Saving pennies to make dollars makes sense

Nation's Restaurant News, August 1, 2005 by Jim Sullivan

In an industry whose average pretax profit is less than 5 cents, we'd all be wise to recall the insightful words of Sony founder Akito Morita, who once remarked, "While making more money is important, it is critical to remember that losing less money is just as important, too."

Every year I present dozens of live seminars at operator and supplier conferences around the globe. One of the most popular topics is how to shave costs without sacrificing speed, quality, accuracy and service. This month I'd like to share 10 ways to reduce costs with my favorite audience of all: Nation's Restaurant News and NRN.com readers.

Reward and recognize "waste-watchers." If a team member contributes a cost-saving idea that saves you $100, why not reward him with a $20 "commission"? "Remember that all money is not created equal," Chili's president, Todd Diener, once told me. "$100 in sales is $100 less taxes and expenses; $100 in savings is $100." Make it a habit to recognize and compliment your crew members who stick to the proper specs, portions and recipes. If you see it, say it.

Invest in cone cups for team member drinks. QSR managers face a daily frustrating sight: dozens of half-filled soda cups cluttering up their kitchens and drive-thru counters, the remnants of half-finished, abandoned crew sodas. Those paper cups are not cheap. Jack Hager, a regional manager for KFC in Lynchburg, Va., has a cost-effective remedy: "One of our franchisees put in a cone cup dispenser for his crew," he says. "They cost much less than our regular cups, the crew drinks less soda and they can't leave the cup lying around where it's both unsightly and can get you in trouble with the health department."

Train your team daily. Sloppy portioning, improper bagging and incorrect order taking are the results of sloppy--or nonexistent--training. Don't blame the crew if they don't know what to do because you decided to save labor dollars on education. As Wes Lazar, a general manager for Texas Roadhouse in Wisconsin, says, "If you think training is expensive, try ignorance!"

Cook less more often. The fact is food flavor does not rise proportionate to the amount of time it's kept in a steam table or stored overnight in the walk-in cooler. Fresh tastes better and results in less waste.

Beware the irony of saving money and losing customers. One Wendy's franchisee I know claims that shaving just one second off of his drive-thru window time directly results in another $11,000 in higher gross sales over a year. Impressive numbers, to be certain. But there's a rookie mistake that even the most savvy QSR operators can make time and time again. Area managers demand lower labor costs, and unit managers respond by understaffing, even at peak periods. The result: swamped teams and long wait times for the drive-thru or walk-in customer. Or worse, we put such a premium on speed alone--since drive-thru traffic is exceeding 70 percent of volume in some QSR operations--that we sacrifice order accuracy. It is the classic case of a dollar chasing a dime. While long waits and inaccurate orders anger drive-thru customers to no end, they ironically speed up your drive-thru service in the long run ... because your customers don't come back! Staff for peak periods, train your team to repeat orders back to customers and do double-handed exchanges of food, beverage, payment and change.

Make sure the night crew cleans properly. What's worse than trying to open your restaurant in the morning but first having to finish what the night crew didn't do? Not much. This hidden cost drives up labor dollars, customer service and even staff turnover.

Maximize tenure, minimize turnover. Industry research indicates that the cost of recruiting, interviewing, training and hiring a new QSR manager exceeds $20,000. Wow. If you sell a burger for $2, that means you have to sell 10,000 more burgers to recoup the cost of losing one good manager and finding a replacement. How many more of your products do you to have to sell each year just to cover the cost of crew member churn in a QSR segment whose annual hourly turnover averages 134 percent?

Scrap boxes. Some operators designate a specific brightly colored waste bin for all food that had to be discarded--and not sold--because it was prepared improperly or substandard. That results in food being made over again or, worse, the customer refusing to reorder it. That "scrap box" is an effective way to visually demonstrate the collective waste and cost of mistakes per shift. One franchisee I know even has posted a sign over his scrap box that says, "Here's Your Raise," as a reminder to his staff.

Check in all deliveries accurately. Giving a delivery the cursory once-over because it's time-consuming or inconvenient is just plain stupid. The best kitchen managers are sticklers for that process. You should be, too. After all, they don't let you "eyeball" your gas at the Kwik-E-Mart, do they?

Store things in the right places. "In this business food is money," notes Rick Obinger, purchasing manager for Chicago's upscale N9ne restaurant. So much of food waste and overprep in restaurants could be avoided by taking the time to train your team to properly tag, rotate and store your dry goods, wet goods, raw and/or prepped products, and even point-of-purchase marketing tools. Remember FIFO--first in, first out--and LILO--last in, last out.