Restaurant Consulting NYC | The Dog Days of Summer How to Manage During a Downturn in Business | 4Q Consulting, LLC

The Dog Days of Summer

How to Manage During a Downturn in Business

Summer in the NY Metro Region is often a slow period for area restaurants – as the temperature and humidity rise while kids are out of school, customers escape the heat to take vacations and many leave for weekends.  Being able to nimbly anticipate these slow weeks and make changes to your operation will allow you to survive the dog days of summer without taking a financial hit.

As we discussed in our last blog, The Value of A Good Business Plan, a restaurant is a living breathing entity that requires constant reevaluation. Now restaurateurs must understand the value of being flexible when the thermostat rises and business levels fall off as people escape the heat.

Here are four key things to help manage your restaurant in a short downturn:

Adjust Your Cash Flow Management – Many restaurants fail not because they are unprofitable, but because they ultimately become insolvent. The single most important step for survival of your restaurant when business slows is to rigorously manage your cash. Calculate what your cash flow needs will be based on both your estimated fixed and variable expenses.  Know what your break-even point is, as sometimes a viable cash management strategy is to close the business for the slowest portion of the slower season.  And lastly, adjust the way you operate to further reduce your variable expenses.

Adjust Your Variable Expenses – Variable expenses are those expenses that change based on your level of business – the largest controllable categories being food and labor costs.  From Where Oh Where Has My Margin Gone?, we know that labor is a restaurant’s largest variable expense and is only becoming more costly.  Planning for this fall-off in business is key in being able to scale back schedules in advance, rotate out vacations among the staff and utilize staff that has been cross-trained – increasing productivity per work hour.   If you have staff standing around staring at the walls, you have too much staff on hand.  Lowering total payroll also lowers payroll taxes and payroll processing fees.  Other controllable variable expenses can include paper goods, any merchandise, some utilities and maintenance.

Adjust Your Menu Offerings – Changing your menu can also impact food, beverage and labor costs. Consider replacing some menu offerings with less expensive items using seasonal and local ingredients. Consider lightening your menu to offer more salads and refreshing cold options.  You don’t want potential customers not to consider coming to your restaurant on a hot, sticky day because your menu is too heavy.  Furthermore, less labor-intensive preparations allow you to work with less staff.  Guests, by nature, tend to eat less and lighter fare when the thermostat rises.  Cooking with what is locally in season is always less costly than using out-of-season imported items.  

Adjust Your Purchasing and Inventory Management – When items are not flying out of your walk-in or your stock room, you should look at what you are buying and how you are buying it.  Intelligently reducing the overall number of offerings on your menu can increase your product cross-utilization allowing you to carry a smaller inventory – both in number of inventory items and quantity of each item you stock.  Analyze what is selling, at the best profit margin, and either remove the non-selling items or find creative ways to reinvent them.  By sitting on non-moving inventory, especially alcoholic beverages, you are just tying up your cash flow.

Being aware and flexible about managing your business in the Dog Days of Summer can help keep your bottom line from melting away.

Email us today for a free business consultation at www.4qconsult.com.  We help restaurants be profitable, from Start-ups to existing restaurants looking for a fresh set of eyes.  4Q Consulting, LLC can develop customized plans and operational guidelines to survive a slow period of business!

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 | 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, Hospitality & Real Estate Consulting NYC | We’re Having a Heat Wave, A Tropical Heat Wave… | 4Q Consulting, LLC

We’re Having a Heat Wave, A Tropical Heat Wave…

Just as Irving Berlin wrote: 

“We're having a heat wave, A tropical heat wave, The temperature's rising, It isn't surprising, She certainly can can-can."

With a mini heat wave in the NYC forecast for this week restaurant owners should be prepared to take some proactive steps to keep both their guests and employees safe when the mercury rises.

Here are 4 areas to focus on to keep guests and employees safe in a heat wave:

Keep People Safe – 

• Keep guests and workers cool, comfortable and hydrated – make sure everyone is drinking plenty of water.  
• Either provide both shade and air circulation or close outside seating during the hottest part of the day – to ensure the safety of both your guests and employees.
• Provide water and food for your staff – Hydration is vital, but so is maintaining blood sugar levels.  
• Monitor staff and guests for signs of distress or heat stroke.
• Lighten the uniforms of the dining room staff – think about a summer weight uniform, with light colors and short sleeves.   
• Monitor patron’s alcohol consumption as over consumption in extreme heat can be accurately dangerous.

Maintain Your Equipment –  

• Service all refrigeration and HVAC units prior to summer so they don’t breakdown in a heat wave.
• Instruct your staff to keep the air conditioning at a consistent level.  Turning the AC or refrigeration units down too far will overload and freeze up your cooling system, rendering them useless. 
• Ensure kitchens are properly ventilated and have fans. 
• If your ice machine is air cooled and struggling to keep up, consider purchasing cubed ice for drinking; similarly, if your refrigerators and walk-ins are struggling, consider purchasing dry ice.

Monitor Food Safety –  

• Monitor refrigerator and product temperatures closely and take corrective action immediately. Remember, all foods must be stored at or below 41°F.  If your walk-in is above 41°F, your food is not properly stored and can be a health hazard.
• To keep cold food cold – 
• Keep walk in and fridge doors closed as much as possible.
• Install Air Curtains to minimize refrigeration loss when doors to walk-in refrigerators and freezers are opened
• Do not overload refrigerators – if the fan unit in the fridge is blocked, this will cause poor air flow and will inhibit the unit’s cooling ability.
• Do not block refrigerator’s external condensing unit with debris and storage items; which would inhibit the units cooling ability.
• Prepare food in small batches to reduce the amount of time food is out of refrigeration and in a very hot kitchen.
• Use proper thawing and cooling techniques: do not leave food out on counters to thaw; thaw all food under running cool water (water should be below 70°F).

Modify Menu Offerings – 

• Offer lighter menu items for the summer – heavy sauces, stews and roasts are can be unappealing when the mercury rises.  These could include cold options such as salads, sandwiches and cold soups.
• Add more small plate and appetizer options as people not only eat lighter food, but they tend to eat smaller portions when it is very hot outside.
• Add frozen non-alcoholic drinks, chillers and fruit flavored waters to menus.

As Cole Porter said in song: “It’s too Darn Hot!”  A few proactive easy fixes can help you get through these periodic heat waves while keeping your guests and employees safe. Also, keep these changes in mind for next year’s planning.

Don’t know where to begin?  Ask yourself, do you have the proper written 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, 2014-2015.

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