Restaurant Systems: 90-day Plan on Which Systems to Implement First
Thank you - I get it! The light finally came on! I understand the reason why the chains are successful! I now know what it takes to turn my good restaurant into a great business - It's all about having systems and controls for everything I do. I need training systems, employee manuals, prompt financial reporting, job descriptions, checklists, customer service standards, recipe manuals, a marketing plan… but wait, where do I begin? I'm working 12-15 hours a day as it is, when will I find time to get all this done? Who can I get to help me?
Over the years, this magazine and website have provided hundreds of how-to articles to help our readers learn about and understand the systems employed by successful operators. Although the systems used may differ, there exists a common purpose among both successful independents and chain operators alike -- in order for a restaurant to be successful, it must deliver consistent quality in both product and service.
Considering that 60-80% of your business comes from repeat customers; it's paramount that you meet or exceed your guests' expectations over and over. However, too many operators fail to recognize that in order to be consistent, they must have systems in place that promote consistency.
In his article, 'How to Turn Your Good Restaurant into a Great Business', RestaurantOwner.com's Jim Laube says, "You can only create consistency and predictability, the two most important factors in any business, with a good system." He lays out a step-by-step plan on how to prepare an operating manual that documents all your restaurant's systems and procedures. He calls for restaurant operators to learn to work "on" their business rather than work "in" their restaurant.
In this article, we're assuming you're starting from scratch and that you have no real management systems in place. We'll outline a 90-day plan on how to get started by adopting and implementing basic systems and controls that equally impact consistency and profitability. Keep in mind; the guest experience and the profitability of your restaurant are intrinsically intertwined. You cannot expect your restaurant to be profitable unless you deliver a positive guest experience; likewise, what benefit is there to you, the restaurant owner, to own a restaurant without expectation of turning a profit?
Once you've completed this 90-day crash course for systems implementation you'll be ready to start tackling more advanced management systems.
The First 30 Days
The very first thing you need to do is to make a commitment that you and your managers will incorporate daily, weekly and periodic routines into the day-to-day management of your restaurant. In order for your restaurant to be consistent, the management must be consistent. Consistency can only be achieved as the result of a top-down management practice.
Begin using a manager's log. One of the greatest challenges to restaurant management success is the ability to communicate incidents, messages, and other happenings from one shift to the next. For the last thirty or so years the tool of choice has been a standard daily. The approximately 8" x 13" "red book", as it has been commonly referred to, can be purchased at any office supply. This particular version has an entire day dedicated to each page and the larger size accommodates lots of entry space.
Alternatively, several companies have created restaurant industry specific versions that allow operators to record daily sales, weather, and notes to each other. Regardless of which version you use, make a commitment now to begin using a manager's log to document daily events, especially employee or customer incidents. For serious incidents such as a food poisoning complaint or an employee getting hurt on the job, you should have forms specifically intended to record such occurrences (i.e. Foodborne Illness Complaint form, Accident Report form, etc.)
Delegate accountability to key employees. If you're like most operators, you're most likely already working 60-70 hours a week. You can't do this alone. If your restaurant isn't large enough to have the luxury of several managers then you need to recruit at least two or three key personnel that you can rely on to help run your restaurant.
The first thing you will need to do is to define your organizational structure. The logical distribution of accountability for full service restaurants is to assign each department, kitchen, bar, and dining room, to a specific manager or key employee.
On the other hand, if you operate a limited service restaurant then you might consider splitting accountability between kitchen and service, or in other ways, such as according to a distribution of tasks (scheduling, ordering, training, etc.)
Regardless of whether you employ ten people or a hundred, each one must be held accountable for their job performance. While everyone is responsible for making the restaurant successful, in order to improve your systems you need assign areas of accountability to key players.
Hold weekly managers meeting. Now that accountability has been assigned, it is important that your team meet weekly to compare notes, review previous week's progress, and plan for the future. I know, you're probably thinking, 'it's hard enough getting a day off as it is -- how am I going to find a time to meet that doesn't infringe on someone's day off?' It could be a challenge; finding the right day is largely dependent upon how many key employees or managers there are in your organization.
I've always found that Tuesday afternoons work best for a weekly manager's meeting. This gives the bookkeeper time to prepare weekly financial reports (we will discuss these later). In fact, keeping focused on weekly periods, you need to decide which day will begin your week. My preference, as for many operators, is to define the week as Monday through Sunday. However, several chains start their week on Wednesday and end it on Tuesday; or Thursday through Wednesday. It really doesn't matter which you choose; what matters is that you begin managing your business week by week.
Use your meeting times wisely and keep agendas simple, limiting meetings to one or two hours. Consider also that with today's technology it's very easy to meet via teleconference or using an online meeting tool. This can be an effective way of limiting everyone's time commitment while maintaining the benefit of weekly management reviews. (For more information on weekly planning see, "Weekly Planning: Big Plans Require Small Steps", by Chris Tripoli.)
aProgress report -- If you're serious about getting "systematized" then you should have been able to purchase a manager's log, create an organizational chart, assign accountability and implement your weekly meeting in just two or three days.
Now that your management team is assembled to meet weekly, and each member has a specific area of accountability, you're ready to start tackling task-oriented objectives such as the creation of forms, manuals, and checklists. Use the manager's log and weekly meetings to assign various tasks and continually communicate progress and objectives.
Create opening and closing checklists. It's often said that air travel is one of the safest forms of transportation. One of the reasons is that pilots use a preflight checklist before each flight, even though they've performed the same routines a thousand times. Likewise, one of the best practices for successful operators has been the use of opening, shift change, and closing checklist for each job position. This ensures that the restaurant is properly prepared to handle the demands of day-to-day business in a consistent manner.
Begin by creating manager's checklists. Your team should easily be able to come up with a list of routine duties that need to be completed before and after each shift. For instance, items typically found on an opening checklist include turning off the alarm, checking the manager's logbook for notes, performing an opening cash audit, preparing cash drawers, review reservations, scheduled banquets and catering events, conduct unit walk-thru, or do a line check for quality control. Closing duties might be to set the alarm, inspect cleaning duties for each station, preparing the bank deposit for next day, placing phone orders to message machines, and dozens of other tasks that ensure the opening team walks into a clean restaurant and is ready to begin work.
Once the initial manager's checklists are complete your team can begin working on checklists for each job position in the restaurant. Assign accountability to department heads and be sure to set a completion date.
One more thing, be prepared to modify your checklists as you add more systems and controls. You'll be surprised at how much your checklists will change over the initial 90 days.
Establish customer service policy -- Phase 1. Many operators have the mindset that in order to draw more guests they need to first increase their marketing and promotions. While true that better marketing can generate more traffic, if you don't provide your customers with an excellent guest experience you'll only succeed in more rapidly letting more people know that you don't have good customer service.
Establishing an all-encompassing customer service policy will be a work-in-progress project that should be done in phases. In fact, your staff and management should continually review ways to improve the guest experience. But the first step in establishing consistent customer service is to create some basic guidelines and expectations for staff and management. Your team's objectives will be to define and document the following components of your customer service policy:
Implement a DSR. As we alluded previously, what use is it in having a good restaurant if you're not making any money? Sound financial tracking begins with the accurate recording of sales. The Daily Sales Report (DSR) is the core tracking element for controlling cash.
Gaining the maximum effectiveness from your DSR entails a two-step process wherein the revenue (sales) side of the equation is generated at the cash register or POS level, and the settlement (receipts) side is based on actual receipts. The difference between the two is commonly referred to as Cash Over and Short (Cash O/S).
Most POS systems have built-in sales reports that give an accounting of recorded sales and receipts; however, all too often operators fail to reconcile their POS or register reports with actual cash and credit card deposits. A properly constructed DSR serves as the source document for posting to your accounting system. It also serves as a summary report of sales and receipts collected from server and cashier checkouts.
Below is a sample of a typical DSR.
Begin using purchase orders. The last objective for our first 30-day goals will be to initiate some purchasing and receiving guidelines. While there are several aspects to having a complete set of guidelines, one of the most useful tools is to write a purchase order for everything you have delivered. A properly executed purchase order should have the correct quantity and price promised for each item ordered.
When deliveries arrive, have designated personnel verify that the price on the invoice and the quantity received is the same as that on the purchase order. One more thing -- don't take the driver's word for it -- visually verify that each item has been delivered by having the driver show you everything he brings in. Be sure to weigh all items purchased by weight to insure correct amounts.
aProgress report -- Accomplishing these tasks in 30 days may seem like a tall order, but with the reality is that some operators will not only accomplish these objectives but will start working on the next 30 days as well.
OK, now that you've had a chance to get used to "managing" your restaurant as opposed to simply working in it, it's time to start implementing result-oriented systems that can be measured in terms of dollars to the bottom line, guest satisfaction level, and staff improvement.
Begin tracking item sales mix. Your POS system may already do this for you. If not, be sure your POS or cash register has been programmed to record the quantity and sale amount of every menu item you sell. Get rid of the "open food" key. Review the item sales mix in your weekly managers meeting. Identify slow movers and make adjustments accordingly.
Count key items daily. This is one of the most effective cost-saving measures any restaurant can carry out. The objective of this practice is to identify 10-15 high-cost, high-use items that you use every day; then to track the purchases and sales of that item daily. For example, let's say that your restaurant has several items that use 8 oz. chicken breasts. The manager begins the day by counting the number of breasts on hand and records it to the key item tracking sheet. She then enters the number of breasts received from the vendor that day. The # sold for the day is taken from the item sales mix report (includes all items that have an 8 oz. breast). Finally, she counts the actual number of breasts left at the end of the day.
In the example below, note that there should have been 30 breasts on hand at the end; however, the actual count shows only 28 breasts on hand, meaning that 2 chicken breasts are unaccounted for. Be it because of theft, waste, or mistake -- the result is reduced profits to the bottom-line.
Start an invoice log. In order to effectively control food and beverage cost, management cannot afford to wait on getting a P&L report that may be several weeks old. Management must track and calculate food & beverage costs on a weekly basis so that they can react swiftly to cost control issues. The first step in calculating the food cost part is to keep a record of your daily food and beverages purchases on what some operators call an invoice log. Post or record your food and beverage invoices to the invoice log worksheet each day and indicate what amounts are chargeable to the appropriate food or beverage account categories. A detailed log of your food and beverage purchases will help you identify purchasing inefficiencies or waste.
Create a master labor schedule. A master schedule is a helpful tool for showing the staffing requirements for each day of the week. By referring to a weekly master schedule, the person that prepares schedules can verify that the proper number of staff have been scheduled for each shift. The master schedule also serves as a budgeting tool for estimating expected labor costs. From this point forward you should know the projected labor budget each time you prepare a new schedule.
Track labor costs daily. Now that you have a labor budget it's time to put it to good use. If your staff isn't using the time clock feature built into your POS system then now is a good time to start. Properly set up, your POS system can give you detailed labor cost reports on a daily, weekly, and period basis. Compare your daily labor cost reports to the budgeted labor cost totals from your schedule. Daily comparisons help management to quickly spot discrepancies and react to looming budget overages.
Begin using an order guide. An order guide is a tool for counting and tracking all the products that your restaurant uses and must reorder. A par level is assigned to each item to ensure you have enough -- but not too much inventory on hand. Par is usually referred to as the "build to" quantity to have on hand that will get you through until the next time you order. Properly designed and used, the order guide becomes the main tool in creating purchase orders and processing weekly inventories. If you keep inventories on spreadsheet or inventory control software, use the order guide to record your on-hand counts, and enter the data into your program, using the order guide as a reference.
Start using a daily prep sheet. The Daily Prep Sheet (DPS) can help you and your staff make smarter, more informed decisions of what and how much prep to do every day. Develop a DPS for each kitchen prep position. Let each prep person determine the usable quantities of product on hand, indicate the inventory amount on the form and calculate how much of each product needs to be prepared. Then have the chef, sous-chef or kitchen manager review the DPS before the work begins. The DPS should serve as a checklist so nothing falls through the crack and as a tool to help your people control production so the "right" amount of food gets prepared.
Begin take month-ending inventories. The only way to get an accurate cost of sales report is to figure in your beginning and ending inventory values. Purchases alone do not reflect the true cost of sales. The correct formula for calculating cost of sales for a given period is as follows: Cost of Sales = Beginning inventory value + Purchases -- ending inventory value. Count the quantity on hand for all food and beverage products, and then multiply the quantity by the cost of each item to arrive at the value for that item. Next, add the extended values of all items counted to arrive at a total inventory value. Give the values to your bookkeeper or accountant so that they can be figured into the cost of sales on your monthly P&L.
Initiate pre-shift meetings. One of the best ways to improve customer service is to implement daily pre-shift meetings with your staff. Use this time to keep staff continually focused on making your guests feel special, praise them for good work, and keeping them informed about daily specials or new menu items The pre-shift meeting allows you to give daily reminders of your standards and expectations.
Start building a customer database. Looking back, you'll realize that you've implemented numerous systems and controls that will help your restaurant run more smoothly. Hopefully, you've seen an increase in guest satisfaction as well. You're now getting to the point where you should think about expanding your marketing efforts in order to build repeat business. The best way to build repeat business is to market directly to your existing guests -- and the best way to do that is to have a database containing their names, email address, and mailing address. Many operators collect birth dates as well.
Create standardized recipe book. In order to ensure consistency in your menu you need to be consistent in preparing the recipes. This is best accomplished by creating a standardized recipe manual containing exact instructions on how you want your staff to prepare your menu. Even a simple, single menu item often requires several subrecipes that are produced in batch and become part of the routine preparation tasks. Each subrecipe is then added to the Recipe Manual for reference by the kitchen staff.
Begin daily kitchen line checks. One of the most important factors to creating consistency is to have a kitchen line that is fully stocked and ready for lunch and dinner rushes. For this reason, good operators use a kitchen line check form before each shift to ensure the quality, temperature and quantities available for everything on the line.
Begin taking inventories weekly. I know, you just got started on monthly inventories, but to get a handle on your weekly cost of sales, consider taking inventory once a week.
Prepare weekly prime cost report. Prime cost is a restaurant's total food, beverage and payroll costs for a certain period of time. In table service restaurants, the generally accepted rule of thumb says that prime cost should run no more than 60-65 percent of total sales. For quick-service restaurants, the goal is to keep prime cost at 55-60 percent of total sales or less.
The weekly prime cost report is comprised from data in the DSR, the invoice log, beginning and ending inventory values, and your daily labor cost reports. Operators that are diligent in preparing a weekly prime cost report can expect a drop in overall cost from 2-5% of sales in just a few short weeks. Below is an example of a prime cost report:
If you were able to incorporate all of the systems listed in this 90-day plan, then congratulations, you're on your way to becoming a first-class restaurant operation. Looking back, you've accomplished quite a bit; however, there's still more work to be done. The good news is that you now have some systems and controls to help you be more consistent and to become more profitable. It will be significantly easier to dedicate time for such things as developing employee manuals and training systems.
To help you plan your next step we have included a "Best Practices Scorecard" below. This is a listing of some of the systems and practices used by successful operators. Hopefully, you will have already implemented many of these practices.
BEST PRACTICES SCORECARD
Hiring & selection guidelines
Employee policy handbook
Manager's log book
Opening & closing check lists -- all positions
Labor forecasting & scheduling system
Standardized recipe book
Standardized prep list with pars
Routine kitchen line checks
Customer service guidelines
Supply Ordering and receiving system
Marketing & Menu
2-4% of sales budgeted for marketing & promotion
Annual/monthly marketing plan
System for tracking ROI on promotions and discounts
Reviews menu engineering at least twice per year
Maintains a customer database
Has consistent branding
Utilizes at least two direct marketing practices
Policy for handling donation requests
Participates/sponsors at least one community event per year
Incorporates 4-wall marketing
Has a minimum of 4-6 marketing promotions a year
Has an established system for promoting public relations
Daily sales report
Maintains sound checkout and cash controls
Documented cash auditing procedures
Daily cash reconciliation
Daily key item inventory on 10-15 products
Tracks all discounts and voids
Daily recording of purchases
Daily labor cost vs. forecast
Knows the optimum sales/customers per labor hour
Uses an Industry Standard Chart of Accounts
Menu and recipe cost calculations
Periodically compares ideal cost to actual
Computes prime cost weekly
Knows weekly and monthly break-even sales points
100% of sales reported
Physical inventory taken weekly
Profit & loss statement within 7 days of month (period) end