Looking for healthier profits? While no one can compel people to spend more in your restaurant, there is always room to tweak the other side of the profit equation: expenses. Even if you think you are done with belt tightening, you might find a good idea among the 10 in this two-part series. Here are the second five:
6. Develop and stress operating standards.
SIB’s Schneider says multiunit operators sometimes can contain costs by following consistent procedures.
Let’s say one of your restaurants has grease traps cleaned every 12 weeks, but another one does it every eight weeks. Will the lower frequency suffice? What about your water heater temperature? If it’s five degrees lower you’ll save on fuel. Multiply those savings by several units and the money starts to add up.
Consistency is especially important with a new location. “When you open a new store, you should have standards and procedures and set service levels, not let people go rogue,” Schneider advises.
7. Ask your vendors for help.
Companies that supply your restaurant have a vested interest in keeping you happy (and selling you of course), so don’t be shy about asking them for help with products or techniques that can trim your operating costs. Having a fresh set of eyes look at your systems might spark some new approaches. And if you’re thinking about buying a new piece of equipment, the vendor can put you in touch with other operators using it to see whether it makes sense in your case.
8. Consider a co-op.
Independent restaurants are at a disadvantage when it comes to purchasing, but there are a number of groups that allow them to combine buying power. One is the Dining Alliance, which reportedly saved its 13,000 members more than $15 million last year alone. Being a member not only saves on purchases, it eliminates the need for an owner or manager to deal with multiple sales reps or look for better prices. Dining Alliance only collects a fee if it can find savings.
Group purchasing also offers a hedge against price volatility. This past summer, for example, when corn prices spiked, some Dining Alliance members had a contract with a lower price locked in.
9. Manage inventory better.
Inventory management has a direct impact on profit margins, cash management, asset turnover and return on investment, says Lee Plotkin, a hospitality purchasing consultant. Tips from him:
• Rotate all products using a FIFO plan. You can save time labeling with dates if you follow this practice.
• Use food storage labels and dates for perishable products to avoid spoilage.
• Assign someone in the restaurant the job of reconciling supplier invoices against orders. Plotkin recommends giving this job to someone other than the person receiving the order to ensure checks and balances.
10. Think before signing any contract.
Yes, it does pay to read the fine print, Schneider says. “It’s amazing the terms that some restaurants get locked into for the services they spend money on every month.” Among traps he says to avoid:
• Auto-renew clauses. Many service agreements contain clauses that say if the service is not canceled within a certain window of time, the contract renews automatically. “These providers are counting on the fact that you’re going to forget,” Schneider says. These kinds of clauses can involve up to 10 years.
• Pricing that runs out before the contract does. Cable companies are notorious for signing up customers at dirt-cheap introductory rates, then bumping the price up to realistic levels after a short period.
• Contracts that stay with you no matter what. If your restaurant relocates or shuts down, you may still have to pay.
• Sneaky terms hidden online. Lately some contracts don’t list all the terms, but refer clients to a website for the full details.
• Electronic signatures. Sure it’s convenient to be able to sign a contract online. But it makes it harder to make any changes. “I recommend people print out any contract and go over it, line by line, with a pen or highlighter,” Schneider says. “It’s a lot easier to spot—and hopefully negotiate changing—any surprises.”
