Ever Run Out Of Month At the End of Your Money? 9 Smart Ways to Control Costs & Make Money
Profitability is a two-sided coin. On one side is sales-making and the other is cost-control. That means if we’re not outselling we’re being outsold, and also that we need to find ways to cut costs without cutting corners. Restaurants, bars and hotels—or any business for that matter–don’t close because they run out of cash, they close because they spent their money on the wrong things. Here’s a list of creative ways to make certain you’re capitalizing on the smartest investment you can make: watching your waste.
Post your monthly invoices. Does your hourly team have any idea what you pay every month for the “invisible” costs, like electricity, water, heat, gas, insurance, lease/rent, and garbage removal? Post a different utility invoice each month on your bulletin boards with the totals highlighted. Now employees can relate the cost of doing business to their own expenses at home.
Think big. Don’t invest time, money and resources toward something that has a small payoff. Identify and focus on the largest cost-savings opportunities in your restaurants. Know your most troublesome recurring expenses and show your teams how to minimize them. Find out which leader or team in your company does the best job managing those expenses and how they do it. Share that knowledge with your other managers and teams. Measure and share report results frequently to enact a sense of progress, and make sure progress is made on your target before moving on to another specific cost-saving area.
Preach P&L 101 Daily. Teach your employees how little you make as a business before you teach them how to sell more. Your hourly team believes that managers, owners and operators are making a fortune. They think that when a customer gives you a dollar that most of that spend is profit. Why should they know better if you haven’t taught them differently? The very first page in your training manuals should reinforce this reality; motivate people to serve better and sell more by educating them daily on why it’s important to do so.
Return-on-Retention (ROR). Labor cost is not your biggest controllable expense, retention is. If the annual turnover rate in your restaurant is greater than 50% you’re bleeding controllable costs. Let’s say you have 40 employees per unit. Losing an average of twenty of them each year (50% turnover) will cost a conservative minimum of $500 per employee in new sourcing, interviewing, hiring, and training costs. That totals $20,000 per year in additional labor costs. If you have a profit margin of 10% you now have to generate $200,000 in gross sales annually just to cover your turnover costs. Let’s say this particular store grosses $1 million in gross sales annually (or $2,740 per day). This means that for 72 days each year in every unit every penny of your sales is going to pay just for turnover. In this scenario, all of January and February sales will go to paying turnover costs; you don’t make any money until March 4. Retaining reducing turnover is huge in what it saves you and also in what it doesn’t cost you.
Sell more. This may be your best cost-cutting strategy. Higher sales rotates more inventory, makes advertising more effective, makes labor dollars more efficient, and shareholders happier. Unlike most other foodservice processes, selling doesn’t cost. It pays.
None of us is as smart as all of us. Those who plan the battle don’t battle the plan. Solicit your team’s ideas and get them involved in decision-making relative to cost-control. Your employees talk about areas where you’re wasting money or creating unsafe conditions (which can cost big if left unattended). Place on dot on a map of your restaurant to mark the location of every employee slip, fall or accident in the last 90 days. Your Danger Zones will be clearly highlighted.
Follow your recipes. The driving force behind high food and beverage costs in the kitchen or behind the bar comes from cooks, servers or bartenders that choose to follow their own recipes or measure “by eye” instead of using the prescribed spoons, cups, scales or shot pourers. Having controls in place is critical for consistency, flavor, taste, and profitability. Allowing crew to set their own portioning levels creates higher costs, inconsistent portions, and an inconsistent product. Customers notice.
Play the “Price is Right.” At your next crew meeting, display everyday workplace items that are commonly abused, over-portioned or accidentally tossed by employees. Include items like sugar packets, ketchup packets, butter, crackers, silverware, napkins, plates, glasses, table tents, menus, knives, an extra ounce of meat, a handful of fries, etc. Put these on a table in the front of the team with a card face down featuring the price of each item or portion. Employees in teams of two try to guess the right answers.
Give unbelievers a job at the competition. One of the most important things you can do to reinforce a cost-conscious culture is to get rid of the people whose actions or attitude fail to support those efforts.
Jim Sullivan is a popular Keynote speaker at foodservice conferences worldwide. Visit his website at Sullivison.com to learn more and get his books, DVDs, free mobile apps and leadership enewsletter. You can follow him on Twitter, Pinterest and LinkedIn @Sullivision. Thanks.