| A recent analysis of 120 of the largest publicly | | | | areas up, and address the costs with each |
| traded restaurant companies in the United States | | | | vendor. Schedule a time to negotiate better |
| shows that the average net profit is 11.71%. That | | | | pricing, bulk buys, or other methods of reducing |
| led me to contemplate what operators have to | | | | the total cost of your products. Are you getting |
| do to actually get that eleven cents to the | | | | the best deals on product, considering the |
| bottom line, and it's harder than most people | | | | services rendered? Are you comparing prices |
| realize. | | | | tokeep honest vendors honest? |
| Selling a million dollars worth of burritos that cost | | | | 3. Turn your scheduling upside down. How can you |
| you a million dollars equals a waste of time. | | | | save money on your labor? Can you have hourly |
| Profitability is critical to a restaurant operator, and | | | | staff come in one hour later? Can you combine |
| essential to the growth of your business! As an | | | | efficiencies to reduce your staff costs? Are your |
| operator, you actually do three things with your | | | | people cross-trained to handle multiple tasks, |
| money: You generate it, you spend it, and you | | | | thereby reducing the need for specialized help? Is |
| save it. Let's concentrate on the spending and | | | | your management staffing optimized for |
| savings components for a moment, and you'll see | | | | efficiency? |
| how closely tied in they are to each other. | | | | 4. Property and real estate costs. Have you |
| For ease of understanding, let's assume that an | | | | evaluated each area for cost savings or deals? Is |
| average operator makes an average of 10% net | | | | your landlord willing to drop the cost of rent in |
| operating profit. That is no small feat, and my | | | | exchange for services or a longer lease? Can you |
| compliments go out to those that can keep up | | | | convert into a triple net lease, and lower your |
| these numbers month after month! | | | | fixed rent? |
| Based on the above assumption of 10%, for | | | | 5. Utilities. Are you turning on kitchen equipment all |
| every dollar you keep, you have to make $10.00. | | | | at the same time, creating a peak spike in energy |
| Where does the other $9.00 go? I'll list a few | | | | costs? Can you delay equipment usage by a half |
| places, and I'm sure you can add a few of your | | | | hour a day? How about air conditioning and |
| own: | | | | heating? Can you use these more effectively by |
| Labor, benefits, taxes, cost of products (food, | | | | turning them on later, or turning them off earlier? |
| liquor, supplies), equipment, uniforms, repairs | | | | Can you use more energy efficient lighting |
| & upkeep, cleaning supplies, phone, bank and | | | | throughout the operation? |
| credit card fees, utilities, vacations, advertising, | | | | 6. Contracted services, including laundry and |
| rent, mortgage, lease payments. | | | | cleaning services. Are these areas that you can |
| As a consultant, I frequently hear clients say, "I | | | | negotiate the fees? Will they drop the costs if |
| want to make more money", and I challenge | | | | you agree to a long-term usage agreement? |
| them by responding, "How much money did you | | | | 7. Bank, credit card, and other financial fees. Are |
| save today?" To illustrate this point further, if you | | | | you getting the best deal on your credit card |
| can save $5.00 on a laundry invoice, at 10% net | | | | discount rate? Have you shopped for lower rates |
| operating profit, that $5.00 translates into $50.00 | | | | recently? Are you being charged excessive bank |
| of income that did not have to be earned...just to | | | | fees for basic banking services such as a checking |
| pay for that laundry. | | | | account? All of these fees are negotiable, and |
| Worldwide, there are approximately 8 million | | | | you'll quickly save by shopping around. |
| food-service establishments. Just imagine if each | | | | 8. Telephone charges. Do you have long distance |
| one saved just one dollar a day in operating | | | | costs controlled? Who can make long distance |
| expenses. The figures can quickly become | | | | calls and why? Unless your chef is ordering fresh |
| mind-boggling. | | | | fish from Hawaii, there is no need to use long |
| Then why is it so hard to generate additional | | | | distance services. Virtually all vendors have 800 |
| profits on the monthly profit and loss statement? | | | | numbers, or they'll make accommodations for you |
| It's because as operators, we become conditioned | | | | to place your orders toll free. |
| to running our restaurants in the same way, day | | | | 9. Supplies, small wares, and other controllable |
| after day. We become familiar with the same | | | | expenses. Do you have a purchase order system |
| vendors, charging what appears to be a | | | | in place? Who has access to petty cash? Who |
| reasonable cost for the product or service | | | | has the authority to purchase these items? Unless |
| supplied. | | | | systems are in place, you're loosing valuable |
| Have you ever thought about a complete | | | | assets. |
| overhaul of your financial thinking? What would | | | | 10. Menu design. Are you selling the most |
| happen if you evaluated each vendor and their | | | | profitable items possible? Are they placed in the |
| pricing structure one by one? What would happen | | | | right spot on your menu? Unless your menu is |
| if you looked at your operation with a criticaleye | | | | costed out correctly, and laid out properly by an |
| towards expenses and revamped the way you | | | | expert, you are selling yourself short. (May I |
| actually do business? Could you really save $50.00 | | | | humbly pitch our services? We're great with |
| or $100.00 a day or more? Remember that | | | | menus!) |
| $50.00 translates into $500.00 and $100.00 | | | | 11. Marketing plans. Unless you have a |
| translates into $1,000.00. | | | | well-conceived and thoughtfully crafted marketing |
| If you could save $100.00 a day in operating | | | | program in place, you will probably be throwing |
| expenses combined, in a seven-day period that | | | | good money away on temporary promotions. |
| becomes $7,000.00. Over the course of 365 | | | | 12. Rewards in place for creating additional |
| days, that becomes $365,000.00 you don't have | | | | profitability. It takes work to create profit. How |
| to earn! | | | | about creating profit teams? Take key staff |
| Here's some tips on how to increase your net | | | | members and make them responsible and |
| income and bring more money to the bank, step | | | | accountable for various financial components of |
| by step: | | | | your operation. When they realize a cost savings, |
| 1. Your profit and loss statement--did your | | | | reward them for theirdiligence, and you will reap |
| accounting firm create this form for you? Are | | | | the rewards, line item by line item. |
| they negotiable in their fees? What other | | | | Remember, it's not what you make, it's what you |
| preparation options are available to you? | | | | keep. By concentrating on keeping more of your |
| 2. Look at your top costs. For most operators, | | | | money in your pocket, you'll increase the |
| they will be food and beverage. Break these | | | | profitability and value of your business. |