Think Wages are the Only Reason Your Costs are Increasing? Think Again
Imagine a situation where you’re managing a limited service restaurant. You’ve been doing this successfully for some time and think you have a strong understanding of the ins and outs of your operation. One day, you visit your books and are confronted with a stark reality - the math just isn’t working anymore.
Your traffic remains consistent, and you have predictable revenues, but rising costs elsewhere are stalling growth. After all, flat traffic can’t compensate for rising costs in labor, rent, food and supplies.
The scenario above is an unfair reality for many people working in limited foodservice management. Today, 82 percent of operators are dealing with labor issues ranging from minimum wage increases, Affordable Care Act overtime exemptions, restrictive scheduling and other personnel related costs (Operator Economic Realities – Technomic January 2017). Food cost increases, changing trends and an increasingly crowded marketplace also rank high on the list of operator concerns.
Now that you’re aware of the issue, let’s take a look at measures others are taking to combat rising operational costs. One line of thinking is to attack labor costs by reducing employee hours, cutting benefits, or reclassifying management positions. While this may improve your bottom line, it does so at the cost of employees. Your workers are the lifeblood of your business, and keeping them happy and taken care of is a part of what you do. The smart business owner is aware of this and will attack the bottom line by making the rest of their operation as efficient as possible.
The next logical target would be pricing. If you have predictable traffic, why not just raise prices to fix wage issues? Unfortunately, this doesn’t work. According to a recent study, only 27 percent of consumers are willing to pay more for food/beverages so restaurants can pay employees more (planning program US industry Status and Outlook – Technomic 2017) and one-third of U.S. adults are eating out less than they did three months ago, mostly because of cost (Reuters study).
The Right Fix
If reducing labor costs is unfair to employees, and raising prices is unfair to customers, what does a responsible operator do to attack their bottom line? One option is to invest in technology and smarter supply management.
If you’re looking for supply inefficiencies start with observing customer behavior. Many food service businesses suffer from customers abusing self-service policies on paper products. Customers think “hey, here is a pile of free napkins, I need to wipe my hands, better grab as many as possible and throw away what I don’t use.” You know better than anyone that those napkins aren’t free at all, and waste piles up over time. Now, let’s take a look at overuse. Here’s how one national chain observed this inefficiency and what they did to fix it.
What White Castle Did
Burger chain White Castle observed that their single-ply napkins and dispensers utilized an open-source container, which encouraged wasteful ‘hook and grab’ customer behaviors. The waste from the old dispensers drove up costs and required frequent maintenance to keep dispensers well-stocked. Not only was it a drain on supplies, but it was starting to affect labor. Something had to be done.
GP PRO conducted a limited test by installing the Dixie Ultra® SmartStock™ Automated Napkin System in 10 White Castle locations. As a result, White Castle found that not only did they save on napkin costs but also on time spent by employees restocking, cleaning and maintaining the dispensers. Overall, they saw a reduction in napkin usage of 64 percent1, in addition to time and labor savings, all for a one-time investment in dispensers.
Foodservice operators all understand how important it is to invest in technology, but the nature of technology has changed. It’s not just computers and POS systems anymore. Technology is everywhere, and the best way for you to gain an edge over competition is by reevaluating everything - especially the things that seem to be decidedly non-tech like paper products. If you want that extra edge, it’s important to upgrade before the competition does.
For more information on how GP PRO can help bring your foodservice business into the modern age, take a look at our Dixie Ultra® SmartStock™ solutions.
1Usage reduction for SmartStock® napkin is 40% when switching from a 13x12 full fold napkin to SmartStock® napkin in a limited service restaurant environment.