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Category Archives: Questions

These are questions that have been asked of me in the past, and my replies. They are from one on one conversations, food service industry discussion forums, and questions that have been answered by email.

No longer accepting new clients

O’Dell Restaurant Consulting has stopped accepting new clients as of July 12th 2016. The success of my other company, Friend That Cooks Personal Chefs, means that it requires 100% of my time moving forward. Existing clients with retainers will still be able to use their prepaid time.

I am going to leave this blog up as a resource since it gets 400+ views a day and because my articles are referenced on dozens of other sites, books and magazines. Our primary website will be coming down.

I welcome you to comment on articles and ask questions if you like. I will still monitor the blog and interact as needed.

Thank you for your support and interest in what I have had to say over the years as a food service consultant, and good luck to all of you.

Brandon O’Dell

O’Dell Restaurant Consulting

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Should an Applebees server who posted a customer receipt online be fired?

A recent story from my area of the country brings up an important question that will inevitably come up many more times. What should a restaurant owner do if an employee posts a customer’s receipt online? Does it make any difference that the receipt has something rude written on it?

Here is a link to the original story I’m referencing on the Consumerist. In short, the media is reporting that a church pastor stiffed a waitress because they didn’t like the 18% auto-gratuity on their check, the waitress posted the receipt online and then was fired by Applebees. One media outlet, the Huffington Post, is circulating a petition to get the server her job back.

Here is the USA Today version:

There are some major mistakes in most, if not all the news stories I’ve seen about this situation other than the original. Since the Consumerist’s original story had the facts right, it begs the question of intent of the other media outlets in misstating them. Here are the important facts being left out:

  • The waitress who posted the receipt online was not the waitress who waited on the pastor. She was not the one purportedly “stiffed”.
  • While the pastor crossed out the auto-gratuity and added up the tab without the tip, she did leave the server a $6 cash tip on a $34.93 tab, equating to a 17% tip. The server was not “stiffed” at all.
  • Applebees, where the incident took place, charged the 18% auto-gratuity to the pastor anyways, because it is their policy to charge 18% automatically on tables of 8 or more. This is standard in many full service restaurants. The waitress actually made a 35% tip on the table, though that certainly wasn’t the intent of the pastor.

I’m not posting this information to defend the pastor in any way. The pastor wrote “I give God 10%, why do you get 18%?” on the check. Even if she intended it for the restaurant and not the waitress, this sort of activity by a customer is inexcusable. The restaurant should “fire” the pastor as a customer for leaving such a comment on the tab in my opinion, or at a minimum give them a warning, and the church should fire the pastor for disgracing the church as its primary representative in the public. Using God as an excuse to make a negative statement about tipping an individual person is never okay, even if she did leave the server a 17% cash tip.

The real question being raised here is, “Should the server who posted the receipt be fired?”

My opinion is that yes, the employee was rightfully fired by the Applebees where she worked. Customer receipts are private property of both the customer and the business, not the server. As such, the server has no right to post that information online, regardless of what was written on it. Had the server only shared what was written on the receipt, without posting a picture of the receipt, I might have a different opinion. It’s possible there might even be some sort of criminal law broken by the server. The server’s defense is that there is nothing in the employee manual forbidding her from copying and posting receipts online.

I’d like to get the input of restaurant owners and managers out there that could face the same situation in the future. What do you think is the right thing to do as a restaurant owner?

One piece of advice I do have to offer restaurant owners on this type of incident is that you should have a policy in your manual forbidding employees from posting pictures of guests, their personal property, or the property of the restaurant online. I also believe it would be good to expressly allow the posting of food and drink pictures online for the purpose of promoting the restaurant.

Brandon O’Dell with O’Dell Restaurant Consulting is an independent restaurant consultant who offers operations and concept strategy consulting for independent restaurants and small chains. You can learn more about their services at www.bodellconsulting.com.

How can I use gross profit pricing for a new restaurant?

When opening a new restaurant, you are going to have to make assumptions about all your expenses and your head counts regardless of whether or not you price by gross profit. Since you will already have those assumptions, it only makes sense that you set prices so that you will collect enough markup (gross profit) from each of those assumed customers to cover all the expenses you are assuming.

 

Since you won’t have “real numbers” to work with in your startup, it will be important that you create your budgets conservatively. Set realistic expectations for traffic and for expenses, based on your/your advisor’s experience and averages in your area. You’ll need to be doing all this regardless of whether or not you price by gross profit. Pricing by gross profit simply guarantees that if you bring in the customers you assumed, and you keep your expenses down to where you assumed, that you will at least make the profit you budgeted for.

 

Without pricing by gross profit, you are simply guessing at whether or not there will be enough markup to cover your expenses. Pricing by a budgeted cost percentage doesn’t take into account the other expenses of the restaurant.

 

In short, budget conservatively and use your assumptions on customer counts and expenses, along with accurate recipe costs to price by gross profit in a startup.

 

Brandon O’Dell

O’Dell Restaurant Consulting

web:  www.bodellconsulting.com

blog:  http://blog.bodellconsulting.com

email:  brandon@bodellconsulting.com

office:  (888) 571-9068

What's the difference between retail and restaurants?

Many new owners think that running a restaurant will be easy if they’ve worked in the retail world. While all their retail skills do help, there are major differences between owning and operating a retail shop, and operating a restaurant.

These include:

In the food biz, you are also the warehouse and manufacturer of the product you are selling, which together both make up more work and require much more managing than a business that just sells the product. This is the major difference.

In the food biz, your product is perishable. After it is manufactured, it has to make it to the customer within a few short minutes in order to be satisfactory. A retail stores product isn’t worthless 5 minutes after it goes on the shelf.

In the food biz, you are also managing a distribution system. Whether it’s only coming from the kitchen to a tray on the counter, or all the way to a table, or even all the way to their home, you have to have a system for getting a highly volatile product to your customers before it’s ruined. They aren’t just plucking something off the shelf and bringing it to your register to pay.

There are a LOT more expenses involved in a restaurant compared to retail. The line items of things you must manage in a restaurant dwarf that of a retail shop.

Inventory procedures and control are much more complicated for a restaurant than a retail shop. While both types of businesses require you to track your cost of goods sold, the process in a restaurant is MUCH more complicated, as you will likely have more items on your inventory in more various stages of prep that all have to be counted, tracked, and ordered more often. These items are also much easier to waste and steal than in most retail settings.

Managing a food business and managing a retail business just aren’t the same thing. Not even close. While managing a food business requires all the skills used in managing a retail business, those skills are only a fraction of the skills you need.

The most difficult transition isn’t going from retail to food, not if you have worked production in the food business, it’s going from employee to owner. Managing in a business and owning a business are not the same thing. Not to say that people don’t successfully make that transition because some do. Most need experience running a business with someone else’s money first though, in a structure with support and mentors to teach you what you don’t know.

I would suggest reading a couple books to give you some insight on being an owner that you may not have considered. Any book on opening and operating a restaurant will help. One that I think is good is “The Everything Guide to Starting and Running a Restaurant” by Ronald Lee, a guy who owns and operates restaurants. I would also suggest “The E-Myth Revisited” by Michel Gerber, and any and all books by Al & Laura Ries or Dan Kennedy. They are real world marketing gurus.

While you can’t realize it until you open your business, the toughest part of the restaurant business isn’t making and serving great food. Doing that is relatively easy. The toughest part is creating a concept that speaks to people, and creating a system of marketing to get people into your business.

The biggest mistake new restaurant owners makes is thinking that all they have to do is “build it and they will come”. They believe their food is so good, or their idea so revolutionary that people will flock to them. They talk about building their business by “word of mouth” instead of having a real marketing plan, and more often than not, they fall flat on their faces. Don’t make these mistakes. If you do nothing else, study restaurant marketing. I think everyone who owns a restaurant will tell you they greatly underestimated how important marketing is. Remember, word of mouth marketing can’t work if no one knows who you are.

Brandon O’Dell
O’Dell Restaurant Consulting
www.bodellconsulting.com
blog.bodellconsulting.com
brandon@bodellconsulting.com
Office: (888) 571-9068

O’Dell Restaurant Consulting Weblog moves to new address!

Hello everyone. Thank you for tuning in to the web log for O’Dell Restaurant Consulting. We have decided to move our blog from WordPress to our own web host! Please make note of the new address. You can follow links on the top right of the page to subscribe to this new address.

http://blog.bodellconsulting.com

We hope to see you at our new address. All new content will be coming to that address, and not to this one, so don’t miss out! Please join us there.

Sincerely,

Brandon O’Dell

How do I figure my food cost?

Calculating how much the food you sell costs you to sell is a very important practice in running a profitable restaurant. Knowledge is power, and knowing your food cost compared to your sales and your ideal food cost is very empowering information. By figuring your food cost percentage, you have an early warning system to alert you to potential theft and waste.

Before we get into the process for calculating food cost, it’s good to talk about how often this should be done. I suggest calculating your food costs at the end of every week. If you happen to have a cost control issue, it’s best to know as close to the time the occurence happened as possible. The farther you get away from an occurence that caused a cost problem, the harder it is to determine what that occurence was.

You are going to need to track a few pieces of information to calculate your food costs. You will need to know:

  • How much is my starting inventory for the period I am evaluating?
  • How much is my ending inventory for the period I am evaluating?
  • How much food did I purchase during that period?

This is all the information necessary to calculate actual food costs for any given period. How long that period is depends on you. As I said, I suggest evaluating food costs every week.

In addition to knowing your actual food costs, you’ll need a couple other pieces of information to compare the actual food cost to:

  • What is your ideal food cost for the period being evaluated? (we’ll discuss how to calculate ideal food cost also)
  • What are your total sales for the period being evaluated? (you’ll also need to track your sales by item to calculate your ideal food cost)

Now let’s go one step at a time to get these powerful pieces of information.

Calculating actual food costs

Calculating your actual food cost starts by taking an inventory of all your food items at the same time every week. Choose one time as the starting and ending time for all your reporting for that week. I suggest ending your reporting after the end of business on Sunday, but before the beginning of business on Monday. Inventory levels are usually at their lowest on Sunday, so inventory takes less time to count and calculate.

The inventory that you take every week will serve as the starting inventory for the week to follow, but also the ending inventory for the week that is concluding. It will be used in both capacities to calculate food costs depending on whether the calculations are for the past week or the coming week. By counting your inventory, and using a spreadsheet to multiply out the value of all your items on hand, you will come up with a dollar amount that shows you how many dollars in inventory you have on hand.

This starting inventory is the beginning to the food cost equation. The equation looks like this:

starting inventory + purchases – ending inventory = cost of food for period

By taking a physical count of all your food on hand, you’ll have the starting inventory and the ending inventory parts to this equation. From there, you simply have to track your purchases within that time period. For this number, you’ll use dollar amounts from invoices received in the period being evaluated. It does not matter to the equation when that food is actually paid for.

Start with an inventory you took on the Sunday before a week started. Add all the dollar amounts for food received during that week. Subtract the amount of your inventory counted on the following Sunday. The resulting number is the cost of goods sold, or food cost, for the week.

Calculating ideal food costs

Ideal food costs are the amount of money the food you sold during a given period should have cost you. Compare your ideal food cost to your actual food cost to help you identify when there is a breakdown in your system. If your actual food cost goes up for a period, your ideal food cost should go up too. If it doesn’t, then you’ve just identified a problem, possibly theft or waste. If your ideal food cost does rise with your actual food cost, then you know your food cost is high not because your staff did something wrong, but because of the sales mix of your menu items for the period. This is important to know, because most high food cost menu items also contribute more gross profit dollars to your bottom line, so a high food cost for that period is not be a bad thing. The only way to know whether it is bad or good, is to compare it to your ideal food cost.

Here are the equations to figure your ideal food cost:

recipe cost for menu item × number of item sold = ideal cost for item

ideal cost for all items added together = ideal food cost

In a perfect world, your ideal food cost should match your actual food cost exactly. Since it’s impossible to perfectly measure every piece or food, or track every piece of waste, you will see some variance between your actual and ideal food costs. You have to decide how large a variance is acceptible. I believe you should expect to keep your actual and ideal costs within .5% of each other. Variances larger than this tend to point to problems in your system. These problems could include theft, waste, under-portioning, over-portioning, poor prep procedures, bad food receiving procedures, or other problems.

What we haven’t covered yet is the “percentage” part of food costs. I’m sure you’ve noticed that other restaurateurs express their food costs in a percentage. I also suggested your ideal and actual food costs stay within .5% of each other.

Food cost percentages

A food cost percentage is an expression of what your food cost you to serve compared to the sales you made during the period you’re evaluating.

The simple formula for figuring this percentage is:

actual food cost ÷ total food sales = actual food cost percentage

 

ideal food cost ÷ total food sales = ideal food cost percentage

 

The resulting percentage is the percent of your sales that go to pay for the food you sold, whether it’s actual or ideal. These percentage make it easy for you to compare your actual and ideal costs to each other, but also make it easy to compare food costs from different weeks, months, quarters or years to each other.

I hope this explanation helped you learn how to calculate your food costs. Calculate them every week, along with your ideal costs, and you’ll find that the extra attention you are paying to your costs will open your eyes to many opportunities to save money in your restaurant or food service. If you need some tools to help you calculate your actual or ideal food costs, please visit the webstore on our website.

What reports are needed to run a restaurant right?

That’s an important question. There isn’t enough reporting and record keeping in the restaurant business. Many chain restaurant can see by the end of the week whether they made money or not. Most independents have to wait until their accountant returns the monthly numbers anywhere from 4 days to 4 weeks after the end of the month. In my opinion, this is too late. If you don’t know how you did in the first week until the end of the month, you’re not managing proactively in my opinion. You need to be on top of a problem as close to when it happens as possible to solve it.

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Minimum reports I suggest for every restaurant owner:

Sales by item – day/week/period
Purchases & Expenses – week
Inventory – week
Ideal cost of sales – week
Prime cost – week
Budget – week/period
Preliminary P&L – week/period
Actual P&L – period/year
Guest counts – day/week/period
Gross profit per customer/item – week
Labor – day/week/period
Cash reconciliation report – server/shift/day

Each of these reports should include the necessary comparisons to sales, budgets, etc. Reports have to be designed properly, and include all the information needed. With just the budget, labor, purchases, inventory and sales reports, you can generate about anything you need, most importantly a preliminary P&L. If your reports aren’t enough to build a preliminary weekly P&L or cash flow statement out of, most POS software don’t, they aren’t enough in my opinion.

Of course there are other useful reports to have, but most I think can be ran on an “as needed” basis. There are also shift reports that are necessary to the operation of your business, but those aren’t included here.

How can I make my employees accountable?

Question:

When you work in an excuse-driven culture, how do you change the mindset and teach others to become accountable?

Answer:

Unfortunately, the most effective method for me to implement quick changes in attitude is through forcing it. That almost always requires “executing a hostage in front of the firing squad”.

Words are the first step. Accountability has to be taught as an expectation. You tell employees that your business expects them to be accountable, which means doing everything THEY can do to fix a situation rather than concentrating on what someone else should have done to avoid it.

I teach that they only have control over themselves, and they will get the most accomplished by concentrating on what they DO have control of (themself) rather than what they DON’T have control of (others).

Once they know you expect them to be accountable, you have to hold them accountable. That means no exceptions to the rules, no favorite employees who get away with things, and unequal punishment. It also means having pre-determined punishment for violations to documented rules, and making sure employees are taught those rules and sign an agreement to follow them.

Once the rules and the punishments are in place. The only thing left is equal and fair enforcement. Even a tough boss will be seen as fair if everyone is playing by the same rules. The bad attitudes most often come when there isn’t enough accountability, and people are allowed to break the rules. Then, employees who follow the rules are the ones who feel slighted, and they end up being the ones who leave. When rules are fair, and enforced consistently, the bad employees are the ones who leave.

Any time a situation gets bad, I’ve found it’s often necessary to fire someone to get compliance from the rest. This is especially necessary when there has been an extended lack of rule enforcement.

When I observe an “excuse-driven” culture, it almost always means there is a lack of consistent enforcement of the rules.

Is this a bad time to start up a new restaurant with a slow economy?

Slow economies have traditionally been very good for quick service restaurants. Eating out is usually the last part of the budget that a family sacrifices on. They do however change where they are eating out. Restaurants that offer exceptional value benefit from the increased consideration of value in the decision making process of a family or individual.

More important to the potential success of a restaurant than the national economy, is your local economy. While the national news bombards us with doom and gloom messages of recession and job loss, some cities still have economies that are thriving. In our country, there is opportunity to make money out there in the restaurant business. The industry will grow this year, as it always does.

There are restaurants that won’t make it through the year. There always are. They will blame the economy, cheap customers, thieving employees, greedy vendors, gas prices, and everything else you can imagine, except themselves. You can’t base your opportunity on the experience of others. We all have our own individual challenges within our businesses. You have to evaluate your situation seperate from anyone else and determine if there is still opporunity there for you, and whether or not the risk is worth it.

Brandon O’Dell
www.bodellconsulting.com

Is it a good idea to shrink our Italian restaurant’s menu by 15-30%?

We currently have 60 entrees and 24 soup/salad/apps. We are known for our pizza, so we have a full pizza section which includes 6 sizes, 2 types of dough, 33 toppings, calzones, strombolis, 6 specialty pizzas, 7 sandwiches, beer, wine, and standard beverages.Which is better, 50 items or 100?

If you ask me, you need to eliminate 2/3rds of your menu. Big menus mean big waste, big inventory, big kitchen staff, big cost control issues, big ticket times and big confusion for your customers.

One thing to keep in mind with a restaurant. You are only ever going to be as profitable as your peak dining periods. Meaning….  when you have a large menu, you can not serve as many customers in any given period of time. With a large menu, people take longer to order. Big menus clutter POS’s, making the average time to input a ticket longer. They mean more prep for the kitchen, resulting in more kitchen employees in earlier to prep, and more employees on the line to produce too many different types of food. Even with more employees on the line, it takes longer to produce food when you have less multiple orders of the same items being made at the same time. All this extra time means you can’t serve as many people during your peak periods, which is where 80-90% of your revenue, and 100% of your profit is made. If you can increase your customer counts during peak periods by 10%, then you can increase your profit by more than 10%.

From a customer viewpoint, more choices doesn’t mean you’ll get more regulars because you have so much to choose from that people will keep coming back to try everything. That is a huge misnomer among owners and managers, that perpetuates the use of large, inefficient menus. More choices on a menu for customers means more confusion about who you are, what your specialities are, and why they should like you better than the Italian restaurant down the road.

Simply put, more choices isn’t better for business, it’s worse.

As far as what’s better, 50 items or 100? Neither. They’re both way too many. If you want to be known for having great food, you need to have a limited number of items, that stand out to people each on their own merit. If you have 4 or 5 great menu items that stand out from your others, people may remember them if there are only 10 or 15 surrounding them. If you bury them under 60 other items, people are less likely to remember what it was they had that was so great, and they’ll be less equipped to sell their friends on how great your food is. Confusing your customers isn’t good for business.

Stripping down a menu isn’t hard to do. The hardest part is convincing yourself it’s a good idea when you believe that more=better. Simply take your sales mix report, and eliminate most the items on the bottom half of your report that aren’t selling as much. Within the top half, keep all your top sellers, then make a list of what kitchen station those items are prepared in, saute, grill, fry, cold, etc. Use your top sellers, and a selection of the rest of the items you haven’t already eliminated to create a menu that balances your menu between each of your production stations. When you finish, I would suggest having NO MORE than 20 main course dishes, including sandwiches (10-15 would be better, I would eliminate the sandwiches altogether), 4-6 starters and 2-3 salads. If you are known for your pizza, then pizza should maybe make up 2/3rds of your main course selections. 6 sizes of pizzza is ridiculous though. Any more than 3 is complicating things unnecessarily. You could even think about going to only 1 individual adult size, and 1 individual kid size. This, and eliminating the sandwiches on your menu would greatly increase your average gross profit per item sold.

Stop worrying about trying to be everything to all your customers. While you should still accomodate special requests if possible, you should make sure you are charging a special price for that accomodation, and you also shouldn’t be encouraging them. Your servers and your kitchen staff don’t like it, regardless of what they tell you. It makes their job harder. If you cut your menu down, you are more likely to gain new customers, than to lose old ones. Take this statement to heart, THERE IS NO CUSTOMER OF YOURS THAT ORDERS ALL 60-80 MENU ITEMS. They WILL NOT be dissapointed enough about losing a few options to quit dining with you, especially if they are regulars, and especially if you train your staff to explain that your reduction in choices helps you give them better food, better service, and serve more people.

Discourage the ordering of those old menu items, clean up your POS, simplify your training, and make your operation capable of serving more people during your peak times. Your employees and your pocketbook will thank you.

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