Sunday, March 11, 2018
BACK TO THE BASIC’S IN TIMES OF STRESS
We will look over the next few articles how to refresh our winning attitude in our restaurant operation.
There has been a pestilence placed upon doing business in Ontario, it is called an interfering Liberal government, lead by professional disrupters, Kathleen Wynn and Justin Trudeau. High wages (and higher yet to come), heavy tax burdens as they give every special interest group “free” whatever they demand, a new regulations that neither has reason or sensibility but designed as appeasement to more special interest groups, higher and then even higher utility costs, fuel surcharges, carbon taxes and list is an ever growing snake of destruction.
The politician; once the friend of the common person has become an adversary to those who just desire to live, provide for their family, and enjoy that which their hard worked has gained. Yet even the family has come under the politician gaze and is a target for their troublesome meddling as well.
In Ontario there was a loss in part-time jobs (59,300) in January 2018, could the fact the Wynn increased the minimum wage to 14.00 per hour have any bearing on this increase in job losses? The small business cannot endure such harsh increases. More small businesses are shutting down, fast food is acquiring ordering kiosks to eliminate employee’s, full service restaurants have placed unreasonable tip out demands on their servers so they supplement the wages of BOH staff, effectively eliminating the servers wage increase. Gas has increased by 0.30₵ per liter (or $1.13 per US gallon) as fuel companies’ deal with the wage and carbon charges. All these, of course, are past down to the average consumer, who did not get a substantial increase to assist in covering these additional and onerous cost of living expenses.
Some wonder why restaurants have placed a 25-30% increase on menu items, they believe that it just an opportunity to rip off the consumer and the consumer is left with but one choice, boycott the restaurant and find another place to spend their money with, yet the problem is universal as every restaurant contents with the new stresses. We need to remember that these increases were not handed one piece at a time, but were sudden, heavy and were across all industries.
So how did that menu price get increased by such a substantial increase? If we break it down, (in a rather simplified manner) the farmer incurs a labor cost and a transportation increase to get their product to the manufacturer or processor who incurs a labor cost and a transportation increase to get the product to the distributor who incurs a labor cost and a transportation increase to get the product to restaurant who now must pay substantially more now for that same product. The restaurant operator (or any business) must recoup these heavy increases or face the loss of the business. The only way is to increase the menu price; there is no other way. These costs were not small enough to just tighten the belt or bite the bullet, they are not small enough just to absorb, this time the bullet was aimed at the heart of business in Ontario by the government, business had little choice but to pass these costs on to the consumer and bullet hit them squarely in the wallet.
So how does the restaurant withstand a governmental onslaught or any other for that matter? We must go back to the basics of a good operator: When the sales income equals the cost for labor, overhead, and food, the breakeven point has been reached. Our formula is, the breakeven point sales = labor + overhead + food costs. However we are not in business to breakeven, we are in business for profit, profit is not a dirty word as some suggested, it is however the “paycheck” of the business owner/operator so our formula is: profit = sales – (labor + overhead + food costs).
The basics begin with using financial statements, measure progress and results, financial statement are the road map of where we begin (are at) and to the future, following it can prevent your getting too lost at a place where there is no returning from. The financial statement proves the ability of the manager, the efficiency of employees, where weaknesses exist and what the urgency to attend to them is. In hard uncertain times your financial statement pinpoints what are problems you face so that you can make the right corrective decision.
However, in order for the truth to be shown on the financial statement the truth must be entered into it. Opening and closing inventories, every transaction entered, from the smallest cash transaction to every invoiced item. Look at every line item and then look again, a good operator will not wait until the month end P&L, they will know daily what their Prime Costs are. Be sure all sales are accounted for, are cash sales handled exactly the same as charged sales, skimming is s scourge to a good operator, unrecorded sales make the financial statement worthless, as all consequential controls are lost in restaurant skim. Keep in mind too, an operator who cheats will (knowingly or not) employ staff that will also cheat, skim, and steal.
Speaking of the employee, do you keep them in the dark, or, do you train them to understand their business? Yes, their business, you are a team; no restaurant can be successful without a great operating team. Those in BOH or FOH, to the very managers and owners, must become a single minded team, with the idea of providing the very best to their customer for fair recompense. When the staff learn the cost of doing business, they begin work toward achieving profitable goals. When they think opposite they will work crosswise to the owner/operator. Make it simple for them to understand, give them 100 pennies (if you can still get them here in Canada) 100 pennies= 1$, now have them break that dollar down as if they are in business.
$1.00, minus 33% for food = 0.33₵, 0.67₵, minus 32% of the $1.00 for labor=0.32₵, minus .10₵ for rent, 0.10₵ utilities, 0.02₵ insurance, 0.03 advertising/marketing, 0.02₵ taxes, 0.01₵ breakage & loss, when the employee sees seven little pennies left in their hand they begin to understand the operator and the problems they face to just keep that employee employed. The good employee sees and knows the challenges faced by their employer and will work to be as valuable as any other “asset” in the business.
As a team, employees will give thoughtful acceptance of the operation, like exact portioning, reducing waste, controlling utilities, and the multiplicity of great and small steps a restaurant must make to control costs and having a shot at making a profit, therefore giving the operator a paycheck in addition to the employees own. Staff have a wealth of knowledge, they will often see solutions to problems management may not have considered, they are certainly in tune with the desires of the consumer so may provide a clearer perceptive on vital changes that are required. You have a team make use of them.