By Roger Robinson, Ph.D., SCORE Mentor
As we continue our series that started with “So You Want to Open a Restaurant?” — here we get into the nitty-gritty of the restaurant business.
Restaurant Processes and Checklists
Develop detailed process flows and checklists that document the steps of how you do business. This is the first step in building a restaurant capable of producing consistent products efficiently with the financial results expected. These processes and checklists should be designed to use as a guide in deciding what the restaurant should be doing in the following key operational areas:
- Manager’s opening
- Manager’s shift change
- Manager’s closing
- Customer Service
Preparing Menus and Setting the Right Price
Plan your menu carefully.
Know what items your customers prefer and how they like them prepared. Provide variety while maintaining stable cost averages.
Menu prices are a combination of food costs and what is needed to meet expenses and realize a profit. Generally, the price of an item is approximately more then three times the food costs, depending on restaurant type, operating expenses and competitors’ prices.
To establish pricing:
- Estimate your sales—counter-balance higher cost items tagged with lower mark-up, with higher mark-ups on lower cost items;
- Maintain a desired overall food cost percentage including waste and shrinkage, usually 30% or less of gross sales to obtain a normal margin of profit;
- Balance items ranging in popularity—monitor high demand items which can determine your success.
In the restaurant business, you must have procedures for controlling inventory and costs. Ask people in the industry for information about procedures for:
- Purchasing and Inventory Control. Develop centralized control over all buying and physical inventory that is easily defined and integral to the profit and expense control process. Know exactly what minimum inventory exists and needs to be maintained. This capability can be obtained with QuickBooks and other equivalent software programs – but it must be kept current to be effective.
- Most of the time, purchasing is done over the telephone, by fax, or online. Often no contract is signed between the purchaser and the supplier; therefore, it is essential that you choose your supplier carefully.
Develop specifications on food brand names, size, quantity, grade/weight, delivery time/place, emergency deliveries, availability and policies for substitutes or damaged goods. Entertain bids from multiple sources and get the best product for the lowest price. Use a Purchasing and Receiving Form.
- Receiving. Check all deliveries against the Purchasing and Receiving Form, focusing on three things: quantity, price and quality (i.e., temperature: frozen goods must be frozen); packaging should be intact. Make sure specifications are met. Careful recording will show short shipments, price variations, and weight differences.
- Budgeting and Projecting. Establish a cash budget and maintain cash flow projections on a continual basis.
- Calculating Monthly Food Costs. Determine the actual cost of food consumed and the actual cost of food sold. This is a combination of opening inventories, purchases, adjustments and closing inventories. This ratio should remain relatively constant.
- Calculating Beverage Costs. Record all bottle deliveries and purchases.
- Preparing Food. Make sure staff understand portion sizes (photograph entrees or give written instructions) and set up a recipe reference file to list dishes, portions and supplies needed.
- Ensure refrigerated and frozen products are quickly placed in a cold storage – storage temperature for dry goods (between 10-21 C) and frozen goods (-18 C or less). Rotate your stock to ensure that oldest items are used first before the new stock.
Thinking of starting a business? How about running the idea by someone who’s been there and done that? A SCORE mentor can help you for free! There are over 70 mentors in the Greater Phoenix Valley. Schedule your free session now!