Do the math! Numbers + Knowledge = Profitability in the restaurant industry - Brand Points Plus Canada

Do the math! Numbers + Knowledge = Profitability in the restaurant industry

Remember when you were daydreaming in math class, wondering when you were going to use all of this stuff again? And who would ever need 30 watermelons? Well, guess what….?

Addition

Every dime counts in this crazy industry. Are yours adding up?

“Unfortunately for the groaners, a business is all about making a profit and profit is a number,” chides David Hopkins, president of The Fifteen Group, a leading hospitality consulting agency. “Unless you have complete control over all of the numbers in your business, then you are missing out. And that isn’t just for restaurant businesses — that is for any business.”

Hopkins and his team work with new and existing restaurants to achieve maximum profitability, brand amplification, efficient operations and a strong brand presence.

“So many people in the hospitality industry don’t realize how much more profitable they could be with a little guidance,” says Hopkins.


“It’s important to keep your numbers relevant, so you know exactly how your business is doing. You can’t make the right decisions without the right information,”

David Hopkins, president of The Fifteen Group

Subtraction

Ball parking costs, using inaccurate measurements and adopting an “it’s fine” attitude can all impact the bottom line.

“It’s important to keep your numbers relevant, so you know exactly how your business is doing. You can’t make the right decisions without the right information,” says Hopkins.

Your staff need to be ready to make adjustments based on what actually happens in the kitchen, bar and front of house, and therefore need to be well trained.

Simple calculations like recipe yields can affect your entire operation — purchase amounts, labour requirements, recipe and therefore menu costing: it’s the domino effect.

Example

  • Your famous recipe for mashed potatoes yields 6,250 mL or 50 x 125 mL servings. But, last night, there wasn’t any left after 45 orders of that side. Why? The ‘why’ is important to find a fix for this situation. Was the math wrong? Was the portioning wrong? If different potatoes were used, would the outcome be different?

Subtract the guess work!

Profitability in the restaurant industry

Multiplication

Banks don’t accept % values. Which is why The Fifteen Group are huge advocates of Menu Margin Pricing — focusing on profitability of items and how they relate to other menu offerings as opposed to the per cent cost of the dish.

A 30% food cost — an industry standard — is an easy way to track food costs. However, the devil (and the profitability) is in the number details.

Example

  • The food cost of dish #1 is 25% and the food cost of dish #2 is 35%. Which would you prefer to sell? Are you sure? What if you knew that Dish #1 offered $5 profit and Dish #2 provided $10 profit? The choice is simple when put in those terms.

Multiplied over days, weeks, and months, a simple refocus significantly boosts profitability.

Division

Dividing and delegating tasks is the only way to get it all done. Your time is valuable (and likely in short supply). But every task costs money, in labour.

“Running a restaurant is extremely time-consuming and hectic,” acknowledges Hopkins. “Too many operations just do bookkeeping to get books done.

Outsourcing

Outsourcing to a company like The Fifteen Group may allow restaurants to dedicate more of their time to honing other aspects of their business.

Do what you and your staff do best. If butchering is not a strength of your kitchen team nor important to your brand: outsource. Especially if it saves dimes to dollars and allows you to focus on strengths. But again, it comes down to knowing the numbers.

“Too many restaurants write and post schedules without having the cost of the schedule calculated (which is a number),” says Hopkins. “You are never going to maximize your profitability if you are writing staff schedules without seeing the exact cost implications of those schedules to the bottom line.”

Got your number?

“Numbers are essential to running a profitable kitchen; tracking the cost of goods sold (COGS) ensures appropriate ingredient purchasing. The proper application of math is absolutely essential to ensure you know what you need, and where you can save.

Cost of Goods Sold = Opening Inventory + Purchases — Closing Inventory

The game is simple. Be in charge of your numbers. Keep them relevant, understand what they mean, adjust when necessary. It will all add up — profitably.


Cost of Goods Sold = Opening Inventory + Purchases — Closing Inventory


TIPS on Saving $$$ – Making $$$

  • Standardize all recipes
  • Use strict inventory records
  • Keep accurate measurements
  • Work with multi-functional ingredients
  • “Every restaurant has control over strategic ingredient use and vendor selection,” says Hopkins.
  • Rewrite menu adhering to menu psychology. Menu psychology is the principle that consumers have predetermined ways of scanning a menu and responding to colours, numbers and symbols. How can you use that psychology to “engineer” the menu for higher profits? 

Examples

  • Strategically place specific menu items in the “golden triangle,” where eyes typically track a menu first 
  • Limit categories to a maximum of seven items so as not to overwhelm
  • Don’t use dollar signs $, since they remind diners they are spending money
  • Reevaluate using menu margin pricing. This is a reminder to put aside just the food cost and determine the $ of profit per menu item instead. You can’t deposit %.
  • Reduce portion sizes, but not flavour and taste

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