Breaking Down the Fudge Factor
Experience and educated guesses drive a lot of the daily decisions in a restaurant: what quantities to prepare; how many workers to assign; what to order; how the special will sell; and how it will impact regular menu items.
Operators know some are off target on any given day, but as long as overall sales and margin goals are hit, that's a grey area many can live with.
But that may be changing as restaurateurs find there is real money to be saved using the menu analysis and forecast-driven production systems incorporated into backend restaurant management systems.
New Orleans-based Taste Buds, for example, drove down food costs from 31 percent to 27.5 percent and labor costs from 12.5 percent to about 11 percent using software from Compeat (www.compeat.com). That's in line with the typical four- to seven-point reductions restaurant operators enjoy when deploying solutions that allow them to see, control and scrutinize their costs, vendors say.
In addition to reduced inventory and labor costs, these solutions can mean reduced waste, fresher food, tighter delivery cycles, more effective menu changes and promotions, as well as enhanced manager accountability and therefore improved performance -- for the operators willing to do the work to truly integrate them into their operations.
For Chris Rodrigue, CEO of Taste Buds, which operates three concepts including Zea Rotisserie & Grill, Semolina, and Semolina Bistro Italia, running a restaurant without an advanced food prep tool is not an option. "We use a prep mentality -- prep to shelf life," says Rodrigue. "We want to prep once for the usable life of the product."
Taste Buds uses time and motion studies to determine the processes involved in preparing its dishes, then uses forecasts to dictate what's made, and when. "In two organizations I've been in we've been able to reduce labor by more than 33 percent in the prep room simply by forecasting properly, based on product mix, and using the shelf life of the product to tell what to prep," Rodrigue says. Items with a hree-day shelf life, for example, are made three days a week, reducing food costs by eliminating waste.
Another secret: calculating a daily par level (the most of an item that will ever be consumed, plus one) rather than averaging across days. "That decreases the product prep, decreases the time to manage the product, decreases waste and impacts labor," says Rodrigue.
Managing menu analysis
Beyond making prep more efficient, these tools also make ordering more accurate by recommending orders based on forecasts, not just previous orders. Operations can incorporate variables such as upcoming promotions, area events, seasonal trends and gut instinct into forecasts so they are coming as close as possible to the ideal inventory.
That comes in particularly handy when new items are added to the mix. Crystal Bridge Inc. operates nine Arby's franchises in Broward County, Fla. In addition to using Restaurant Technology Inc. www.internetrti.com)to guide ordering and food prep, the franchisee enters recipes into RTI's menu analysis tools to see their impact on food costs, paper costs, revenues and gross profit.
The company looks at daily sales and product mix pre- and post-intro to measure the results of sales and marketing and the item's impact on other menu items, says Mike Welch, president. "We can know the cost of the item and use the tool to see what we believe sales will be and how the sales mix will change. What will happen if we promote the item?" The tool also enables Crystal Bridge to decide when to participate in optional brand promotions.
Especially powerful is the real-time visibility the tools provide, a particular advantage for restaurants whose senior management is remote, such as chains and franchise systems.
"The beauty of the whole system is, you're not waiting until the end of the week to solve a problem," says Crystal Bridge's Welch. "You're solving problems daily."
The secret to making the most of backend solutions, users say, is to employ them in the environments where they can do the most good, and then commit to doing the work to make them effective.
Arby's corporate employs RTI for overall business analysis, while franchisees such as Crystal Bridge use it in their own headquarters and within each unit. At the franchisee management level, for example, Crystal Bridge looks to the system to continually tweak its operation. For example, "If a restaurant is running .5 better than ideal food costs, you can decrease the waste amount in the recipe so it causes the variance to go to .25," says Welch. "We want to run as close to ideal as possible." Individual units tap the tool to drive tactical daily tasks in addition to monitoring key metrics.
To gain the most benefit, however, users must be prepared to work.
"I've seen too many restaurateurs think they can buy a piece of software and plug and play," says Taste Buds' Rodrigue. "You have to plan how to use the tool before you set it up. People don't commit the time and resources. They're not willing to make the financial investment to get the most out of it." Securing the technical expertise to translate recipes into something that works operationally in the software can also be a challenge, he says.
Next, train managers and franchisees to use it. "Get operators involved in using the system not just from a report standpoint, but understanding how it's produced," says Crystal Bridge's Welch. "That's the only way they can start helping more." Remote access to data means management can call a store and start right in on solving problems, not just get updates on daily results. Then, best practices at leading stores can be shared with under-performers.
"It's a must-have," says Welch. "When you weigh the costs versus the benefits, you can't afford not to have it."