Profitable Forecasts

Everyone now discusses the current trends with tremendous confidence. The consumer has traveled downstream from upscale to value. Some restaurants are offering smaller portion sizes for lower price points. Value menus remain hot. These trends were not so easy to spot 8 months ago.

I took a walk on King Street in Old Town Alexandria last evening at 7:45 PM. The restaurants farthest from the Potomoc River were slowest. I noted a French restaurant Le Gaulois had closed. Most of the restaurants with entree prices above $25 were nearly empty.



On the other hand, many other restaurants were packed. No seats were empty at Eamonn's a Dublin Chipper. Coffee houses, pastry shops, pubs and focused menu concepts were generally busy.

Would Le Gaulois been saved if they had run weekly forecasts and compared actual results with expectations? They may have seen a drop in covers on normally busy nights and tried a table d'hote option. It would have taken courage but they might have tried a different menu style last fall.

When you look at their 10 Best and Southern Living reviews, its tough to see the storm ahead:

This Old Town favorite offers country French cuisine as comforting as it is delicious. Top menu choices include bouillabaisse, cassoulet, and a hearty pot-au-feu, a pleasing combination of beef, vegetables, and savory spices. The appealing place includes a lovely garden patio and a rustic, French interior. The wine list is full of little-known French offerings, along with local wines, and desserts are as you'd expect, with rich French pastries, mousses, and tarts. (© 10Best)

Request a table out in the courtyard garden full of green trees and blossoming fresh flowers at this restaurant in Old Town Alexandria. The cassoulets are consistent at this French restaurant, but we say splurge for the seafood (especially the scallops), the chef's specialty. (from Southern Living)

The hours of operation and average entree price complete the story:

Hours:
Mon-Thu 11:30am-10:30pm, Fri-Sat 11:30am-11:30pm, Sun 11:30am-9:30pm
Pricing:
Average Main Course Price: $27.00

The clientele shifted from a splurge attitude to a value attitude in our area. People began tightening their spending habits last fall. We see the impact in this top rated restaurant closing the door.

Inventory Dilemma

Hi there,
Interesting blog you have there. I hope you have time to give me some advice. I’m the controller of a medium sized hospitality company. We operate several fast food places with lots of inventory (around 700 unique items per location). Inventory takes forever to count, and of course, the longer it takes, the less motivation on the part of the employees to count it, leading to probably inaccuracies in the numbers.

Here’s the dilemma: the owners don’t trust the inventory, or the possibility that the inventory will EVER be counted right, so they have decided to select a truncated list of items to count based on various criteria. One of the owners tells me that this is common industry practice – even though I don’t have a lot of experience in the hospitality industry, I don’t see how only counting some items could yield worthwhile numbers, but at the same time I could see the benefit of not counting certain things. It seems to me they only want to save labor dollars, to be honest. Do you have any experience you could share?

Regards,
Andrew
Controller

Andrew,

Thanks for the excellent question. As long as the short list is counted frequently and usage compared to sales, I agree. Do these key item counts weekly with a full count monthly.

Three suggestions: 1. Most QSR operations have far fewer than 70 unique items. QSR implies focused menu. If a QSR operation stocks too many unique items, it is a warning sign. 2. Analyze sales and determine which menu items need to go (unpopular) and which items are making the money (popular). Trim the losers and promote the winners. 3. You may have a thief. Many people who can't get an accurate inventory, with all the tremendous tools available, do not want to get an accurate inventory.

Why Did This Week Suck?

In the movie "A Few Good Men", Tom Cruise's character Danny shouts out "I want the truth!" and Jack Nicholson's character Colonel Jessup shouts back "You can't handle the truth!" just before the Colonel offers the entire truth. While sitting in on management meetings at some of my client's offices, I'm tempted to mimic Danny and ask for the truth.

The truth gets swept into the closet at too many of these meetings.

With regard to food cost results, I have seen some major screw ups over the years. Here's the top 2:

1. Manager ordered his staff to cook 200 whole rotisserie chickens (typical demand is 40 per night) since he felt they might spoil. He offered the birds at a $1 discount.

Instead of freezing the raw birds, the staff followed orders and prepped 5 times the usual marinade, prepped the chickens and slow cooked them all day long on the rotisserie. They sold an extra 10 chickens. The additional unit sales weren't enough to offset the discount of $50. What did they do with the other 150 birds?

They never did sell well the next day when they were offered cold for $2 off. More ingredients were wasted when the staff whipped up a mess of chicken salad. Try to imagine the additional labor, the marinade ingredients, the gas used to cook the chickens, the mayo and veggies used in the salad.

Instead of stopping the insanity early and eating the $250 on day one, the mistake was allowed to dominate the week. The manager never survived this debacle.

2. A fast moving multi-tasker put 10 cases of baby back ribs over medium heat and went outside to check on a delivery. Since the restaurant was not open for breakfast, no one was in the kitchen for the next hour. The delivery didn't go as planned and several phone calls were required to communicate with the vendor's main office.

By the time the employee made it back to the kitchen, he realized his mistake. The ribs were all ruined (burned on the one side). The owner came in 2 hours later and asked why the kitchen smelled like something was on fire. He was told how the 300 pounds of ribs were burned and discarded.

This was an honest mistake. The ribs were immediately discarded and the employee never wasted another rib again.

These huge errors were well documented due to the shear size of the hit. It would have been impossible to change a couple of Excel entries to heal these wounds. As crazy as it seems, I found the 2 meetings following these events to be fantastic.

Everyone discussed real issues and developed safeguards to prevent a replay.

Check Out The Hospitality Finance Blog

I took down my well crafted Yahoo Finance Pipe with a filtered news feed for the hospitality industry. Eric Hertha's Hospitality Finance Blog will keep you up-to-date on any and all reports for public companies in our segment.

Restaurant Flash Report Format

Hi Joe,

Thanks for your newsletters, its of great help to me in the industry.

I would request if you could help me find/make a format of Cost Controller's "Daily Flash Report" in excel, with all possible data it should contain.

Thanking you for your support,

Harish

Good request Harish! Thanks for the compliment.

The daily flash report has to have all the essential information. Our business is quite straightforward from a reporting viewpoint. Sales, food and beverage cost and direct labor dominate the profit and loss statement. The daily report should include sales by meal period, total food received, total beverage received, number of workers and total hours for management, kitchen and service.

In addition to this essential information, I like to include notes and explanations including unusual events (from a financial perspective). Perhaps the weather was very poor or a key staff member called in sick. You may have lost power or had 3 tour buses pull in at the same time.