Teaching employees the basics of cost control and selling Spike Mafford/Photodisc/Thinkstock

Teaching employees the basics of cost control and selling

Little costs can quickly add up and cut into profits

Jim Sullivan is a popular keynote speaker at leadership, franchisee and GM conferences worldwide. This article does not necessarily reflect the opinions of the editors or management of Nation’s Restaurant News.

The collective shouted responses from the 40-plus servers, greeters, bartenders and cooks who were sitting in the crowded dining room at 9 a.m. on a rainy Saturday morning were both frenzied and unnerving.

“Fifty cents!” “Eighty cents.” “Thirty-five cents!” “Seventy-five cents.” “Ninety-two cents!”

This was no auction; it was an embarrassment. But I’m getting ahead of myself.

A week earlier, at around six o’clock on Friday evening, I was walking through this very same dining room, filled with dining and drinking guests, en route to the kitchen. I wanted to compliment our GM for the hard work she did on a recent successful craft beer and appetizer promotion.

One of our guests recognized me, shook my hand and remarked on how busy the dining room was. He suggested that our restaurant was something akin to “running a gold mine.” I smiled wryly, thanked him for his patronage and moved on to the kitchen.

As I entered the kitchen I overheard an expediter call out to a prep cook: “Jason, did you ever set a timer for those chicken breasts?” The reply froze me in my tracks. “Whoa. Dude. No. Dang, I spaced it. Sorry.” Jason leapt to the oven door, yanked it open and the smoke told the tale. Jason cursed and shrugged — oh well, things happen — and proceeded to dump the charred black chicken into the trash. But we each saw it differently. In his mind, it was 36 pieces of burnt 6-ounce chicken breasts that cost $1.98 each. But I saw it 36 entrées we could no longer sell at $9.95 each, or a loss of $358.20.

Not 20 feet away, a dishwasher accidentally dropped a fork in the running garbage disposal. As the grinding commenced, he determined the best way to free it was to repeatedly turn the disposal switch on and off until the “on” part was no longer functional. We eventually got it working again — along with a $725 plumber’s bill.

Ten feet from the dishwasher, I watched a server absent-mindedly scrape a dirty plate over a garbage can while engrossed in conversation. A knife slid from her plate into the trash. I was pretty certain she saw it and positive that she wasn’t going to retrieve it. I was right on both counts.

And then there were the two bartenders who had just rented the movie “Cocktail” the night before, poorly doing their best Tom Cruise impression behind the bar by flipping and dropping bottles of booze. Or the server who addressed a party of six at the end of the meal by saying, “You guys didn’t want any dessert or coffee or anything, did you?”

I had just witnessed a succession of real-life lessons in Foodservice Economics that now needed to be shared with the staff. Ironically, we had a restaurant full of guests and were probably losing money. I called the owner and discussed what I saw in detail. If it was happening in this unit, our other operations were surely suffering the same incremental losses. Worst of all, it was preventable. It was time for a mandatory all-employee meeting the following Saturday to discuss the topic of cost-control, menu merchandising and P&L 101.

Before I began to educate them on waste-watching, I thought it wise to first gauge their baseline awareness. So I opened the meeting by asking a simple question: What do you think is the average profit on the dollar here? Their replies are listed in the opening paragraph. I wrote them down on a flip chart. The lowest guess was 33 cents. They really hadn’t a clue, but I couldn’t really fault them. None of our training materials mentioned profitability, cost and margin, so the best they could do is guess. Whose fault? Ours as managers, not theirs as team members. 

If this situation sounds familiar, it’s time to face facts: 1) Your team thinks that you’re making a fortune, and 2) It’s your responsibility to habitually demonstrate that in the restaurant business, there are more ways to lose money than to make money. Here’s a narrative that worked for us, and that you could use, too.

The hourly team must first understand how cost-control and menu merchandising are flip sides of the same coin (after all, a good way to reduce costs is to raise sales). I displayed a simple bar graph reflecting the National Restaurant Association’s research that the average profit on the dollar in the foodservice industry is under a nickel. I marked five glasses with labels that said food & beverage, labor, marketing, rent, equipment & supplies. I took 100 pennies representing $1 that a guest gave us and put the appropriate pennies in each respective glass that reflected the appropriate expense. When I was done, I had five pennies left, which I asked each team member to put in the palm of their hand and pass on. Then I said:

“The average profit is about 5 cents on the dollar, and we sell a burger and fries for $7. After you subtract the cost of sourcing, buying, storing, prepping, garnishing and serving that burger, bun, fries, lettuce, onion and tomato, on that plate we bought, on that table we own, with that napkin, silverware and ketchup we purchased, you don’t make $7, you make 35 cents (a nickel on each dollar times $7).

Now, what if a server or guest drops and breaks a glass that costs us $1 to buy? Or what if a team member eats $1 worth of french fries they don’t pay for? Or if we over-portion $1 worth of dressing, or $1 of napkins in our to-go containers? You now have to sell three burgers at $7 each to make enough profit to pay for either the broken glass, gobbled fries or extra dressing. Now think even bigger: If somebody else drops and breaks a plate that costs $10 each, you now have to sell 30 burgers to pay for one piece of china. Sell 80 $7 burgers during a shift, and also break one $10 plate and five $1 glasses, and eat $5 dollars of fries you don’t pay for and guess what else you’ve broken? Yep, even.

It struck home for our team, and if you find that lesson helpful to share with your staff, feel free to use it. The bottom line is if you were to elevate the importance of cost-control to the level of the importance of food safety in your restaurant, how much more effective would your efforts be?

All money is not created equal. $100 in sales is $100 less taxes and expenses. $100 in savings is $100. Emphasize the importance of controlling costs and merchandising the menu with your team every single day. That way, you’ll never run out of month at the end of your money. 

Jim Sullivan is a popular speaker at foodservice conferences worldwide. His two books, “Multiunit Leadership” and “Fundamentals,” have sold over 300,000 copies and are available at Amazon.com or Sullivision.com. You can follow him on YouTube, LinkedIn and Twitter @Sullivision.

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