Running a restaurant is more complicated than most people realize. You have to do an awful lot of things right to make a little bit of money.
And when you’re busting your butt providing a great product and great customer service, you should at least be able to put some money in your pocket at the end of the day, right?
To that end, we wanted to show you seven ways that restaurant managers leave money on the table that should stay in their bank account instead.
We reviewed our customers’ purchases against a database of rebates.
More than 40% qualify for at least one rebate ranging from $100 to over $1,000 in a six-month period. If this is the case for our customers, then it’s probably the case for you, too.
Keeping track of rebates can be a game-changer in saving money. Sure, it’s not life-changing money… but would you take $100 if it were in your hand?
#2 Receiving & Invoicing Processes
The traditional invoicing process opens up too much room for error. Many times the receiving process is often rushed… you follow a paper trail of invoices from your chef, to your GM, to your accountant, to your owner.
In addition, restaurants often fall into the traps set by a poor receiving process:
- the product never gets delivered
- catch weight items are super-sized
- the product disappears before it’s even stocked
- invoiced prices are different than what was quoted
Lack of process in the receiving and invoicing area of restaurant operations leaves the door wide open for waste. And waste means money down the drain.
#3 Buying Without Knowing the Price
You can’t manage what you don’t know. A simple way to stay on top of your costs and not overspend is to ask for a weekly quote from suppliers.
Most vendors update their prices weekly, so it should be no big deal for them to send you an updated price sheet before you place a weekly order.
What’s the big deal?
Think about if the grocery store didn’t have price labels on the shelves. You wouldn’t know what brand was cheaper than the other. You wouldn’t know to buy chicken this week because prices have gone down and hold off on the pricier beef.
Also, how can you keep your suppliers honest if you don’t even know the prices of items?
We’ve seen prices of everyday items vary 20 – 40% over time for certain restaurants, and we’ve seen variations of up to 80% between customers for the same period.
If your prices are higher than expected on your invoice, you only have yourself to blame.
#4 Deviated Pricing
Sometimes you just have to ask to save money.
Depending on the number of locations you have and the quantities you purchase, you may be able to get a price break from your supplier (note: not your distributor). Your distributor can help you look for these opportunities.
Take into consideration the products you buy and the volume you purchase.
With this information, you can seek discounts for your large-quantity items, especially if they’re packaged goods such as French fries, cooking oil, etc.
These discounts are typically independent of the distributor you use and are set by the supplier or brand. It discounts the price to your distributor based on your volume and then passes the discount through to you.
The distributor keeps its normal margin, you get a better price and the supplier locks in your brand loyalty and volume for its product.
#5 Lost Credits
The typical restaurant has a few items a week that are either not delivered, rejected at the door, or rejected after being opened. Sometimes this is adjusted upon receipt and a new invoice is issued/paid. Other times, you have to submit a credit request.
But just how responsible are you about tracking credits?
Many restaurants just don’t have a consistent way to capture and track these credits to ensure they show up on the invoice.
While you would expect all of these credits to show up on future statements, that’s not always the case. It’s not necessarily your supplier trying to take advantage of you. Instead, the fault lies with the manual processes and lack of effective technology on the supplier’s side.
Let’s face it, suppliers process a ton of transactions every day, pushing a lot of paper, and getting it into systems that were typically built when AOL was on the cutting edge of tech.
Don’t wait on suppliers. It’s ultimately your job to track credits.
#6 Ignoring your Cost of Goods Sold
Better safe than sorry… well, unless it’s costing you hundreds of dollars a month in waste. Food waste can take on several forms, and your Cost of Goods Sold can help you track it.
It helps you catch if you’re over-ordering and letting food spoil. It lets you see if you’re over-portioning due to excess inventory: When there’s a large supply of ingredients on hand, it’s natural to want to use them up before they go bad.
It can even help you crub theft. When there’s a surplus of food, skimming a little off the top seems more justifiable. You might as well grab a few steaks and stick them in your backpack if you’re probably going to end up throwing a few out every week… or so the thought process often goes.
Ignoring your COGS leads to unnecessary guesswork… which leads to waste… which leads to less money in your bottom line.
Restaurant theft comes in many forms, and the saddest part of being in the restaurant industry is realizing a lot of people are trying to steal from you. Employees, vendors and, yes – even customers – sometimes have no qualms about pulling straight from your pocket.
The biggest and easiest theft deterrent is making it known you’re watching.
For vendors, put a formal process in place for how you purchase and receive product. Restaurants that order based on current price quotes and that check in product at the door avoid price gaming and drivers pilfering product.
Putting this into action can be as simple as documenting the receipt of every item at the door or as thorough as weighing catch weight items to ensure proper labeling and charging for product.
For employees, a visible inventory control process is critical. Counting product at the door, monitoring your COGS, and researching exceptions raises visibility and makes theft much more difficult.
It’s also important to put basic procedures in place around the movement of food and beverage. If food comes out of the kitchen, it needs to have a recorded sale in the POS system. Even if employees get a comp’d meal, it should be rung up so you can control the amount and avoid the habit of employees coming to the window and ordering food from the kitchen.
High-cost items such as wine and liquor should be locked up and a log should be kept of who moves the product from one location to another.
Conclusion: Get Your Money Back
Every aspect of the restaurant business has opportunities for improvement.
By focusing on these seven, we hope you can find some quick ways to increase your cash flow and continue to pursue your passion as an artist, entertainer and general nourisher of your community.
We created Orderly to address exactly the challenges restaurants face on a daily basis… it’s the easy-to-use, do-it-for-me app for restaurant profitability. And our app is free on Google Play and the App Store!