How Data Can Save Single-Unit Operators Time and Increase Profitability

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How Data Can Save Single-Unit Operators Time and Increase Profitability

08/21/2018

This article from Orderly,  a data-driven food cost management solution, details how restaurants can use a data-driven approach to help minimize their food costs.

According to the National Restaurant Association, seven in 10 restaurants are single-unit operations, with restaurant owners often acting as chef, operations, customer service and CFO. Because of this, sorting and deciphering 10-12 invoices per week from six different food and beverage suppliers becomes part of the inventory nightmare that is crucial to managing food costs.Knowing that food cost alone can account for 28-35 percent of restaurant expenditures, single-unit operators must be savvy when it comes to food cost management. While juggling the staffing, purchasing, marketing, customer service, food quality, accounting, etc., the single unit independent operator has to now try to tackle taking inventory?

    A data-driven approach can help smaller restaurant and group owners optimize their food cost, the biggest driver of their profitability.

    To do that, you have to first start with understanding and taming the relentless stream of chaotic invoice and receipt data coming from suppliers. Getting this information from the paper invoice into digital form is definitely tedious, but also can be fraught with error. Interpreting pack sizes and units of measure. Being sure to manage supplier substitutions and interchangeable ingredients is always a challenge. Unlike the big chains, there is no staff whose job is only to manage this work.

    This is where data science comes into play, as time is the most important commodity for owners working in a number of different roles within the restaurant. A data-driven approach can help smaller restaurant and group owners optimize their food cost, the biggest driver of their profitability.

    Recording, normalizing, categorizing and even just deciphering this raw information is daunting. Most restaurants don’t track this info at all, and then only at the category or supplier level. In fact, more than half of single-unit restaurants cannot even provide an accurate list of their ingredients – giving them absolutely no visibility. Plus, with the commitment needed to count inventory, most owners crunch these number once at the end of the month solely to ensure that they have enough working capital to keep the business going.

    Solutions that apply data science to the detailed flow of each restaurants’ invoice data to account for inventory levels give restaurant owners an accurate weekly cost of goods sold (COGS) without having to count inventory. This innovative approach not only saves restaurant owners hours of time per week, but also gives operators access to their weekly food cost, giving them more real-time information to improve their operations and profitability.

    By tracking inventory weekly, restaurateurs are able to gather more data that can come in handy when working with suppliers. Keeping track of continuously changing ingredient prices important, and data-driven software solutions give owners that visibility. Is Supplier A consistently more expensive than Supplier B for this ingredient? Why are we buying a split case of tomatoes every other day?

    What should restaurant owners keep in mind when looking for a food management software provider?

    • Be Realistic: Understand how much time and effort you are going to and willing to put into food cost management. Not all solutions automatically configure ingredient lists, so pre-configured demos may not always be the best representation of the provider. Beyond that, some providers require manual ingredient list maintenance, which calls for constant updates and management that can take up to four hours a week.
    • Take Action: Data science alone won’t optimize or improve food costs. It is up to the owner to use the metrics to adjust their behavior as a team. That can mean more discipline on ordering, or it can mean including a reckoning of all usage and waste issues with the full staff in a weekly team meeting. It can mean holding chefs to a spend budget every week to hit a target COGS. It can mean following up in working with suppliers to negotiate better prices based on benchmark prices provided by resources, such as the Restaurant Food Index (RFI). 
    • Understand the Onboarding Process: This process can take anywhere from one week to more than a month depending on the providers. Restaurateurs should do their due diligence when vetting these solutions and, most importantly, choose a food cost management partner that is the right fit for their business and partners with you for full lifetime success, not just software training.

    In the ever-changing restaurant industry, data science is fast becoming a go-to solution for small restaurant owners to gain better insight into their business and take control of their food spend.

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