Brace yourselves for continuous price increases in your raw material.  This year it is not just limited to an isolated item such as lettuce or oranges.  It is across entire product lines.  Since the beginning of 2011 price increases have ranged from 3 - 10% across the board.

Wheat prices are up due to severe droughts in Northern China which will affect baked goods and pastas.  Tomato prices have almost tripled due to cold snaps in Florida, Mexico and Texas.  Lettuce has risen in some markets by a factor of four.  Meat prices are going up in concert while production and supplies are down.  It is predicted that poultry prices will follow.  Bison is now selling for more than beef.

So what can be done for the average restaurateur to hold prices and not go broke as food costs have the potential to soar.  There are several ways to combat the issue and even take the opportunity to increase profits.

1.       With the upcoming change of season from Winter to Spring/Summer, take the opportunity to update your menu.  We do not mean change the menu and raise prices.  It is a time to reflect on what your popular items are, how they are prepared and the types of ingredients that are used.  Look at portion controls for your popular sellers.  Do your food preparation procedures allow you to use a less expensive grade of product?

2.       Reviewing your menu options will roll into menu redesign and engineering.  A conscious effort needs to be made to direct your guest to purchase your high gross profit items (which may not be your signature items).

3.       When was the last time you properly costed  out your menu, including the amount of prep time required to prepare the dish?   Can you change the way you spec a product to eliminate 2-4 hours of labor per week on the prep side?

4.       Did you look at alternative suppliers this year?  Yes it is a hassle, but you could knock 2 -3 points off your food costs.

5.       Reduce the number of items on your menu and cross utilize your base ingredients.  Be creative with daily and/or weekly specials.

6.       How about your wine list and liquor offerings?  When was the last time you looked hard at the products you offer?

7.       Train your service staff on sales

Energy prices have a dramatic impact on your food costs.  Start taking a hard look at your invoices and watch out for fuel surcharges.  Don't just accept these charges without first discussing them with your vendor and finding out what they are based on.

National Restaurant Consultants has helped hundreds of operations around the world to improve their performance.  Contact us at (303) 757-3663 so we can help you see better results and profit from the current operating environment.

What is a Dollar Really Worth?

For ease of understanding, let's assume that an operator makes an average of 10% net operating profit. That is no small feat, and my compliments go out to those that can keep up these numbers month after month! Based on the above assumption of 10%, for every dollar you keep, you have to sell $10.00. Where does the other $9.00 go? I'll list a few places, and I'm sure you can add a few of your own: labor, benefits, taxes, cost of products (food, liquor, supplies), equipment, uniforms, repairs & upkeep, cleaning supplies, phone, bank and credit card fees, utilities, vacations, advertising, rent, mortgage, lease payments.

As consultants, we frequently hear clients say, "I want to make more money," and I challenge them by responding, "How much money did you save today?" To illustrate this point further, if you can save $5.00 on a laundry invoice, at 10% net operating profit, that $5.00 translates into $50.00 of income or sales that did not have to be earned...just to pay for that laundry.

Have you ever thought about a complete overhaul of your financial thinking? You may be amazed at what could happen if you looked at your operation with a critical
eye toward expenses and revamped the way you actually do business. Could you really save $50.00 or $100.00 a day or more? Remember that $50.00 translates into $500.00 and $100.00 translates into $1,000.00.

If you could save $100.00 a day in operating expenses, in a seven-day period that becomes $7,000.00 in sales. Over the course of 365 days, that becomes $365,000.00 you don't have to earn!

Let us help you with an Operations Analysis!