Three Keys For Making More Margin in Cafés, Restaurants and Bakeries as CV-19 releases its grip on you.

TABLE OF CONTENTS

1. Introduction

2. Margin  

3. Pricing

4. Waste

INTRODUCTION

When it is obvious that the goals cannot be reached, don't adjust the goals, adjust the action steps - Confucius

When Confucius spoke those words, how would he have had the vision to even know what a global pandemic was?

CV-19 has forced many business owners to completely change the way they do business.  In many cases, this includes closing or restricting their services.

Even though most of the goals you had for 2020 are not likely to happen in 2020, they are still relevant. You now have the opportunity to look at things differently when it comes to your business.  If your margin is not the percentage it should be to give you the life you want, let’s take some action together to get that right.

 Job keeper payments are driving disposable income up for casual workers and increased business re-openings are changing the business landscape each week.

Loyalty is up for grabs; old rules no longer apply.

There has never been a better time for Business Owners to strategically review the health of their operations.

Watch this you tube video for greater discussion.

Consumer purchasing power continues to skyrocket, as the local Cafés, Bakeries and Restaurants are in many cases the only social interaction some people have if they are working from home.

The task of creating memorable hospitality moments and leveraging them to drive new and repeat purchases will remain key for hospitality professionals.

The so-called “Experience Economy,” driven by the millennial preference for authenticity over product, is ruled by the notion that Cafés, Bakeries and Restaurants should not only be places for relaxation and indulgence but also places of communication and of strengthening relationships with peers, family and friends.

The ActionCOACH network has coached thousands of Cafés, Bakeries and Restaurants within Australia and around the world. I myself have had experience as a GM of a wholesale business that supplied this industry. Based on our accumulated knowledge, we have documented the top actions you can take to address the erosion of margin percentage and real dollars within your business.

1. Margin

Let’s look into strategies that have been tested and measured to give you results in reducing the cost of goods.

1.    Ask for a better cost. When was the last time you asked for a better cost? The simple act of asking gets results. If the decrease is not that much, remember you are in this for the long game and over time it all adds up.

2.    Join a buying group. The best way to leverage your buying power is to piggyback with someone else. Effective buying groups will have conditions attached to their membership, such as within liquor buying groups you have “first pour” requirements. This is where someone orders a vodka and soda and unless they name a brand, you pour the brand that you are required to provide. Just go into these arrangements with your eyes wide opened. They are not for everyone.

3.    Negotiate win-win with your suppliers. I have helped businesses reduce their cost of goods by hundreds of thousands of dollars over a year. The strategy is considerably large and would require more information than this paper is designed to give. If you are interested, let's set up a time to discuss. This strategy is used by every FSR (Fast Serve Restaurant). It works but it takes effort and reasonable turnover. Best suited for multi-site owners.

4.    Portion control. This area can and does cost you a lot of money. What procedures are in place to train your team about portion sizes?  At a business, I visited (Baker's Delight), bakers were overloading their little pizzas with toppings as they felt they needed to do this to justify their prices.  Items such as chicken, avocado, tomatoes and lettuce, if overused, can cost you a lot of money as the cost of these four ingredients greatly fluctuate with seasonality. Consider measuring what comes back from the customers to see what is left on their plates.  Are there lots of uneaten fries or sauces? What about lettuce that fell out of the bun, indicating over filling?

5.    Waitstaff. Your team can influence your waste by helping the customers buy the meal that best matches their appetites. Consider asking "Are you hungry today?" or "Do you feel like a large coffee or a regular size?" These types of questions can make a difference to your cost of goods.

6.    A Food and Beverage Margin Calculator. This does require effort, but the return is possibly the biggest I can offer you. I recommend you do this on an Excel spreadsheet. If you are not great at Excel, go find someone who is. An example is shown below. When you have your spreadsheet completed, sort all the products from the highest margin percentage to the lowest.  Start with the lowest, do you ever sell any of these? Can you raise the price?

2. Pricing

With the competitiveness across all segments of the hospitality industry, it would be foolish to recommend a 10% price increase across the board. Let’s look into strategies that have been tested and measured to give you results in your pricing.

1.    The way to find out what is actually the price sensitivity is to mystery shop 3 to 5 of your competitors and to make a diary note to do this every seasonal change. You don’t want to be the bottom and even the middle is “no man's land”. You want to be the top and to hold the top, what you offer must support that position.

2.    Does your business have a UPS (unique selling proposition)? What’s your WOW? Nice uniforms for your team? A team well trained in customer service? What does your ambience say about your business? Have an honest look, ask your clients, better still ask people who aren't buying coffee or cakes why they aren't.  If you are serious about being at the top of pricing, you need this information.

3.    Some items you can increase 50%, some not at all - $13.50 for a burger can be $13.99 without too much if any, consumer push back. Remember not to complicate things, just keep it simple.

3. Waste

In some workplaces, waste is also known as shrinkage. There is a management theory that I teach in my coaching business regularly, which is "if you can’t measure it, you can't manage it". Consider getting 3 buckets and at the end of each shift, record the weight on some simple scales.

Bucket #1: What have your customers rejected? For example, baked goods that should be light and flaky but are instead stodgy; or the wrong coffee made.

Bucket #2: What you can't use but have paid for. Examples: Excess trimming and not being able to use the whole product; outside leaves from the lettuce; the fat that is trimmed off chicken; any bakery floor swept up; bruised avocados, etc.

Bucket # 3: Mistakes your team have made - burnt or overcooked items; leftover goods; doughnuts not sold that day, etc.

With the weights of each of these 3 buckets, which would previously just gone in the waste bin or to a pig farmer, you can put plans in place to reduce the waste over time. It is possible to make a big difference and if your team knows that you are watching, it's magic how things can get 50% better. Remember to keep it simple. Just weigh everything together, then work on the biggest area of waste first, whatever that is.

I have done this type of waste measurement in my supermarket management days. It's nothing new, but it is effective.

For more information contact me at:

[email protected]

www.chrismackey.actioncoach.com

Mobile: 0437474556

P.S. Would you like to join in a pilot program, where we as a group will work on getting you back to full strength before your competition has their first coffee for the day? Just say "3 keys" in your email subject box so I know what it is about.

Click this link and I will get you the Details.

All success,

Chris Mackey

I would like to acknowledge Andrew Johnston from ActionCOACH NZ for his contribution.  Thank you, Andrew.