What is good inventory management? Reduce your costs by managing your inventory.
Inventory management is as much about careful procurement strategies as it is about taking care of it once it’s in your establishment. Once there, it’s yours and that’s your money tied up in inventory on hand. You should be concerned about managing it so that it’s in its most optimal condition to use and sell.
Over the years I have found the most amazing things lurking on the back of a shelf that have gone unnoticed and have rapidly gone from deadstock to unusable garbage. If you paid $500 for it and it was unusable, you’re tossing out $1,500 in lost sales (assuming a 33% COS). At only a 4 or 5 percent profit, how much in sales are you going to have to generate in order to recover from the loss?
Put down what you’re doing and go and walk through your storerooms, coolers, fridges and freezers right now. Take a pad of paper and pencil with you: better yet, take your cell phone too and photograph each and every deadstock item you find as well as recording it on your note pad.
Calculate its inventory value plus its resell value. Using your current rate of profit, calculate how many dollars in sales you will have to sell just to recoup the loss.
The math at a 4% profit rate:
$1.00 / 0.04 = 25 X $500 = $12,500
The math at 5%:
$1.00 / 0.05 = 20 X $500 = $10,000
The lesson here is that the lower your percentage of profit, the more it will take to pay off the loss.
Front-of-house food and beverage industry workers are salespeople!
Surprisingly, many people in the food and beverage industry don’t understand that they are actually in the sales business. I teach and advise about 50 to 60 entrepreneurs each year and it always surprises me that they are thrilled to tell me about their pursuits into entrepreneurship, but few view themselves as sales people. It requires a change off thinking and a change of attitude. Whether you’re an entrepreneur or a food and beverage establishment, salesmanship should be your constant company mantra, for without sales there is no revenue and certainly no ability to maximize profits.
In the F & B industry it comes down to whether a server is an order taker or a salesperson. If you’re going to maximize your profit, you and your employees need to first and foremost understand that you are in the sales business and you just happen to achieve this goal by selling stuff, in this case food and beverages. Right from the get-go servers need to understand that they are in fact working in a sales position and fully understand that suggestive selling and up-selling (done right) is largely about offering better customer service. And you as manager or supervisor must be able to set up, continue, maintain and teach to that point each and every day. To drive this point further, as salespeople, servers do receive what are pretty good commissions of 10 to 20 percent paid daily and mostly in cash; to the rest of us they are called tips, and no less commissions paid on performance and paid on the spot by customers that have come into your place of business and have clearly pre-determined to spend money.
What current processes do you have that set up sales expectations among all of your servers, from the recruiting to the hiring, orientation, training and supervision stage. Where do you instill this? Indeed, all staff members that interact with guests need to be salespeople and have a sales attitude built in.
Daily, what do you include in your stand-up sessions with staff to put them and keep them in a sales-minded place to ensure that every staff member is actively involved in better customer service and increased sales to maximize profit?
How do you standardize recipes for reliability and consistency and how does it affect your bottom line.
Standardization of your recipes looks after a few things; mainly the quality and quantity you will produce. In a word: consistency. Standardization goes a long way to maintaining the reliability your guests come to expect and frankly the reason they come back providing that you have a good product and service in the first place.
Over time I have heard some interesting excuses for NOT following standardized recipes:
These reasons are ridiculous and hint at deeper systemic problems in your establishment. Standardized recipes are cornerstones to providing consistent menu items at a prescribed cost, meaning that if you can control your costs, you can control your profit.
What should happen and why: here are some tips!
Given these few examples, it’s hard to understand why people still want to resist standardization of their menu items.
Mike has worked across Canada as a food and beverage professional and currently divides his time between writing and teaching people how to start and run their own businesses.