If you’re an operator serious about making more money, you and your managers need to know how your biggest, most volatile costs, are running as frequently as possible, to prevent any loss of profit.
Many operators will prepare a weekly P&L report, but by the time you gather the data and identify the issues you’re halfway through the following week. By having a daily report of sales and prime costs when something is out of line you and your managers can immediately react, cut losses and get the problem resolved. Performing this investigation on a daily basis far easier than you think.
As you know, prime costs are cost of sales (food & beverages) plus all payroll related costs. It usually runs 60% – 65% of total sales in a full service restaurant and 55% – 60% in a quick service restaurant. Instead of managers chasing this data, a full-featured cloud-based restaurant management system can send sales and cost information directly to unit-level managers and above-restaurant managers, improving their capability to act now and improve the bottom line.
Reducing Food Costs
Knowing what food and beverage costs are on a daily basis can reduce waste by 2% – 6%, and the savings go directly to your bottom line. The first step is counting and tracking what’s being thrown away at each location. Most food waste is due to four factors overproduction, food expiration, over-portioning and spoilage. Record why each item is wasted in your restaurant management system so you can identify problem areas and training gaps.
The surest way to drive dollars to the bottom line is by identifying the individual menu items with the largest actual vs. theoretical food cost variances. In a typical operation with hundreds of items in inventory, it can be a daunting task, but a restaurant management system with easy to use recipe costing and inventory tracking tools makes performing this investigation on a daily basis far easier than you think! The initial setup of recipe costing does take time, but once implemented your store manager just performs a simple nightly count of 15 ingredients. You’ll start to see on a daily basis variation on actual vs. theoretical food costs and any food waste will quickly emerge for action.
Once waste is identified you can adjust daily production to match demand more closely. Most restaurant management systems include predictive analytics for inventory management, which will automatically note which menu items sell better under various conditions including the day of the week and your sales during similar types of prior events.
Preventing Overtime Costs and Overstaffing
The combination of government mandates and union protests have all but guaranteed that rising wages will affect every operator in 2017 and beyond. You can no longer wait until the end of the week to find out the bad news on staff overtime, which means finding new ways to improve scheduling and productivity.
A key metric to keep track of is hourly sales vs. labor costs. A good restaurant management system pulls sales and labor costs from your POS in real-time and presents hourly sales vs. labor costs in an easy to understand format. Store Managers, Area Managers and GMs are alerted in real-time to hours of the day that stores are consistently overstaffed or unprofitable rather than being a week behind.
It’s important that your management system has employee scheduling tools built-in, which will also alert managers if future schedules they are creating will lead to overtime. Also, staff shift-swap requests are checked on the fly to ensure they do not push staff into overtime.
Measuring prime costs on a daily basis will be well worth the investment when you notice differences on your bottom line. With a modern restaurant management system you can give managers access to the metrics above on their mobile devices in an easy-to-use format. Data can be pulled from multiple POS platforms and updated in real-time via the cloud, so you always have accurate, current analysis at your fingertips to measure and manage your business.