Profit Erosion In A Very Tough Labor Market

August 2019 Newsletter - Profit Erosion in a Tough Labor Market

MAJOR PROBLEM #1

My kitchen labor cost is way up and my kitchen staff turnover is ridiculous.

Challenge

Most of my time is spent running ads, interviewing (if they show up), hiring and trying to train the new people and then they don’t show up for work 20% of the time. This feels like an endless struggle. Help!

Solution

We believe that all our people should be treated with respect and dignity and regard them as assets of the business. If you do this then you will create longevity with employees.

So, how did RGI help with the solution?

We are meeting with management and ownership on spending more time with their people in short one on one meetings and sometimes one on two or three meetings.

We coach on listening, asking good questions, being concerned about the staff member’s well-being, and understanding their concerns. We discuss granting staff members to make more contributions to the business and the environment.

We follow this up with one on one meetings with management to check on their progress with staff members.

Result

I am seeing the staff becoming more engaged in their work and seeing and hearing contentment within the ranks.


MAJOR PROBLEM #2

Food cost while maybe not going up needs to go down to help subsidize the increases in kitchen labor cost.

Challenge

Be very careful about raising any prices to get a better food cost. Now is not the time to better one’s food cost through price increases. The marketplace wants more and more value not more and more price increases.

Solutions

  1. I suggest you talk with your vendors about value propositions to help you achieve your cost goals.

    The suppliers are in for the long haul and are “your partners” in your business. I have found visiting with them about your dilemmas with costs has proved to be quite fruitful for the clients. It is just a matter of working with them on a closer basis.

  2. The second part of the food cost is to evaluate each item for its cost and see if there is any trimming in order with regards to the ingredients and the specifications.
  3. Fully engage your chef to be the driver on this process. Have him show you in writing and in metrics weekly what he has accomplished in terms of costing and bringing the overall food cost down. Track the purchases weekly and compare them to the sales.

RGI helped on this process by working through each one of these items with calls to vendors, evaluation of each item food cost and then working closely with both the chef and management to help engineer the food cost down.

Result

I’ve seen this year food costs go down some 2%-4% this year by following the above pathway.


MAJOR PROBLEM #3

Part of reducing kitchen labor cost is scaling the prep work and making some menu items adjustments.

Solutions

  1. Take all your daily prep items and list them on a sheet with a time spent for each task. This chart will show you where you are spending your time in the prep kitchen. I’ve seen prep reduced in the kitchens up to 20% when doing this study.

    One group was spending 2-3 hours per day making house-made crackers to serve with an appetizer dip. When we costed out the labor to do this task, we saw that we were spending $60/day, 6 days/week or $18,720 + the labor taxes of another $3000 or over $21,000/year. I am going to guess that you have several of these prep items on your list.

  2. I also found that some of the prep people were inadequately trained by the chef’s own admission, so we discussed furthering the development of these people through additional training. We want the prep person to feel good about what they are doing so we gave them a pathway to furthering their productivity which directly resulted in their salary level increasing.

    When explained well and when shown how to do the work more efficiently they got faster, and they made more money. Win-Win deal.

  3. Here is another item I found out about. I have a good friend who manufacturers high end sauces, marinades and dressings. The restaurants of course make all their own sauces, marinades and dressings because this is what prideful kitchen staffs do.

    Well, when doing a blind taste test of these various items we found out the manufactured ones exceeded the flavor of ones we made ourselves. And we now reduced the workload of the kitchen staff.

Result

I’ve seen labor cost be reduced by 10%-15% and we are working on this more to get better results but still paying “good-great” wages and maintaining a prideful, happy kitchen.

This service to management takes several hours per week of intense discussion with management and ownership to discuss the process, monitor the actions and view the results and then start the process over again until we achieve our objectives.

Generally, I’ve seen a total reduction of costs about 5%-8%. It takes some time, but it is well worth it to all concerned.

Evaluate Where We Are & Where We Want To Go

“Do I need to rebuild/remodel my brand”?

And if so what are the steps required and where do I start?

Step 1: Idealize my Goals and Objectives for the ensuing year.

Here are some sample goals to look at:

  • Increase same store sales
  • Increase profitability
  • Enhance frequency of guest visits
  • Be the “go to” place in the neighborhood
  • Sustainability over the long haul
  • What makes us Unique
  • Staff Longevity
  • Pricing Strategy/Value Proposition
  • Data recording and feedback to the key stakeholders
  • And the list goes on…

Often, I hear the following with independent operators: “I am busy every day. I can hardly keep up. I don’t have any time to think this through. I am being reactive vs proactive. I am frantic. I say, STOP! At least stop for a moment and think this through a bit.

Let’s quantify your goals and aspirations for 2019 on paper. Sit down in a quiet area and write out a list. Make it extensive. Do not leave anything out no matter how little you believe the item to be. Go back the next day and review it again to ensure it is as complete as you can make it.

So, before you take this list and make it into an action plan you need to go through a process of evaluating your Brand. This process will include some “fact finding” and then some “idea formulation.”

The fact fining includes interviewing key stakeholders (your team) on what they think the Brand is, identifying your target markets and conducting some informal market research on how the public perceives your restaurant and how they perceive other like type restaurants. The internet can be very helpful to ascertain this info as well as some informal chats with guests and other operators.

Take all of the data you have and combine it into a short but succinct “white paper report” to give to your key stakeholders data to review and comment.

Step 2: Have a Meeting with the Key Stakeholders to Discuss the Findings and what should be added or deleted in order to form a re-versioned Brand and Plan of Action.

In the Brand Vision or idea formulation we would spend time discussing redefining the brand vision, the unique properties of the Brand, and what would be the ranking of these properties to the target market.

Step 3:-Develop Action Plan with Task Assignments and Timeline meet on an ongoing basis (weekly) to discuss the progress. Sometimes the progress can slow down because other operational issues “get in the way”. This is ok. You as the leader need to coach them through this in order to get the results. Don’t be impatient but be firm and active on the task accomplishments by the key people. Stay the Course!

Step 4: Measure the Results and show them to the team. You will find out you may need to do some “course corrections” to get to the end zone. Improvisation is going to be needed. It is ok to adjust as you go through this process but do not lose sight of the end zone.

For assistance in going through this process call Arnold Shain at 206.679.1037.

Promoting Gift Card Sales

Did you know that 30% of all gift cards purchases in restaurants go unredeemed?

We make a big deal of promoting gift card sales each and every year and each and every year our gift card sales go up. First, set a goal. It can be $5000, $10,000 or whatever you think makes sense. Do not set your goal too low!

Task List

  • Take inventory of gift cards, envelopes and card holders.
  • Set the dates – November 23-December 31.
  • You need POS for gift cards to include table tents, check presenters, danglers from the ceiling and/or lobby posters.
  • Decide on a guest incentive – it could be:
    • buy $100 and get $20 bonus card
    • buy $100 for $80
  • Develop a server/manager incentive and contest – use the LET’S SELL GIFT CARDS tracking sheet posted in the employee area.
    • First one to $500 gets $50 cash or anything you feel is appropriate.
    • First one to $1000 gets another $50 certificate.
  • Promote gift card sales on your social media weekly.
  • Coach staff per shift to reach their goals.
    • Maybe offer extra incentive one day per week. Anyone who sells $200 today gets $50. Pay the cash out at the end of shift.
    • Sometimes I’ve used an incentive with the guest that if they buy a card now, I’ll take 10% off of their bill. It works!

The end result is that staff will be excited which makes the guest excited. The service is better and the staff will sell more food and beverage at the table and the guest has a better time and everyone is happy.

Contact Restaurant Group

If you need a bit of coaching and encouragement call me and I can come to your business and help you. This is a really good promotion and you need to do it.


For more information or questions, please contact Arnold Shain at arnoldshain@restaurantgroup.com or by phone at 206.679.1037.

Jesters – Bellevue

Jesters-an Australian Pie Company
Bellevue Square
Bellevue, WA

  • Source Prime Location/Negotiate the Lease
  • Design Development/Construction Management
  • Menu Development
  • Staffing-Hiring & Training
  • Develop Operations Manuals
  • Set up Bookkeeping & Management Reports
  • Marketing & Merchandising

We took an existing Australian based concept, Jesters, which is small hand pie concept and then found a high profile location in Bellevue Square. The design and build out are stunning. Working hand in hand with ownership we developed the fillings to meet American taste profiles. Some of the pies offered are a deluxe double cheeseburger, tenderloin steak & mushroom, rosemary chicken, minced beef & mashed potato, just to name a few. Jester pies uses high quality, local and natural ingredients. All menu items are free of artificial flavoring and hand-made fresh to serve to customers. We searched for the “best” staff, trained them thoroughly and developed a full set of operations manuals. The store is to open the end of February. The first of many!

Visit Website

Set Objectives and Show Pathways

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Stop doing what you have been doing because if you don’t stop then nothing will improve. Guaranteed!

As a follow up to my newsletter last month, I have been doing some serious implementation of my theories. I continue to pursue my course of action because, in the longer run, I feel this approach will prevail.

Basically, we have been coaching and encouraging ownership and executive management to set objectives with their key people who want to earn more and to show them the pathway so in fact, this is able to happen.

I will use the Sous chef as an example. I do this because people in this position always want to earn more and they want a pathway for a better, more lucrative career. Assume they are making $16 to $20+ per hour. If you look at working 40 hours per week this is $41,600 per year. Not bad, but hardly enough of a salary to buy a home, acquire a new car, buy new furniture, etc.

So as an owner, how can I provide a pathway for them to $50,000 per year or even more? We are still in the test phase, but we are working with a number of clients with their Sous chefs or staff members who want to be sous chefs. Here are some key questions we pose to these valuable people:

  • How about if you help the company move the food cost from 32% to 30%? Or maybe to 28%?
  • How about if you help the company decrease the kitchen labor from 17% to 14% of sales through some efficiencies you devise?
  • How about if you help the company move the sales upwards by providing some interesting specials that coincide with the Brand thereby making the brand stronger?
  • How about working with the front of the house team so they are more knowledgeable about the food so they are more comfortable upselling the product and increasing the guest check average? And by the way, this will also increase the service levels as well which should enhance repeat business and guest loyalty as well as build the brand.
  • As the Sous chef, you have the responsibility for ensuring your kitchen team members are well trained. Are you working on this in tandem with the chef?
  • How is the maintenance of the cleaning and maintenance program in the kitchen? What is your contribution to ensuring it is A-1?

I think you get the picture of where I am going in this dialogue. The lesson is this: If you enhance people’s responsibility and give them pathways to grow so they can earn more money because the business will flourish and will have the capability to pay more.

Ownership, managers, etc. must provide an opportunity for their people to grow and earn more. Are we doing this or are we just talking about it without putting an action plan together and implementing it? And following up on it?

We believe in weekly management meetings for key staff members to disseminate info on results compared to the plan. During the next seven days until the next meeting as an owner, general manager or chef, you should be coaching, training, following up, and encouraging these people who “want to make more money.”

Are you doing this or are you complaining, whining or wanting to move out of Seattle to another city with your business? Mostly what I hear is the complaining and not the encouragement and coaching. I do a fair amount of coaching of ownership and key management people so they can get on top of their game to move the business upwards. Patience and action are required on everyone’s part!

Contact Restaurant Group

For more information or questions, please contact Arnold Shain at arnoldshain@restaurantgroup.com or by phone at 206.679.1037.

Are you having a hard time hiring? Here is what you can do!

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Firstly, we all know turnover is expensive.

Secondly, most of what we see with independent operators (non-large chains) is that the orientation, training and follow up are “not as diligent as each one of these items ought to be.”

Why, you ask?

  1. Because you are desperate for new people-You don’t have enough staff in the first place.
  2. Because you are not prepared for bringing on the new people-Training programs are not laid out in a succinct manner.
  3. Because you may have not “trained the trainers” adequately/thoroughly.
  4. Because you are not following up with the trained new employee as well as you could.
  5. Because you initiate training at an inappropriate time of the week or day.
  6. Because you did not do a thorough orientation.

And these are why many restaurants lose lots of newly hired employees during their first several weeks of employment. This can be avoided.

Since turnover is expensive, it can be disruptive to operations and make the job of managing a restaurant even more of a challenge than it already is.

Take Better Care of Team Members

Here are five proven ways to take better care of your new team members so less of them leave during those critical first two weeks:

  1. For clarity’s sake, each new employee should have a job description and a training manual. Good people want to work for good companies that have their act together and are serious about what they do. Make a good impression with these people showing them you are well organized and professional. Have well-crafted, professional forms, training manuals and handbooks.
  2. Every employee should have a thorough orientation and should be walked through the employee manual and training guide carefully and slowly.
  3. Have a written outline of the training plan for each new hire. This shows you are thorough and you actually do have a plan for getting them familiar with your operation and how they will be trained. This will show the new hire and the trainer that you truly care about their success and that you anticipate them becoming a contributor to the team.
  4. Don’t start a new employee on a busy day. They will be overwhelmed, the training will be sub-standard and it will feel unorganized and chaotic. Many new employees after going through this just won’t return the next day.
  5. Also, don’t start them at the beginning of a shift. Too much going on at this time. Start them at a slower part of the day where you can give them the appropriate attention required.

You want to make a great first impression with your new hire(s). Having a well thought out system that is thorough and complete will make the person feel excited and good about their selection to work for you. They will be happier, more productive and a contributor to the team.

Contact Us

For more information about creating “better” training programs, please contact Arnold Shain at arnoldshain@restaurantgroup.com or by phone at 206.679.1037.