Guest Column: Controlling Costs without Limiting Sales, Part 2
Best Practices for Profitable Foodservice, Part Two in a Three-Part Series
Are you ready to spring forward and change your fiscal results? Do you want to see weekly profits increase now, right before your eyes?
You can do this by first determining your true PQ, or Profit Quotient. In other words, what is the difference between your theoretical (ideal world) and actual (real world) Direct Profit Margin (DPM)? Once you have identified areas where you're losing profit, you can make the kind of fact-based decisions to determine the profit potential of your foodservice operation.
[image-nocss] To see significant profit increases, address the everyday realities of the business head-on and then implement a plan with key control points to achieve results. As we all know, this is much easier said than done. But with persistence comes routine, and eventually, with total commitment across the entire organization, the rewards can mean double-digit profit growth.
Following last week's five best practices, here are three more tools to help you effectively increase your sales and profits.
Best Practice No. 6: Develop Efficient Menu Models
Foodservice profitability is built at the very core of the menu model, where your PQ is determined. Here are the primary focus areas to consider when developing a new menu model:
Develop menus that have Efficient Foodservice Response (EFR) delivery cycles. The goal is to develop a supply chain cycle that allows product to arrive at the store's back door with the least amount of shelf life used. Always know the true costs, both in and out of the back door, of all your major vendors and distributors. Play an active role in all product specifications and negotiations. Leverage distribution channels to create vendor relationships that allow for a high variety of product delivered case-ready, while creating the illusion of fresh on-site. Engineer high-profit menus for efficient production with minimal labor steps and waste required. This will increase profit and enable you to provide customers a higher-quality product on a consistent basis. Click here for a Case Study in which revitalizing the menu achieved dramatic before-and-after profit results. Track Sales Per Labor Hour (SPLH) by shiftand then react. Managing labor requires daily and weekly adjustments; you cannot run it on auto-pilot, evaluating labor productivity after the fact. This is a daily shift issue.
Best Practice No. 7: Manage Par Levels Daily
Managing the fine line between building sales and controlling waste requires the tools necessary to set accurate par levels to maximize your PQespecially during slow and peak times of sales. Be persistent on completion and prepared to take three to four weeks for this daily routine to take root in your stores.
Implementing an effective production schedule means having every variable needed to adjust par levels all in one log. Complete this log religiously for every shift and adjust weekly to build sales and profits. Click here for a sample production schedule. Set production levels by both Time of Day (TOD) and Day of Week (DOW). Record Out-of-Stocks (OOS) and waste by item. Deploy a Zero Tolerance Policy for 100% recording compliance to monitor results.
Best Practice No. 8: Implement Daily Control Systems
To effectively drive sales and profit growth, start with a Daily Sales & Profit Log. Simply record Sales, COGS (Cost of Goods Sold), Waste, Labor and Supplier on a spreadsheet with running weekly and monthly DPM totals.
Modify production schedules weekly to reduce OOS and waste, which ultimately increases labor productivity and DPM. Monitor opportunity gaps between theoretical and actual food cost. Depending on the venue service type, establish acceptable waste levels and then monitor performance to ideal cost.
Communicate results and react weekly to avoid embarrassing financial results come month's end.
If you are ready to take the Foodservice Scorecard Challenge, visit www.b2bsolutionsllc.com for our free download today. Stay tuned for next week's Foodservice Digest for the final installment in the series. For questions or comments, you can email me at DHoland@b2bSolutionsLLC.com or call (972) 896-0190.
Glossary of Acronyms
Use these when creating logs for streamlined record-keeping.
PQ: Profit Quotient
DPM: Direct Profit Margin
EFR: Efficient Foodservice Response
SPLH: Sales Per Labor Hour
TOD: Time of Day
DOW: Day of Week
COGS: Cost of Goods Sold