Convenience Store Food Service Consultant- Dean Dirks: News, Articles, Events

May 19, 2008

FOOD SERVICE- NUTS & BOLTS

Filed under: Speeches — Tags: , , , , , , — deandirks @ 9:19 pm

Outline of the “Food Service- Nuts & Bolts” speech I recently gave at the Minnesota conference.

By Dean Dirks

  1. PERFECT STORM
    Highest food price increases in 27 yrs
    Corn price is $5.56 vs. $3.34 last year
    Wheat price is $10.38 vs. $5.80 last year
    Fed. Min.-$5.15 hr to $7.25 (next 2 yrs)
    Current US average minimum wage is $6.27
    Washington-7.93 minimum wage
    Weak economy
    Elastic retail prices- McDonalds, Wendy’s Burger King- dollar menu to grow sales
  2. KEEP SCORE
    Critical Elements of the P&L
    Sales
    Food cost ( Direct and Indirect)
    Labor (  Taxes & Benefits)
    Operating Expenses ( Electricity, repairs, credit card)
    Occupancy Costs ( Allocated rent, taxes)
    Depreciation
    Bottom Line – Net Profit or Contribution
  3. SALES- HOW YOU MEASURE UP
    Inside customer counts- no pay at the pump
    Best in class capture rate (customers who will purchase food) = 25%
    Best in class average transaction (it will be different for various concepts
    Multiply 25% of inside customer counts by the average transaction.
    Example, 600 inside counts x .25% capture rate x $6.50 (average transaction) =  $975 a day
  4. SALES GROWTH- PRICE CHANGES
    Competitor price checks- monthly
    Price increases- focus on high volume items
    Raising all prices will draw attention with not as much impact on the bottom line
    Bean burritos- 200 a day x .20 = $40 a day
    Price increase=  $14,080 in annual sales
    Raise to .99 price point-psychological
    Raise combo meal prices 10 cents.
  5. SALES GROWTH STRATEGIES
    Charge premium prices for freeway locations
    Rural locations, captive market- premium pricing.
    Eliminate 12 oz coffee, offer 16, 20, 24 raise each 10 cents.
    Eliminate 16 oz cold drink, 24, 32, 44 raise each 10 cents
    12 oz 12%-  16 oz 24%- 20oz  40% oz 24%
    Modify your menu to add supersizes
    Up sell combo meals, large drinks, dble meat.
  6. BUILD RECIPES
    Every item on your menu needs a recipe
    Direct materials: bun, hamburger, cheese lettuce, pickles
    Indirect materials: burger wrap, condiment packs, napkins, bag
    Set pricing based on direct and indirect costs. Need 60%-65% margins.
    Analyze price points to maximize profit, if 60% is .95, round up to .99.
  7. IDEAL COST OF SALES MODEL
    Number of items sold / week multiplied by  price
    Recipes are built, linked to raw goods
    Increase in raw costs change the recipe cost
    Items sold per wk multiplied by the recipe cost
     The total item costs then divided by total retail income.
    The model tells you ideal food costs based on sales mix.
    Food costs -reviewed on variance to the ideal cost of sales.
  8. FOOD COST CONTROL
    Employees portioning correctly
    Pre portioned items weighed correctly
    Empty squeeze bottles, mayonnaise, mustard
    Ketchup, mustard pks,  in carry out bags
    Ring  extras, upsize and combo meals correctly
    Employees giving away food  to friends
    Make sure prices are correct on invoices.
    No specials in captive markets ( a freeway location)
    Specials, use low food cost items.
  9. FOOD COST CONTROL
    Paper costs can represent 10-15% of costs
    Napkins in bags
    Alter recipe’s ham for bacon
    Entice customers to purchase low fc items
    Smaller price points- less food per item
    Only sell high volume hot beverage flavors
    75% of coffee sales 5-8, reduce flavors after 8
    Brix soda machines once a month.
    Cappuccino  and coffee machine dumps checked monthly.
  10. FOOD COST CONTROL
    Record all waste
    Inventory at COST once a week.
    Inventory paper products associated with food items
    Food cost info to supervisors the day after inventory
    Call managers and request an action plan
    Food cost management is a minute by minute, day by day process. 
  11. LABOR CONTROLS
    Make labor control part of your culture.
    Time series vs. customer count
    Think dollars, not hours
    Daily and weekly labor a function of sales
    Sales per labor hour
    Make managers accountable for effective  reviews and raises
    YTD labor is one of criteria for bonus
  12. LABOR CONTROLS
    Part time labor. Recruit, recruit, recruit. Needed to reduce labor
    Shift leaders, who will send people home when it is slow
    Hours of operations in food service
    Training is critical, but don’t allocate training dollars
    If the manager is allowed training hours they will use them , they should be training
    Move equipment to reduce labor.
  13. LABOR TOOLS
    Schedule labor based on 15- minute customer counts, not employee needs
    Actual vs. budgeted labor report
    Labor distribution report, overtime, average wage, shift differential, and overtime rates
    Action plan e-mailed the same day.
  14. SUMMARY
    There are no silver bullets in  food service.
    You should not be in the food service business unless you are expensing all costs to a separate Profit and Loss statement
    Success requires hourly and daily attention to food and labor controls.
    You need to react to poor sales, excessive labor or high food costs the next day, not on the 10th of the next month when the P&L is produced
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