Labor Management. NOW Simple.

Owners and operators in the retail and restaurant industries face a common problem with Point of Sale (POS) systems …. sophisticated POS systems can take some time to learn – and operators are too busy with day-to-day operations to learn the systems completely.

As David Scott Peters points out in a quick blog post over at FOHBOH (Front of House, Back of House), a deep understanding of your Point of Sale system is an absolute must.   David points out that in addition to being a cash register, POS systems can perform a number of additional tasks, such as locating ideal food costs, managing inventory, controlling labor costs, and much more.

However, one aspect that David did not touch upon is that there are often major capability differences between the various Point of Sale manufacturers.   Some systems do have built-in inventory, food costing, and labor management modules, but many others do not have these modules.

In many cases, it is preferable to identify and use a best-of-breed solution designed specifically for the task at hand.   For example, CostGuard continues to develop and maintain the best inventory managament system available for restaurants, bars, and clubs.   TimeForge labor management software is designed from the ground-up to make labor management and employee scheduling easy for restaurant and retail operators.

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• Western Food Expo is a wrap!
• Off Topic: Inventory Managment for Restaurants
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Not too long ago, I helped a user (Big Biscuit) with an inventory related question on the Foodservice Forums located at www.foodservicei.com

His questions (paraphrased) were:

• Let’s say that 15 restaurants have an average food cost of 27.50%
• If one of the fifteen restaurants has a 29.50% food cost, could the reason for the higher food cost be because of their product mix? Or, is the only option product theft or shrinkage?
• Put another way: Could a higher than average food cost at one store be because they sell more individual menu items that have higher food costs?

What an interesting question! This question isn’t specific to the hospitality / food-service industry, and could easily apply to a car dealership (average price of a vehicle), retail store, or plumbing repair shop. Without getting too deep into statistical analysis, the general answer to an anomaly in inventory is “it depends”, as the problem could be related to:

1. Vendor changes (perhaps one store gets smaller cuts of beef, so they have to use more beef to get the same amount of stew).
2. Personnel changes (a new cook may use more or less butter than her predecessor)
3. Shrink or Shrinkage (fraud, theft or loss of a product, accounting errors, or perishable inventory)
4. Different product mix (using or selling different quantities of inventory items)

To illustrate this particular problem, let’s assume we have two stores:

Store A and Store B sell the same “stuff” (menu items), and each store has sales of $1,000 per day.

Store A is located in a place where only “locals” would know about it, and most of the locals order burgers, which run $5 gross, but have a food cost of $1 (20%). The patrons also occasionally purchase steaks, at a gross of $20, but with a higher food cost of $10 (50%).

In this case, Store A has a product mix of 20 steaks ($400 gross, $200 in food cost), and 120 burgers ($600 gross, $120 in food cost). Total food cost is $320, or 32% ($320 / $1000) food cost, and each of the 140 clients spent an average of $7.14

Now, let’s say that Store B is located on the boardwalk, and sells more steaks than burgers. With 40 steaks ($800 in gross, and $400 in food cost), and 40 hamburgers ($200 gross, $40 in food cost), Store B’s product mix has an average food cost of 44% ($400 + $40 / $1000), and each of the 80 patrons at this store spent an average of $12.50

In this case, Store B has a 12% higher food cost than Store A. Interestingly enough, Store B only served 80 patrons, compared to the 140 clients that Store A was able to serve – another excellent indicator for tracking shrinkage. What is the average of the two stores? 38% food cost and $9.82 per person on an average check. Both stores are 6% away from the “average”.

As illustrated by the above example, varying product mix can certainly cause food costs to fluctuate, and one should be very careful when comparing averages against each other.

How do you compare product mix at your location?

How long does it take to make an employee schedule? It should take less than 5 minutes! Did you know that labor costs could be as much as 30% of your expenses? TimeForge can help streamline and minimize labor costs through effective employee scheduling at your restaurant, bar, or club.

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One of the newsletters that we receive at TimeForge is the excellent (weekly) Restaurant Report Newsletter. Two weeks ago, this question was posed in the newsletter:

“Inventory Control Programs – What would you recommend as the best inventory control programs that is easy to read, follow and upkeep with information. As well we are looking into a new computer system and program for the front of the house….what would you recommend. We are in Canada and service and maintenance of course is very important.”

Several years ago, we did a study of food-service industry inventory programs, and looked at the adoption and usage of inventory procedures in the marketplace. During this study, we also spoke with many of the “obvious” players in the industry – so we sent the poster a response to her question, which was published in this week’s Restaurant Report:

The interesting thing about inventory systems is that….few people use them. We did a study about 2 years ago of all of the major players, and how many people used their products. Less than 20% of the market uses inventory control (with a computer). That being said, there are some amazing programs out there that will help reduce food costs and/or track inventory.

Some of the main vendors include:

Eatec, MenuLink (part of Radiant), and Compeat are all “high end” systems. Expect to spend between $10k and $40k for your store to get started with one of their packages. Really designed for very large chains. These guys own about 3 – 4% of the hospitality inventory market.

iPro is (was) a one-man show, and is the “bargain bin” version of inventory software. I would stay away from this product, even if it’s only $99. They own about 1% of the market (mostly eBay purchases).

ChefTec is “the” independent inventory product in the US, and is based out of Colorado. Getting support isn’t always easy, but they are very knowledgeable about their product. About 20 employees (as of 2 years ago), and their product starts around $1k. About 2-3% of the market (on the high end).

Cost Guard is an excellent product, which was recently upgraded and a lot of new documentation was written for the product. The owner lives in New York, and runs a tight ship…but there are only about 4 employees at last count. Probably have about 1.3% of the total market. Given the opportunity, I would recommend Cost Guard over ChefTec.

Optimum Control is a Canadian company, and as of 2 years ago, had about 6 or 8 employees. They claimed to have 3,000 installed restaurants, or about .3% of the market. Pricing is around $1k.

If I was you, I would recommend that you give Optimum Control and Cost Guard a try, and see which one works better for you. I believe both of the products have online or downloadable demos.

Regarding the front-of-house…are you interested in a POS system, a reservation system, a scheduling solution, a marketing solution, a video surveillance system, bar and liquor control, or something else? There are all-in-one solutions (I don’t recommend them), and there are individual pieces to the puzzle.

Of course, if you need a labor management tool – please take a look at our software.

Hope that helps – good luck!

Anthony Presley
Founder
TimeForge.com: Restaurant Employee Scheduling Software
P: 866.684.7191

How long does it take to make your employee schedules? It should take less than 5 minutes! Did you know that TimeForge can streamline and minimize labor costs through effective employee labor management at your business, bar, club, grocery, convenience store, or restaurant.

Related articles or pages

• Simple Employee Scheduling – Version 1.8.5 (Part 3)
• Product Mix Relating to Inventory Costs
• Employee Labor Scheduling: Interview with TimeForge.com's Anthony Presley
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• Workforce Labor Scheduling Updates (Part 1)