelled and stored as soon as possible.

- Have and an adequate amount of the correct sized storage containers, ladles, and scoops for each menu item as well as a variety of measuring cups, spoons, and scales.

These measures not only help to ensure less waste, they also speed food preparation and service, especially at peak times. This makes certain that your customers get what they expect every time they dine: consistently good-looking, tasty food, in fair portions, at a reasonable price.

Love of good food and the ability to share it with others is the main reason you opened your doors in the first place; proper food portioning practices help to ensure that they stay open.

September 2012 Issue of Ideal Software's Niche Notes, our FoodService industry newsletter.

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Ideal Software supports #SmallBusinessFriday

This is a guest post from Ian Said, founder of idealsoftware.co.za, a software development company specializing in Inventory Control and POS reporting solutions. Follow Ian on Twitter @costofsale or email Ian info@idealsoftware.co.za.

Using Inventory Control Effectively

August 2012 Issue of Ideal Software's Niche Notes, our FoodService industry newsletter.

IdealSoftwareNicheNotesAugust2012

7 Tips in Determining Restaurant Menu Content and Prices

There is one question that every restaurant owner has to address when setting up their business, and that is “How do I determine my restaurant menu content and prices?” While there are a number of considerations that can help you in answering this question, you need to be aware of the fact that it is by no means a static question.

In other words, setting the cost of the items on your menu (or resetting the cost of them) is something that will need to be done multiple times over the course of your establishment’s lifespan. But where do you start? The seven tips listed below should help you in getting started.

1) Determining COST:

In order to correctly determine the prices on your menu, it is important to be able to price your menu items properly. To do this it is imperative that you understand how to determine the cost of your products. This includes everything from wholesale product costs to delivery fees (when the item first shows up in your establishment) to cooking costs as well as wages and overhead in order to determine exactly what it costs for you to be able to provide this particular dish. While it may seem like a lot of work to do for every item on your menu, you may well be surprised to find out how much you are underselling. Once you have determined the costs you can then (taking into account your competition of course) determine a profitable price point.

2) It's All About the Price Point:

When you are starting out in the restaurant business, a good rule of thumb is to take the cost of each dish (see tip #1) and then double it or triple it (In South Africa, an acceptable cost of sale for food overall should be 32- 40% and beverage 25 – 35% giving an overall cost in the 30 – 37% range- if other costs such as labour and rent are below 10% each, you will still be able to be profitable with a food cost in the 45% region). Of course you will want to take into account what your competitors are charging for the same or similar items. In fact, when it comes to things like specialty desserts and coffees it is not unusual to see a 300% markup. So don’t be afraid to add a little extra. If you track your sales you will quickly be able to determine what the public is willing to pay and can adjust your prices accordingly.

3) Understanding the Price Barrier:

There is a point above which most customers will not go. This point is called “The Price Barrier.” While you may find some individuals who will buy the item, the bulk of those who eat with you will not touch it as it is not a good deal for them. While you may be able to get away with a slightly higher price if you specialize and produce something with a little extra (a steak with all the extras for example) most of your middle income customers will stay below this barrier.

4) Knowing Where to Display your Prices on the Menu:

The art of displaying your menu prices is one that depends a great deal on your individual establishment. While having a standard dish/price column may be expedient for diners to determine whether they can afford a dish, if you’re selling upscale foods you may want to have the price listed below the description of the item to make sure your customers read about the food before dismissing it out of hand.

5) Take Demographics into Consideration:

While considering the demographics may seem like something you would expect from a corporation of chain restaurants, know this; being able to determine what the class of diners that your establishment appeals to can help you determine what you should set for prices, and even how your menu should be designed. Upscale clients tend to pay more on the whole and prefer reading about their food before they decide whether or not to order it as opposed to those for whom price is the primary concern.

6) When Food Doesn't Sell:

It’s a horrible feeling when your food isn’t selling. However, there are ways to ensure that even the worst failure of a dish brings you some sort of return. One of the best ways to do this is to make the dish a “special” by placing it in a high visibility area of your menu, having your servers bring it to the diner’s attention, and by lowering the price (or even offering 2 for 1 deals) in order to get it moving. You can even take advantage of your Twitter or Facebook page or send out special email runs to regular customers in order to advertise your special. Who knows, you might have a sleeper hit brewing that just needs a little nudge!

7) How Prices Affect Establishment Image:

Keep in mind that choosing the price for your menu is a direct reflection on your establishment. It’s true! As much as we might not like to admit it, upscale establishments almost always cost more than middle or lower class establishments. The higher the prices, the fancier your clientele is going to expect your establishment to be. Can you deliver? Do you have the ambiance and the service to back up the high menu prices? If so, then go ahead and raise your prices; however, be prepared to lower them if your clientele decides that there is a point above which they cannot go.

These seven tips are by no means the only factors to be considered as you determine the pricing of your menu. However, by following the advice listed above, you will most certainly see a change in the profitability of your establishment. In a few short months you will see positive changes that you might never have thought possible. All it takes is a little time and attention to detail.

For more info on Ideal Software’s Inventory Management system for controlling food cost follow the link IdealStockControl

July 2012 Issue of Ideal Software's Niche Notes, our FoodService industry newsletter.

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June 2012 Issue of Ideal Software's Niche Notes, our FoodService industry newsletter.

IdealSoftwareNicheNotesJune2012

April 2012 Issue of Ideal Software's Niche Notes, our FoodService industry newsletter.

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March 2012 Issue of Ideal Software's Niche Notes, our FoodService industry newsletter.

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Ideal Software Season's Greetings

Ideal Software thanks their customers for the support received throughout 2011.

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33 Possible Food Cost Problem Areas

In case you missed our recent series on “Food Cost problem areas” which we ran on Facebook and Twitter we’ve grouped them all together and listed them here. Here is Part 1 of Ideal Software’s 101 ways to deal with FOOD COST.

The food is great, the service fabulous and the restaurant is busier than ever – but are you wondering why the bottom line isn’t all it should be? Check your FOOD COST! Here are 33 possible Food Cost problem areas:

1. No balance of high and low cost items on the menu
2. Theft in any form
3. Purchasing of more than what’s needed
4. No Daily checks of invoices, quality and prices
5. No controls on issuing items from storage areas
6. Over preparing
7. Approving invoices without checking the deliveries and following procedures
8. Not following exact portion sizes
9. No reconciliation of food sold vs food consumed
10. Frozen Food not rotated
11. Negative relationships with suppliers
12. Not implementing a HACCP program
13. Chemicals stored next to food causing possible poisoning
14. Perishable left out of the refrigerated area
15. Food used in the bar and recorded as bar sales
16. Food purchased at cost for personal use
17. Supply doors not locked
18. Poor paperwork and use of control rooms
19. Burned or overcooked food due to poor training
20. Scales not regularly calibrated or replaced
21. Poor training
22. Not using standardized recipe
23. Dull knives
24. Fake company invoices being sent for payment
25. NO control of after dinner mints
26. Credit not received from vendor for returned merchandise
27. Dry foods areas are not well organized causing over ordering
28. Credit not received from a vendor for returned merchandise
29. Low yields on products
30. Failure to raise prices when food costs increase
31. No reconciling of Kitchen checks and Guest checks
32. No guest checks rung up for house, complimentary or manager food
33. Invoice Accuracy

For more info on Ideal Software’s Stock Control system for monitoring your Food Cost http://idealsoftware.co.za/ideal-stock-control

Restauraunt Food Cost

True restaurant food cost is not what the customer pays for the meal on their plate.  The true food cost is the percentage generated by a restaurant’s food inventory management. It may sound complicated, but at its most fundamental, it is actually quite simple.  Unfortunately many restaurant managers do not calculate food cost the way it is supposed to be done.  Even if they do calculate it correctly, many are not aware of everything that goes into it.

What is Food Cost?

Food cost can be determined as the percentage of the total of your restaurant sales that are spent on food product.  This percentage should stay somewhere around 28-30% in order for the restaurant to show profitability.  When food cost is combined with labor costs, it usually consumes between 50-75% of a restaurant’s total sales.  If your food costs are higher than 35%, it may be time to take a serious look at the way you do business.

These figures are greatly affected by the cost of your other overheads. The figure of 28-30% is used in the United States of America, where labour costs are relatively high. In a country such as South Africa with much lower labour costs, a food cost between 35-37% is acceptable whereas a food cost of around 31% is exceptional.

There are some quick service restaurants with very low labour and rental costs, that can run profitably with a food cost in the 45-50% range.

 

How to Calculate Food Cost:

The ratio for theoretical is actually quite simple:  Theoretical Food Cost = Cost of Food Sales / Food Sales. E.g. if you sell $100.00 worth of food, and the food costs you $29.00 your food cost is 29%.

To obtain an accurate food cost, you will have to include the change in your inventory (stock) levels. If the value of the stock grew over the month, the value it grew by must be subtracted from the Cost of Food Sales. If it shrunk, that value must be added to cost of food Sales.

To get an accurate assessment, you will first need to look at a specific time period in your restaurant’s operating life.  The typical Food Cost assessment is done Monthly.

You can follow the steps below to determine your restaurant’s Food Cost.

 

Steps for Calculating Food Cost:

Step #1:  Establish your time frame for evaluation.  This is not just a one-time deal; your time frame needs to be set up for regular food cost assessment.  You will need to work with your accountant as well as your managers in order to have all the information you need regarding sales, purchases and inventories available to you when the calculation is done.

Step #2:  Total all of your customer checks (or reports received from point-of-sale cash registers).  You only need to include the sales that are generated specifically from food sources and should fit within the time frame that you are looking at.

Step #3:  Determine your Cost of Food Sales.  These are the costs that are related to your food sales and include purchases as well as well as adjustments for inventory level. It is very important not to just include purchase in this part, but also to include the difference in your inventory (from the last time you calculated your inventory, until this time).

Step #4:  Once you have your cost of food sales (including inventory adjustments) you can determine your Food Cost Percentage.  This is determined by taking the total that you came up with in determining your Cost of Food Sales (Step 3) and dividing it by your actual food sales (step 2), the number that you come up with is your FOOD COST.

So:  Food Cost = Cost of Food Sales / Food Sales

Once you have determined your food cost percentage, you need to take a good hard look at the numbers themselves.  While most restaurants that operate successfully consistently generate Food Costs between 28% -30%, the kind of restaurant you are running will have an impact on your overall percentage. For example, whereas Italian restaurants run fairly low (about 28%) a steak house can have Food Cost of up to 40% and still be successful.

By determining your Food Cost on a regular basis, you can develop a powerful analytical tool for comparing months as well as identifying trends in customer purchasing or in product fluctuations that you can counter by being prepared to deal with.  All in all, it is a valuable tool that you will come to appreciate.

 

Additional Considerations:

In general, beverage cost of sale will be lower than food cost of sale, depending on your target market normally 5-10% better.
It is very important to know what each product you sell costs you, so that you can determine that you are selling it at the correct price. Once you have that knowledge, you can set the selling price based on your targeted food cost, what your competition are charging and what the market can bear.

For more info on Ideal Software’s stock control system for monitoring your Food cost http://idealsoftware.co.za/ideal-stock-control