The True Cost of Sales

In order to know where you stand, you need to know the whole story. Too often we look at P/L
statements through a lens narrowed by just the lines we are accountable to. If the costs are good
(under budget), we relax and enjoy the moment of another “successful” period. Whether it is
food cost, labor cost, or controllables, each line is evaluated individually, often without diving
deeper into the underlying details. Top line revenues must be watched and acted upon, with the
sole purpose of generating maximum sales with the staff in place.

Today, margins are too slim to not dig deep into the reported results. While controllables and
food costs will always be reflected in percentages (it should be the same food cost percentage
for selling 1 steak as it is to sell 20), labor has a base minimum cost. Unlike food cost, an analysis
may show that it costs the same labor to serve (sell) 1 steak as it is to serve (sell) 20. Productivity
measures the amount of production per hour, but we know that restaurants require hours of
production for a comparatively short service time.

These relationships are easy to establish in catering, where you know well in advance the
forecasted revenue and can schedule accordingly. Restaurants and bars are not as easy,
especially when gauging exactly what the shift will bring. Because of this, it is very more important
that the chef and all culinary managers know the following three key things for every meal shift:

1. What is the base staffing needed to open the doors?

2. How many covers (and revenue) will each shift do?
3. What is not being offered that guests would buy?

Base staffing is essentially the absolute minimum needed to open the doors for 1 to whatever.
To determine the base staffing you need to factor two things, and make adjustments that can be
made.

Those two factors are:

1. Menu size and degree of difficulty
2. Kitchen layout and flow

Menus have gotten larger as a means of addressing guest needs, whether those needs are real
or perceived. As a first step means of determine the correct menu size, perform a menu
engineering analysis to see true guest preference. Then, adjust menu offerings based on guest
preference and executability.
Kitchen layouts were designed to address business and service levels that in many cases no
longer exist. Usually, they are too big. Reviewing the layout of a line may identify an opportunity
to increase efficiency simply by relocating of consolidating equipment. Look to reduce steps that
cooks need to take.

Forecasting covers is the only true way to determine mis en place and staff needed for a
particular shift. Over-production is simply a result of improper planning. There is no better tool to
plan the day than an accurate forecast. A bit of a science to perfect, but historical data will
forecast covers with amazing accuracy, if based on typical capture rate, number available
outside of catering, and local traffic trends. Make it a priority to plan for what you know, and
know the forecast.

Factors needed to forecast accurately:

ƒ House count available (total guests minus guests in catering)
ƒ Capture rate
ƒ Historical local business traffic (changes per day of week)
Using these data points, a quick and easy forecast can be made by the following formula: House
Count Available (HCA) x Capture Rate (CR) + Local Business (LB)
HCA x CR + LB = Forecasted Covers

Other factors such as weather, type of hotel, reservation trends, etc can add to the formula. The
more info the better, but the key here is to have a target to work towards and staff for.

Revenue opportunities can be found outside of the menu as well. The current Great Room
strategy proves that food and beverage targeted to guest preference creates additional sales.
The secret however is to offer items designed for the area. Bar and Lounge customers WILL order
food if it is compelling and hassle free. Think of the tables and where people will sit before you put
a spaghetti with shirt-staining tomato sauce on the bar menu. Instead, offer shareable finger
foods like sliders, flatbreads, wings (still the favorite), and dips that can be eaten casually, with a
group or as a single. The classic mistake is to offer the restaurant menu appetizers just because it’s
easy for the kitchen. Share mis-en-place, but tailor the menu to the environment and mood of
the guest.

In the restaurant, specials work well if they are complimentary to the menu and not just trading a
sale. If there is a great steak on the menu, don’t offer a second steak, instead choose an
alternate preparation like a braise, or a seasonal item like a fresh fish in season. Spring brings
expensive Copper River Salmon that many recognize as a prized fish, but other fish like cod can
deliver that same sense of market freshness to the menu. Great opportunities can be found in
sides, if targeted to the season. Offer spring asparagus simply steamed or grilled with lemon and
olive oil, a bowl of steamed sweet corn on the cobb all summer, a basket of just picked RIPE
strawberries in June, or a bowl of perfect July cherries dusted with crushed ice are examples of
interesting and compelling add-ons that many people would be more than happy to order. Price
these with value in mind. Remember, this is incremental revenue that the guest had no intention
of spending. When the season and prices change, simply stop and move to the next item in
season. Two important rules of this: local is best if you want to sell seasonal and most important,
don’t do anything beyond the simplest preparation. For example: “Steamed Unknown Farms
sweet corn with butter and sea salt” sounds better than “coriander grilled corn on the cob with
harissa oil and fava bean puree”. If the product is right, do very little beyond just cooking it
perfectly.

Bar Food That Works Restaurant Revenue Generators

Wings, traditional buffalo and asian flavors Side dishes of the season – corn, asparagus,
foraged mushrooms, etc. Keep it simple, focus on
Sliders, almost anything on a mini bun fresh local.
Dips - healthy dips like hummus, Bundle a beverage with selected entrees or apps
- rich dips like crab or spinach and artichoke
Offer value sensible entrees that lower food cost
Flatbreads and finger breads
Implement “Express Menu for Groups Under 15”
Sauce-free entrees like Steak Frites
Fruit for dessert. Simple, chilled, and in season ripe

The key is to maximize the revenue of every cover. Don’t be afraid to sell the items people want
to buy.