By David Scott Peters
Restaurant Expert

Five Things You Can Do Now to Weather Any Economic Storm

I originally wrote this article in the fall 2008 when the economy was really starting to hit my members where it hurt. And many of my members, because they have put systems such as these in place, have weathered the past two years much better than they expected. It’s all about operating at the lowest cost possible to maximize every dollar that comes through the door – in good times and in bad times.

So here are five easy-to-implement systems that will help you weather any economic storm – from the economy to slow tourist traffic - and also help your business in the long run.

1. Raise prices. If you’re feeling the pinch, you could have no choice. A mistake would be to start ordering lesser quality substitutions, such as catfish instead of grouper. People who eat in your restaurant on a regular basis have come to expect a certain level of quality. If you start offering lesser quality ingredients, it will be noticed, and you’ll pay the price in the long run. And you don’t have to raise prices by much to have an impact, as long as you’re implementing changes in other areas.
2. Purchase smarter. This is a two-parter. 
   • First, order a descending dollar report. You can get this from your vendor. It shows what you spent the most money on down to the least amount of money. This isn’t necessarily in volume, but in price per item. It’s not that I ordered 10 cases, it’s that I spent $1,000 — which could have been 1 case. Based on these figures, you can try to find like or better products at cheaper prices, which can have a huge impact on your business. You can take something you usually spend $3,000 a month on and get it down to $2500. Attack the next thing, say it’s $2,000 a month on down to $1500 and so on. Work your way down the report, cutting dollars off each item you order until you get to the bottom and can’t cut any more. You don’t want to sacrifice your quality, so it won’t work on every item, but this can be huge. I’ve had members cut their spending by 5, 7, even 10 percent.
   • Second, get a prime vendor agreement. Rather than order small amounts of product from a large number of food distributors, you’re better off to order most, if not all, of your product from one distributor. Yes, you might be getting a killer deal on cheese from one vendor, but in the meantime, you’re getting railed in your janitorial and paper items from another. Cherry picking won’t get you far these days. It’s no longer to your advantage to purchase this way. A prime vendor agreement will make a huge impact on your bottom line, cutting percentage points off your operations costs, guaranteed.
3. Recipe costing cards. Create a recipe costing card for every item on your menu – including your bar drinks. Include everything down to the single piece of lettuce. If you’re a quick service restaurant, you can include the cost of the to-go packaging. Making these cards and training everyone to them eliminates waste and over-portioning. Plus it provides a great training tool.
4. Menu engineering. Sit down and take a long hard look at your menu. If you have them at your disposal, run a few reports through your POS system. Look at your item-by-item sales mix report and your key item report. Plot each item on a graph, with the number sold on the y axis and the profits made in dollars on the x axis. These will tell you what items are ordered most often and how much they cost you to make. Combine your recipe costing cards with your POS reports, and you’ll see the dogs on your menu. The dogs are the ones that don’t sell, or the ones that do sell, but cost you money to sell. You don’t want dogs. You want stars. You want popular, high-profit menu items. Get rid of the dogs, highlight the stars. Encourage people to purchase the higher priced items on your menu.
5. Waste sheets. All causes for waste are avoidable and are a direct result of a lack of management and training. Waste includes a burned steak, food that spoiled because it was buried in the back of the walk-in and wasn’t rotated properly, and serving portions that are too large (this ties in to the importance of recipe costing cards). The waste sheet includes what the item was, that it was wasted, why it was wasted and how much that cost. Some people also like to put how much money it would have been worth if you sold it. Keep track of what gets wasted, and you’ll see a drop in waste. It’s an automatic drop in your food cost.

Lean, mean, fighting machine

Whether we’re in a recession or not, these things will impact your bottom line. If you’re already doing these things, I think there are probably places you can still trim. Go back and look at the areas where you can make a difference.

And just imagine. These five suggestions focus purely on cost of goods sold. That’s just one area within your restaurant. There are margins all over your restaurant where you can have an impact.

David Scott Peters is a restaurant expert, coach, trainer and speaker, specializing in teaching independent restaurant owners how to use systems for increased sales and increased profits. He is the nationally acclaimed restaurant coach whose unique “SMART Systems” approach to boosting profits has earned him the title of, “The man who can walk into any restaurant in America and find $10,000 in undiscovered cash before he hits the back door – Guaranteed!” Visit www.TheRestaurantExpert.com for more. Learn more tips, tricks and secrets in David’s free five-part e-course, “How to Explode Your Restaurant Profits NOW!” Simply sign up to receive the e-course at TheRestaurantExpert.com.

By David Scott Peters

Structuring a bonus program in your independent restaurant  is actually not that difficult. The bigger challenge is having the right systems in place to build it properly. Without the right systems, many management bonus programs are what I call management “entitlement” programs, where managers expect a bonus just for showing up. 

Here are the six systems you need to have in place to write a useful management bonus program that will encourage your managers to earn their bonus:

1. Job Description: This is often overlooked when we talk about management. Without a detailed job description for each level of management in place, you have managers on the floor who have no real clue of what their job is or how well you expect them to do it. The beautiful part about a well-laid out manager job description is it becomes your paint-by-numbers outline when you start to write your bonus program because your minimum expectations are already outlined in black and white.
2.  Budgets: Budgets give you, the operator, the ability to set targets, measure progress, evaluate performance and ensure you run profitably. As a part of the budgetary process you have to create realistic targets such as food cost, pour cost and labor cost percentages you want management to achieve. Honestly, without a budget and targets in place there is no structure for any reasonable bonus program. You might as well run a charity.
3.  Prime Cost Control Systems: When you have budgets in place for your restaurant, you have cost of goods sold and labor targets (together they make up what is called your prime cost), but do you have systems in place to help management achieve those targets? For example, just giving your management team a 30 percent labor cost percentage to shoot for isn’t enough. You must give them a road map of how to control those numbers and achieve their goal, or you might as well not even bother implementing a bonus program. They will never hit their goals, which ultimately translates to lost potential profits for you. 
4. Scoring Systems: When I refer to scoring systems, I am referring to both those that you impose and those that are imposed on you. For instance, your health department inspections scores and customer complaints are imposed on you. You should also be utilizing secret shopping services, customer comment cards and internal inspection forms to make sure your restaurant is working in all areas. Profitability alone should never be your sole focus. While scores are not something you can put a hard dollar cost to, in many instances, low scores can kill your business. So implement, utilize and evaluate your scores. They will tell you a lot about how well you are doing and should be included when evaluating managers’ performances.
5. MBOs: I successfully used Management by Objectives (MBOs) early on in my career and it remains a staple in my business planning to this day. The concept of MBOs was originated by Peter Drucker at The Harvard Business Review. He is called the Father of Modern Management, and he outlines MBOs in his 1954 book The Practice of Management. MBOs is a systematic process that helps management focus on company goals and reach the best results possible. There are five basic steps to the MBO Process, which are: 1) Review the objectives the company would like to accomplish, 2) Set objectives for your management team, 3) Continually monitor progress, 4) Continually evaluate progress, and 5) Reward the achievers. When you’ve done all that, you then start the process over again.
6.  Timely Reporting: Last but not least, you have to have timely reporting. It’s not good enough to have all of these systems in place if you can’t gather, analyze and distribute your results to your team on a timely basis. Taking too long can de-motivate your management team and even worse yet, cause you to lose money.

My goal with this article is to get you thinking about how important systems are in your restaurant and how they relate to rewarding your management team. You have to hold them accountable before you can reward them. Go down the list and take an inventory of what you have in place and if something is missing, add it to your I MUST IMMPLEMENT LIST. With these systems you can begin structuring your management bonus program.

David Scott Peters is a restaurant expert, coach, trainer and speaker, specializing in teaching independent restaurant owners how to use systems for increased sales and increased profits. He is the nationally acclaimed restaurant coach whose unique “SMART Systems” approach to boosting profits has earned him the title of, “The man who can walk into any restaurant in America and find $10,000 in undiscovered cash before he hits the back door – Guaranteed!” Visit www.TheRestaurantExpert.com for more. Learn more tips, tricks and secrets in David’s free five-part e-course, “How to Explode Your Restaurant Profits NOW!” Simply sign up to receive the e-course at TheRestaurantExpert.com.

By David Scott Peters

For the past five years I’ve produced a monthly member newsletter. It’s come a long way from the first few editions produced by me on amateur publishing software (Word!) to the professionally produced piece it is today. But no matter how pretty it looks, it’s the content that is important. And it’s full of great content for independent restaurant owners.

The March issue is hitting mailboxes this week, and I just wanted to take some time to tell you about this month’s contents. If you’re interested in seeing more of it, I offer a three month trial for only $3. Sign up here.

David Scott Peters – “Define What Makes You Different,” an article focusing on how to write your restaurant’s unique selling proposition so that you can clearly define your restaurant for prospective customers and increase traffic.

Coach’s Corner – “Try This System Worth Five Points,” an article written by TheRestaurantExpert.com Coach Fred Langley about using the purchase allotment system to budget for and purchase your food. Implementing this system has commonly saved restaurant owners upwards of five points off their food costs.

Linda Peters-Gethcell – “New Identity Training,” an article focusing on keeping your staff motivated and interested in providing great customer service in your restaurant.

Brad Hackert – “When a Cup Isn’t Always a Cup,” an article by TheRestaurantExpert.com Coach Brad Hackert about what can happen to your food cost when you use the wrong measures in your recipe costing cards.

Tonetta Weaver – “Gift Card Accounting,” our favorite accountant Tonetta offers insight into the regulations governing what to do on your taxes with the cash generated from gift cards before the gift cards are cashed in.

Every month this newsletter if filled with original content generated by myself and my team of restaurant specialists. Try it for three months and see if you don’t come away with some great tips and tools for using systems in your restaurant.

David Scott Peters is a restaurant expert, coach, trainer and speaker, specializing in systems for independent restaurant owners. He is the nationally acclaimed restaurant coach whose unique “SMART Systems” approach to boosting profits has earned him the title of, “The man who can walk into any restaurant in America and find $10,000 in undiscovered cash before he hits the back door – Guaranteed!” Visit www.TheRestaurantExpert.com for more. Learn more tips, tricks and secrets in David’s free five-part e-course, “How to Explode Your Restaurant Profits NOW!” Simply sign up to receive the e-course at TheRestaurantExpert.com.

By David Scott Peters

Weekly Restaurant Tip

Develop a marketing plan – based on your budget.

To market or not to market? That is the question. Every restaurant should have a marketing plan and program, but it should be catered to your revenues, goals for gaining new business and goals for retention. No coupon should be issued without knowing the projected impact on your business and how you will pay for it. No offer should be made that can’t be upheld on your end without damaging your business. Marketing is an essential part of any business, but you have to be smart about it.

David Scott Peters is a restaurant expert, coach, trainer and speaker, specializing in systems for independent restaurant owners. He is the nationally acclaimed restaurant coach whose unique “SMART Systems” approach to boosting profits has earned him the title of, “The man who can walk into any restaurant in America and find $10,000 in undiscovered cash before he hits the back door – Guaranteed!” Visit www.TheRestaurantExpert.com for more.

Click here to see the Budget Creator Software and Break Even Point Software developed by The Restaurant Expert. With these systems in place, you’ll never question whether a coupon or discount will do harm or good to your restaurant.

By David Scott Peters

Weekly Restaurant Tip

Test ‘Em Before They Hit the Floor

You can tell someone how to do something until you’re blue in the face, but how do you know they were really listening unless you ask? An essential part of any training program is the test that comes after you teach. Don’t let your new employees interact with your customers or your food until you test their knowledge. After completing the training program, every new employee must pass a test before hitting the floor. If they don’t pass the test, start the training over again.

David Scott Peters is a restaurant expert, coach, trainer and speaker, specializing in systems for independent restaurant owners. He is the nationally acclaimed restaurant coach whose unique “SMART Systems” approach to boosting profits has earned him the title of, “The man who can walk into any restaurant in America and find $10,000 in undiscovered cash before he hits the back door – Guaranteed!” Visit www.TheRestaurantExpert.com for more.

Click here to see the training manuals – including job descriptions – from TheRestaurantExpert.com. They’re fully customizable and totally restaurant focused.