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SIB Helping Trim The Fat

Published: September 2, 2012

Looking for healthier profits? While no one can compel people to spend more in your restaurant, there is always room to tweak the other side of the profit equation: expenses. Even if you think you are done with belt tightening, you might find a good idea among the 10 in this two-part series. Here are the first five:

1. Rethink equipment and layout.

“Food costs change; guest palates change. Operations are not something you set up once and leave for 10 years,” says Molly McGrath, a chef and senior project manager with the The Culinary Edge, a consulting group that helps restaurants optimize menus and operations. She suggests regular reviews of layout and equipment and updates as necessary for efficiency.

For instance, if you opened your first restaurant 20 years ago you might have needed five phones to handle takeout orders and reservations. In the e-commerce era, do all those phone lines sill make sense? “In some ways there is an ignorance that carries through,” says Dan Schneider,  founder of SIB Development and Consulting, which  evaluates and negotiates fixed monthly costs for restaurants. “Certain services might not make sense any longer, but you just continue the bad habit.”

Walking through the steps needed to make each dish can help you figure out a way to streamline the time, which boosts productivity. For instance, “if you have a very popular sandwich, put all those ingredients in a line on a prep table so the cook doesn’t even have to look for them,” McGrath suggests. It also makes sense to prepare the best-selling items closer to the pickup window to reduce steps/motions.

2. Find out the real cost of credit cards.

Heartland Payment Systems helps restaurants evaluate one especially thorny expense category: credit card processing fees. “There’s a practice of trying to obfuscate the cost of processing using monthly statements,” says Tony Ventre, senior restaurant specialist with Heartland.

Ventre suggests owners contact their processor and get the company to walk through a statement and explain all the fees. “If they won’t do it, find another processor,” he advises.

An owner who understands all the fees and charges is better equipped to control processing costs. For instance, transactions involving manual entry of credit card numbers (for takeout or deliver orders, for example) typically cost more to process. Equipping delivery drivers with mobile payment units can help slash that cost. If one statement contains a large number of manually entered transactions, it might raise a red flag—the culprit might be a malfunctioning credit card reader that no employee has bothered to report.

And don’t assume a credit card’s higher fees make it less of a deal than a lower-fee card. Ventre says he once believed that—until the company with  the premium fee-card showed him that guests using it tended to spend $10 more per meal. “The numbers didn’t lie,” he recalls. “I wanted that $10, so I paid for that $10.”

3. Look at alternate energy sources.

Green operational practices not only appeal to many restaurant customers, they also can help trim utility costs. The Asheville, NC, location of pizza franchise Mellow Mushroom recently installed a solar heating system to supply hot water for dishwashers, sinks and bathrooms. The system circulates liquid through rooftop panels heated by the sun. The liquid transfers heat to storage tanks that feed heated water into the restaurant’s conventional hot water system. Besides trimming the restaurant’s energy costs and offering a hedge against future increases, the system earned Mellow Mushroom a 35 percent state tax credit, a 30 percent federal tax credit and renewable energy credits that it was able to sell to the local power company.

Hodad’s, a San Diego burger concept, has halved its energy bill through the use of LED lighting at its newest unit. The retrofit of an existing space was sponsored by a local utility.

4. Streamline the menu.

This is a basic restaurant management task, but one that often gets overlooked: Do you have the right mix of items on your menu? Right meaning a mix that most efficiently uses your space, inventory and labor force.

“A lot of times people have bulky menus that offer a lot of choices, but there are things not moving or outdated, or something popular that has a lot of unique ingredients,” McGrath says.

One of Culinary Edge’s clients, a sandwich shop, kept in stock six mayonnaises and eight mustards—an inventory nightmare. To simplify, the shop now makes all sandwiches with a single “secret” sauce. “Not only have you streamlined what’s out on your make table, you’ve also created a signature flavor that’s unique to you and not in the restaurant down the street,” McGrath says.

Do you need to have sliced, diced and rough-chopped onions to produce your recipes, or is there a one-size-fits-all cut, and can you outsource the prep? McGrath says the quality of precut produce items has improved, and even though they cost more than raw ingredients, restaurant owners should factor in not only prep labor but cleanup time and labor when deciding whether to pay the premium.

5. Hire someone to eyeball bills.

Even if an owner has the time to scrutinize every bill that comes across his or her desk, who can be bothered to comparison shop for services? Firms like SIB Development & Consulting specialize in sifting through service bills—things like pest control, trash hauling, utilities—and finding ways to reduce them by adjusting services, looking for errors and overcharges and negotiating for better rates.