Winter 2008

HOW TO BETTER MANAGE YOUR CASH FLOW: DEVELOPING A SALES & EXPENSE BUDGET AND FOLLOW THROUGH ON THE IMPLEMENTATION.

Uncertain times brings about weakening sales, less cash available and plenty of angst on the part of management because they are worried/concerned about their jobs, money, their own issues, et al.

So what is one to do?

• Develop an operating budget for the week, month, and year. Spell out each line item so it is clear to your management team.
  
• Each team member is responsible/accountable for their line item(s) on the budget. This should include a sales line as well. I would do the sales line by day part. (customer count times guest check average = sales)
  
• Budget the labor. Develop a manning chart.
  
• Budget the cost of goods. If your intent is to lower the cost of goods give yourself enough time to whittle it down to the desired level. This category is going to take the most time to lower and become more efficient which is a whole other topic(s).
  
• Look closely at all of the operational expenses. Are you maximizing them? Look at past results as a barometer but you don’t need to actually abide by them. It is a new day and age so you have license to take a chunk out of them.
  
• Each team member has a “checkbook” for their cost line(s). They have a budgeted amount to spend each week/month and must track it carefully in their checkbook.
  

The results versus the budget needs to be tracked weekly and each team member needs to submit a written report on how it is going. Variances to the budget need to be accounted for and the remedy(s) need to be listed with a plan of action.

HOW TO RAISE THE BAR FOR YOUR MANAGEMENT TEAM
Management needs a sense of purpose, goals & objectives, a pathway to success, rewards, reviews and the like. We have found that weekly meetings with the management team as a whole and the individual members make everything better: financials, service, food, cleanliness, marketing, repairs, and spawns a host of new ideas to take the business to another level.

As an owner or the CEO, you need to set up the objectives for yourself for the year to, firstly, get comfortable, run them by some trusted advisors, and then present them to the management team. The team will generally buy off and probably give you some additional input on what could be done to even “raise the bar higher”.

As the leader you need to guide the process, keep it organized, communicate, and follow up. Each team member needs to have short term goals (monthly) and long term goals (annually). Goals are an agreement between you and the team member and need to be documented in writing. The progress needs to be checked. Coach the team member on how to be successful. Quantify the results (accountability). It is easier to see results in writing and on a chart. It needs to be a linear, straight forward process that everyone can see (transparency). There should be rewards as needed as well as constructive criticism. You should listen carefully to each person. They should pay attention to you as well. This communication is a two way street.

Our experience is that sales go up and costs come down when a plan as described is in place and is followed through upon. Everyone is happier. Why? Because they know where they stand. There is no ambiguity. Everyone knows the pathway to success.

PREVENTING CREDIT CARD FRAUD: IT'S NOT JUST VISA’s PROBLEM!
The October 2008 standards for credit card security are now in effect for all merchants who process credit cards, so everyone is on the same page now—at least sort of. Depending on how your restaurant processes and stores credit cards and the volume of your transactions, the hoops you need to jump through to comply with the current PCI (Payment Card Industry) standards can vary dramatically. The bottom line, though, is that if you fail to do your part to protect your customers’ credit card data and if a breach occurs resulting in loss, your business is now on the hook. Penalties you may be exposed to include:

• Fines imposed by your credit card bank.
  
• Restitution of losses
  
• Being required to contact every one of your customers to notify them that you screwed up
  
• The worst kind of bad publicity for your business
  

On the other hand, the PCI compliance standards are so complex that you may well feel like you need a team of attorneys and IT experts to even understand the rules, let alone follow them. What, realistically, should you do to limit your exposure to credit card fraud without paralyzing your business?

• Assess your exposure. You can’t be expected to protect data you don’t have, but your computers may store sensitive data you’re not aware of. A restaurant that processes cards over a phone modem has a lot less exposure than one with a POS system. If you have a computer system that stores credit card numbers in case a transaction needs to be re-run, you really need to be careful.
  
• Make sure you aren’t storing prohibited credit card data, even in hard copy format, such as full magnetic stripe data, the PIN number or PIN block, or the CVVW number.
  
• Obtain a copy of the PCI self-assessment questionnaire that pertains to your level of credit card risk. You can determine which questionnaire fits your business and download it at https://www.pcisecuritystandards.org/saq/instructions_dss.shtml
  
• Fill out the questionnaire. When complete, submit the certification of compliance statement. If you need to fill out questionnaire C or D, you may need the help of an IT professional to review the questions related to your computer system.
  
• Develop a written security plan that is comprehensive yet realistic for your business. This needs to address both physical controls and computer controls for limiting access to sensitive information.
  
• Screen and educate your employees. No system is so secure that a careless or dishonest employee won’t render it useless.
  
• Make a commitment to data security, and make sure your managers buy into it. Adequate security practices, such as using strong passwords and locking down networks, are a hassle—but nothing like the hassle of dealing with an identity theft audit.

HOW TO LOWER YOUR FOOD COST
Age old issue so what else is new? This is the bane of every operator we’ve ever come across. Most operators think that the way to lower the cost is through buying less expensively. There is an element of truth to this, but we’ve never seen the food cost drop because of the buying proposition. So here are some quick tips on what to do:

• Are the recipes accurate? Check them yourself and then do a “Thumbnail” cost of your top 10-20 sellers.
  
• Today is not the right time to “raise” prices so you need to approach the cost of goods from an ingredient standpoint. Check with your vendors on what may be able to be substituted for some of your more costly ingredients. There are a number of options available.
  
• Check your POS to ensure everything has the right pricing. And the right tax.
  
• Do you have a “prompt” on your POS for coffees, soft drinks, etc. that are server issued.
  
• How is the security on the walk-in, freezer, and dry stores? How about paper goods, cleaning supplies, dishes & utensils, kitchen smallwares? While not part of the food cost lack of security just opens the door for “honest people doing dishonest things”.
  
• How is your receiving process? Are you checking in all orders? Are you weighing them in? Are you checking invoice pricing with quoted pricing?
  
• How about the prep function? Are procedures in place? Spend some time with the prep staff to see if they are following the recipe guide.
  
• Spend more time in the kitchen checking, testing, weighing, tasting, et al. This will guarantee the food cost going down. And the food being better.
  
• While you are at it check the plates for taste/flavor, eye appeal, consistency, etc.
  

So this is the short story on food cost. Checking in on food cost transcends to better kitchen cost controls and better food. You will be shocked at what you see if you haven’t been spending much time in the kitchen recently.

If you need assistance in any of these areas, please contact Arnold at 206.679.1037.

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