Control Costs

Process

Control Costs

To be successful in this business you must learn to squeeze and grow. This cute little phrase means that you must squeeze expenses while you grow your sales. This is also called top line / bottom line management. It would be a shame to increase sales by 10% and give it all away in increased expenses.
I know because I’ve done it.

Before I say one word about cost control, I want you to understand that the goal of your restaurant is to build sales, innovate and make a profit! You will grow your business by improving your STRENGTHS not your weaknesses.

Your goal is NOT to spend your life scrimping and cutting corners. The biggest mistake most restaurant owners make is to become so focused on cost cutting that they actually save themselves right out of business.
YES… You must eliminate waste and cut fat. It’s ok to throw out the baggage, but never the crew. Never cut muscle or bone that you will need later when your sales increase. Now that I have that off my chest… we can talk about cost control.

The first thing you must understand is what your costs are supposed to be.

Your cost percentage goals are very simple – 30-30-30-10
Cost of Goods (food & beverage) 30%
Cost of Labor 30%
Other Cost (that’s everything else) 30%
Profit 10% of Sales
You must work hard and focus to make these percentages happen.

Reducing cost by 10% is so simple that it can be done it in ONE move:

RAISE PRICES
I did it and it works! My profit went from a measly 5% to 15% overnight!
What are YOU waiting for? Permission? OK fine, you have my permission to raise your prices! I can hear some of you already. Why didn’t I think of that? I’ve been running around like an idiot costing menu items, inspecting trash cans and cutting labor cost for years. That Food Guru is a genius! Whodathunkit!  

This little exercise will really test your thinking. If you refuse to raise prices there must be a reason.
1- You have a poverty mindset
2- You don’t believe in your product
3- You are NOT worthy
4- Your prices are too high already

In order for you to accomplish the mission you will need to improve your thinking and raise your standards. I will show you how to think like a restaurant owner and operator. I will also teach you to focus with Terminator determination to achieve your goals. You will learn to THRIVE in any economy.

“Problems cannot be solved at the level at which they were created”- Albert Einstein

Cutting Labor Cost is harder than cutting food and bar cost because of the human element. 

Most owners and managers like their employees and hate taking food from their families. To be a successful business person you must be able to make tough decisions. Personally, I like the employees that are the most productive and make the company money. I reward them with the most hours and best shifts. Remember, you are not here for a popularity contest; you are here to make a profit for the business.

How do you know what your labor cost should be?
Remember the 30-30-30-10? That means our labor cost goal is 30% of sales.
To determine what your labor cost should be do the following.
Imagine that your sales are $20,000 a week and our goal is a 30% labor cost. ($20,000 x .30 = $6,000)
That means we can spend $6,000 per week on labor.

The Linear Schedule:
Is a tool that you can use to determine how many people you should schedule per day and how many hours each of them should work. The linear schedule will help you determine exactly what your labor cost should be. This tool makes it simple to see where you are under or over scheduling. See the example on the next page

In my restaurant every manager has a working role. The AM Manager is actually the GM, the PM manager is the FOHM (front of house manager) and the Chef covers the cooks days off as a rounds cook. This keeps everyone on their toes and maximizes production and profit. In addition to their paycheck, managers earn a bonus based on PROFIT. See manager bonus in the management chapter.

Sit down with each of your managers and build a LINEAR SCHEDULE together. Going through this exercise together will spark some serious conversation and be a real eye opener for both owners and managers.

The idea is to ask the tough questions such as:
What time does the cold lunch cook need to start?
Exactly what do they need to accomplish?
What time should they be finished?
This process focuses on the needs of the business and gives the owner, manager and employee solid information regarding schedule needs of the business.

Food & Bar Cost:
Managing food and bar cost is much easier than managing labor cost because of the human element. If you like this linear schedule example, wait until you see how I manage Food & Bar Cost without doing inventory.
You’ll love it.

Remember:
You will build your business by increasing sales NOT cutting costs. You must focus on and build your strengths and minimize your weaknesses. You cannot save yourself to wealth in the restaurant business, you will only save yourself out of business.

There are many other great ideas to help you in the cost control chapter.

If you need help getting your costs under control, I would love to help

Peter Harman
The Food Guru
foodguru@foodguru.com