VSAG Founder Dan Simons contributed his views on reducing restaurant operations costs in the August 2009 QSR Magazine article “10 Ways to Save: Ideas for Saving Thousands in Operating Costs.” Simons shared his cost-saving methods in the areas of food cost, shrink, and workman’s compensation, just a few of the many areas in which VSAG can help food and beverage related businesses better their bottom line.
QSR tapped the best minds in the business to come up with a realistic list of ways operators could save thousands of dollars in less than one year. There’s no advanced logic or restaurant expertise needed—just a willingness to try new systems or make a few adjustments to existing protocols. From the bathroom to tax forms, QSR found the easiest ways operators can immediately boost the bottom line.
1. Workman’s Comp / Savings: $150 a month
One great hidden gem in an operator’s budget is workman’s compensation insurance, says Dan. Although restaurateurs cannot forgo the cost all together, they can easily reduce it.
Workman’s compensation is figured annually based on a forecast of the upcoming year’s labor costs. When the economy slows and crew sizes are reduced, often that insurance figure is not recalculated. Furthermore, when insurers go to resign a business for another year, operators often do not update their labor figures. As a result, workman’s compensation insurance is often based on outdated and inflated labor figures.
Savvy operators will update those figures regularly with insurance providers and receive rebates immediately rather than waiting until the end of the year.
2. Shrink / Savings: up to six percent of sales
When you talk to restaurateurs about shrink, most of them don’t even know what that is,” Simons says. “It’s a sure thing that if a restaurateur isn’t actively managing loss prevention, they’re losing money—totally 100 percent guaranteed.”
According to Simons, the best way to prevent theft is to watch the back door. Operators can catch both intentional theft and waste, which Simons categorizes as unintentional theft, by simply using clear trash bags and performing trash audits.
“It’s not waste, it’s theft,” he says. “We bought the product and you threw it away when it wasn’t yours to throw away.”
Employees often smuggle goods in trash bags that are taken out to the dumpsters then steal the hidden products once they are out of the building. Other popular concealers include cardboard boxes and backpacks. Simons advises operators to breakdown all boxes before they are taken to the dumpster to prevent employees using them for smuggling and to not allow employees to bring duffel bags or backpacks into work.
“Trust is not a lost prevention strategy,” he says.
3. Menu / Savings: 2–3 points of food cost
The general rule in the restaurant industry is that 20 percent of your menu represents 80 percent of your food budget. Ensuring that your top items aren’t cannibalizing more of your budget is essential.
The first step to getting your menu spending under control is to request a velocity report from your food vendor. Have the company give you a list outlining from the most expensive to the lowest-priced items. “Those top 15 percent are the ones you need to be going over with a fine-tooth comb,” Simons says.
Operators should follow those items in terms of frequency and price all the way to the back door, where all items should be weighed. “If a driver has 10 clients that he drops off blocks of cheese to, and one owner doesn’t weigh them, you take a pound off each block, and you’re in the cheese business,” Simons says.
For operators overwhelmed by the thought of weighing every food item, Simons advises to at least ensure that all meat is weighed.