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Early Warning System

How do you know if your restaurant is operating as you expect or want it to? Is it by the looks on the faces of your guest? Is it the reviews, both positive and negative, on industry related websites?  The amount of activity in our kitchens; or is it just a gut feeling? This week’s periodical summery is all about using the number our restaurants generate daily, weekly, and monthly to stay on top of how our business is doing. This article from the February 2012 issue of Restaurant Start-up & Growth talks about how to identify what number should be examined daily, weekly and monthly to give operators an idea of how their restaurant is performing. It goes into depth about how weekly prim cost reporting makes managers more cognizant of the effects labor scheduling has on the business.

The article breaks itself up into three different sections starting with daily reports and how using daily information helps us be more efficient each shift. As strange as it may be to start off talking about the article points out that most restaurant operators like to start out with an annual plan and break it down into periods, and monthly cycles. The importance of doing this is to be able to use this annual goal to set daily and weekly expectations and sales goals for your management team to keep them on track. This is because by using daily number properly managers are better prepared to accurately plan the preparation of product, efficiently manage labor cost, and meet that day’s sales goals. Think about it like this: You are giving your management team access to the numbers form the same date the year before and you are asking your team to beat last year’s numbers.

However a daily sales report isn’t simply a sales record, it is this and so much more. The real main purpose of a daily sales report is to track the day’s actual sales, account for any voids, promotions, refunds, and payouts so that cash is accurately accounted for. If you use this report to track sales by day part, breakfast, lunch, and dinner, along with including cover counts and check averages your management team can better track trend in daily customer spending and let us as operators know what is working and not working on a day to day basis. Tracking lunch cover counts and check averages can let managers know what daily specials to offer, just as tracking these same things with dinner can let a manager know when to run server sale contest on appetizers or desserts.

Another great daily report to use is the daily P-mix or menu-item sales report as it is also known as. This is a great report for chef’s and kitchen managers to use to help prep themselves for the day and week ahead. It’s great to look at a monthly report and see that you sold 360 orders of “X” a month, but if you can see the daily reports and see that on this day you sell 15 of “X” dish and on other day’s you only sell 5 of “X” dish you can prep accordingly. This will not only save money on food cost because we are not wasting extra product, we are also saving money on the second biggest prime cost in the restaurant industry by cutting back on labor. If there is less to prep then it takes less labor hours to do it. In the end the little bit of time and product that is saved at the end of each month will add up to large savings over the course of a year.

Knowing what each day is projected to bring or how each day did also helps with the second part of the article and that is weekly prime cost calculations. The prime cost of the restaurant world is our food and beverage cost plus all payroll salaries, wages, taxes and benefits. A restaurants prime cost is also one of the best indicators of the profit potential and how well our restaurants most volatile costs are being managed. A restaurant whose prime cost are out of control almost always have problems with product consistency, and food quality.  If a restaurant is really interested in making the most profit it can then calculating prim cost only once a month is not enough, the highly profitable restaurants actually use weekly prime cost reports.

When prime cost are calculated weekly, operators and managers don’t have to wait for the end of the month to find out what happened with the most important cost areas for restaurant success. If there is a problem with food cost, beverage cost, or labor cost it can be addressed that week and is normally fixed by the next week, putting the restaurant back in-line with its sales goals. If it isn’t calculated each week you won’t know how long the problem is going on and it could take a lot of time and lost sales to fix if you are only looking at the month end report.

Another benefit with weekly prime cost calculations is that it changes the entire culture in your kitchen because of the awareness and sense of ongoing accountability it creates. If you can tell your chef and managers that they raised the prime cost of the restaurant each week it puts them on notice and gives them time to correct the issues so that it doesn’t affect your monthly sales goals. The article claims that in as little as the first few weeks you could see a decrees in prime cost by as much as 2-5%, and assuming that everything else stays the same this 2-5% goes right to the bottom line.

Lastly the article talks about the how monthly review and analysis of your restaurant’s P&L or income statement is one of the most important reports to see the restaurant’s overall profitability. The best way to review and compare how your business is doing is to set up our income statements using The National Restaurant Association’s Uniform System of Accounts for Restaurants. This creates a common language for all restaurants to talk about industry specific expenses and sales.  On top of giving you monthly totals of your daily and weekly reports all in one place the monthly P&L statement let you monitor and keep track of our other expenses, both controllable and non-controllable.

When it really comes down to it, it’s a numbers game. Restaurants generate lots of numbers and the more reports that help you understand the numbers the better and more profitable your restaurant can be. When these reports and numbers change for the better or worse it lets us as operators and managers know when something is working well and should be continued. These same reports can provide a reliable early warning system that something in our restaurant is amiss and needs attention. Staying on top of your key numbers is a way to stay on top of our business and our prospects for success.

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