Saving Pennies to Grow Dollars Makes Sense

by Jim Sullivan

In an industry whose average pre-tax profit is less than five cents, we’d all be wise to recall the insightful words of Sony founder Akito Morita who once remarked that “While making more money is important, it is critical to remember that losing less money is just as important, too.” Every year I present dozens of live seminars for operator and supplier conferences around the globe. One of the most popular topics is how to shave costs without sacrificing speed, quality, accuracy and service. Here’s 10 ways to reduce costs.

1.Reward and recognize “waste-watchers.” If a team member contributes a cost-saving idea that saves you $100, why not reward them with a $20 “commission”? Remember that all money is not created equal. 100 in sales is $100 less taxes and expenses. $100 in savings is $100. Make it a habit to recognize and compliment your crew members who stick to the proper specs, portions and recipes. If you see it, say it.

2. Invest in cone cups for team member drinks. QSR managers face a daily frustrating sight: dozens of half-filled soda cups cluttering up their kitchen and drive-through counters, the remnants of half-finished, abandoned crew sodas. Those paper cups are not cheap. Jack Hager, a regional manager for KFC in Lynchburg, VA. has a cost-effective remedy: “One of our franchisees put in a cone cup dispenser for his crew,” he says. “They cost much less than our regular cups, the crew drinks less soda, and they can’t leave the cup lying around where it’s both unsightly and can get you in trouble with the health department.” 

3. Train your team daily. Sloppy portioning, improper bagging, and incorrect order-taking is the result of sloppy (or non-existent) training. Don’t blame the crew if they don’t know what to do because you decided to save labor dollars on education. As Wes Lazar, a GM for Texas Roadhouse in Wisconsin says: “If you think training is expensive, try ignorance!”

4. Cook less more often. The fact is, food flavor does not rise proportionate to the amount of time it’s kept in a steam table or stored overnight in the walk-in cooler. Fresh tastes better and results in less waste.

5. Beware the irony of saving money and losing customers. One Wendy’s franchisee I know claims that shaving just one second off their drive-through window time directly results in another $11,000 in higher gross sales over a year. Impressive numbers, to be certain. But there’s a rookie mistake that even the most savvy QSR operators can make time and time again. Area Managers demand lower labor costs and unit managers respond by under-staffing, even at peak periods. Result: swamped team and long wait times for the drive-through or walk-in customer. Or worse, we put such a premium on speed alone (since drive-through traffic is exceeding 70% of volume in some QSR operations) that we sacrifice order accuracy. This is a classic case of a dollar chasing a dime. While long waits and inaccurate orders angers drive-through customers to no end, it ironically speeds up your drive-through service in the long run…because your customers don’t come back!  Staff for peak periods, train your team to repeat orders back to customers, and do double-handed exchanges of food, beverage, payment and change. 

6. Make sure the night crew cleans properly. What’s worse that trying to open your restaurant in the morning but first you have to finish what the night crew didn’t do? This hidden cost drives up labor dollars, customer service and even staff turnover.

7. Maximize tenure, minimize turnover. Industry research indicates that the cost of recruiting, interviewing, training and hiring a new QSR manager exceeds $20,000. Wow. If you sell a burger for $2 that means you have to sell 10,000 more of them to recoup the cost of losing one good manager and having to find her replacement. How many more of your products do you to have to sell each year just to cover the cost of crew member churn in a segment (QSR) whose annual hourly turnover averages 134%?

8. Scrap boxes. Some operators will designate a specific brightly colored waste bin for all food that had to be discarded (and not sold) because it was prepared improperly or sub-standard. That results in it being made over again or worse that the customer refused to re-order. This “scrap box” is an effective way to visually demonstrate the collective waste and cost of mistakes per shift. (One franchisee I know has even posted a sign over his scrap box that says “Here’s Your Raise”).

9. Check-in all deliveries accurately. Giving a delivery the cursory once-over because it’s time-consuming or inconvenient is just plain stupid. The best kitchen managers are sticklers for this process. You should be too. After all, they don’t let you “eyeball” your gas at the Kwik-E-mart do they?

10. Store things in the right places. In this business, food is money.So much of food waste and over-prep in restaurants could be avoided by taking the time to train your team to properly tag, rotate and store your dry goods, wet goods, raw and/or prepped products, and even point-of-purchase marketing tools. Remember FIFO (first in first out) and LILO (last in last out).

And finally, don’t forget that raising sales is the number one way to reduce costs, but it’s wise to remember that volume can also hide a multitude of sins. Encourage your team to look for and find ways to streamline costs without sacrificing speed, quality, or sales.

Jim Sullivan is a best-selling author and popular speaker at manager conferences worldwide.  Follow him on Twitter or YouTube @Sullivision