Guest Column: Controlling Costs without Limiting Sales
Best Practices for Profitable Foodservice, Part One in a Three-Part Series
The peak season is upon us and now is the time to ensure the proper foundation exists to achieve fresh results that last. With a well-thought-out plan and commitment to operations excellence, you can maximize your resources to achieve double-digit profit growth.
Sales-building at its best focuses on selling more product to more people, more often and for more money. Combine this with operations excellence and you will have the winning recipe for foodservice success.
[image-nocss] One definition of insanity is doing the same thing over and over again, expecting a different result. Fresh results require fresh solutions, and success comes by rolling up your sleeves and digging into the numbers and then addressing systemic issues that prevent growth. In this article and the two articles that will follow in future issues of Fare Digest are proven best practices to help jump-start your sales results.
Best Practice No. 1: Solid Strategic Plan
Whether you have five stores or 100, a solid plan is crucial to winning the "market share" race. It's time to take the blinders off and check the egos at the door. With a fresh outlook, perform a SWOT analysis of your program's Strengths, Weaknesses, Opportunities and Threats. Set realistic benchmarks and carefully develop a plan that balances the five P's to Success: Planning, Product, People, Positioning and Profit.
Best Practice No. 2: Strong Value Proposition
The reality is that consumers today have more fresh choices than ever, conveniently located on every corner. What's more, every competing channel and operator is working overtime to steal your market share. Being right on price is simply an "ante" into the game. The key elements of a strong value proposition are taste, quality, variety, freshness, consistency, convenience, atmosphere and price. Conducting a simple customer survey can reveal fresh ideas toward unlocking profits.
Best Practice No. 3: High Variety, Low Complexity Menus
Adopt the strategy of "less is more." A great example is the typical Chinese restaurant model: lots of variety yet the inventory count is low, waste is minimal and labor productivity is very efficient to maximize profits. As a general rule, recipes should use 10 ingredients or less, five labor steps or less, and each ingredient or prep item should have three or more uses. Make every inventory item and labor step work for you.
Best Practice No. 4: Engineer Profitable Menu Items
No matter if you offer full-service, self-service, pre-pack or a combination, you should target 25% to 30% Direct Profit Margin (sales less cost of goods sold [COGS], labor and supply costs).
Engineer your menu based on two variable results: Daily Quantity Per SKU (DQPS) and Penny Profit per Item (PP). Menu items with low DQPS and PP are losers that must be re-engineered to convert into winners or be removed from the menu. Constantly introduce new items, forcing peak performers to set new benchmarks. Diligently track profit daily and communicate results weekly, reacting live-time to end every week and fiscal period better than the last.
Best Practice No. 5: Measure What you Treasure
There is a myth in foodservice that cost control limits sales. In fact, effective cost control systems are essential to effectively building sales. One look at your daily production schedule, waste logs, COGS tracking and labor schedules should indicate exactly why all your profit is going down the drain. We don't take percentages to the bank, so make every penny count.
If you are ready to take the Foodservice Scorecard Challenge, visit www.b2bsolutionsllc.com for your free download today. Stay tuned for next week's Fare Digest for five more best practices for profitable foodservice. For questions or comments, you can email me at DHoland@b2bSolutionsLLC.com or call (972) 896-0190.