Lessons in Profitability for Independents
As one of the last sessions of the day, Len Ghilani of the Ghilani Group knew restaurateurs were on overload, so he gave a pep talk.
“We have the best jobs in the world,” he told the crowded breakout room at the Minnesota Hospitality Conference and Expo last month. “The worst thing is we don’t have the room (to accommodate all the guests) or we run out of the special. We get to celebrate. People eat and drink for all occasions from weddings to divorce, so why do we feel like it’s a burden to make a dollar?”
To ease that burden, Ghilani gave seven things that successful larger restaurant chains do that the smaller guy can borrow. While the audience may already know many of his points, he contended, they’re not always knitted into the fabric of how things are done day in and day out.
The first item: Know the difference between food cost and inventory control. “People think if we’re running 28 to 30 percent food costs we have control on inventory,” he said. But if you’re ordering more food that you’re cooking, “we have cash sitting on the shelves rather than in the bank.”
Another tip was to monitor your product mix report. Rate each menu item for cost and popularity. Items fall into several categories, he added, such as a “dog,” where food cost is high, sales low; the puzzle, “all the elements are there,” but sales are low; and star, a good seller and low food costs.
“Know your winners and losers and change your menu to the more profitable items,” he says, adding “just because it’s a dog doesn’t mean you have to kill it.” (This is not a quote to be taken out of context, by the way.)
One of his clients saved a “puzzle” by raising the price and giving it a prominent place on the menu as a boxed item. The raised visibility meant more people noticed it and ordered it.
The third tip was: Know the difference between labor management and schedule management. This is where you need to use software that gives you complete enough data so that you can forecast when and where you’re going to need labor, he said.
You should be able to generate a flash report from your POS system so you can measure sales and labor in quarter hour increments. The goal, he stressed, is to be proactive rather than reactive, so that you have the right people in the right places. You want to avoid cutting people, and you want to avoid being understaffed for a rush.
Some of forecasting is recognizing that every week won’t be the same. Look at events going on in your area, the weather reports, what hours are generating the most sales, etc.
“Make adjustments on week two for week three,” and so on, he said.
Develop your teams and cross train them. To save money, look for the little things that add up. If employees are clocking in 15 to 20 minutes before their shifts start, that’s wasted money. However, he adds, schedule for the employees’ needs and not the business’. If employees need 40 hours, make sure they’re 40 productive ones for you.
And to find good team members, he said, go hunting versus going fishing. Unfortunately, that often means poaching. “It feels bad, but it’s survival,” he said about recruiting another restaurant’s top employees.
And never, ever refuse to take an application, even if you’re not hiring.