Quality of Products

The first and most important attribute of a restaurant food supplier is that they have high-quality products.

However talented your chef is, they can’t overcome poor ingredients, so make sure your suppliers have fresh, quality goods. On each delivery, carefully assess incoming produce to ensure it meets your standards.

Pricing and Payment Terms

Suppliers differ in price and the terms they offer. It’s worth the time to compare suppliers of similar quality to find the best price on the product you need.

Some suppliers require payment on delivery, while others offer Net 30 payment.

It’s typically advantageous to your restaurant to select the longest possible payment period. The Buyers Edge Platform can help manage your supply chain to make sure that you receive the correct products at the best prices.

Delivery Options and Schedule

Your best restaurant food supplier is one that delivers to you on a compatible schedule. Assess the options for delivery and optimize for a schedule that makes the most sense for your needs.

For produce, you want a delivery schedule that gets you the freshest possible goods for immediate use. Other types of goods, such as alcohol and paper products, can be delivered at longer intervals.

Customer Service and Support

Finally, don’t forget about customer service. You’ll be working closely with suppliers for restaurants for a long time, and will depend on their services.

It’s important that your suppliers have a meaningful commitment to a high level of customer service. If you have a problem with the day’s delivery of seafood, you want your seafood supplier to consider that to be their problem too, and work hard to resolve your concerns.

Types of Food Suppliers for Restaurants

Wholesale Food Distributors

Wholesale distributors purchase goods in large quantities from manufacturers for resale to restaurants. They often offer a wide variety of goods at wholesale prices. It’s quite possible that you can find a single distributor offering produce, meat and seafood.

Local Farms and Producers

The modern dining customer values local food and the support of local farms. It can be to your advantage as a restaurateur to establish connections with farms and farmers in your area, and highlight the origin of your ingredients on the menu. Whether local farms can supply the appropriate type and quantity of food for your restaurant will depend on your area, the season, and your restaurant concept.

Specialty Food Importers

Hard to find goods from distant regions of the world are the province of the specialty food importer. This business is dedicated to the provision of gourmet goods such as wines, cheeses, specialty meats, pastries, and spices.

In the United States, a specialty food importer will often be dedicated to bringing European goods to the American market.

Steps to Finding and Evaluating Food Suppliers

Identifying Your Restaurant’s Needs and Requirements

When preparing to select new suppliers, begin with an overview of your menu.

Dish by dish, what ingredients are required to execute these dishes?

Make a list and then consult with your chef—does he want to change the makeup of any of these dishes, or add entirely new creations to the menu?

Once you’ve established your ingredient list, track which products are coming from which suppliers. Most likely, you’ll want to preserve your relationship with your best suppliers while replacing the worst performers.

Optimizing your restaurant’s operations is key and companies like RASI & The Buyers Edge Platform offer services that can help tremendously for your restaurant’s profitability.

Researching and Comparing Food Suppliers

You may be wondering how to find food suppliers for a restaurant.

These days, the best approach is two-pronged: research online and talk with friends in the industry.

With your list of confirmed ingredients in hand, do some research online to find prospective suppliers that offer what you need. Collect phone numbers or email addresses, and start contacting them to request quotes.

You may find a supplier that offers a significantly better deal than others. In that case, don’t immediately sign a contract before you’ve done your due diligence. Research online to determine whether the supplier has a good reputation, and ask other restaurateurs for their experience.

Conducting Site Visits and Sampling Products

Once you’ve whittled down your list of prospective suppliers to a few candidates with the best prices and reputation, it’s time to sample products for quality.

Most local farms will be glad to show you their operation, including how they harvest and store produce for distribution.

Other types of suppliers, such as meat and seafood wholesalers, may not offer a tour but will gladly deliver sample goods. Ultimately, there’s no better way to test the quality and flavor of a product than to try it yourself.

Reviewing Contracts and Agreements

Your chosen suppliers will offer standard contracts and agreements—review them carefully to ensure their terms are satisfactory and appropriate to your needs.

If there are particular clauses that are unclear, ask for clarification. A contract is a negotiation on paper, so don’t be afraid to ask for changes that make the terms more favorable to your restaurant.

Tips for Building Strong Relationships with Food Suppliers

Communicating Effectively and Establishing Trust

Relationships are built on communication and trust. Speak frequently with your vendors, and bring up any issues that arise, such as quality problems or unreliable delivery schedules.

The more openly you can discuss the issues, the quicker you’ll see resolutions. Be careful to approach such conversations with a solutions oriented mindset, focused on how you can solve the problem together, rather than a focus on blame.

Being Open to Negotiation and Collaboration

Your restaurant food suppliers are businesses with their own way of doing things, their own schedules and procedures that work for them.

Be willing to negotiate to find contract terms and delivery schedules that work for you both. Treat the supplier management team as your collaborators in solving problems, rather than taking a competitive or adversarial approach to issue resolution.

Providing Feedback and Sharing Goals

In any relationship, clear and timely feedback is an important component to building a shared understanding of how to work together.

When problems arise, address them immediately in a constructive fashion. Beyond issue by issue problem solving, you can help your suppliers understand how to serve your restaurant by sharing goals with them. Give them clear metrics to aim at.

Maintaining Regular Contact and Showing Appreciation

Ultimately, the health of your supplier relationships will be determined by the quality of your contacts with them. Most suppliers will tell you that the most important thing they want from a restaurant is consistent payment. But there’s more to it than that—they also want appreciation for the job they do and the products they deliver. If your restaurant food vendor is delivering high quality food on schedule, let them know you’re grateful. Have regular positive interactions with your vendors; these interactions will form the basis of a relationship that thrives and can survive difficulties.

The post Finding the Right Food Suppliers for Your Restaurant appeared first on Restaurant Accounting Services, Inc..

Even before the COVID-19 pandemic, technology for restaurants was already on the upswing. From tech-friendly POS systems to restaurant bookkeeping, many restaurants have adopted innovative technological tools, whether from customer-facing or internal accounting platforms.

Once the pandemic hit, those restaurants that were able to implement restaurant technology survived the economic downturn. Many eateries were forced to use new technology to assist with a more takeout-oriented business model. Others were able to cut costs and optimize revenue with agile, intuitive restaurant accounting software.

From so-called “contactless tech” (which encourages social distancing) to online order and self-checkout systems, it’s clear that restaurants, bars, food trucks, and similar service establishments simply can’t ignore these new technology trends. After all, during the height of the pandemic, at least 60% of all food orders were consumed off-premises.

RASI’s restaurant accounting software has always been ahead of the technology curve, and we’ve helped everyone from small, independent restaurants to nationwide franchises empower their own operations and make restaurant technology work for them. And we can help your restaurant ensure your accounting platform keeps profit, expenses, vendor management, and more in focus.

So which types of technology in restaurants are here to stay?

Restaurant Technology Trends

Like many business trends, technology for restaurants is largely driven by demand. And this demand originates with how, when, and where your customers eat. To cite just one example, the online food delivery marketplace is nearly $200 billion per year – a figure unthinkable pre-pandemic, but now a regular aspect of modern life.

WATCH THE FULL VIDEO BELOW!

Here are just a few examples of how technology in restaurants has grown. Keep an eye on these restaurant technology trends for this year and beyond:

• POS systems. Point-of-sale terminals are becoming more commonplace in every type of restaurant, especially fast-food establishments. But they’re also a regular part of revenue streams such as merchandise sales for other restaurants. This technology in restaurants isn’t going away, so it’s critical that you seamlessly integrate your POS and accounting systems. Once integrated with RASI’s accounting platform, for instance, you’ll enjoy assistance with everything from taxes & compliance to labor & sales management.
• Employee management. Technology for restaurants isn’t just for customers. Smart, forward-thinking restaurants have embraced agile restaurant technology to run their operations more efficiently. And with RASI, you’re able to partner with HR-focused solutions for issues such as compliance around break periods, predictive scheduling, tip pooling and more.
• Reservation systems. Despite the explosive growth in online orders and takeout, reservations are still an important part of most restaurants’ revenue. With streamlined technology in restaurants, such as workforce intelligence analytics, you’re better able to ensure you’re properly staffed to handle ultra-busy business cycles that require an efficient reservation system. In addition, waits that exceed 30-45 minutes can increase the likelihood of customers going to other restaurants.  Having a reservation system creates a better guest experience and convenience for the customer and increases sales for the restaurant.
• 3rd party orders. 3rd parties come with a price for the restaurant. Verifying fees and having checks in balance to ensure proper fees are applied certifies that using these services remain profitable for the restaurant.
• Safety, health & quality control. With enhanced safety and health protocols on everyone’s mind – including your customers – technology in restaurants can also be used to ensure health department compliance, proper equipment operation, safety & health measures, quality control and more.
• Automated inventory tracking. Are you storing too much food? Is your supply chain working for or against you? Does your restaurant optimize all available storage space? If you can’t honestly answer these questions, it’s time to improve the technology for your restaurants with helpful food cost analysis, item level reporting, menu item velocity reporting, and the like. With RASI’s multi-unit inventory software, you’ll have an accurate picture of critical data to help you cut costs, increase revenue, and ultimately improve customer service!

LISTEN TO THE FULL PODCAST EPISODE BELOW!

Put RASI’s Business-Boosting Technology in Your Restaurant Today!

Deciding which restaurant technology to embrace can be a difficult choice. The restaurant accounting experts at RASI are here to discuss how we can help today. Feel free to call us directly at (720) 826-9900, or request a demo today and see first-hand how you can improve the technology in your restaurant today!

The post Why You Should Embrace Technology in Restaurants appeared first on Restaurant Accounting Services, Inc..

What’s the one key ingredient – figuratively speaking – of your restaurant’s ultimate success? Some restaurant or bar owners think it’s all about location, location, location. Others may lean toward a loyal customer base. And don’t forget about seasonal swings and capitalizing on the “perfect timing” aspect of sales.

All valid “ingredients,” for sure. But have you considered the importance of menu pricing as a key driver of revenue and profit? Think about it this way: whatever type of eatery you run (restaurant, bar, catering service, food truck, etc.), day-in, day-out purchases off your menu are the most consistent source of income. And finding the right balance to offer customer value and optimal profit is critical to a profitable enterprise.

Pricing a menu impacts your restaurant well beyond the daily, weekly, and monthly books. Without a sound, sustainable menu pricing formula in place, it’s virtually impossible to ensure other sectors of your business are funded, including everything from utilities, labor, real estate, food stock levels, and much more.

RASI’s complete line of accounting services, including intuitive analytical applications, gives your restaurant a distinct advantage in all phases of pricing a menu, from conception to implementation. Let’s get into some specifics of restaurant menu pricing, including a key distinction with menu engineering.

Fundamentals of Pricing a Menu

Finding the right menu prices isn’t done by accident or on a whim. The most successful restaurant owners know it’s all in the details – namely, profit margins, food cost percentage, current market conditions, the competition, and more.

Keep in mind, menu pricing is much different than menu engineering. While menu pricing deals with finding the best possible menu costs, menu engineering is a true nuts & bolts exercise. Seasonal sales swings, vendor pricing, supply costs, you name it – menu engineering is more or less the “algorithm” of smart pricing strategies. Make sure you check out our informative article on menu engineering for some more in-depth analysis on the subject.

When figuring out your menu pricing formula, or even when engineering your menu, it’s helpful to keep in mind the relationship between costs and profit margins, especially in the wake of skyrocketing inflation: when costs increase, margins decrease. There’s simply no way around this inverse, dynamic relationship.

But back to the menu pricing formula…what are some ways to set your restaurant menu pricing?

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Restaurant Menu Pricing Based on Ideal Food Cost Percentage

Once you figure out your food cost percentage, you have the foundation in place to set a profitable menu. Food cost percentage takes two factors into consideration: 

• How much is spent on food ingredients
• How much revenue is generated from this expense

Simply divide the ingredient cost by the sales, and you have the ideal food cost percentage. Those two factors in the equation require four different inputs: starting inventory, food purchases, final inventory, and total food sales.

Let’s say your restaurant, Frank’s Lunch Box, has a starting inventory of $5,000. You made $8,000 in purchases. At the end of the year, your final inventory was $3,000. With total food sales of $30,000. Your food cost percentage would be:

(Starting inventory + food purchases) – final inventory / total food sales, or

(5,000 + 8,000) – 3,000 / 30,000, which is

10,000 / 30,000, or

33%

So, your ideal food cost percentage is 33%. For every one dollar of revenue, 33 cents were spent on food inventory. Lucky for your restaurant, that’s right in the “sweet spot” of food cost percentage. Most profitable establishments keep food costs anywhere from 25% to 35% of overall revenue.

Now, how does this factor into restaurant menu pricing? The ideal menu item price formula is:

Cost per serving / ideal food cost percentage

If Frank’s has a food cost percentage of, say 40%, and you’d like to decrease that to 25%, you need to reduce this factor by 15%. Let’s say Frank’s best-selling chicken sandwich is currently on the menu for $10.00, and costs your restaurant $4.00 per serving to make. That’s a 40% food cost percentage.

In order to get the food cost percentage down to 25%, let’s plug the numbers into the equation.

Cost per serving / ideal food cost percentage

$4.00 / 25% = $16.00. So, in order to get your food cost percentage to a more manageable 25%, you have to raise the price of the chicken sandwich from $10 to $16.

Gross profit margin and cost of goods (COGs) are also helpful factors when pricing a menu. Here are a few other things to keep in mind:

• Competition pricing. It’s always helpful to know what your competitors are charging for similar menu items. If price reductions or slight increases are required, we recommend slight modifications to separate your restaurant’s menu from the competition.
• Premium menu items. Market trends and fads are common in menu items. Take “gourmet” grilled cheese sandwiches, for example. Even when made with premium breads and gourmet cheeses, many restaurants can charge up to $20 for a sandwich, even though it only costs less than $5 to make!
• Pricing balance. Your entrée selections should have a “ballpark” range that’s not too drastic; most restaurants, for example, charge anywhere from $18 to $30 for main courses. If the range is too sharp — $5 sandwiches next to $25 salads – that will cut into your profits and may confuse diners…”does this restaurant know what they’re doing?”

LISTEN TO THE FULL PODCAST EPISODE BELOW!

Contact RASI Today – To Learn More About Pricing Strategy for Restaurant Menus

Here’s a smart strategy – connect with our restaurant accounting experts today. Our powerful, agile restaurant accounting software gives you plenty of tools to help with menu pricing, not to mention multi-unit inventory, compliance, payroll, and much more.

Request a demo today, or call us directly at (720) 826-9900. 

The post Restaurant Menu Pricing: The Secret to Your Restaurant Success appeared first on Restaurant Accounting Services, Inc..

What is inventory management? How do successful restaurants manage inventory? Does your restaurant have a sound strategy for this critical restaurant to-do?

You have questions about restaurant inventory management…and RASI has the answers! Our restaurant accounting software, including a powerful inventory management application, helps restaurants just like yours keep track of product levels, incoming supplies, analyze food costs, and identify discrepancies with vendors, food items, and more.

Inventory management enables restaurants to track existing product levels (food, supplies, etc.), and also know when to reorder. And it’s certainly one of the more “tricky” aspects of day-to-day restaurant management. Managing restaurant inventory is the ultimate balancing act; your business requires a base level of ingredients and supplies to account for regular operations, but not too much.

Without a proper inventory tracking system, your restaurant could quickly run out of crucial menu ingredients; conversely, you also don’t want too much inventory taking up valuable interior space. Inventory management helps companies know how much product to order and when to order it. 

Inventory management can be accomplished with spreadsheets and manual counting. But inventory management software helps ease the process and more accurately count and track your products. Additionally, it can show important financial and performance data and re-order products when it reaches certain levels.

Here are a few inventory examples, and how NOT accurately accounting for stock levels could negatively impact business:

Perishables

Ingredients and menu items with a finite expiration date require accurate, timely, daily (sometimes, even hourly) tracking in order to fully optimize product levels. Every restaurant must properly account for perishables, whether it’s a food truck, catering service, or regular brick-and-mortar establishment. For perishables, how restaurants manage inventory is directly tied to having a good menu engineering system in place.

Available Storage Space

Food isn’t the only finite “ingredient” of your restaurant; space is also limited. Wasted space with too much (or even not enough) inventory brings down the operational efficiency of any eatery, and managing restaurant inventory the correct way allows you to properly utilize all available real estate.

Bulk Purchases

Another balancing act with managing restaurant inventory involves bulk purchases. At times, it may be advantageous to participate in a bulk purchase or manufacturer rebate program to save money. However, too many products purchased without regard to customer demand could take up valuable shelf space with minimal benefit to your operation. Throw in rampant inflation, and the equation is even more muddled. That’s why it’s more important than ever to have a robust, automated inventory platform working in your favor.

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How Do Restaurants Take & Manage Inventory?

How do restaurants manage inventory? It starts with a system for initial quality and cost assessment. While every restaurant has their own method of inventory management, 

Here are the top 4 things to look for in a restaurant inventory management system:

1) Does your restaurant inventory management system include count sheets? Key info includes quantity, price, cost, and fluctuations from previous inventory levels.

2) Does it have the ability to schematic your inventory sheet together? List all products and amounts. RASI’s recommended best practice is shelf-to-sheet count sheets.

3) Does it update the current price based off of the most recent purchases so your inventory reflects the most up-to-date pricing? 

4) Does it provide the ability to view and assign par-level inventory? “Par inventory” is the baseline quantity of every item that’s required for daily operations. This helps pinpoint the exact time you should order more inventory.

Benefits of Properly Managing Restaurant Inventory

Get your restaurant inventory management locked in, and your establishment will enjoy the following benefits:

• Optimal food usage. From perishable items to sporadic menu demand, inventory management best practices ensure less food waste.
• Managing supply chain impacts. Sound restaurant inventory management allows restaurants to lessen the impact of supply chain disruptions. Check out RASI’s article on this subject for more info.
• Better vendor management. Timing is everything in the restaurant, particularly with vendor payments & purchases. Effective inventory strategies enable businesses to capitalize on the best possible outcomes with these crucial commerce partners.
• Happier customers. Closely related to food utilization, this benefit stems directly from having on hand exactly what your restaurant needs – when you need it.
• Maximum ROI. Managing restaurant inventory is all about reducing waste, which positively impacts your bottom line.

LISTEN TO THE FULL PODCAST EPISODE BELOW!

Let RASI Assist With Your Restaurant Inventory Management Needs

If your inventory strategy needs refinement, or you’re looking to establish a restaurant inventory management program that’ll contribute to the best possible ROI, RASI can help today. Schedule a demo to see our agile, intuitive inventory platform at work. Or, call our experts today at (720) 826-9900. We look forward to hearing from you soon!

The post How do Successful Restaurants Manage Inventory? appeared first on Restaurant Accounting Services, Inc..

The Importance of Calculating Food Costs 

Every restaurant operator has a multitude of responsibilities. From profit optimization to menu engineering, there’s never a shortage of factors to contend with.

Thanks to recent spikes in inflation and rising costs, food cost percentage is suddenly back as a hot topic — and for good reason. By even the most conservative estimates, costs have spiked around 20% for some restaurants – even more in big cities, resort towns, and other high-demand establishments.

If your restaurant is struggling with keeping operations afloat while keeping pace with ever-increasing menu ingredients expenses, understanding how to calculate food costs is critical. Let’s take a look at the importance of food cost percentage, different variables that impact your overall cost structure, how to calculate food costs, and more.

How to Calculate Food Cost Percentage:

The food cost percentage formula is relatively simple…you’ll need to have the following inputs, all in dollar value, ready to go:

• Beginning Inventory: inventory you started the period with
• Purchases:  purchases made throughout the period
• Ending Inventory: inventory on hand (remaining) at the end of the period
• Total Food Sales: all food sales from the period

Take your numbers from the inputs above and put them in the food cost calculator below to find your food cost percentage!

Food Cost Percentage Calculator

Food Cost Percentage Example

The following example illustrates just how important it is for your restaurant to fully grasp how to calculate food cost and how a slight increase in percentage can negatively impact your entire restaurant operation.

A detailed look at your food cost percentage provides more accurate tracking and forecasts for your P&L statement. This insight also empowers your purchasing department to make the best decisions for entire menus and even single ingredients.

Example of calculating food cost:

For this purpose, suppose your restaurant serves 500 customers daily.

If the average customer spends $20, and you have an up-to-date & accurate assessment of costs via weekly purchase tracking and weekly inventory, you will be able to accurately calculate your food cost enabling you to seamlessly project restaurant cash flow & profits from your entire menu.

Now, what if your food cost percentage calculations are off by even 25 cents per customer, and you’re spending that much more on your ingredients? That’s an extra $125 per day – or in yearly terms, an extra $32,500!

Small changes, huge impact. You’d never purchase a lot of ovens or automatic dishwashers without having a complete understanding of the costs. Well, that’s the same with food cost percentage.

What’s more, if you dig into the details and pinpoint which ingredients fluctuate on a weekly or monthly basis, or are more likely subjected to inflation spikes, you can anticipate these increases and make more informed purchasing decisions. All to the benefit of your entire operation.

Benefits of Understanding Food Cost Percentage

In the restaurant industry, knowledge is power. And knowing how to calculate food costs and track percentages is, in many ways, somewhat of a superpower! Get your costs locked in, and your restaurant will enjoy:

• Superior menu engineering. From your go-to menu items to individual ingredients, it’s always better to have the most accurate expense information at hand. This allows you to deliver high-quality menu offerings to customers while keeping costs as low as possible.
• Higher revenue. With food cost percentages as low as possible, you’re better positioned to optimize profits – and as our example above showed, even the smallest advantage here pays big dividends to your bottom line.
• More efficient supplier/vendor relationships. Your vendors and suppliers are the lifeline to your business. Without a reliable and affordable stream of supplies – including one of our most critical supplies, food – running your business is impossible. Once you have a firm grasp of food cost percentage, you can leverage your partnerships with suppliers and other vendors more efficiently.
• Better forecasting & planning. Food cost percentages are constantly in flux. And while your restaurant can’t predict the future, you can still anticipate changes to costs down the road, if you understand where prices are today.
• Accurate weekly inventory calculations. Regular inventory counting (RASI recommends weekly tracking — and always on the same day/night) – not only helps with food cost percentage and gives you a clearer picture of your entire inventory dynamic, including storage area, equipment, and other assets. There are many reasons to count your inventory; food cost percentage is just one.

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How to Improve Food Cost Percentage Tracking

Here are a few ways you can immediately improve your accuracy:

• Stay on top of industry trends – you’re better able to understand what’s driving food costs and develop innovative ways to save money with purchases.
• Get timely, intelligent data – RASI’s data analytics offer customized information directly related to what matters most to your restaurant.
• Track your past & current data – RASI offers everything from financial reporting to multi-unit inventory tracking to show you past & present food cost percentages.

LISTEN TO THE FULL PODCAST EPISODE BELOW!

Wrapping Up

Take the next step with your food cost percentage data. Learn how to better calculate food costs with RASI’s complete restaurant accounting services. Schedule a demo now, or drop us a line – we’d love to help your restaurant optimize profits and lower costs today! Keep track of this critical expense category, and you better your chance of staying competitive – all while anticipating possible price hikes tomorrow.

RASI has a host of resources to assist you with weekly inventory and keeping food cost percentage fully in view, even while you concentrate on other crucial business tasks. Our tech-friendly analytical tools, accounting tools and other software applications allow you to manage even the most volatile business landscapes.

The post How to Calculate Food Cost appeared first on Restaurant Accounting Services, Inc..

Running a restaurant only yields successful results when a clear and actionable playbook is in place to guide your team. These data-based guidelines for managing your kitchen, front of house, finances, and day-to-day functions are the keys to proficient restaurant operations management. They enable you to consistently review and execute your plans to ensure you’re never missing out on any areas of opportunity.

Front of House

Operations management varies between the different facets of your restaurant. For example, a few aspects of managing your FOH entail the following: forecasting labor and setting efficient staffing levels, training staff to properly merchandise menu items based on contributing margins, and ensuring that your overall guest experience meets your restaurant’s objectives for service, ambiance, and quality. 

Back of House

Operations management – very broadly – for the BOH is about minimizing expenses while producing dishes that meet your quality and profitability standards. Concepts like proper portioning, waste and theft management, menu engineering, vendor management, and proactively maintaining equipment are just a few of the everyday items on an operator’s mind.

Finances

Then there are the finances, the backbone of any decision for restaurant operations in either your FOH or BOH. Having an explicit knowledge of your books by regularly reviewing your financial statements is the only way operators can make educated decisions to fatten up their bottom line. Throughout this article, we’ll explore and summarize our best practices in restaurant operations management.

Examples of successful operations management in action

Operational Reviews

First and foremost, it’s critical that every management team has regular operational reviews (we recommend quarterly). These reviews assess how your restaurant is currently performing against key performance metrics (KPMs), review your break-even points, and compare your budget to your actual expenditures (i.e., a Budget vs. Actual). A few Items that should be in review for an operator’s Budget vs. Actual include:

• Sales
• Labor
• COGS
• Vendor Spend
• Fixed & Semi-Variable costs

The next step of an operational review is to set strategic goals, tactics to achieve said goals, and how you’ll measure your success (GTM) for the future. RASI teaches that goals should be SMART (specific, measurable, attainable, relevant, and time-bound). You’re guaranteed to find opportunities to grow revenue and cut costs if you follow this process!

Period End Audits

Beyond operational reviews, your team should also run financial audits at the end of every fiscal period. In this process, you examine your performance over the most recent period, focusing on the following:

• COGS (cost of goods)
• Labor
• Expenses
• Analysis of your balance sheet
• Reconciliation of your banking records

You can easily remember these categories by noting that they spell CLEAR, which is precisely how you want to view your fiscal health! Review the period trends for each category mentioned above and compare them with historical year-over-year trends. You can review this article on best practices to financially close out a period for more on period end reviews!

How Period End Audits and Operational Reviews are your data-based guidelines for success

Maintaining a consistent cadence of operational reviews and period end audits gives you the insight you need to make changes that improve your bottom line. You may learn that you can reduce inventory costs and food spoilage by keeping less product on the shelf in the back of the house. And you’ll know exactly the amount to stock based on prior sales and purchase trends. When planning staffing levels in the front of the house, you may learn that sales trends suggest a redistribution of staff from weeknights to weekends, with fewer shifts midweek and more starting Friday night. Exactly how many shifts? The data from your reviews will guide you in the right direction!

How tech-enabled restaurant operations management can help increase profitability

Actionable insights

Utilizing the right software is a powerful means to get the most out of your restaurant management and operations efforts. Software can aid you every step of the way, from examining sales and labor trends to budgeting and forecasting. RASI has built an integrated financial accounting and payroll solution that provides the leverage to gather actionable insights from a summary level all the way down to the source data, in order for operators to make operational changes that fuel profitability in your restaurant. 

Complete financial clarity

The most significant gains in operations management come from having complete clarity into how your restaurant is performing and the opportunity to reflect on how it can be improved. With regular operational reviews and period end audits, operators have the information to make substantive changes to how the restaurant does business and set ambitious yet achievable goals. Good financial reporting enables proactive, educated business decisions. 

Improvement of management team

Additionally, having a clear picture of your restaurant’s financial health and performance empowers operators to train their management teams to take financial accountability within their specific functions of the restaurant. When you work with managers to set departmental goals, provide them with pertinent information on their execution relative to previous goals. Even more important, keep them in the financial loop as the numbers come in. By doing this, you’re positioning your management team to take ownership of their roles. You also help the restaurant succeed on a more collaborative level.

Selecting the right software to get the most out of your operations management

By now, you know that software can help achieve successful operations management. But which software suite to choose? Here are a few basic requirements: 

• Hospitality-specific software: Purpose-built software and hospitality-specific accountants are the one-two punch to successful restaurant operations management. This unique combination enables restaurateurs to become powerful using industry-specific reporting and guided financial analysis. 
• Comprehensive financial reporting: Staying on top of the key metrics needed to proactively manage your restaurant is critical for success. Weekly financial statements give you a clear view of the health of your business. This ensures business decisions are made in a timely and accurate matter. 
• Real-time insights: It’s helpful to know how well your operation has performed in the past. It’s even more powerful to know exactly how you’re performing in the present. You need the analytics and instrumentation to fly the plane while it’s still in the air.
• Integration with source data (your POS): The software you use to help manage your restaurant operations should be integrated with your Point of Sale System. The only way to retrieve source data without manual imports and exports of files is through integration. It’s critical to know that your data flows seamlessly from your POS directly into your accounting system.

You need solid data that you can trust, presented through a clean user interface. When you combine that with proper operations management practices, like operational reviews and period end audits, you’re in a position to make lasting improvements to your restaurant. Moreover, you’re actively setting the guidelines for success. 

We freely admit we’re a bit biased here. We think we’ve built the most powerful operations management solution for the restaurant industry. RASI’s software ticks every box. Our team of experts is ready to assist your team in becoming more powerful and profitable! Contact us today for a free demo.

The post The Best Way to Maximize Restaurant Operations Management appeared first on Restaurant Accounting Services, Inc..

Industry supply/transportation issues and labor shortages control much of the conversation these days.

Having proper tools to keep tight control of your prime costs is essential to operational efficiency and profitability. Furthermore, by understanding what your prime costs are as a percentage of sales and the proper strategies to control prime costs, operators can look forward with the direct intention to utilize prime cost controls as an additional method to increase profits. 

What is Restaurant Prime Costs?

Restaurant Prime Cost includes your most significant expenses – it’s your cost of goods (food and beverage) and labor expenses (including payroll taxes). These are the first two categories you’ll find on your Profit & Loss Statement. Prime costs are one of the most important areas of focus for restaurant owners and operators as it’s the two expense categories that are directly controllable through strategic and data-driven decision-making.

How to Calculate Prime Cost?

Let’s start by first laying out what is the Prime Cost Formula?

Prime Cost = Total COGS + Total Labor 

TOTAL COGS

“COGS” stands for Cost Of Goods (or Cost Of Sales). COGS is the first Prime Cost area you see on your Restaurant P&L.

What is the COGS formula? As a quick reminder, we’ll put the COGS Formula below…

( Opening Inventory + Purchases – Credits – Ending Inventory ) / Sales = COGS

To learn more about what should be reflected in either food cost or pour cost, review our full guide on How to Control Your Cost of Goods!

TOTAL LABOR

Labor is the largest expense for most restaurants, and it’s the second and final Prime Cost area on your Restaurant P&L. Your total labor includes your Operational Labor (your FOH & BOH/hourly employees) plus the remainder of your labor. I.E., your salaried employees, payroll taxes, employee benefits, and employee discounts.

Restaurant Prime Cost Ratio

To get your restaurant’s prime cost ratio (a.k.a prime cost as a percentage of sales), you simply take your total prime cost and divide them by your total sales.

Knowing this number helps you determine where your prime cost fits within the industry average. More importantly, however, this allows you to compare against your historical data to ensure you’re making progress over time and maximizing profits.

What is the Formula for Prime Cost as a Percentage of Sales?

Prime Cost as a Percentage of Sales = Prime Cost ÷ Total Sales

Prime Cost Percentage Calculator

To calculate your restaurant’s prime cost as a percentage of sales, plug your Prime Costs from the Prime Cost Calculator above and your Total Sales in the calculator below.

What is the Average Restaurant Prime Cost?

Average Restaurant Prime Costs range is typically between 60% – 70% of sales, the lesser end of the range (or lower without cutting corners) being your ideal target. Keep in mind that this range can vary significantly between quick-service restaurants and full-service restaurants.

Why is it Important to Control Prime Costs?

Operators need to control their prime costs because COGS and Labor are the largest expenses to the restaurant. If you’re lowering your prime costs, then you’re positively impacting your bottom line.

Prime costs can fluctuate greatly depending upon what’s happening around the globe. Commodity prices, staffing challenges, and consumer behavior can all affect your prime costs. Therefore, the more frequently you review your prime costs (and your financial statements, for that matter) the better. We recommend a weekly manager meeting to review P&Ls for this reason. If you consistently assess your data, you’ll be better equipped to make educated business decisions based on opportunities presented in your analyses.

WATCH THE FULL VIDEO BELOW!

 3 Strategies to Control Prime Costs

1. Review and Forecast Labor, then Schedule Accordingly

Getting control of your labor dollars can feel daunting, especially when you’re facing industry-wide labor shortages. When reviewing labor, our best practices include:

• Review Period Trends: Analyze your last three periods, look at your overall labor costs, and see if you can identify any trends
• Review Historical Trends: Analyze YOY trends to highlight areas of opportunity 

Note, it’s critical to understand what took place at the time of your trend comparisons (holidays, parties, weather, etc.). This knowledge will help paint the picture in the long run so you can understand if you’re comparing apples to apples or apples to oranges.

What Tools Can Help Forecast Labor & Schedule Accordingly?

• Sales & Labor Analysis Report: Utilizing a tool like a SLA Report (a Sales & Labor Analysis) helps provide you with key metrics to better understand what you’re currently doing in Sales and Labor compared to what you had forecasted in those areas. This report not only shows what you’re doing well, but more importantly, it’s a yellow highlighter on your areas of opportunity within proper forecasting. Forecasting and adjusting based on actual sales allow you to hit your budget goals continuously.

2. Take Control of Your Inventory & Optimize Your Menu

Counting inventory is the best way to get an accurate representation of your true usage. Your inventory should be a total of all the food product, nonalcoholic beverage, beer, wine, liquor (Note: For QSRs, we suggest including your packaging in this as well), etc. 

Additionally, when you count inventory, you touch everything inside the restaurant; including, all equipment, storage areas, walk-in freezers, etc. So, while you’re counting, you can simultaneously perform a facility maintenance check. In doing this, you can catch any maintenance issues before they become a bigger problem.

Furthermore, keeping tight inventory control helps you alleviate issues like waste, error, portioning issues, or theft – all simple areas to reduce costs by spending the extra time to manage them properly.

We recommend you engage your management team in the process. By doing so, you create a baseline for which the team can make meaningful decisions. Ultimately you’re going to save more money with the impact they can have rather than the actual labor dollars it costs for them to perform inventory. Check out this list of best practices in counting inventory to learn more!

When you know your restaurant’s actual usage, you can compare it to your actual costs. By utilizing that data and comparing it to your sales, you can then establish the optimal steps to maximize your menu’s profitability.

What Tools Can Help Manage Inventory & Optimize Your Menu?

•  Weekly Spend Forecast: Just like the name reflects a weekly spend forecast puts you in a position to evaluate and optimize daily spending with a weekly spend forecast. Check out our Declining Budget to learn more about how you can stabilize your costs and increase your cash flow.

• Menu Item Velocity Reporting: Menu Item Velocity Reporting shows daily operational data that identifies sales volume per menu item or category. You can then view which items have positive sales and a positive contribution margin to optimize profitability within your menu. Additionally, it’s critical to ensure you adequately train your staff in merchandising those particular items. Merchandising is how restaurants continue to evolve and sustain permanent, long-term growth. The first step here is to educate your team members on which menu items have the highest velocity and most significant margin. Equally as important, train your team to recognize which items, while still necessary to your menu balance, aren’t the ones that are going to provide your business with the greatest margin contribution.

• COGS Audit Reporting: In a restaurant, COGS is where the managers can make the most impact. When analyzing COGS, you’re looking at your big-ticket items – anything that’s significant in getting food to the customer. With COGS Audit Reporting, you can review and approve item and purchasing variances in real-time to ensure impactful business decisions are being made based on real-time data. Additionally, just like reviewing labor, operators should review COGS for trend analysis on a period basis as well as a YOY basis. Doing so provides you with opportunities to leverage relationships with your vendors – Example: Is there an opportunity for price negotiations or product discounts?

3. Leverage Relationships with Your Vendors

Building relationships with all of your reps from your food and beverage vendors can help you maximize savings. Creating a partnership between your restaurant and your vendors is vital to deepen the level of engagement you have to strategize together.

Be prepared before you sit down with your key vendor partners to ensure you know purchasing trends and price volatility. This way, you can ask about applicable programs or discounts specific to your goal and what you need.

What Tools Can Help You to Leverage Relationships with Your Vendors?

• Manufacturer Rebate Program: If you’re not currently involved in any manufacturer rebate programs, you might be missing some cost savings that could help decrease your overall cost. A manufacturer rebate program leverages the purchasing power of all its members to negotiate contracts with suppliers that end up benefiting everybody in that organization. As part of a larger group, you’ve got strength in numbers, which leads to lower product costs that you couldn’t attain on your own.

• Invoice Analysis Tool: An invoice analysis enables you to track key inventory price changes and quantities purchased over time. Utilizing this tool provides you with the data to speak intelligently with your vendor partners about various strategies for your franchise players. Examples include the possibility of product substitutions, recipe enhancements, or raising menu prices.

LISTEN TO THE FULL PODCAST EPISODE BELOW!

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