QSR tapped the best minds in the business to come up with a realistic list of ways operators could save thousands of dollars in less than one year. There’s no advanced logic or restaurant expertise needed—just a willingness to try new systems or make a few adjustments to existing protocols. From the bathroom to tax forms, QSR found the easiest ways operators can immediately boost the bottom line.
1. Workman’s Comp
Savings: $150 a month
One great hidden gem in an operator’s budget is workman’s compensation insurance, says Dan Simons, principal at Vucurevich-Simons Advisory Group. Although restaurateurs cannot forgo the cost all together, they can easily reduce it.
Workman’s compensation is figured annually based on a forecast of the upcoming year’s labor costs. When the economy slows and crew sizes are reduced, often that insurance figure is not recalculated. Furthermore, when insurers go to resign a business for another year, operators often do not update their labor figures. As a result, workman’s compensation insurance is often based on outdated and inflated labor figures.
Savvy operators will update those figures regularly with insurance providers and receive rebates immediately rather than waiting until the end of the year.
Savings: up to 6 percent of sales
When you talk to restaurateurs about shrink, most of them don’t even know what that is,” Simons says. “It’s a sure thing that if a restaurateur isn’t actively managing loss prevention, they’re losing money—totally 100 percent guaranteed.”
According to Simons, the best way to prevent theft is to watch the back door. Operators can catch both intentional theft and waste, which Simons categorizes as unintentional theft, by simply using clear trash bags and performing trash audits.
“It’s not waste, it’s theft,” he says. “We bought the product and you threw it away when it wasn’t yours to throw away.”
Employees often smuggle goods in trash bags that are taken out to the dumpsters then steal the hidden products once they are out of the building. Other popular concealers include cardboard boxes and backpacks. Simons advises operators to breakdown all boxes before they are taken to the dumpster to prevent employees using them for smuggling and to not allow employees to bring duffel bags or backpacks into work.
“Trust is not a lost prevention strategy,” he says.
Savings: 2–3 points of food cost
The general rule in the restaurant industry is that 20 percent of your menu represents 80 percent of your food budget. Ensuring that your top items aren’t cannibalizing more of your budget is essential.
The first step to getting your menu spending under control is to request a velocity report from your food vendor. Have the company give you a list outlining from the most expensive to the lowest-priced items. “Those top 15 percent are the ones you need to be going over with a fine-tooth comb,” Simons says.
Operators should follow those items in terms of frequency and price all the way to the back door, where all items should be weighted.
“If a driver has 10 clients that he drops off blocks of cheese to, and one owner doesn’t weigh them, you take a pound off each block, and you’re in the cheese business,” Simons says.
For operators overwhelmed by the thought of weighing every food item, Simons advises to at least ensure that all meat is weighed.
Savings: up to 10 percent of traditional build-out
McAlister’s Deli, known for its signature 4,000-square-foot stores, recently figured out how to save 10 percent in build-out costs by streamlining its kitchen and cutting seating.
Bill McClintock, the brand’s senior vice president of development, says leaving the décor inside the restaurant was extremely important, ensuring that customers still got the same dining experience in the new smaller stores. Where he saw savings, however, was the refrigerator.
Rather than relying solely on walk-ins, McAlister’s new kitchen relies heavily on reach-in freezers, eliminating the need for multiple large walk-in coolers.
Also, by cutting down on seating, operations costs like upkeep and rent are reduced. Not to mention that consumers extend the lunch daypart by coming in early or later to avoid the crowds in the smaller stores.
Savings: 10–25 percent of energy bill
The most common sources of energy waste are lighting, refrigeration, and the HVAC system. Matt Kim, director of product development at Prenova, an energy-management company, says nearly half of the energy reduction can be attributed to maintaining the corporate set point. Often franchisors recommend set temperature points and franchisees waste money by deviating from those suggested temperature points.
As a solution, Kim suggests not allowing employees to change the thermostat or to install a system that automatically prohibits temperature deviation.
Operators also often waste money by lighting rooms that can be lit naturally through sunlight. Installing dimmers in those rooms allows operators to maintain a constant brightness relative to how sunny it is outside.
Finally, Kim recommends seeing an afterhours delivery first-hand. According to him, operators are usually surprised that walk-in refrigerator doors are propped open for hours at a time while deliveries are being made.
Savings: 3–5 percent, up to $6,900 per year
The old (and costly) way to create a schedule was for a manager to sit down with a pen and paper, maybe an Excel spread sheet, and labor for hours developing a plan for the week. Online scheduling programs can put an end to that and save operators about four hours a day in labor costs.
Online products like Schedulefly allow employees to submit time-off requests online so that when the manager creates the schedule only available employees are able to be selected. Because the system is completely automated online, employees can access their schedules and time changes through e-mail, text message, and Facebook.
In addition to speeding up the schedule process, Schedulefly’s technology also tallies labor costs as operators assign employees, which enables them to better manage labor costs.
Savings: $13.55 per restock
Keeping a store clean is essential to keeping repeat business. But how operators achieve that cleanliness may be costing them big bucks.
Purchasing ready-to-use cleaning supplies like Windex, Mop n Glo, and Clorox is considerably more expensive than using products that can be diluted. For example, Cintas’ dilution rate is 1:256, which saves on average $13.55 each time new cleaning supplies have to be purchased.
In addition, JohnsonDiversey, a chemical solutions company, found that on average employees use three times the suggested amount of soap and detergent when washing dishes. Using a dosing or dispensing system can cut down on overuse and save operators up to 80 percent in freight costs.
8. Tax Credits
Savings: up to $9,000 per employee
On May 25, 2007, President Bush signed into law the Small Business and Work Opportunity Tax Act of 2007, which gives tax credits to employers who hire specific groups of people. The quick-serve industry has a 23 percent employee eligibility rate, higher than any other restaurant or retail segment, but operators rarely take advantage of it.
The employees who enable operators to collect tax credits include crew members on federal welfare (or member of a family receiving welfare), those belonging to a tribe, and disabled veterans. Work Opportunity Tax Credits can even be used to offset the Alternative Minimum Tax, contrary to what most companies think.
In addition, JobApp CEO Blake Helppie says operators often don’t know about tax credits associated with hiring individuals living in counties affected by Hurricane Katrina.
Savings: up to 7 hours a week (x$8.25 per hour= $57.75 per week)
Some cost-saving tips save operators time, others save them money. KlickKitchen, however, allows operators to save both. The food sourcing Web site not only streamlines the food-ordering process, it also pits vendors against each other—bidding for operators’ business.
The technology works like this: Each online user is given a virtual clipboard that is populated by the available inventory of more than 23,000 items or manual entry. At that point, operators can either send out their food requests and let the bidding begin or instantly contact vendors to get a price quote. And because there is a paper trail on the Web site, confusion and inaccuracies are avoided.
The Web site has a $300 initial setup fee and a $1-a-day membership fee. KlickKitchen CEO Jordan Glaser estimates ROI is about 2–3 weeks.
Savings: up to $113,100
It’s good for operators to know about ways to reduce workman’s comp insurance, but what might be even better is cutting out the claim altogether. When an employee is injured at a restaurant, 40.7 percent of the time he or she can return to work without seeking off-site care, according to Medcor, an outsourced health service.
Medcor provides a 24/7 toll-free injury triage service so the employee can speak one-on-one with a nurse. If the injury is minor, the nurse will guide the employee through first aid steps. If the employee needs additional care, the nurse will provide him or her with employer-specific information about how to receive the appropriate level of care—avoiding unnecessary ER visits or out-of-network treatment.
Additional savings include reduced legal fees, improved staff productivity, and discounted fees from preferred clinics.
Work Opportunity Tax Credits
- $2,400 for each new adult hire
- $1,200 for each new summer youth hire
- $4,800 for each new disabled veteran hire
- $9,000 for each new long-term family assistance recipient hired over a two-year period