Monthly Archives: September 2009

What shall we promote today?

How do your staff know what to promote? Is it just left to chance, or do you brief them to ensure they focus on the items that make you the most profit? It sounds obvious, but unless you know at any one time how much profit margin you make on each sale, how do you or yor team decide which items to promote?

Here are some of the actions you can take to ensure you know your most profitable items – opposed to your most popular ones. This way you can ensure you are doing everything to promote the right products and services, and playing down your loss leaders. Making you the margin you deserve.

When applied to your menu this process is termed ‘Menu Engineering’. But why limit it to you menu? Apply this tool to any of your offers to wheedle out your poor performers, and ensure you are focusing your resources and energy on the items that make you the biggest margin in all parts of your hotel or restaurant.

There are three stages to determining your most profitable items.

1. The first stage is to identify your profit contributions

2. The second to analyse the popularity or demand

3. And the third to assess your focus of attention

Stage one ~ Margin contribution

Whilst we often focus on a percentage margin (or in the case of menu items we tend to refer to a food costs percentage), it’s actually more useful to look at the margin contribution in monetary terms. For example:

Your Pea and Broad Bean Risotto costs £1.20 per portion to produce and you sell it for £6.00 (excluding VAT), so your food cost is 20%, and your gross margin is 80%. So this appears to be a healthy margin and on the face of it would be a good dish to promote.

Compare this to your Thai Style Seabass, which costs £4.50 per portion and you sell for £13.50 giving you 67% gross profit.

Now, on the face of it you’ll want to sell more of the risotto because the margin is higher. However if we think about this in monetary terms, for every risotto you sell you make a £4.80 gross profit, yet for every seabass you sell you make a profit of £9.00. Doesn’t it therefore make sense to be selling more seabass than risotto? Well of course it does; that’s why we need to look beyond the margin percentage.

The easiest way to do this is to create a simple table as below, listing all your menu items.

Stage two ~ Identify popularity or demand

In order to identify the true contribution of each item or service we need to look at its popularity or demand; in other words how many of these do we sell.

This can simply be done by extending the above table.

Stage Three ~ Assessing your focus of attention

Using an adaptation of the ‘Boston matrix’ we can now attribute each of your menu items to one of four categories.

A. High contrbution value and popular (Achievers) ~ Thai Seabass

B. Low contribution but popular (Backbone) ~ Venison Sausage and Mash

C. High contribution value but not popular (Challenge) ~ Lamb and Apricot Pie

D. Low contribution and is not so popular (Duds) ~ Pea and Broadbean Risotto

Achievers

Obviously these are very attractive to your business and you want to keep these. What is it that makes these items so popular? The more you can emulate the success of this category the better.

Backbone

These items are popular, and are often what brings in the numbers, but make you less profit on an individual basis. The challenge here is to make them more profitable without losing their appeal. So be careful not to reduce the production cost or increase the price without first considering what impact this will have on sales volume, on the dish itself, and the knock on effect on other dishes too.

Although these items might withstand a small price increase, the very reason they are so popular could be down to their price, and the perception of value for money. An alternative is to review the cost price, maybe substituting an expensive ingredient for a less expensive one (e.g. changing the cut of meat), or looking at an alternative garnish, but without compromising on the quality of the dish.

Challenges

Your challenge with these is how to change them to make them popular, but without compromising the profit margin. Is it the wording on the menu, the perception of value for money, or the dish itself that needs some attention? Maybe your merchandising lets it down, or your staff do little to promote it. Analyse what you can do differently, then test the results.

Duds

These are the items you need to drop in favour of more profitable and more popular items. What can you learn from the other three categories – particularly your achievers – to come up with alternatives? Although they may not be losing money, they will be detracting from sales of your more profitable items, and could be tying up a disproportionate amount of stock, resources and labour.

As the risotto illustrates, not everything with a high margin percentage is necessarily what’s best for your business – if something gives a low monetary margin and isn’t very popular, stop wasting your energies on it and replace it with something more popular or with a higher margin – or ideally both!

Clearly not everything will always slot quite so neatly into one of these four categories, but at least it will give you a start of where to focus to revise your offer to help you weed out your poor performers and achieve the best profit margin over all.

The examples given here are for your menu, but exactly the same principles can be applied to any aspect of your operation – so review your bar, spa, conference packages, room tariff, inclusive deals – anything where you can influence the component parts, the cost price or the selling price. And drop the ‘dud’ items so you can concentrate your energies on your top performers your ‘achievers’.

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Cash might be King, but so is your Stock

Stock is no different than cash – so treat it as such.

You wouldn’t leave your safe unlocked or your till drawers open, so why would you leave your store rooms open to anyone and everyone?

Here are my top 30 tips on controlling your stock

Check suppliers’ prices before ordering, and adapt your order if price changes will reduce your margin
Keep stock as low as possible by only ordering what you need ~ you’ll benefit from easier control, staff wont be tempted to use more than they need, reduced wastage from perished or damaged stock, and most importantly it helps your cash flow
Only ever buy products on offer if you know they are needed, or can be utilised cost effectively e.g. incorporated into the menu without it affecting your sales or margins
Control who is allowed to place orders for high priced items
Don’t allow purchases for staff to go on your invoices ~ ensure they are invoiced directly to avoid any discrepancies or disputes
Keep an order book so you have a permanent record of what’s been ordered
Check all deliveries are complete, adequate shelf life and in good condition ~ never accept anything that is not to standard. Keep a dedicated set of scales and a thermometer in the food delivery area
Check invoice prices against suppliers’ list or quoted prices, and don’t accept expensive substitutes for out of stock items
Conduct your own spot checks on deliveries ~ check what your suppliers send and what your staff are willing to accept
Keep stores tidy, with everything having its own place – it’s far easier to control. Print out a layout of the stores and label shelves to ensure everything goes back to its proper place
Separate items to avoid risk of cross contamination and subsequent wastage ~ high risk foods away from low risk, cleaning chemicals away from food or laundry, etc. Not just in the stores, but on housekeeping trolleys or baskets too
Ensure correct storage for the product ~ i.e. stored at the correct temperature, correct atmosphere
Keep stores locked, with access only from those who need it, and only allow staff to take what’s needed for the day to avoid excess items going to waste
Keep particularly high value items somewhere it is easy to monitor e.g. gifts, saffron, truffles ~ anything that is easy to steel, or easy to over use – even if unintentionally
Date stamp perishable products clearly and ensure stock rotation to avoid spoilage
Write the prices of items on their box so staff see what they cost
Fit dispenser pumps on cleaning materials to avoid over use
Take stock regularly, and at the same time each period, weekly if possible, but as a minimum monthly – to get accurate stock consumption figures (this also encourages low stocks and good rotation)
Ensure all items are physically counted on each stock take ~ don’t just assume the contents of a box is the same as last time
Use an independent stock taker for high value stock such as liquor, or even for all your stock takes if you don’t have the staffing to do this accurately
Check stock and consumption in all areas ~ don’t forget disposable items such as napkins, foil, printer paper, ink cartridges, toilet rolls, etc
Follow a regular cleaning and maintenance schedule on all your store areas ~ freezers, fridges, chilled areas checking for temperatures, air circulation, cleanliness, rotation of stock, door seals on fridges and freezers, evidence of pests, security
Know your expected usage and check your actual consumption figures against this. If you know on average only 60% of guests use the body lotion and you’ve had 100 room nights this week does your body lotion bottle consumption equate to this
Openly investigate any discrepancies as soon as they are identified. If you have a problem with pilfering this will make people less inclined to take the risk
Check your detergent dispenser concentrations on dish washers yourself – don’t leave this to the sales rep
Keep your choices limited to avoid low stock turnover. Don’t be tempted to buy in items just because one of your regulars requests it; you’ll never be able to please everyone all of the time (and when it comes to the menu, too big a choice gives the customer the perception of low turnover too)
Ensure all staff are trained in stock control – this means chefs/service staff are trained in portion control, housekeeping staff are trained in the correct storage and use of toiletries and cleaning materials to avoid wastage
Educate staff in the budgets and margins involved in the businesses – if they think you make a fortune on every sale they wont control costs
Make it crystal clear to staff what the rules are on use of materials – including what’s allowed and not allowed for personal use. Post a sign by the staff entrance reminding them of the rules
Accidents do happen ~ but ask staff to let you know when there has been anything out of the ordinary to affect wastage or stock levels

Increase your profits without the need for a single extra customer in your restaurant

https://www.naturallyloyal.com/products-resources/money-matters/

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The 12 days of Christmas – What? Already?

Whether we like it or not, Christmas can be our busiest time of year.

So it can be make or break for some hotels or restaurants in what has been for some a difficult year.

But what happens when we get our sums wrong?

Your Christmas menu is key to your profitability over Christmas.

How would you like an independent review of your menu?

For the next 12 days only we are offering a Christmas Menu Review, to check you are doing everything to make your menu irresistible, offering excellent value for money, but at the same time making you maximum GP. Sounds good?

Click here for more details

Christmas is coming…..

Yes, I know the kids haven’t even gone back to school yet, but Christmas should be your most profitable time of year, and this year will probably be more competitive than ever. So here are 20 actions to do now, so you don’t leave things to chance, and help get you on track for your best Christmas season ever.

Finalise your Christmas menus offering lots of sparkle to give your customers exceptional value for money, and make you stand out from the competition.
Make sure you fully cost everything including extra labour costs, entertainment, decorations and non-food consumables to ensure you are still on target to reach your profit margins.
Plan your minimum spend per booking, taking into account popular dates and less popular times, and price accordingly.
Be creative with the type of events you can hold – can certain areas be roped off for drinks parties, pre dinner receptions or buffet events. If demand normally outstrips your capacity can you hire a marquee for the garden (with all the appropriate access, lighting and heating of course)?
Create a Christmas web page(s), which includes menus, costs, capacity, deposits, dates, times of service, etc.
As well as the small print, make your Christmas web page inviting: Dig out your old photos of past Christmases with everyone having a good time, and the restaurant or hotel looking its cheery best.
Plan your promotional material and get this professionally designed and printed as soon as you have finalised your promotions.
Set up a Pay Per Click campaign on Google Adwords to attract Christmas parties.
Make it easy to pay deposits – ideally with a few clicks on line, or via credit cards over the phone. Waiting for a cheque to be posted and cleared is too much hassle for most people, adds more uncertainty for you, and does nothing for your cash flow.
Brief staff on what you are offering, prices and everything they need to take bookings and deposits.
Send out regular mailings to everyone on your list (you do have a list, don’t you?) each time focusing on a different aspect of what’s on offer.
Offer attractive incentives for early bookings (with a deposit).
Contact everyone who booked last year (and the year before), identifying what you are doing this year to make the occasion different / even better than last year. Include an exclusive offer for them only, and first option on dates.
It’s never too late to start building a list, so run a competition or prize draw for a seasonal hamper or case of champagne.
Contact local businesses, club secretaries, local societies, business networking groups, the local gym, village/town hall, and wherever groups of people get together who may want to celebrate.
Invite party organisers to a preview event to give them a taster, or put together an exclusive offer, to build loyalty.
Talk to other local businesses who offer complimentary services – your wine merchant, local B&B’s, gift shops, other attractions to share mailing lists, and potential joint ventures.
Nothing should be competing with your Christmas promotions so don’t plan any other offers or accept other vouchers during this period that undermine your potential Christmas revenue.
Plan your extra staff requirements now so you don’t get left short. Contact your seasonal workers – and local colleges as soon as they are back – so you can get your pick before the competition or supermarkets snap them up.
Christmas should be a season of goodwill – so don’t forget your loyal staff and give them something to look forward to and an incentive to put in that bit extra over the busy period, and help you make it a huge success.

To give you that nudge you need and help you get off to a flying start, we are offering a Christmas Menu Review, to help you make sure you are offering the best possible options, whilst earning you the best possible profit margin.

Click here for more details.