Restaurant Consulting NYC | The Value of A Good Business Plan Your Restaurant’s GPS - Gastronomic Positioning System | 4Q Consulting, LLC

The Value of A Good Business Plan

Your Restaurant’s GPS - Gastronomic Positioning System

For many, opening a restaurant is often a romantic idea, until reality sets in of just how difficult it actually is.  We advise clients that developing a detailed business plan is the first step.  A great business plan becomes your navigation system (your GPS) for everything from raising funds, to fleshing out a concept, to getting open.   In its simplest form a business plan is a guide for your business that outlines your goals and details how to achieve them.

A good business plan should include: a summary of your concept, mission and company goals; a market analysis of where you plan to open – including a competitive analysis; a detailed description of your product and how you plan to execute that product; a labor model; several sets of financial models and an exit strategy – in the event that your concept doesn’t work.

Before and after opening your restaurant, a business plan can:

Be a pre-investment gut check - Investing in the development of a business plan before doing anything else can save you money, time and often heartbreak. The plan gives you an opportunity to flesh out your concept and to investigate whether it can be profitable in the marketplace.  You might just discover that what you thought was a great idea won’t work:  the demographics of the area may be wrong; the rents may be too high or the financial models don’t work for your concept.  Better to know in advance than risk losing many thousands of dollars after the fact.

Help you source start-up capital and financing – Many independent restaurants that try to self fund their start-up, are often under capitalized and fail within the first year.  A detailed plan, with several detailed sets of financial models, allows restaurateurs to secure outside monies with various types of lenders and/or through alternative sources.  Your plan must be able to answer the following questions for lenders and investors: 1) how and how soon do you plan to have a positive cash flow in order to be able to repay a loan or pay out investors? And 2) what is the unique selling proposition for your restaurant – for example, why will customers come to your restaurant versus the others in the neighborhood?

Help you manage cash flow- Careful management of cash flow is a fundamental requirement for all restaurants. The reason is quite simple: many restaurants fail not because they are unprofitable, but because they ultimately become insolvent.  Most restaurants' cash flow can fluctuate dramatically from week to week primarily because of the timing of payments like payroll, sales tax, and rent combined with on-going operating expenses. Unexpected costs, such as emergency repairs, only amplify this fluctuation. Knowing your business cycle (e.g. busy season/ slow season) will help you be proactive in your cash flow management. The only thing worse than having a cash shortage, is having a cash shortage that was a total surprise.

Be used as an on-going road map to your success and should be updated often.  By continuing to review and update your plan, you can understand and develop changes to, and the growth strategy for, your business. Regularly checking your planned performance versus your actual results allows you to make the necessary changes to get you back on track.  This is a living breathing document, not a book that is thrown in a drawer and never looked at again.

We see restaurants that did not start with a formal business plan struggle to be successful - they figured their passion and optimism were enough to build a successful company. Operating without a plan can prove to be more time-consuming and costly in the long run – like driving somewhere without directions and just hoping you get there.

Don’t know where to begin?  Do you know how to write a great  business plan with appropriate financial models? www.4qconsult.com can develop business plans to meet your needs. 

All original content copyright Noelle E. Ifshin, 2016-2017. 
President
4Q Consulting, LLC 
noelle@4qconsult.com  www.4qconsult.com 
244 5th Avenue, Suite 1430, NY, NY 10001  
(212) 340-1137

Restaurant Consulting NYC | Are You Being Penny Wise and Pound Foolish? How to Consider Managing Your Restaurant’s Big Purchases | 4Q Consulting, LLC

Are You Being Penny Wise and Pound Foolish?

How to Consider Managing Your Restaurant’s Big Purchases

If you are putting off upgrading your aging restaurant equipment or are not investing in equipment that makes you the most productive, you could be harming your business while trying to save money.  As discussed in our last blog, Where Oh Where Have My Margins Gone, the current financial challenges in the restaurant business are on the rise with increasing labor regulations, higher wages and market pressures. Many restaurateurs are thinking that with rising costs there is no way they could possibly spend for new, expensive equipment, technology or software.

Before “cutting off your nose to spite your face”, analyze how you can monetize a capital investment by growing your sales, cutting your costs and delivering a consistent, quality product.

The purchase price might be a big number, but if you use the 4Q Approach, it shouldn’t be that scary:

Quantify Your Purchase.  To quantify this big spend, you need to fully understand your business and the economies of the purchase.  If you are buying a rotisserie for your restaurant, do you buy the small manual unit or the larger capacity, automated unit?  To answer this, you need to calculate how many more chickens you need to sell to recoup the cost of the larger unit.  If you can increase output – to sell more, and create a more consistent (better) product with little added labor - the increase in cost from one unit to another is easy to overcome.  Additionally, you can profit by the flexibility a larger unit affords, offering a wider range of rotisserie menu items.

Qualify Your Purchase.  Very often restaurants put off installing new or upgraded equipment due to sticker shock.  Upgraded equipment can often lower your ever-increasing variable costs, optimize work flow, or offer up solutions to operational challenges. This can lead to improved product quality and, in turn, repeat business. More efficient equipment can possibly replace part or all of your labor cost by lowering the number of man hours needed to monitor product produced on old, inefficient equipment.  Think about an older rotisserie that most be continuously monitored to prevent burnt or unevenly cooked chickens – in this example both your labor and food costs can be impacted.  Additionally, modern equipment can lower energy costs and replace the cost of constantly repairing older units.  

Quantitative Analysis of Your Purchase.  Most large equipment or software expenditures can be financed in some way, so you don't have to lay out a large chunk of money all at once.  When investing in your business, don’t go part way: buy the equipment you need to improve efficiency, and grow your business.  When you decide to buy a new car, to replace the Junker that is constantly in for repairs, you buy the entire car - you wouldn’t buy the tires one month, the engine the following month and the chassis the third month.  Instead, you would finance your large expenditure to make the price palatable.  You must analyze the impact buying new equipment has on your restaurant operations.  What you can potentially save in your cash flow, by being more efficient, can be used to finance your new purchase. Sometimes, new equipment “pays for itself”.

Query about Your Purchase – Before making a large capital expenditure is it always a good idea to speak to your accountant or financial adviser.  Make sure you understand the depreciation and tax benefit implications of a capital investment in advance.    Additionally, there are often state rebates and incentives for installing new, more energy efficient kitchen equipment that can help offset the purchase price.

Making smart, planned decisions on your large capital expenditures can often help you grow, and streamline your business for the long term.  

Don’t know where to begin?  Do you know how to and procedures in place to be as successful as possible?  www.4qconsult.com can develop customized operational guidelines to meet your needs. 

All original content copyright Noelle E. Ifshin, 2016-2017. 

Noelle E. Ifshin
President
4Q Consulting, LLC 
noelle@4qconsult.com  
www.4qconsult.com 
244 5th Avenue, Suite 1430, NY, NY 10001  
(212) 340-1137

Restaurant Consulting NYC | Where Oh Where Has My Margin Gone? The Changing Labor Environment and How It Affects Restaurants | 4Q Consulting, LLC

Where Oh Where Has My Margin Gone?

The Changing Labor Environment and How It Affects Restaurants 

People outside the restaurant industry are often surprised by how small restaurant profit margins actually are.  To say margins are razor-thin would be an understatement, as the average profit margin of a restaurant is 3-5% of total revenue.  Labor expenses are a restaurant’s largest expense and the external forces on labor are keeping many restaurateurs up at night.  

Labor-related issues will be the biggest challenges facing the restaurant industry in 2016 and beyond. Restaurants will need to rethink their business models to handle the changes that are coming.  Here are four items that we are advising our clients to watch carefully:

Tightening of the Job Market - Finding top talent is becoming increasingly difficult for restaurant operators.  With the improved economy, the growth of the restaurant industry and the continued low labor participation rate, finding quality staff is challenging.  According to federal data, the restaurant industry alone added 40,000 jobs, or 16% of all workers to the US economy in February 2016.  With increased competition for talent, the cost of recruiting and hiring new employees has become more and more expensive. Moving forward, employee retention will be a cost saving imperative and restaurants must work to slow the revolving door of employee turnover. Conversely, working short staffed has its own costs associated with overtime pay, poor product quality and customer service.

Higher Minimum Wages – Minimum wage increases disproportionately affect restaurants as the food service industry employs close to half of all the people in minimum wage jobs.  It is therefore no wonder that operators are worried about where the minimum wage issue is going.  Many states and municipalities – such as California, Seattle and most recently New York City and New York State – have passed accelerated, higher minimum wage laws that are forcing operators to rethink their labor and compensation models. 

New Regulations Governing Hourly Employees – Paid sick leave, spread-of-hours rules and healthcare insurance are additional changes to the landscape that operators must prepare for now and in the near future.  Ensure that you are fully versed in all the laws and regulations that affect your restaurant, so you can plan for any economic impact of these in advance.  If you need help in understanding these very important rules, get it. Not planning can put your restaurant at risk for a lawsuit.

Changes to the Federal Overtime Laws – The U.S. Department of Labor is working towards changes in defining who is an “exempt” vs. “non-exempt” employee. This will have a major impact throughout the restaurant industry.  Traditionally, salaried employees - such as restaurant and bar managers, chefs and sous chefs - perform manual tasks throughout their day while managing their staff.  New regulations may re-categorize these positions as “non-exempt” based on the job functions and entitle them to overtime pay if their salaries are below a certain amount.  Should this happen, operators will be required to rewrite their manager job functions and descriptions due to the potential economic impact of these changes.

With these big labor challenges, it will be crucial for operators to become more and more efficient to preserve their bottom lines – especially for smaller mom & pop operators.  As discussed in Between the Lines - Operational Challenges That Can Make or Break Your Restaurant:

         “Restaurant success depends on many things, but it can all boil down to 
          one question:  Where does the money go? Having a handle on your 
          operations is a key to answering this question. Have processes and 
          procedures to reduce economic drains, train your staff to follow them and 
          hold them accountable.” 

Not adapting and hiding your head in the sand will lead to poor management and poor fiscal controls – which can make those margins evaporate faster than a sauté pan of boiling water. 

Don’t know where to begin?  Do you know how to put policies and procedures in place to be as successful as possible?  www.4qconsult.com can develop customized operational guidelines to meet your needs. 

All original content copyright Noelle E. Ifshin, 2016-2017. 
Noelle E. Ifshin, President, 4Q Consulting, LLC 
noelle@4qconsult.com  www.4qconsult.com 
244 5th Avenue, Suite 1430, NY, NY 10001  
(212) 340-1137

Restaurant Consulting NYC | You and Me and Restaurant Makes Three | 4Q Consulting, LLC

You and Me and Restaurant Makes Three

Husband and Wife Restaurant Owners

As discussed in The Family Owned Restaurant, family business are the bedrock of the U.S. economy. Family businesses often start with a husband and wife team trying to make a better life for their families.  In many cases, the marriages and the businesses become so intertwined that it becomes hard to tell where one ends and the other begins.  Starting and running a successful restaurant can be more demanding than having a baby, and often couples do not survive the birth of a restaurant.  

In order to ensure both the restaurant and your marriage survive, here are four important items to keep in mind when opening or running a restaurant with your spouse:

Treat the business like a business, not an extension of the home.  Draw a distinction and leave work in the business. If both husband and wife are to be partners in the restaurant, having a written partnership agreement is recommended – especially if you plan on having additional business partners. By the time you realize you need an agreement, due to a dispute, it is often too late.  You should have a written agreement that includes: the division of ownership; an outline of the amount of, and stipulations for, taking salaries; and how to handle any profits or losses.

Don't assume that the role in the personal relationship translates to the roles in a work relationship. Just as you want to define the partnership agreement, it is advised that couples decide in advance the work roles within the business – which spouse is going to do what.  For example, the person who balances your personal checkbook at home might not be the best one to reconcile purchase orders and inventory.  And, when defining job roles, if there’s something neither is good at, delegate it to someone else!

Couples we work with find that the key to their success as both a married couple and business partners is to continually communicate their roles and how they can help each other in those roles.  In that regard:  

Standard operating procedures (SOP’S) should be agreed upon, set and followed. Understanding the task expectations of each role and adhering to the agreed upon SOP’S that meet them, removes the possibility of misunderstandings with couple business owners.  Even the small tasks matter: agreeing upon how receipts are filed and the books are balanced; when cash is taken to the bank and who does it; who orders food and beverages and what levels of inventory you plan to keep; and who handles staff scheduling and how are changes to the schedule made are all examples of key items to agree upon in advance.

Support each other and be unified.  Present a united front to your employees at all times.  As basic as it sounds, do not bicker, fight or have large disagreements in front of your staff.  Like another other business partner relationships, you will have disagreements on how to run the business. Remain professional at all times and take those arguments off-site or behind closed doors.

Even though you are spending a lot of time together in the restaurant, you still need to make time for each other.  Find a way to have a night together away from the restaurant – even if you end up discussing restaurant business, being in a different environment changes the conversation.  And most importantly, try not to go to bed angry.  Fighting couples don’t work well together and can have a huge impact on how the business functions.

Remember why you decided to open a restaurant in the first place.  You want to plan ahead to be as successful as possible, while ensuring that demands of the restaurant don’t pull apart your marriage!

Don’t know where to begin?  Do you know how to put policies and procedures in place to be as successful as possible?  www.4qconsult.com can develop customized operational guidelines to meet your needs. 


All original content copyright Noelle E. Ifshin, 2015-2016. 

Noelle E. Ifshin
President
4Q Consulting, LLC 
244 5th Avenue, Suite 1430, NY, NY 10001  
(212) 340-1137

Restaurant Consulting NYC | Seven Deadly Restaurant Sins | 4Q Consulting, LLC

Seven Deadly Restaurant Sins

Owning and running a successful, profitable restaurant is never easy.  When you break down restaurant business concepts into their lowest common denominator, you are left with the “3 P’s” - Product, People, and Process.  What is served, who serves it and how it is served should tell the customer the story of who you are and what your brand is.

The Seven Deadly Restaurant Sins are behaviors that get in the way or prevent you from properly executing the “3 P’s”.  The sins, if ingrained in your restaurant, can become barriers to change, growth and success.  

Think of the sins as “land mines” which must be avoided in order to be successful:

Greed – Greed can often get you into trouble as a business operator.  In a free market economy an operator wants to be as profitable as possible.  However, operators must also financially take care of their employees by offering them a fair wage, and their customers by providing excellent customer service and a product at a price the market will bear.  We have all read about famous restauranteurs who are sued for various reasons:  violating wage and hour laws; not distributing tips properly; underpaying illegal immigrant staff; price gouging tourists; adding gratuities to checks subjectively.  The cost of this greed, in the form of PR headaches, legal fees and loss of business is almost always greater than the few extra dollars you can collect. 

Gluttony – Gluttony is nearly synonymous with greed and is defined as “one given habitually to greedy and voracious [behaviors]; withholding from the needy”.  In business, gluttony can be very destructive; it is not knowing when enough is enough and profiting to the detriment of others.  Your business is a citizen of the community in which is exists; it is important to have a program that gives back to the community or to your employees. In larger companies, these types of programs can help attract top employee talent.  For small businesses, an out-reach program does not have to be expensive - simple, easy and workable are often best.  Try donating leftover food to community kitchens, or left over raw scraps to a company that makes mulch for a community garden; volunteer time for a local cause; sponsor the local little league team.  Involve your employees and get ideas from them about what is important them.  You will be seen as a good corporate citizen, which will pay you back in positive PR.

Pride – Pride is a double edged sword in the restaurant business.  Pride in your product and staff can be very useful to help you stand out in a crowded field, however pride can also act as a hindrance to improving your business.   Pride can prevent you from being able to: recognize when you are on the wrong track; change course in time to prevent a financial downfall; react to factors in the economy – such as rising food and commodity prices.  If you always look with a critical eye, you will always find ways to improve.

Sloth – Sloth is defined in Merriam-Webster’s dictionary as “reluctance to work or make an effort; laziness”.  Laziness in any business is the kiss of death, but especially in the restaurant industry.  Once laziness sets in, standards start to slip, corners get cut and consistency of product and service becomes non-existent.  The antidote to sloth is vigilance of even the smallest details.  It’s the little things you decide to ignore that add up, causing your standards to decline.  As we discussed in Consistency is King, “Customers should not have to spin the roulette wheel each time they visit your restaurant; they should experience the same quality of food and service every time.”

Wrath – Wrath is great anger that expresses itself in a desire to punish someone. Operators who yell, belittle and antagonize employees or customers won’t be open very long.  In today’s world where anything can be posted on line and go ‘viral’ overnight, an operator must be the utmost professional and lead by example at all times.  Once you have a reputation as being wrathful towards your employees, it will be very hard to recruit and keep top talent.  Customers will avoid restaurants where the owner or manager has a reputation for yelling at guests.  Your restaurant wouldn’t exist if not for the employees and customers, who should be treated as the valuable components of your business that they are.  If something is wrong with your business, look at yourself first.  The old proverb rings true here – “A fish rots from the head”.

Envy – Envy is a feeling of discontent or covetousness with regard to another's advantages, successes, and or possessions. The sin of envy in a restaurant is to covet other restaurants, to worry about what others are doing and not to focus on running your own business.  It makes you take your eye off the ball in your own operation, which in turn, can cause your downfall.  Owners must focus on making their restaurants the best they can be, whatever they are – if you own a hot dog stand, make it the best hot dog stand you can without being distracted by what the owner of a five star restaurant across the street is doing (or wearing, or driving).  With focus, you will be much more successful.

Lust – Lust in business is often seen in conjunction with envy.  To lust is to crave or desire something, often what others have.  It can be a lust for power, money, or material objects and, like envy, can lead to unscrupulous behaviors.  Lust can lead to not reporting all your cash income, taking kickbacks from vendors, ordering personal items through the business, and not being honest with your partners and investors about the business’s finances. Besides some of these actions being illegal, these behaviors drain resources and break the trust of those who count on you, putting obstacles in the way of building the business to the level of success it could achieve.

What all these sins have in common is that falling prey to them is shortsighted and they get in the way of flawlessly executing the “3 P’s” - People, Product and Process.  The restaurant business is not brain surgery!  At a basic level, restaurants should be able to provide an excellent product at a fair price through superior customer service.  Avoiding the Seven Deadly Restaurant Sins puts you on the path to building a sustainable, profitable, long-term business.

Don’t know where to begin?  Ask yourself, do you have the proper procedures and operational guidelines in place to help you be as successful as possible?  4Q Consulting can develop customized operational guidelines and training programs to meet your needs. Email us today for a free business consultation at www.4qconsult.com.


All original content copyright Noelle E. Ifshin, 2015.
Noelle E. Ifshin, President
4Q Consulting, LLC
244 5th Avenue, Suite 1430, NY, NY 10001  
www.4qconsult.com

Restaurant Consulting NYC | Happy New Year! | 4Q Consulting, LLC

Best Wishes 

for a Happy New Year 

filled with Health, Happiness 

and Spectacular Success 

from all of us at 4Q Consulting, LLC

4Q Consulting can develop customized business and 

operational guidelines to help you start and run your business. 

 Email us today for a free business consultation at www.4qconsult.com.

All original content copyright Noelle E. Ifshin, 2014-2015. 

Restaurant Consulting NYC | Happy Holidays | 4Q Consulting, LLC

Happy Holidays and Best Wishes 

for a Happy New Year 

filled with Health, Happiness 

and Spectacular Success 

from all of us at 4Q Consulting, LLC

Restaurant Consulting NYC | Between the Lines - Operational Challenges That Can Make or Break Your Restaurant | 4Q Consulting, LLC

Between the Lines - Operational Challenges 

That Can Make or Break Your Restaurant

Today’s restaurants face many challenges: intense competition; rising cost of goods and real estate; and the slow U.S. economy - just to name a few. Restaurants average profit rates of 3-5% of sales* - thin margins by any measure. However, poor management can make those margins evaporate faster than a sauté pan of boiling water. It is no wonder that 60% of all restaurants fail within the first three years **

As a restaurant owner, you oversee all areas of your business.  These can be separated into three basics: Finance, Sales and Marketing, and Operations. Yet with only so many hours in a day, many owners neglect the breadth of their responsibilities, and only watch their revenue.  Sales and marketing is important in getting customers into your restaurant, and we covered this at length in Attracting Customers.  However, it is what happens within your operation, between top-line sales and bottom-line profits, which makes or breaks your business.

Here are the 4 biggest challenges that can make or break your restaurant:

Poor Financial Controls – Owners often watch their sales daily, while not watching their costs and expenses as diligently.  Common sense points out that if your profit margin is zero it will always be zero, regardless of sales level, unless you change something. Restaurants should measure costs in relation to sales on a weekly basis, as discussed in both Why a Weekly Food and Beverage Inventory is Crucial to your Small Business and Does your Restaurant Compile a Weekly P&L Statement.  Reviewing weekly statements allows you to spot problems and make operational adjustments much sooner than waiting until the full P&L at month’s end: improper product ordering and handling, waste, cash management and employee theft can be significant drains on your business, every day.  

As revealed in How Much of your Profits are Being Eaten by Employee Theft, many employees steal because they can get away with it, and few restaurants have the right controls in place to prevent it. Further, Measure by Measure and 4 Simple Ways Your Restaurant Employees Can Help You Be More Profitable showed how not controlling spoilage, waste and improper portioning can decimate your small margins. 

Poor Staff Training – As we stated in our Blog:  A Well Trained Staff is Your Secret Weapon, “People run your business and your business is only as good as your people. An effective training program is an owner’s key tool to ensure consistency in product and customer service, which is a basic tenet of running a restaurant.”  This is true for all staff, at all levels.  

With a properly trained staff you have less waste in your restaurant.  A short list of why this is includes: Training mangers on proper inventory and ordering avoids excess product; stewards on proper product storage and handling avoids spoilage; cooks and bartenders on proper recipe execution and production levels maintains portion controls; and servers on proper use of the POS system minimizes incorrect orders, misfires and voids.

Poor Quality Control – Quality Control is all about consistency. In our experience, consistency is best achieved by adhering to standard operating procedures that are codified in writing. As outlined in 4 Reasons Why Your Restaurant Needs an Employee Handbook, recipe books, job-specific handbooks, and training manuals standardize tasks and clearly communicate to employees your expectations and the standard to which they will be held. These procedures should cover, in detail, every process in your establishment, from purchasing guidelines to how to deal with an unhappy customer. As boring and unsexy as it sounds, excellence comes from consistency, which can only come from diligence and attention to detail. If customers know what to expect every time they walk in your door, they will keep coming back.

Poor Leadership – Whether it is you, as the owner, or an outside hire running your restaurant, there is a big difference between being a manager and being a leader. As discussed at length in Follow the Leader, “In order to lead rather than just manage, which is vital in today’s diverse, fast-paced world, one must be able to be more than a day-to-day task master. While a manager deals with the technical dimension in an organization or the job content, a leader marshals resources, human and otherwise, for the best possible results.”  Leaders communicate vision, build relationships and trust, train, coach and mentor, and encourage change and risk-taking.

Often, managers who come up through the ranks are not properly trained as managers and make common mistakes.  In the Top 4 Mistakes Managers Make in Managing People, we discuss how “Managers are the front line representation of your business and must effectively work with a diverse group of people. They must live and breathe your company core values and practices.”

Restaurant success depends on many things, but it can all boil down to one question: Where does the money go? Having a handle on your operations is a key to answering this question. Have processes and procedures to reduce economic drains, train your staff to follow them, hold them accountable and have trustworthy leaders in your organization. Additionally, you must be vigilant that your standards are upheld, and make changes as needed. It doesn’t hurt to get an outside, objective opinion from time to time as a gut check whether it is a consultant or mystery shopper

Don’t know where to begin?  4Q Consulting can develop customized business and operational guidelines to help you start and run your business.  Email us today for a free business consultation at www.4qconsult.com.

All original content copyright Noelle E. Ifshin, 2014-2015. 
   

Restaurant Consulting NYC | The Big Chill | 4Q Consulting, LLC

The Big Chill

The coldest air in almost 20 years has swept the nation this week with 90% of the country being issued freeze warnings.  Combine record snow falls from Storm Hercules last week, a vicious cold snap and the Farmer’s Almanac’s 2014 forecast for a colder and snowier winter than the average, and we have a recipe for rising commodity prices now and well into the spring.

Food and commodity prices are driven by basic supply and demand and tend to be inelastic – once they rise, they are slow to fall below the increased level.  This means that prices continue to go up, driving up operating costs.

These price increases can and will affect all aspects of the restaurant business, and operators must pay close attention to commodity prices and availability.  Now is the time to start planning for your spring menus and pricing levels, so as not to be caught off guard. 

Here are 4 possible increases to watch out for:

Meat Prices – According to Bloomberg, “Cattle futures reached $1.371 a pound this week, the highest since Chicago trading began in 1964.” This increase in futures pricing is due to several factors, most of which is uncertainty in yield levels at slaughter houses. In colder months, and in harsh weather, livestock need more feed to keep warm, increasing livestock farmers’ operating costs. Since livestock use more of their energy to stay warm in these conditions, they do not gain as much weight, resulting in a decrease in supply.

Dairy Prices – Dairy cattle, like beef cattle, will also use more energy to stay warm and have lower weights.  Lower weight dairy cattle produce less milk, which in turn lowers supply and raises prices.  Additionally, the on-going debate in the US Congress over the Dairy Policy portion, of the yet-to-be passed Farm Bill, is causing more uncertainty in the dairy market.  Unless a new Farm Bill is passed before March 1, 2014, the odds are dairy prices will fluctuate significantly until the un-subsidized dairy market can settle into normal supply and demand patterns.

Produce and Grain Prices – A deep freeze obviously harms produce crops.  Usually, these disruptions in the planting and growing seasons are contained in a few specific regions of the U.S.  This week all 50 states issued an unprecedented number of freeze warnings, affecting all regions of the U.S.  In Florida, the world’s second largest citrus-producing region after Brazil, this week’s freeze potentially harmed up to 15% of the citrus plants. This can have resounding impact for pricing going forward.

Wheat futures on the Chicago Board of Trade climbed as much as 1.2% this week, Bloomberg reports: “ 'As much as 15% of winter-wheat plants in the Great Plains face damage’, as stated by Kyle Tapley, a senior agricultural meteorologist at MDA Weather Services in Gaithersburg, Maryland.” This has implications for all grain-based products well into the spring and summer months.  Expect increases in raw cereals and flours and possible increases from your Bakery and Bread suppliers.

Energy Prices – Energy prices are on the rise due to demand and scarcity.  When the temperatures drop, demand for energy increases as we turn up the thermostat, while production of gas, oil and coal slows and can even stop, driving up prices.  Increased energy prices affect all other commodity prices, as it is more expensive to bring those products to market.  Additionally, increased energy costs affect restaurants by increasing the costs of product delivery and fuel surcharges, heating your restaurant space, heating your hot water and using your kitchen appliances.

During a cycle of limited energy supply and increased energy prices, farmers who grow corn may get a better price for their limited crop selling it for Ethanol production rather than feed. This in turn can drive up the price of feed and the cost of raising farm animals, pushing meat and dairy prices up, as well as cutting the supply of grain on the market with the price impact there as well  . . .  It is all connected.

As a business owner, you must be aware of all of the external economic forces that affect your business and be able to plan for them. As we head into this very cold and snowy winter, keeping an eye on costs and energy usage, and appropriately adjusting your menu and offerings, to maintain your quality and profitability will be a must for operators.
  
Don’t know where to begin? 4Q Consulting can develop customized operational guidelines to help you manage your costs through all stages of your business.  Email us today for a free business consultation at www.4qconsult.com. 

All original content copyright Noelle E. Ifshin, 2013-2014.

Restaurant Consulting NYC | Consistency is King | 4Q Consulting, LLC

Consistency is King 

Customers should not have to spin the roulette wheel each time they visit your restaurant; they should experience the same quality of food and service every time.  It should not matter which chef or server is working on any given day, the customer experience should never be a surprise.  It is one of the reasons McDonald’s is the number one restaurant in the world – you know what you’re going to get whether in New York, Los Angeles or Chicago.

Consistency is the key to establishing regular clientele, and regular clients are the most important customers to have.    Maintaining regular clientele is a critical factor in establishing a solid reputation that will attract newcomers.  

Assuming you have hired the right employees and trained them properly, here are 4 points to focus on to ensure consistency:

Consistent Messaging - Your food isn't the only thing you provide your guests; you also give them an experience.  A lack of consistent messaging can turn customers off and stop them from coming back. Your brand’s message has to extend to every single aspect of your restaurant, from the persona of your servers, uniforms, type of music playing in the dining room to the logo on your napkins.  Also, all of your advertising, marketing and social media campaigns must be aligned to accurately depict what your restaurant is.  Customers trust you to deliver on your promise and they want to know what to expect.

Consistent Food – Beyond reducing waste, as referenced in Measure by Measure, consistency produces the same appetizer, entrée and cocktail every time.  For this reason, written recipes and standardized kitchen and bar procedures are essential.   You want your signature Salmon entrée to taste the same on Monday night as it does on Friday night.  Additionally, establishing correct production levels ensures menu items are available when your guests want them.

Consistent Service - Whether you are fine dining, casual table service, or a neighborhood dive bar, guests have certain expectations as to the service they want to receive. How guests are greeted at the door and at the table, when and how their orders are taken, how they are served and treated, are all essential “Steps of Service”.  By having these service steps codified, and adhered to, in conjunction with your brand image, ensures a uniform delivery of your product. Great service is achieved by knowing the basic steps of service that guests expect and being able to repeat them time and time again.

Consistent Vigilance – You and your manager’s daily vigilance to the standards you set are crucial in order to ward off possible problems. This can be done by getting ahead of any potential issues through proper planning, training, and constant communication. All employees must know their roles, how to execute them and what to do should they run into problems.  As discussed in our previous Blog, Are Your Pre-Service Meetings a Waste of Time?, pre service meetings are the appropriate time to reinforce your expectations and standards with your staff. 

As an owner, you should know what’s really going on in your restaurant from the guests’ point of view.  Consider using trained mystery shoppers from firms specializing in this service, or recruit your own shopper from your pool of friends, acquaintances and even regular customers. 

Monitor and engage in on line review and social media sites, such as Yelp, Trip Advisor and Facebook to see what your guests are saying about you.  These observations can serve as a way to identify where improvements need to be made and can be used to retrain, tweak and change as needed.

Great dining experiences can be easily cancelled out by one bad experience and one bad experience will cause a customer serious hesitation when deciding whether or not to return to an establishment. You have thoughtfully created a product and image for your restaurant.  It is imperative that you preserve that identity.   Consistently providing the same quality product can determine the success or failure of your restaurant. This does not mean that your product must be high end or gourmet; it just has to be the same product day in and day out.

Don’t know where to begin?  4Q Consulting can develop customized business and operational guidelines to help you start and run your business.  Email us today for a free business consultation at www.4qconsult.com.

All original content copyright Noelle E. Ifshin, 2013-2014. 

Restaurant Consulting, NYC | Harassment – It’s Not Just For Supervisors Anymore! | 4Q Consulting, LLC

Harassment – It’s Not Just For Supervisors Anymore!

From time immemorial, the restaurateur has held to the adage that the customer is always right. But what if the customer is wrong by grossly misbehaving toward your employees?  Employees always have to be polite and helpful to customers, but they don’t have to tolerate unwelcome flirtation, verbal abuse or physical injury.  Most business owners are familiar with the idea of eliminating harassment between supervisors and subordinates in the workplace; however, it is important to protect your employees from harassment in all its forms, which can come from anyone with whom they interact while performing their work duties. In a restaurant setting, once you throw alcohol into the mix with harassing customers, difficult situations can escalate quickly.

Deciding when a particular customer’s behavior crosses the line and makes for a hostile work environment may be a judgment call; however: "Once an employer is put on notice that any of its employees are being subjected to sexual harassment, it must take prompt corrective action to stop it," according to Lynette A. Barnes, regional attorney of the EEOC's Charlotte District Office, whose jurisdiction includes the state of Virginia.  "This is true regardless of whether the harasser is a co-worker, there [sic] supervisor or a third party.”1   Ms. Barnes made this comment summarizing the 2012 ruling of EEOC v. Southwest Virginia Community Health System, under Title VII of the Civil Rights Act of 1964, which awarded $30,000 to a receptionist who complained of sexual harassment by a patient.

Other EEOC lawsuits have been decided that all forms of harassment (sex, race, religion, sexual orientation, etc.) in the workplace can be committed not just by supervisors and coworkers, but by third parties such as customers, vendors, delivery people, or repair workers, and the employer can be held liable. Harassment can even happen outside the workplace while work duties are being performed – think about your delivery people.

These lawsuits can be costly to defend and the awarded damages can be a huge financial burden, enough to put you out of business.

Here are 4 ways to keep your employees safe from the threat of third party harassment and protect you from lawsuits:

Formal Written Policy – As discussed in 4 Reasons Why Your Restaurant Needs an Employee Handbook, “having a well written manual in place can protect your business from potential labor disputes and costly legal fees, which can destroy your business.”  Your manual must have a section that addresses harassment, both within the organization and from third parties, and how to deal with it.  It must include clear guidelines outlining: how an employee can escalate a situation to a manager, supervisor and/or the owner; what steps will be take once a complaint is made; and a non-retaliation clause.

Train Employees on How to Handle Situation – Once you have a written policy, this policy must be included in your employee training for all positions.  Train your staff on how to stay safe from aggressive or harassing customers. Often situations get out of control quickly and your staff must be able to remain calm throughout.  Have safety systems and protocols in place should these situations escalate. Additionally, your managers and supervisors need a higher level of training than your front-line staff to be able to deal with these types of complaints. Managers should be sensitive to situations that they can diffuse before they become reportable problems, or aware of situations that employees do not report.

Safety Systems and Protocols Protecting Employees – Have safety systems and protocols in place should these situations escalate. Regardless of how management learns about the harassment, you should immediately re-assign an upset employee, so as not to have to deal with or talk to a particular offending individual.  Then the manager must address this with the offending person. This can be a difficult conversation, but no customer, vendor or repair person is more important than the legal rights of your employees. 

Consider these additional steps: having an employee buddy system for closing, so no one person closes alone late at night; putting notification of unacceptable employee behavior on your website, on POS computer ‘pop up’ messages; and including a term in all contracts with third party vendors and service suppliers notifying them of your policy on harassment and requiring them to adhere to it.

Remove or Ban the Individual from your Establishment - If the behavior doesn't stop, the owner or manager needs to take such action as removing and possibly banning a customer, vendor or repair person from the restaurant. Many Restaurant owners do not want to take such a drastic step and lose a customer, but the cost of losing a customer is much less than the cost of an EEOC lawsuit.

Like many other issues we have addressed in our blogs, the keys to protecting your employees are: training, communication and vigilance.  It is important that your employees can feel safe in reporting a situation to management and know that you and your team “have their back”. Keeping a comfortable work environment allows your employees to do their best, provide the best service and keep your customers happy. 

The people whom you hire can be your biggest asset. It is easy to forget that Employees are Your First Customers, if you do not take care of their well-being, they will not be beneficial to your business.

Don’t know where to begin?  4Q Consulting can develop customized business and operational guidelines to help you start and run your business.  Email us today for a free business consultation at www.4qconsult.com.

Footnotes:
1.   http://www.eeoc.gov/eeoc/newsroom/release/9-6-12b.cfm


All original content copyright Noelle E. Ifshin, 2013-2014. 

Restaurant Consulting NYC | Between the Lines - Operational Challenges That Can Make or Break Your Restaurant | 4Q Consulting, LLC

Between the Lines - Operational Challenges 

That Can Make or Break Your Restaurant

Today’s restaurants face many challenges: intense competition; rising cost of goods and real estate; and the slow U.S. economy - just to name a few. Restaurants average profit rates of 3-5% of sales* - thin margins by any measure. However, poor management can make those margins evaporate faster than a sauté pan of boiling water. It is no wonder that 60% of all restaurants fail within the first three years **

As a restaurant owner, you oversee all areas of your business.  These can be separated into three basics: Finance, Sales and Marketing, and Operations. Yet with only so many hours in a day, many owners neglect the breadth of their responsibilities, and only watch their revenue.  Sales and marketing is important in getting customers into your restaurant, and we covered this at length in Attracting Customers.  However, it is what happens within your operation, between top-line sales and bottom-line profits, which makes or breaks your business.

Here are the 4 biggest challenges that can make or break your restaurant:

Poor Financial Controls – Owners often watch their sales daily, while not watching their costs and expenses as diligently.  Common sense points out that if your profit margin is zero it will always be zero, regardless of sales level, unless you change something. Restaurants should measure costs in relation to sales on a weekly basis, as discussed in both Why a Weekly Food and Beverage Inventory is Crucial to your Small Business and Does your Restaurant Compile a Weekly P&L Statement.  Reviewing weekly statements allows you to spot problems and make operational adjustments much sooner than waiting until the full P&L at month’s end: improper product ordering and handling, waste, cash management and employee theft can be significant drains on your business, every day.  

As revealed in How Much of your Profits are Being Eaten by Employee Theft, many employees steal because they can get away with it, and few restaurants have the right controls in place to prevent it. Further, Measure by Measure and 4 Simple Ways Your Restaurant Employees Can Help You Be More Profitable showed how not controlling spoilage, waste and improper portioning can decimate your small margins. 

Poor Staff Training – As we stated in our Blog:  A Well Trained Staff is Your Secret Weapon, “People run your business and your business is only as good as your people. An effective training program is an owner’s key tool to ensure consistency in product and customer service, which is a basic tenet of running a restaurant.”  This is true for all staff, at all levels.  

With a properly trained staff you have less waste in your restaurant.  A short list of why this is includes: Training mangers on proper inventory and ordering avoids excess product; stewards on proper product storage and handling avoids spoilage; cooks and bartenders on proper recipe execution and production levels maintains portion controls; and servers on proper use of the POS system minimizes incorrect orders, misfires and voids.

Poor Quality Control – Quality Control is all about consistency. In our experience, consistency is best achieved by adhering to standard operating procedures that are codified in writing. As outlined in 4 Reasons Why Your Restaurant Needs an Employee Handbook, recipe books, job-specific handbooks, and training manuals standardize tasks and clearly communicate to employees your expectations and the standard to which they will be held. These procedures should cover, in detail, every process in your establishment, from purchasing guidelines to how to deal with an unhappy customer. As boring and unsexy as it sounds, excellence comes from consistency, which can only come from diligence and attention to detail. If customers know what to expect every time they walk in your door, they will keep coming back.

Poor Leadership – Whether it is you, as the owner, or an outside hire running your restaurant, there is a big difference between being a manager and being a leader. As discussed at length in Follow the Leader, “In order to lead rather than just manage, which is vital in today’s diverse, fast-paced world, one must be able to be more than a day-to-day task master. While a manager deals with the technical dimension in an organization or the job content, a leader marshals resources, human and otherwise, for the best possible results.”  Leaders communicate vision, build relationships and trust, train, coach and mentor, and encourage change and risk-taking.

Often, managers who come up through the ranks are not properly trained as managers and make common mistakes.  In the Top 4 Mistakes Managers Make in Managing People, we discuss how “Managers are the front line representation of your business and must effectively work with a diverse group of people. They must live and breathe your company core values and practices.”

Restaurant success depends on many things, but it can all boil down to one question: Where does the money go? Having a handle on your operations is a key to answering this question. Have processes and procedures to reduce economic drains, train your staff to follow them, hold them accountable and have trustworthy leaders in your organization. Additionally, you must be vigilant that your standards are upheld, and make changes as needed. It doesn’t hurt to get an outside, objective opinion from time to time as a gut check whether it is a consultant or mystery shopper

Don’t know where to begin?  4Q Consulting can develop customized business and operational guidelines to help you start and run your business.  Email us today for a free business consultation at www.4qconsult.com.

All original content copyright Noelle E. Ifshin, 2013-2014. 
   
Footnotes:
* 2005 Cornell Hotel and Administration Quarterly, http://cqx.sagepub.com/content/by/year
** NRA’s Restaurant Industry Operations Report 2013

Restaurant Consulting NYC | The Family Owned Restaurant | 4Q Consulting, LLC

The Family Owned Restaurant

Family businesses are the bedrock of the U.S. economy.  “Family owned businesses contribute 57% of the U.S. GDP, employ 63% of the U.S. workforce (FEUSA, 2011), and are responsible for 78% of all new U.S. job creation. (Astrachan & Shanker, 2003).” * Business schools have entire courses dedicated to examining the dynamics of family businesses.   According to Rocki-Lee DeWitt, Professor of Management at the University of Vermont’s School of Business Administration:

                   “When family and business are ingredients in a restaurant 
                    business, be ready for some tasty treats and momentous
                    flops. The family must ask themselves ‘What would this 
                    business look like, and how would it run, if my family wasn't 
                    involved in the business?’'"

Psychologically, families tend to be driven by a deep concern for both the well-being of individual family members and the family legacy.  When a family works together, normal family goals may come into conflict with the economic goals of the business.  

With proper planning, many of these challenges and conflicts can be avoided.  Here are four “must-haves” if you are considering owning or currently running a family-owned restaurant:

Have a Written Partnership Agreement – Many families assume they do not need to formalize their partnerships with family members.  By the time they realize they need an agreement, due to a dispute, it is often too late.  You must have a written agreement that should include: the division on ownership; an outline of the amount of, and stipulations for, taking salaries; and how to handle any profits or losses.  Additionally, and possibly most importantly, family partnerships must have defined job roles – who is going to do what?  Just as a corporation would have specific written job descriptions and job roles for executives, so should a family-run restaurant.  Do not assume how the responsibilities and work load will be divided up. If you are formally registering your company as an LLC, a Corporation or a Partnership, some of these factors will impact how you structure your business.

Have Written Standardized Procedures and Strict Internal Controls – The challenge of any family owned business is how not to run it as the family unit.  Standard operating procedures (SOP’s) should be followed by all employees, whether or not they are family members.  Having written manuals outlining SOP’s for all procedures in the restaurant, ensures that all employees are held to the same standard. For example, the owners or family members should not be doing their personal grocery shopping intertwined with the restaurant’s food ordering.

Furthermore, if a family member has always been great with money, you still need internal cash controls in place.  Ensure that your policies and procedures are just as stringent as they would be if an outsider was doing the work, and have your cash and internal controls reviewed by your CPA.

Have a Higher Level of Professionalism – Just as family members must be held to standardized procedures, at minimum, in their duties, they must be held to a level of professionalism to keep personal matters out of the business.  Family members typically have insight into each other's personality and thought process that non-related business partners wouldn't have, making crossing the professional line into personal terrain tempting.  While lashing out at a co-worker would not be acceptable in most corporate positions, it's easier to lose your cool when there's a personal relationship involved.  I hear from many of my clients in family-owned restaurants “you say things to your relatives that you wouldn't say to anyone else, or you would land in court".  Leave your emotions at the door and remember your family members are your co-workers when you're at the office.

Have a Succession Plan – A comprehensive written succession plan is crucial for all businesses, especially family-owned restaurants, to avoid disputes and misunderstandings.  First and foremost, have a plan should one of the partners or family executives decide to leave the business: how will their role be covered and how will ownership be re-allocated?  Consider including estate planning in your partnership agreement for an older partner to protect the family and restaurant from estate taxes and probate costs.  Further, don’t assume younger generations will want to come into the business or that they will know how to run it when they do; start grooming your successor several years before you plan to retire.  Lastly, if no family member wants to run the business and you don't want to bring in an outsider, start to put together a detailed plan, sooner rather than later, to sell or merge.

Whether a restaurant is family-owned and operated, it is still a business and must be set up properly with clear, well-defined goals and objectives and be operated with the same standardized procedures as any other business.

Don’t know where to begin?  4Q Consulting can develop customized business and operational guidelines to help you start and run your business.  Email us today for a free business consultation at www.4qconsult.com.

Footnote:
* University of Vermont School of Business Administration, Family Business Facts             http://www.uvm.edu/business/vfbi/?Page=facts.html

All original content copyright Noelle E. Ifshin, 2012-2013.