The Leak Behind The Line

Most of the money problems in a restaurant aren't happening in the dining room. They're happening in the cooler, at the receiving dock, and in an eight-year vendor relationship that's never been questioned. This episode goes there. 

Transcript

SPEAKER_00 0:01

Every restaurant has a suggestion box collecting dust somewhere near the host stand. This show is a different kind. Operators send in their real challenges, staffing, costs, culture, systems, anonymously, and we talk through them on air. If you've ever felt like your operation is running you instead of the other way around, you're in the right place. I'm Ryan Hornebrook, founder of Elevated Restaurant Solutions, and this is the suggestion box. Welcome back to episode eight of the suggestion box. I'm Ryan Hornabrook, your host, uh, with over 15 years of experience in the industry from dish to director, um, giving insights on anonymous uh challenges sent in by real owners, real operators, real industry pros, and we talk about it in real time. Uh, the show has been amazing so far. It's been seven great episodes. We continue to get fresh um submissions every week, and without it, this doesn't work. So uh a huge appreciation to everybody that continues to send some stuff in. Um, this week we're gonna talk a little bit about leaks and not from the pipes in the kitchen. We're gonna talk about some purchasing, some vendor relationships, and some waste management that a lot of operators manage by feel and wind up paying for in margin. Um keep those submissions coming in. Uh, just a reminder every single week it is anonymous and it's working. So um there's no wrong situation, and we do greatly, greatly appreciate it. Now, before we get started, I wanted to give a little shout-out because this has been my first full week back in operations in over a year. Really happy to be back in operations, by the way. It's uh it's been very exciting. It is a fresh perspective on everything that I've talked about over the last 15 months, and it's a really good opportunity to practice everything I preach. Um, and it's been very refreshing so far. The restaurant group that I'm with is very successful. They align with everything that I believe in uh in terms of hospitality and how they treat their staff and how they treat their guests. Uh, just a very, very good situation. I couldn't be more proud to be involved with this restaurant group. But with operations comes obviously wear and tear on your feet. I was humbly reminded of what that felt like the first day. So I ordered a pair. This is not paid advertisement. This is just me sharing a product that I very much am happy with. Uh, I ordered a pair of Ufos, they're UA Plus slides for home after a shift. Let me tell you, when I say I'm walking on clouds, I'm walking on clouds. It is a phenomenal recovery tool. After a 10, 11, 12 hour shift. You get home, you take your shoes off, you slide into UFOs, UA Plus. I'm telling you, your feet, your body, your joints, your knees, they're gonna thank you. So just had to get that out there because I'm wearing them right now, and my feet feel refreshed and ready to roll tomorrow.

What You Have vs. What You Need

SPEAKER_00 3:30

All right, let's jump in. Uh, submission one says, I've been doing my own ordering for six years and I've got a pretty good feel for it, but my food cost bounces around week to week more than I'd like. I can't always explain why. Some weeks I run out of things, I thought I had enough of other weeks. I'm throwing product away. I don't have a formal system, but I just walk the cooler and order what looks low. Is there a better way to do this without becoming a full-time job? Without it becoming a full-time job, I'm sorry. Um, yeah. I mean, there definitely is. There's way better tracking than it sounds like what is going on right now. And I'm sure you have a solid heartbeat on your operation and what is in your coolers, and it probably feels fine, and it probably has been fine, but you're you're operating without a safety net. Doing it by feel, doing it by by look, by just walking through uh without anything documented to refer back to. We talked about this last week, but that's just that's operating with no um safety net underneath you. Uh the bouncing food cost is really the telltale sign that you know it's not necessarily working as well as it should be, or there there's other options out there, and we're gonna talk about some of them. But it means the ordering is more reacting to what's in front of you rather than anticipating what's gonna come the week ahead. And that only comes from you documenting it every week, noticing patterns, creating a par, uh, have a dynamic par, not a static par. Everything is gonna change, but noticing that pattern, compounding week over week, honing in on what you're actually going through versus just walking through, reacting to to what you what you already did. Um but all in all, yes, there's a better way. And uh it doesn't have to be a full-time job. It can be it can be done um in a timely manner and in a structured way. Uh because the way you're doing it right now, by visual, you can see what what's on the shelves. You can see what looks low, you can see what looks high, and you but you you can't see how fast that that product's moving or what it should look like on Thursday, given what's on the books for the week. So going back to dynamic par levels, I mean, items that don't have a defined minimum or maximum that are tied to actual usage, uh it's just a guess every week. Every time you do you do an order, it's just based on your gut, on what you feel you're gonna need or feel that you went through. You're just kind of replacing and and there's no there's no foundation on why you're doing it. And a big bigger problem, in my opinion, is that you can't teach that, you can't train that. So, like if somebody else wanted to do the order or you couldn't be there, um, you know, you can't instill how you do that because that's not a real structure. So you can you can tell somebody how you do it, they're not gonna do it the same way as you, and there's gonna be hiccups there, you're gonna run out of stuff, you're gonna over-order. It's it's gonna cause a problem every single time you don't do it. Um and with a food cost that's bouncing, you know, that much, um, it's a purchasing inconsistency because there is no foundation that you're running off of. It's it's in your head. And inconsistent ordering produces inconsistent cost every time, full stop. Think about it. For a million-dollar restaurant, a 1% swing in food cost is $10,000 a year. And if you're reacting uh in your ordering, you have a reactive ordering system, that's gonna produce way more than a 1% swing. So for every 1% that you swing, say it's a 3% swing, it's $30,000 just in in consistent ordering every week. Now, if you had a structure, same process, same order, same time every single week, now we start to we start to get a little more consistent. We start to flatten that swing. So, I mean, for me, this is most definitely a documentation thing, where you're gonna build a par sheet of your top 20 cost items, a list of what you need on hand at the start of each ordering period and what you use in a typical week. It's probably gonna take a couple hours to build, but once you do it once, that becomes the anchor for every order going forward, whether you do it or somebody else does it. It is by far the most consistent way to do this. You're gonna count before you order, not instead of ordering, but count before you order, subtract what you have from what you need, and then account for what's on the books for the week ahead, and order the difference. That's the system. You could do it in Google Sheets, you could do it in Excel. You don't need any fancy tech to do something like that. You could do it on paper if you really want to. But I would be doing daily counts on your top 10 cost drivers proteins, produce, key, drinks, um, 15 minutes, open close. The discipline of counting that is gonna force conversations about par levels that a lot of people only do quarterly. I'm not saying you have to do it every day for a year, but you do it every day for two weeks, and you're going to say three weeks. Because what do they say? 21 days creates a habit. So do it for 21 days, and then you're going to now have this newfound um perspective of what is in your restaurant, what should be in your restaurant. So do that count for 21 days, and then we're going to adjust our pars seasonally. I talked about this, I think, in the very first or second episode, but people change their eating and drinking habits every season, especially where I'm from. I'm in the northeast of the United States. But I think it happens everywhere. People are eating differently at 4th of July than they are at Christmas. So uh I take a look at and try to change things um four times a year at least, seasonally. So I would adjust the pars seasonally because what you need, you know, come 4th of July is going to be different than what you need in the new year. Um and I'm never really huge on static anything because we have a living breathing business. So we should have living, breathing documents and living breathing systems and processes that we audit time to time to make sure they're working and just dynamic everything, static nothing. Um, but you know, we're gonna we're trying to get away from the the running running out and throwing away pattern and go in a different direction. Now you can keep the gut feel that you have in the mix. I never say eliminate the gut, because there is a lot gut related in in this industry that you need in real time. But use it to flag weird situations and anomalies and override the par when something specific's happening. Obviously, if you have a 45-person lunch in and they're most likely gonna drink a bunch of lemon drops, maybe we crank that Tito's order up. Or if you have a happy hour that they came in last year and loved the appetizer packages, maybe we jack up those appetizer packages this week. So you can you can use your gut and use the data. It doesn't have to be exactly what's on that par sheet, but at least you now have a solid baseline of what you're gonna do moving forward. Let that data be the starting point, and then use your gut after the fact, not the other way around. We're not gonna start with our gut and just take a look because then you can't reference back to it, you can't recognize patterns, you can't train it to somebody else, and it's not a real system. You're you're always gonna be fluctuating, you're always gonna be inconsistent, and that's not what we want to do here. That's not how we stay successful. So the par sheet's gonna tell you what you need, and you cannot run an accurate and tight food cost without it. So,

Loyalty Without Accountability

SPEAKER_00 12:52

all right. The next one. Um I've used the same food distributor for eight years. My rep is great. He's responsive, reliable, and always does right by me when there's an issue. But I've started to notice that I've never really shopped around and questioned my pricing. Uh, I just trust that they're giving me a fair deal because the relationship is good. A good chef friend of mine recently switched distributors and is saving significantly on the same products. Now I don't know whether to rock the boat or just leave it alone. Okay. I've had this happen a couple times throughout my career, and not just food vendors, um, liquor vendors, credit card processing, cleaning companies. There comes a time where people get complacent. And this is not just vendors, this is this is across the board, this is staff, staff as well. People get complacent and comfortable after a certain amount of time because they feel secure. And when you feel secure, sometimes, not all the times, but sometimes laziness plays a factor. And when you get too comfortable, you get lazy. Now I talk about auditing stuff all the time. Talk about auditing the menu, talk about auditing uh our processes. I also audit relationships and making sure that we are profitable, we are ethical, we are responsible, timely. Um you don't want to rock the boat necessarily. Like you don't have to do it in a you don't have to do it in a way that's gonna make the relationship rocky. But that being said, eight years without a price check is eight years of not knowing whether the relationship is being um valued or being relied upon. You know, those are two completely different things, and good reps know the difference. Now, we talk about compounding all the time. Um, we've talked about it on the show. Compounding changes in this industry make or break the success of a restaurant. Now, this is one of those times because loyalty without accountability, so without auditing the relationship or the process, uh creates this dynamic where price drift happens gradually and invisibly. So what happens in you know isolation seems minor, but when you add it all up over the course of a couple years, we're talking about pretty significant margin hit. So this happened with uh a company I was working with. Um the credit card processing had drifted from 3.5 to 5.2% over 18 months. Now, credit card processing is an expense. You know, it's it's just you know it's there, but it's not one of the things, it's not one of the glamorous things that you are necessarily looking at or auditing while there's so much other stuff going on. Um, but it had crept up and it became a it became a pretty hefty expense. So we found it, we looked at it, we audited, we sat down, we we we checked out where these uh drifts were happening, and we shopped around. We just talked to a couple people and said, hey, what do you use? What are you seeing? What's the market look like? And we were able to find a really good situation and and get back two points in credit card processing, and that shift alone amounted to six figures. It's a six-figure shift over the course of a year. So, you know, when we talk about compounding um changes and compounding incidents, we're not just talking about upselling, we're not just talking about food waste, we're not just talking about all of those things that you think about in terms of operations on the floor, but it's the back end stuff too. Uh stuff that you have to be looking at outside of food cost, liquor cost, and uh revenue. Now, that situation was, you know, there wasn't a personal connection with that credit card processor, so it became a very easy situation uh or an easy decision to make that switch. There was nobody's feelings were hurt, and you know, it wasn't like a long-standing relationship. Now, with vendors that you deal with on a pretty much weekly basis, when we're talking about food distribution and liquor, beer, wine distribution, beverage distribution, that is slightly different because you should be able to. All right, a good vendor relationship shouldn't require you to stop being a good business operator. Meaning a rep who genuinely values your account should respect a pricing conversation. If you can't sit down and say, hey, listen, here's where we were a year ago, can we just take a look at what's going on right now? I'd really love to grab, you know, an hour Monday, uh, if you could just come in or Tuesday if you can come in around lunch and let's just have a conversation. Let's see if if you know there's there's any way that we can save a little bit or uh if we need to shift things around. Because if if that relationship can't survive a straightforward business conversation, not separate the business from the personal. This is a business conversation, then that relationship was never solid in the first place. So any good vendor that I've had would absolutely welcome a conversation and would actually be proactive in helping make sure that I was receiving every bit of help that I could in terms of cost management. Um so make sure that you actually value the relationship as well. Uh but in your situation, I would absolutely get a competitive quote. And you don't have to do it as um as a threat, you just do it as you know general information. I think you should know anyway what the market is doing at all times. Uh, not all times, but every once in a while, I would I would just see where the market's at, just to make sure that you're good. Um, but pick 10 to 15 of the highest volume items and get pricing from one or two alternative distributors on the same specs and just see what happens. It's like price checking when you go to uh you know any major um department store and they they offer price check or price match, you know. But bring that information to your rep as a conversation and just say, I've been doing some benchmark work and I want to make sure that we're still in a good place. Let's take a look at these together. Because a rep who's been earning your business will come back with something and sit down and be reasonable with you. But a rep who gets defensive has been taking advantage of the relationship, now you're gonna know, okay, maybe it is time to go somewhere else. And build this into an annual habit, you know, maybe when the new year hits, just to get like a benchmark. Um, but get a baseline on your top items in the beginning of the year, regardless of how the good how good the relationship is, uh, do this anyway, because it keeps the vendor honest, it keeps you informed, and it keeps it keeps a rolling audit of of where you're at. Because at the end of the day, loyalty is an asset in a vendor relationship, but at the same time, it needs to be mutual. And the only way to know is to test it occasionally. Test everything. Always be testing your menu, your staff, your processes, your vendor relationships, your expenses. Always be questioning everything. Never get complacent, never get comfortable. Because stuff is always not what it seems. You're always gonna find information. It's always good to have new information. Adapt. Times are changing. This is a fluid environment, this is a fluid industry. Nothing is ever the same. People eat differently, people drink differently, people behave differently. This is a fluid operation that needs fluid maintenance and monitoring. So

Four Leaks, One Number

SPEAKER_00 21:51

all right, the last one today uh looks like food cost. My food cost is consistently higher than it should. Be given my sales volume, but I can't find where it's going. My chef says we're not overportioning. My manager says there's no obvious theft, and the menu hasn't changed. I feel like I'm losing product somewhere between receiving and the plate, but I can't prove it or point to it. Where do I start? Okay. This is actually one of the most solvable problems in the operation, but only once you know where to look. Now it's probably in one of four places that I've tend to see uh food costs being elevated, but nobody being able to point out where it's coming from. So let's go through those four. One is receiving. Product is being accepted without being weighed or verified against the invoice, the yield on receiving products. If there's uh something shorted, if there's a substitution from a distributor, um all of those things can add up fast. And a lot of people never catch them because we say that we're checking stuff in, but sometimes we're in the heat of lunch where you know we can't control delivery times all the time. Uh sometimes it's somebody different accepting the orders. Um there's uh a multitude of factors that go into receiving, um, but a lot of times we're not receiving the full yield on what we what we ordered or what we thought we ordered. Storage is another one because improper storage conditions accelerate spoilage. Uh, if it's not labeled properly, a lot of times FIFO is not going to be followed. Um, so older product is gonna get buried, it expires, there's cross-contamination, um, the there's not usable product anymore, that all gets um tossed and unused. And uh that would also jack up your cost. Prep would be another one in terms of over prepping, um, because if you're over prepping for a projected volume that actually doesn't materialize, then the the trim waste on protein that hasn't been accounted for in the receipt uh recipe cost is gonna be a major increase in your food cost. And then uh the last of those four is probably during service, and it's portioning that is slightly drifted. And we talked about this either last episode or two episodes ago. But if you don't have a build book or any type of documentation that says this is the standard with a picture of the dish and with the the counts and the amount of what is supposed to be on the plate and the recipe as a side portion, whatever that is, um, portioning is gonna drift from the spec and it's gonna happen in small amounts over time, but day-to-day is not gonna look like much. Month to month is gonna look a little worse, quarter to quarter is gonna look worse than that. Year over year is gonna be significantly uh different. So you if there's a staff meal, family meals, um, if they're not being tracked uh against the food cost, um, any unauthorized consumption, uh, any unauthorized comps, all of that stuff is going to jack your food cost. And everybody might just think all of those things are are okay or not important, which is why everybody's telling you, yeah, I don't see anything. I don't know what it could be. Because a lot of things, a lot of times those things are just standard. It's like, yeah, of course. But even if they're standard, you got to track everything. If you want the accurate costs, and if you really want to get down to the um accurate tracking and find out where you're you're losing some money or where you could be retaining a little more money, you have to track all of those things. And while, you know, individually, none of those things look like a major crisis, leaks running simultaneously can account for two, three, four percentage points in food cost. And nobody thinks anything's wrong. And, you know, three points in food cost is an astronomical number. So I would start at the first thing we talked about receiving. I would weigh every protein delivery. Um you don't have to do it from now until the end of time, but I would just start and do it maybe two weeks. But I would weigh every protein against the invoice just to make sure that the discrepancies um disappear or are not there because sometimes they'll surprise you. And the distributor will adjust it once that you know that you're checking, or once that they know you're checking. Um, I would walk the cooler and dry storage with fresh eyes. I would check dates, I would check labels, I would check and make sure that everything is FIFO compliant. Uh, I would look for product that's been buried. Sometimes there's something behind something that shouldn't be there. It's improperly stored. Um, it's maybe 20-30 minutes in the morning before you start anything. Um but it it's it's something that a lot of people don't do or a lot of people get comfortable or complacent with and lazy with, but a lot of times you'll you'll find you'll find some some loss there. I would do a live portion check during a prep session and watch the actual yield that comes off of the products against what the recipe card is saying that should come off. Because even a half an ounce on one thing, um, one dish, it seems minuscule. It's like, why even bother? Who cares? Whatever. But if it's a half an ounce of a high volume protein, that could be thousands of dollars annually. And uh lastly, I would start a waste log. And anything that gets thrown away gets written down with a reason. Do it for a week diligently. Get people on board for a week and let them know, and just say, listen, we're trying to crack down, and you'll get some some people that roll their eyes, or you'll figure out who's on board and who's not. Um, but I would do it for a week. Anything that gets thrown away, anything that gets dropped, anything for any reason gets written down with that reason, and and a one week is gonna show you exactly what products are disappearing and why. Now, the whole thing in all of these exercises is not to catch anyone doing something wrong. We're just gonna try and close the loop and and figure out what you paid for and what you sold. And the loop is what's causing the elevated food cost, usually. And I think if you do um if you do all that, then your problem will be solved. Listen, food cost percentage, uh, right along with labor cost percentage, these numbers are not numbers that you directly manage, they're outputs, they're symptoms. It's a number that tells you what's happening in all of those places that we just talked about in your operation. So those are the inputs. And that is another week of the suggestion box. And look at that. Submission one looked like a food cost problem, and it was a purchasing system problem. Submission two was uh what looked to be a vendor loyalty problem, and it was actually a pricing accountability problem. And this last one looked like a mystery, nobody knew, but it was actually all four of the small systems failing to run simultaneously, uh, adding up to one big number. So all three of those operators uh are running restaurants where the guest experience is solid, but the money is leaking, and the part of the operation the guest never sees. The fourth wall, which when there's leaks there, they happen fast because not a lot of people catch them all the time. It's not part of the main show, which is actually the hardest kind of problem to fix because there's no guest complaint to point to. It's just a number that doesn't add up and uh a feeling that something's off. But front of house is where you earn the guest, back of house is where you earn the margin, and both need to be at the same level of attention. Uh, and a lot of operators give them very different amounts of that attention. You have to pay attention to both and be aware of both and constantly audit both. So, um, how much are you aware? I mean, do you do you know the gap between what you paid for this week and and what you actually sold? And if you don't, do you know where to start looking? You know? Thanks to everybody that submitted this week. I know the purchasing and waste stuff is not really the most sexy thing to talk about, and nobody really talks about it. Uh, but I'm glad we were able to today because it is something that is refreshing um and a nice little reminder. So thanks again for tuning in to the suggestion box. This was episode eight. I look forward to speaking to you all next week. Uh, have a great week.