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.

Why Do Restaurants Fail & How We Can Prevent It

Developing and opening a new restaurant is exciting, often the culmination of a personal dream or a company strategy. Regardless of concept, brand, cuisine and design, there is one thing that these projects always have in common: the founders strongly believe that the venture will be a success. Unfortunately most have fatal flaws that caused the restaurant to fail.

It’s not that the idea wasn’t great, or the food wasn’t yummy. It’s not that the service was bad, or that the interior design was lame. The flaws are hidden in the disconnects between each element of the project. All the pieces need to work together, or nothing will work at all when it comes to scaling and adjusting the business.

Most entrepreneurs take a linear approach to restaurant development. They find a location, create a business plan using a template, and get advice from their restaurant manager cousin. They do a budget, raise some equity, and sign personally on a bank loan and a lease. They hire an architect, a chef, and staff. They do some marketing, and then open the doors. This type of process is a recipe for disaster. It could create a defect that you don’t see coming for a year or more. Until you’re faced with a problem that can’t be solved within your means.

The S/HA approach to restaurant development is based on the concept of Profit Building Blocks. That is our proprietary method for ensuring that restaurants are built on a stable foundation from day one. There are no silos. All aspects of the project are developed simultaneously, with the vital hurdles being crossed prior to signing a lease.

We reconcile subjective ideas with objective reality, like how to create a particular guest experience with the right labor model, produce delicious food at a target cost from an intentionally designed kitchen that was built to align with the labor model, and within budget. All in the right sized space for which you’re paying the appropriate rent in a location that is accessible to your core customers. Profit Building Blocks takes into account all of these moving parts and ratios. It’s a philosophy of balance that yields a focused healthy enterprise that meets the needs of all stakeholders. The learning curve is steep in the restaurant industry. With S/H/A’s expert support and guidance your project will have the cohesion that gives restaurants excellent odds of succeeding.

Find out how S/H/A’s restaurant consultants can help you open a profitable restaurant, or turn around your failing restaurant. Get in touch with us today!

10 Signs Your Hourly Employee is Ready to Be a Manager

“Tend to the people, and they will tend to the business.” –Thomas Edison

I’ve had the privilege of helping to groom dozens of exceptional hourly employees into manager roles, many of whom became even more successful and grew into much bigger roles. I’ve often reflected on what it takes to become (and develop) an effective foodservice leader. And if building leadership bench strength is also important to you and your organization, it helps to know what to look for among your exceptional hourly team members that will help make their transition to management effective. So here’s my short list of behaviors to identify and consider when you’re evaluating team members for promotion from hourly to supervisory ranks. 

1. They can manage themselves. The ability to effectively manage others begins with the ability to first manage oneself.
2. They routinely demonstrate ABCD (Above & Beyond the Call of Duty) behavior. One sure sign of manager-ready associates is a commitment to master and excel at the tasks at hand.
3.  They have the respect of their fellow employees. All of them. Strong character is a critical cornerstone of strong leadership. If you have integrity, nothing else matters. And if you don’t have integrity? Nothing else matters.
4.  They model the way. Whenever you cite the model employee in meetings with your fellow managers, you use her or him as an example of patience, performance and productivity.
5. They’re already managers (without titles). Other team members tend to ask this associate the kinds of questions they’re afraid to ask real managers for fear of looking dumb or forgetful. And they patiently explain and demonstrate the right way every time.
6. They build their own replacement. The promotion-worthy hourly employee shares expertise and insight, and successfully trains, develops and motivates the next generation team member to the role they once had. And they do it with fun and focus.
7.  They challenge the process, calmly. Manager-worthy associates master their role and actively search for (and often find) better solutions to common obstacles.
8. They spend time with other outstanding performers. It’s been said that you are the cumulative sum of the five people you spend the most time with. Outstanding team members tend to hang with people who like them and are like them.
9.  They like to learn and be given targets. The best future leaders are learners and goal-oriented. They examine how the job they do might be done even better and then share what they’ve learned with others.
10. They always seem to be working during the most profitable/productive shifts. Look at your spreadsheets. Compare the best days—and the worst ones—with the labor schedule. Which team members–and which managers–are consistently on staff on the best and most profitable days? And which are most often present on the worst ones? 

If you’re hiring someone from the outside to be a new manager, be certain you assess their capacity for learning as well as their resume. In today’s world, resumes are somewhat irrelevant in that managers should not be hired based solely on what they’ve done, but rather for what they can do. Bank on the future more than the past. No one comes as close to perfection as they do on a resume. The ability to self-direct and self-instruct are critical skills rarely found on a resume, but worth searching for in your hourly talent pool.

Having an entrepreneurial outlook and an innate ability to be a lifetime learner are platinum skills for the next generation of foodservice leaders.