Taking the “L” out of the P&L
If you’re a restaurant operator serious about making more profit, you and your managers need to know how to identify your biggest problems in the operation to prevent any unnecessary loss of profit.
Many operators will prepare a Profit and Loss (P&L) statement, but by the time you get it and identify the issues, the month is over and you hope not to make the same mistake again. By having a daily report of sales and major costs, you will know when something is out of line you and your managers can immediately react, cut losses and get the problem resolved. You should at the very least, do a weekly P&L analysis to catch the problems before it’s too late.
In addition to Cost of Goods Sold, Operators deal with the rising costs of Employee Related Expenses. In Hawaii, we have an incremental annual minimal wage increase already in effect. By the year 2020, our minimum wage in Hawaii will be $10.10 per hour. We need to reduce our payroll expenses.
How to best cope with Rising Labor Costs
The first thought is to raise menu prices to be able to afford the Rising Labor Costs. But at what point does that affect your business and turn away customers. Much of what happens in our restaurant business is not totally understood by the customer. All they see is the increased price, “This place used to be affordable”.
So what else can be done? One answer is a very strict labor control system that tracks your man hours based on fluctuating sales periods. For instance, your lunch meal period is from 10:30am till 2pm, but your peak time is 11:30am – 1pm. There are two hours of the lunch period that are not generating as much sales, therefore should not have as much staff on the floor. By staggering your shifts, you could cut down on a couple of man hours per meal period, time 365 days a year, can really add up. Then it comes down to management sending people home when it is slow.
The other factor in controlling labor costs is cross training, what else is the employee able to do to cover the work needed to be done? In order to keep your staff happily employed, you need to make sure that they make enough money at your business so they don’t have to look elsewhere for it.
The last thing that you ever want to do is cut down on service. If you feel the need to reduce the number of employees on the floor, then you should consider training programs that will make the remaining number of staff more efficient.
There are a couple of things that could be done in the back of house as well, one idea is to create a less labor intensive menu. Cut down on the prep time, buy a piece of equipment to stream line the prep, like a Robot Coup. Again, cutting a couple of hours a day adds up, do what you can to analyze ever hour.
For more information on controlling your P&L contact
Gregg Fraser, Executive Director of the Hawaii Restaurant Association.
Hawaii Restaurant Association 2909 Waialae Ave. #22 Honolulu HI. 96826 808-944-9105
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