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What is the Salsa Packet Item in Your Operations?

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This is a picture of a pile of Mild Taco Bell Salsa packets.  These are what is left after my wife and I used a few on our tacos for dinner last night.  I know how to treat my lady.

Do you want to guess how many packets are in this pile?


That is 47 mild salsa packets that are now in my trash can.  I don’t know what salsa packets cost taco bell but I would guess that this represents any where from 20 to 50 cents worth of profits.

Average Guest Check at a Taco Bell is $7.00, fool.com, and average unit volume for 2014, is $1,049,000, I backed into this number using sales and unit counts from NRN and the Yum annual report.  That means an average Taco Bell serves around 150,000 guests per year.

I’ve scoured the web and there are tons of posts about people getting 20 to 40 salsa packets per order.  Let’s just assume that a salsa packet costs Taco Bell a penny and the average waste is 10 packets per order, which from my own experience is a pretty low number.

That means that the average taco bell owner is throwing away $15,000 a year in profits.  Are there ways that a Taco Bell manager could be managing to this without slowing down ticket times and through put; absolutely!

If you aren’t actively managing your operations and communicating what is important, why it is important, and then inspecting what you expect you will lose money.

I want to digress here for a second.  The analysis that I did is very basic and I was able to do it with a few internet searches.  If you read the OpsAnalitica blog, then you know that we are always talking about operations data and how important it is for restaurant managers.

That basic analysis I did above is using operations data and I found a potential loss in profits per location of $15,000 a year.

Imagine if you were capturing really great operations data every day in your restaurant, you can with a tool like OpsAnalitica.

Imagine if you were able to sit down for a couple hours per quarter and review your operations data and compare it to your costs and sales; do you think you could find even $5,000 of waste or inefficiency in your business? What is the salsa packet item in your restaurant that is costing you thousands that you aren’t managing?

Do you think it would be helpful to know the real costs of things? Of course it would. Do you know what a waiter no calling or no showing costs you in lost sales or how much revenue you lose when your cook time increases by 1 minute per ticket?

I know you will be amazed at how much this stuff costs and how the solution to most of these issues is just a small change in how you manage your restaurant.

Operations Data when merged with sales and cost data is the most potent competitive advantage that restaurant managers have because it is such a new area of operations.

Running more efficient and profitable restaurants is what you got into this business to do.

What is accountability in restaurant operations?

We’re always talking about “driving accountability” and “holding our managers accountable”, but what does that mean? 
For a multi-unit operator accountability can make or break your business.You need to know that policies and procedures that you have put into place and trained your staff to perform are actually getting done every shift. 
You know that one slip up can cost big time. If you get someone sick or get a bad health inspection score you will wind up on the local news and the event is logged in Google forever. You know what a low letter grade in your window can cost you? There can be a 5% swing, compared to an A or B, in sales.
These are the things that keep us up at night. That keep us from enjoying days off or vacations (if you’re lucky enough to take one). Accountability solves these issues.
Accountability means that you created a culture where consistent daily execution is ingrained in your management team. It just happens automatically because they see the value in running great operations. You have systems in place that give you visibility into your operations even when you’re not standing in the restaurant. 
They don’t do things because they are told to, they do SMART Pre-shifts because they know the data is valuable and contributes to making better operations decisions. They feel part of the overall success of the operations.
Accountability creates better running and safer operations. You can now enjoy days off and have the piece of mind that your team is executing every shift. 
We’d like to give you a list of 3 Tips on How to Hook Up Top Talent for Your Team. Simply click here and we’ll send it directly to your inbox

Restaurant Performance Index – July 2015

The restaurant industry posted it’s gain in RPI in 3 months in July at 102.7. This was the 29th consecutive month that the index stood above 100.

The Current Situation Index saw the largest gain since December 2014 posting a 103.7. This marks the 17th consecutive month above 100 signaling expansion in the market.

July represented the 33rd consecutive month above 100 for the Expectations Index clocking in at 101.7. This tells us that operators are generally optimistic about the months ahead.

Here’s a video summary of the Restaurant Performance Index report:


Restaurant Delivery Services

I came across two articles today discussing restaurant delivery services, specifically in Seattle. One on Geek Wire and the other on The Stranger. Both of them were very different in the story they were telling which was interesting.

The Stranger talks about how Postmates is reeking havoc on the restaurant industry. Mainly causing “resentment” between the restaurant staff and the delivery drivers/couriers. The rift is around tips according to the article. The restaurant workers are missing out on any tips from the Postmates takeout orders that they would have normally gotten.

The couriers are getting some tips, but no tips are making it’s way to the restaurant workers. Postmates allows customers to enter a tip for the restaurant, but it’s confusing and not very clear how it works. So this tip doesn’t happen, ever. Apparently the way it works is there’s a $5 delivery fee which gets split 80/20 in favor of the courier. On top of the 20% ($1) of the delivery fee there’s also a 9% service charge on the order that goes to Postmates. The restaurant workers see nothing unless the courier leaves them something, which never happens.

If the numbers in the article are true the couriers aren’t exactly killing it on tips either. They get a $4 delivery fee plus an average tip of $1-$1.75 on average according to the article. So call it $5.50 per order. Seems like it would be tough to get enough orders in an hour to make it worthwhile, but I guess if you’re on a bike and not a car you don’t really have any expenses. Plus you’re exercising.

Click here for The Stranger article. There’s some salty language, but we’re all adults here.

The other article, more interesting in my opinion, was on Geek Wire about Amazon dipping it’s toes into the restaurant delivery market. As part of their new Prime Now service they are testing, with local employees, restaurant delivery.

If there’s any company that can figure this out it would be Amazon. They are already offering alcohol delivery in Seattle. In NYC they apparently offer delivery of prepackaged meals from a few stores, but you have to cook the meal once you get it, it’s not delivered hot. That’s the difference with the Seattle test.

It makes sense for Amazon to try this out, but it’s not like they can have a UPS driver swing by Chipotle and pick up a burrito on the way to your house. They’ll have to implement a delivery arm similar to Postmates. Now if they throw marijuana delivery into the mix they might have a winning combo.

You have to wonder how long these types of services will be affordable with prices inevitably going up across the board with minimum wage increases, increases in food costs etc. At some point I have to think that consumers would just assume go to the restaurant vs. pay the $5 plus 9%, plus tip on top of the meal price. But maybe you can’t put a price on convenience.

Click here for the Geek Wire article about Amazon.

The challenge with growing operations

There has been a lot of great press this year about the restaurant industry’s economic impact from the number of employees to the estimated $709 billion in revenue in 2015. 
Growing your operations is a great accomplishment. You have succeeded and now it’s time to grow and expand.
All you have to do is take what you are currently doing now at your five locations and do the same at your next ten or fifteen locations right?
There’s only one small problem, there’s only one of you! You are no doubt already feeling the pressure of not being able to be everywhere at once with your current five locations, but now you are adding ten more. 
You’ll be adding staff and hoping that they are executing daily, every shift, without you being there running the show. 
You will no doubt start noticing the need and benefits of automated solutions to help you spread your time across all of your operations. Just because you are growing doesn’t mean you don’t have to be involved, it just makes your time more valuable
You’ll start looking into implementing systems that give you visibility into your operations at any time of day or night, no matter where you happen to be at the moment. Technology has gotten to a point where not only is this possible, but it’s also a cinch to implement and it’s affordable with quick ROI
Specifically mobile technology is at a point where you can manage your business from your smart phone. Companies in all industries, including restaurants, are implementing systems to help increase profits and give them a leg up on the competition
Even simple things like standardized cleaning checklists can make your life a lot easier. Consistency across all your operations allow you to check against 1 standard and measure each location against each other. We’d like to give you a Master Cleaning Checklist that we found that is very thorough. Click here to have the checklist sent to your inbox for free! We hope that this can be a valuable tool for you whether you are starting from scratch or already have one, but it could use a little tweaking. 
Keep on Inspecting!

Do third party inspection programs drive consistent daily execution?

It’s hard to believe that having a 3rd party inspection service show up twice a year, maybe once per quarter (we very rarely see this), has a big impact on the daily execution of operations. 
Anyone can be great for a day or a shift with some notice. But to be great every shift takes a disciplined and consistent approach to running great operations. We must inspect what we expect every shift.


Inspect every shift so that you can be great every shift. When you are prepared every day it doesn’t matter when the health inspector shows up. It doesn’t matter when you get a fluke rush. The team will be ready for any scenario. 
Sign up for the webinar and see how you can drive accountability into your operations and execute consistently every shift
We hope to see you on the webinar. 
Keep on Inspecting!

Slower Restaurant Employment Growth in San Fran & Seattle

A preliminary look into employment data by Forbes Contributor Stephen Bronars points to slower employment growth since the minimum wage increases in San Francisco and Seattle.

In the article Higher Minimum Wages in San Francisco and Seattle Mean Fewer Restaurant Jobs takes a look at year over year quarterly changes in employment averages. Here are some of the points he makes regarding his choice of data to use:

  • The minimum wage laws apply to cities but Bureau of Labor Statistics (BLS) employment data are available for Metropolitan Divisions
  • This is more problematic in Seattle where three out of four jobs in the metro division are outside the city limits, while two thirds of restaurant jobs in the San Francisco metro division are in the city
  • In addition, the monthly data are not seasonally adjusted and subject to a substantial margin of error

I have copied the full article with charts below and it’s also linked above, but Stephen concludes the following, acknowledging that more analysis will be needed as more data becomes available:

  • Had restaurant employment in San Francisco grown at the same rate as in the rest of the U.S., there would be 2,520 more restaurant jobs in the San Francisco metro division
  • Had restaurant employment in Seattle grown at the same rate as in the rest of the U.S., there would be 1,175-1,490 more restaurant jobs in the Seattle metro division

Last year Seattle decided to increase its minimum wage to $15 per hour over several years. The first increase to $11 per hour, for large employers, became effective on April 15th. Last fall San Francisco also adopted a plan to increase its minimum wage to $15 over the next few years and the first increase to $12.25 per hour became effective on May 1st. Because many restaurant workers earn less than the new minimum wages, most economists expect restaurant employment to decline in these cities as competition encourages restaurants to economize on labor costs.

Earlier this month Mark Perry, of the American Enterprise Institute, observed that job creation in Seattle’s restaurant industry stalled in 2015, perhaps due to the minimum wage hike. Last week Erik Sherman, a Forbes contributor, took issue with Perry’s interpretation of the data and purported to show that employment in San Francisco’s restaurant industry has grown since its minimum wage increase.

In this post I take a closer look at restaurant industry employment in San Francisco and Seattle. Before turning to the data it is important to understand its limitations. The minimum wage laws apply to cities but Bureau of Labor Statistics (BLS) employment data are available for Metropolitan Divisions.[1] This is more problematic in Seattle where three out of four jobs in the metro division are outside the city limits, while two thirds of restaurant jobs in the San Francisco metro division are in the city.[2] In addition, the monthly data are not seasonally adjusted and subject to a substantial margin of error. For this reason I focus on year-over-year changes in quarterly employment averages. I find that food service job growth slowed in Seattle since the minimum wage increase. In San Francisco, where more detailed data are available, there has been slower job growth in restaurants, but caterers and food trucks are growing more rapidly after the minimum wage increase.

Outsourced Meals

About 40 percent of the typical household’s food budget is for meals away from home and this increases to 46 percent for households in the top income quintile (from the Consumer Expenditure Survey). The “Food Services and Drinking Places” industry is prominent in San Francisco and Seattle; it accounts for about 10 percent of private sector jobs in San Francisco and 7 percent in Seattle. This is not surprising because San Francisco and Seattle are among the wealthiest cities in the U.S.[3]

Higher minimum wages will cause restaurants to economize on labor costs and hire fewer employees even in relatively wealthy cities. Competition will encourage food service companies to find less labor intensive methods of delivering prepared meals to their customers. For example, customers placing orders on computer tablets can reduce the demand for food servers.

San Francisco: Slowing Job Growth in Brick and Mortar Restaurants

The following table presents annual percentage changes in second quarter employment in several restaurant categories in the San Francisco metro division as well as the remainder of the U.S., and in San Francisco outside the food services industry. The table shows a slowdown in job growth in brick and mortar restaurants in the past year.[4] The all restaurants industry group, which includes full service and limited service restaurants, snack bars, and cafeterias, saw job growth of only 0.31% in the past year. Restaurant employment grew much less rapidly than in other sectors in San Francisco in the past year. In addition, had restaurant employment grown at the same rate as in the rest of the U.S., there would be 2,520 more restaurant jobs in the San Francisco metro division.

Click here for chart in full article

There has, however, been rapid employment growth (33.5% in the past year or 2,800 jobs) in the Special Food Services industry, which includes caterers and food trucks. This continues a recent trend; employment at caterers and food trucks has more than doubled since 2011. Although caterers and food trucks accounted for less than 10% of food services jobs in San Francisco in 2014, they accounted for more than 60% of job growth in food services over the past year so that overall growth in food service jobs slowed by 1.7% in the past year.

Declining Food Service Employment in Seattle

The most detailed BLS employment data reported for the Seattle metro division is for the “Food Services and Drinking Places” industry group.[5] The following table presents annual changes in second quarter employment for “Food Services and Drinking Places” in the Seattle metro division and the rest of the U.S., and private sector employment in the Seattle metro division outside the food services industry.[6]

Click here for chart in full article 

The table demonstrates that employment in the food services industry in the Seattle metro division grew more slowly than in other regions of the U.S. and more slowly than in other industries in Seattle. Depending on the alternative benchmark used there are 1,175 to 1,490 fewer food service jobs than there would have been had employment grown at the same rate as elsewhere.

Tentative Conclusions

While results based on preliminary and noisy data should be interpreted with caution, and more detailed studies will be required as city minimum wages increase even more, higher minimum wages appear to be disrupting the restaurant industry in San Francisco and Seattle and causing a reduction in jobs. In San Francisco minimum wages might be diverting customers to caterers and food trucks, perhaps because they are better equipped to adjust to higher labor costs. The first wave of minimum wage increases appears to have led to the loss of over 1,100 food service jobs in the Seattle metro division and over 2,500 restaurant jobs in the San Francisco metro division. These estimates are likely to be conservative, especially in Seattle, because many jobs in the metro division are outside the city limits and not subject to the minimum wage increase.

*This is a guest post by Stephen Bronars, Partner at Edgeworth Economics, Ph.D. in Economics from the University of Chicago. His opinions are his own.

[1] The San Francisco metropolitan includes San Francisco and San Mateo Counties but excludes Alameda, Marin and Contra Costa Counties and the city of Oakland. The Seattle metropolitan division includes King County and Snohomish County but excludes Pierce County and the city of Tacoma.

[2] The Seattle calculation is based on the BLS LAUS data and the San Francisco calculation is based on County Business Patterns.

[3] According to the Quarterly Census of Employment and Wages, San Francisco County ranks fifth and King County, Washington ranks sixteenth among the 340 largest counties in the U.S., ranked by median earnings

[4] The San Francisco minimum wage was set at $8.50 in 2004 and indexed to inflation. The increase from 2014 to 2015 was $1.51 compared to $0.32, $0.31 and $0.19 in previous years.

[5] This includes full service restaurants, limited service restaurants, cafeterias, snack and non-alcoholic beverage bars, drinking places, food service contractors, mobile food services and caterers.

[6] The Washington state minimum wage increased by $0.37, $0.15 and $0.13 per hour between 2011 and 2014, and the Seattle minimum wage increase from 2014 to 2015 was $1.68 per hour.

Will Minimum Wage Increases Accelerate the Robot Invasion?

There’s an interesting article in the Washington Post, “Minimum-wage offensive could speed arrival of robot-powered restaurants”, suggesting that $15/hr minimum wage will accelerate the move to robots in restaurants.

It mentions that shedding labor in the restaurant industry isn’t a new phenomenon. According to the article in the late 60’s a McDonald’s would have 70-80 employees vs. 30-40 now. Pre-packaged food/ingredients, smarter/more efficient kitchen technology over the years has allowed restaurants to cut down on labor, but there hasn’t traditionally been a lot of talk about cutting FOH staff as there is now.

With the mobile technology revolution FOH staff is very much on the chopping block. Kiosks and tablets at the table offer customers very convenient options for ordering and settling up at the end. Of course some establishments clientele will require a knowledgeable human being to answer questions, suggest pairings based on tastes, etc.  Specifically higher end full service restaurants. But most of the fast casual and quick service brands could absolutely move to more technology and not miss a beat. And matter of fact probably run better.

The thing with technology is that it will do whatever you program it to do. That’s good and bad at the same time because it will only do what you tell it to do. They won’t be very quick on their feet if you know what I mean. But they will never forget to up-sell. Ziosk is very popular right now for a reason.

Robots are coming whether we like it or not and I feel they would be coming regardless of minimum wage. There are other benefits of a robot other than wage ie. no human resource issues, always on time, no taxes, etc. As the article mentions there will always be a need for human labor, but their roles will change to more of a management role and ensuring that the robots are running properly. It’ll be more of a technical position, but also being able to pitch in and help as needed.

It’s going to be interesting to watch what happens over the next few years. I have copied the full Washington Post article below:

EMPTY-HANDED - 250p wide

Crowded. That’s how Ed Rensi remembers what life was like working at McDonald’s in 1966. There were about double the number of people working in the store — 70 or 80, as opposed to the 30 or 40 there today — because preparing the food just took a lot more doing.

“When I first started at McDonald’s making 85 cents an hour, everything we made was by hand,” Rensi said — from cutting the shortcakes to stirring syrups into the milk for shakes. Over the years, though, ingredients started to arrive packaged and pre-mixed, ready to be heated up, bagged and handed out the window.

“More and more of the labor was pushed back up the chain,” said Rensi, who went on to become chief executive of the company in the 1990s. The company kept employing more grill cooks and cashiers as it expanded, but each one of them accounted for more of each store’s revenue as more sophisticated cooking techniques allowed each to become more productive.

The industry could be ready for another jolt as a ballot initiative to raise the minimum wage to $15 an hour nears in the District and as other campaigns to boost wages gain traction around the country. About 30 percent of the restaurant industry’s costs come from salaries, so burger-flipping robots — or at least super-fast ovens that expedite the process — become that much more cost-competitive if the current federal minimum wage of $7.25 an hour is doubled.

“The problem with the ­minimum-wage offensive is that it throws the accounting of the restaurant industry totally upside down,” said Harold Miller, vice president of franchise development for Persona Pizzeria, who also consults for other chains. “My position is: Pay your people properly, keep them longer, treat them right, and robots are going to be helpful in doing that, because it will help the restaurateur survive.”

Many chains are already at work looking for ingenious ways to take humans out of the picture, threatening workers in an industry that employs 2.4 million wait staffers, nearly 3 million cooks and food preparers and many of the nation’s 3.3 million cashiers.

‘Why wait?’

The advent of fast-food chains may have ushered in an era of new efficiencies, but the industry as a whole has largely been resistant to cuts in labor. According to the Bureau of Labor Statistics, since 1987, labor productivity in ­limited-service restaurants has grown at a rate of only 0.3 percent per year, which is low compared with most other industries.

The market research company IBISWorld has calculated that the average number of employees at fast-food restaurants declined by fewer than two people over the past decade, from 17.16 employees to 15.28. And restaurants tend to rely more on labor than other food outlets: According to the National Restaurant Association, dining establishments average $84,000 in sales per worker, compared with $304,000 for grocery stores and $855,000 for gas stations.

The avalanche of rising costs is why franchisers are aggressively looking for technology that can allow them to produce more food faster with higher quality and lower waste. Dave Brewer is chief operating officer with Middleby Corp., which owns dozens of kitchen equipment brands, and is constantly developing new ways to optimize performance and minimize cost.

“The miracle is, the wage increase is driving the interest,” Brewer said. “But the innovation and the automation, they’re going after it even before the wages go up. Why wait?”

All that innovation helps restaurants streamline other parts of their operations — and draw more customers. Electronic menus can be constantly updated so that items that are out of stock can be removed. Connecting the point of the sale to the oven’s operating system allows precise amounts of food to be cooked, which helps cut down on costs. Other inventions save energy, reduce maintenance and better dispose of grease. On the digital side, restaurants are working on apps that include reward systems and location tracking that prompt customers to eat with them more frequently.

It’s possible that new inventions could start to eliminate positions faster than they have in the past.

The labor-saving technology that has so far been rolled out most extensively — kiosk and ­tablet-based ordering — could be used to replace cashiers and the part of the wait staff’s job that involves taking orders and bringing checks. Olive Garden said earlier this year that it would roll out the Ziosk system at all its restaurants, which means that all a server has to do is bring out the food.

Robots can even help cut down on the need for high-skilled workers such as sushi chefs. A number of high-end restaurants use machines for rolling rice out on sheets of nori, a relatively menial task that takes lots of time. Even though sushi chefs tend to make more than $15 an hour, they could be on the chopping block if servers need to make $15 an hour, too.

Of course, it’s possible to imagine all kinds of dramatic productivity enhancements. Persona ­Pizzeria’s Miller predicts that drone delivery systems will eventually get rid of the need to come into a restaurant at all, for example. Brewer has a bold prediction: He thinks that all the automation working its way into restaurants could eventually cut staffing levels in half. The remaining employees would just need to learn how to operate the machines and fix things when they break.

“You don’t want a $15-an-hour person doing something that the person who makes $7 an hour can do,” Brewer said. “It’s not downgrading the employees. It’s that the employees become managers of a bunch of different systems. They’ll become smarter and smarter.”

The value of a human touch

Not everybody, however, agrees that machines could make that much of a dent in labor costs. Implementing new systems is expensive, and mistakes can be devastating. And for some concepts, it’s possible that the presence of employees is actually a restaurant’s competitive advantage. Compared with grocery stores and gas stations, many people come to restaurants exactly because they want some human interaction.

Andy Wiederhorn, chief executive of Fatburger — who is testing tablet systems in his sit-down chain, Buffalo’s Cafe — doubts improvements in technology are going to be enough to keep up with the mandated wage increases, especially when actual people can be his best sales tool.

“I think that tablets have a place at the table, but it’s pretty hard to ask questions, get suggestions from a tablet. I don’t think they replace a server, they make a server more efficient,” Wiederhorn said. “We’re selling hamburgers shakes and fries, and [customers] want to talk to somebody and say, ‘Here’s how I want it.’ So I think in the hospitality industry, to assume that technology will take the place of workers is a false assumption.”

That’s why some restaurants have tiptoed in the direction of increased automation, rather than sprinted, even as minimum-wage hikes loom.

“Because the industry remains overall an industry of hospitality, their challenge remains how to remain high-touch in a high-tech environment,” said Hudson Riehle, the National Restaurant Association’s senior vice president for research and knowledge. If they’re not careful, restaurants could jettison the one thing that kept people coming through the doors.

“Being a service industry, and the need to deliver a personalized experience, means that many of the restaurant operators focus on ensuring that the overall customer experience remains competitive,” Riehle said.


Early Job Loss Results From Seattle

We have been actively following the minimum wage hike in Seattle very closely at OpsAnalitica.  We have written four blogs about it this year. We found this article from the American Enterprise Institutes that discusses restaurant job losses in Seattle since the beginning of 2015, it is only 3 paragraphs so I encourage you to read the whole article.  To keep politics to a minimum the American Enterprise Institue is a center right leaning organization according to wikipedia.  Here are the points that I found most interesting in there article:

  • Seattle city council passed a $15 minimum wage law to be phased in over time, with the first increase to $11 an hour taking effect on April 1, 2015.
  • The chart below shows that the Emerald City MSA started experiencing a decline in restaurant employment around the first of the year (when the state minimum wage increased to $9.47 per hour, the highest state minimum wage in the country), and the 1,300 job loss between January and June is the largest decline over that period since 2009 during the Great Recession (data here).
  • The loss of 1,000 restaurant jobs in May following the minimum wage increase in April was the largest one month job decline since a 1,300 drop in January 2009, again during the Great Recession.
  • In contrast to the January-June loss  of restaurant jobs in the Seattle area: a) restaurant employment nationally increased by 130,700 jobs (and by 1.2%) during that same period (data here), b) overall employment in the Seattle MSA increased 1.2% and by 21,800 jobs (data here) and c) non-Seattle MSA restaurant employment in Washington state increased 3.2% and by 2,800 jobs(data here).

Screenshot 2015-08-09 08.41.41

My issue with the Seattle minimum wage hike is that it isn’t being applied evenly, it is stacked against franchise operators from larger chains.  You could have two sub shops in the same strip center owned by the same person.  One a Subway or Quiznos and the other a non-franchise operation.  The employees would be paid at different rates as the franchise shop would have to pay more for labor creating unfair competitive environment for the non-franchise operation.  Don’t forget that your local Subway is often times owned by your neighbor who wanted to be part of a national chain for advertising and support.

You can read the article below or click here to see the original.


In June of last year, the Seattle city council passed a $15 minimum wage law to be phased in over time, with the first increase to $11 an hour taking effect on April 1, 2015. What effect will the eventual 58% increase in labor costs have on small businesses, including area restaurants? It’s too soon to tell for sure, but there is already some evidence that the recent minimum wage hike to $11 an hour, along with the pending increase of an additional $4 an hour by 2017 for some businesses, has started having a negative effect on restaurant jobs in the Seattle area.

The chart below shows that the Emerald City MSA started experiencing a decline in restaurant employment around the first of the year (when the state minimum wage increased to $9.47 per hour, the highest state minimum wage in the country), and the 1,300 job loss between January and June is the largest decline over that period since 2009 during the Great Recession (data here). The loss of 1,000 restaurant jobs in May following the minimum wage increase in April was the largest one month job decline since a 1,300 drop in January 2009, again during the Great Recession. In contrast to the January-June loss  of restaurant jobs in the Seattle area: a) restaurant employment nationally increased by 130,700 jobs (and by 1.2%) during that same period (data here), b) overall employment in the Seattle MSA increased 1.2% and by 21,800 jobs (data here) and c) non-Seattle MSA restaurant employment in Washington state increased 3.2% and by 2,800 jobs(data here).

Screenshot 2015-08-14 20.26.49

Perhaps Seattle’s restaurant employment will recover, or perhaps it will continue to suffer from the upcoming full 58% increase in labor costs for the city’s restaurants that will be phased in during the coming years – time will tell. What we know for sure is that there are now 1,300 Seattle area restaurant workers who were employed in January who are no longer employed today, so it looks like the Seattle minimum wage hike is getting off to a pretty bad start.


Running Restaurants is Getting Harder – Part 3

To read part two click here

Labor cost is another issue that is going to affect restaurant operations. We can’t just look at labor as bodies and do we have enough. We are going to have to redesign our entire operations strategy to minimize labor and operating complexity so we can operate with fewer people in the future. We were all trained to freak out when we saw a server at $2.85 standing around on the clock imagine how that is going to be when your waiter costs you $15 an hour.

Labor cost is going to affect our make vs. buy decisions on menu items, the complexity of our menu items, and how we serve guests.

Daily restaurant operations from cooler temperatures to dining room cleanliness and everything in between has been an area devoid of data for decision making.  This is crazy because it is our operations that drive sales not the other way around. The reason for this is because there hasn’t been a way to easily collect, store, and aggregate/report on this data, until now.

The invention of the smartphone and tablet have given us the hardware that we need to collect data easily from around our locations. Platforms like OpsAnalitica with our ability to capture, aggregate, and report; allow restaurant managers to look at how operations are running across all of their locations.

Screenshot 2015-08-09 08.41.41

With our advanced reporting engine, you can merge your operations data with your cost and sales data and for the first time you can see how operations affect costs and sales. This increased visibility is a game changer for the industry.

There are things in your operations that you think you know today that with data we could show you you’re wrong. They look to be causal because you don’t look at them every shift, every day, consistently. When you capture data points consistently across your locations, and you can compare those data points to costs or sales you will see that there isn’t a correlation.

We are seeing that people are leaving money on the table or not realizing their full sales potential because of small operations issues that aren’t being paid attention to on a daily basis. Once again because these issues happen in real time and because they aren’t being tracked in a format that allows them to be analyzed they get missed in the fog of running a restaurant. People have operational issues that they don’t even know exist, and often times the solution doesn’t cost any additional money.  The solution is a slight change in how they do something and they can get out of their own way.

In a lot of ways, it’s like flying a plane with no instruments.  You can see what’s in front of you, but you don’t know where you are going.

Don’t fool yourself either, every penny and dollar of cost that you can wrench out of your operations cost is worth it. Walmart has been able to be consistently the low-cost leader and one of the largest companies in the world because of their focus on efficiency and cost control. If Walmart used the same back office and fulfillment infrastructure today as it did even ten years ago, it’s prices would be much higher. Do you know how they do it; operations data!

They know everything about every part of their business, and they track it. Like our industry they use technology like registers to capture some parts of the data but they have also had to go out and invest in other systems to capture other forms of operations data. They use their data and analysis advantage to win on the playing field.

The same is true for restaurants who are operating on the edge of efficiency. They get every penny of waste out of their operations, and they can use those profits to press their advantage in the marketplace.

What is crazy is that you see that profit advantage every day; here are some examples:
* Getting the endcap location in a strip center vs. being stuck in the middle. That takes cash flow
* Redesigning a website or implementing mobile ordering or curbside pickup
* Expanding number of locations
* Advertising
* Being able to keep prices lower than competitors which create a marketing advantage

It takes money to grow and when you are running efficient operations it is easier to generate the capital needed to push your competition around in the marketplace.

In conclusion, the restaurant business is getting harder because there are more outside factors that are determining success at the unit level. At the same time the tools available to operators at the unit level are getting more advanced and cheaper, giving restaurant manager’s huge advantages over their predecessors.

We have always been an operations business, I think for a lot of people, that was limited to executing on service and food. Our business will always be about taking care of the guests, but it has expanded into creating management systems that will allow you to capture data and make data-driven decisions vs. gut decisions.

Gone are the Mel’s Diner days where Mel yelled at the waitresses and cooked eggs. Mel today would be sitting at a table with a tablet trying to figure out how the avian flu was affecting egg prices and redoing his website and menu.


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