Whether you own one restaurant or 100 there’s no eluding the fact that running good operations is paramount to the success of your restaurant company. Or any business for that matter. I’ve been involved, to some capacity, with the restaurant industry since I was 14 years old. My father, who is the President/CEO of a multi-million dollar restaurant company, observes one number every morning he wakes up to check out the previous night’s performance.
That number is RCP otherwise known as restaurant controllable profit. I’m sure the term is ubiquitous across the restaurant industry but is called something different; but at the end of the day, the question is, “how much money did we end up with?” RCP answered that question for him and was the ultimate measuring stick of restaurant operations analysis. I marveled at the way he would analyze the business. For about 8 years I sat there listening having no idea what he was talking about until, finally, it clicked. RCP was one of the last numbers on the spreadsheet. I would asked questions like, “Why are you not looking at all these other numbers? Don’t they matter?” They did matter but the goal was to begin with the end, and work your way back to discover what specifically went right and what went wrong. That long, in depth intro to arrive at this; the top five identifiable metrics to solving your restaurant operations analysis problem.
Using the above terminology, let’s assume you have a location that has a negatively trending RCP. The profit that is controlled by operations is down 10%, week over week and you as the owner want to know why. (Because… you’re losing money) You could confront the COO, District Manager or, if your company is small enough, the manager his/herself. That is the reactive way of handling the situation. Let’s be proactive and discover on our own. Here’s how you can work backward to solve the problem.
A matter that seems almost uncontrollable and can adversely affect restaurant operations performance is fraud or theft. It can happen right under your nose and it can be difficult to spot without a thorough investigation. (Insert Sentinel) Using an above store reporting tool can assist in identifying fraudulent activity. It you need to outsource the investigation, your marketing department should be running daily promo audits so my advice would be to consult with one of them on this particular location. If they find that a certain unauthorized promo code is being used on a recurring basis you may have spotted part, if not all of your problem. Same goes for canceled and voided orders especially if the cancel had already been made. Now you have a food waste issue, too. If you find out the issue does not pertain to fraud or theft, move on to the next metric.
More times than not you will find the root of the problem is labor control. There are two different areas to investigate in regards to labor and how it affects restaurant operations analysis: labor productivity and labor scheduling. For instance, if you’re sufficiently staffed but the employees are not generating an adequate amount of sales the overall performance will take a hit. And the latter- if the manager has a scheduling issue and over-staffs the restaurant the cost of overall operations increases exponentially. If the location is over-staffed and highly productive one would assume controllable profit is contained but do not overlook overtime hours and wage-per-employee! The key is to find the sweet-spot of just enough employees to run a shift but are still very productive in generating sales. The secret: suggestive selling and an increase in guest check average.
And then there’s the obvious: sales. Truly there isn’t much to be said about this topic in regards to performance and restaurant operations analysis. If the sales aren’t there guess what? You aren’t making any money! Shocking, right? Good thing I got my marketing degree because I don’t think I would’ve solved that riddle.
Another obvious but sometimes hard to control metric is food cost and food waste. Food cost is both a controllable and uncontrollable number. If the employees have been trained the right way they will know the specs of every menu item and will not increase toppings in the kitchen. But, you cannot control the prices of the food which you are buying. (But you can control the quantities that you buy!) And, if you buy too much and it exceeds the expiration date say hello to increase food waste thus catapulting your operations costs. In recent studies within the self-proclaimed “Mirus Innovation Lab,” we will argue that your food cost issue is in direct correlation to fraud. (More on than in future blog posts)
Lastly, did your star manager just quit on you? If you don’t have a contingency plan, your operational costs are bound to take a hit. Why is that? Well, your star manager who was so good at controlling labor and food cost is now out the door leaving the restaurant in the less than capable hands of a potential newbie who has to learn the ropes. There will be growing pains and learning curves for this new manager to maneuver but in the meantime, the controllable profit percentage will be affected.
Summing it up:
Regardless of what above store reporting tool(s) you are currently using, chances are, the data is being presented to you in an unrelated fashion. Undoubtedly you have POS data, labor data, inventory data, GL data, and payroll data. Ask yourself the question, “Am I receiving the information in a way that I can clearly see the scope of my business from one place?” If the answer is no, I suggest doing research on ways to consolidate your massive amounts of information to one place to be able to make actionable, smart decisions. Start with Google! That’s what most people do nowadays. Try searching for exception-based restaurant reporting and see what you find. Or, click the image below to learn further about how Mirus can provide your company restaurant reporting and analysis solutions.
[Image credit: meship.com]