Margin Management: make this year count | Kitchen CUT
With the festive period now over, January brings with it a time of comparative calm; time to reflect on how your business has performed over the past 12 months and the opportunity to put new processes in place to make sure that it performs more efficiently and profitably over the next 12 months.
Here, John Wood takes a look at the concept of Margin Management and how you can manage your Food and Beverage overheads.
If you are keen to improve profits on last year, there are some key areas where you can take better control in 2018 to make your business more profitable.
At Kitchen CUT we know and understand the challenges you have within your business as we have worked extensively across all types of industries over the last 35 years. We try to keep everything as simple as possible to ensure that you do not have to bog yourself down with mountains of paperwork and additional administrational tasks. With Kitchen CUT the most complex and time-consuming tasks are simplified, allowing your teams to get on with the important and exciting things, like looking after customers, creating new dishes and menus and training and retaining staff.
Here are 5 key areas that will streamline your business and improve your profits instantly:
1. Cost all your dishes/ drinks correctly
For many businesses, this sounds like a huge task, but it needn’t be. A system like Kitchen CUT can quickly pull together costed recipes and menus and highlight any areas for improvement.
The problem with costing recipes manually in a spreadsheet, is that within less than 1 month they are all out of date and require a lot of time to update. With Kitchen CUT you just simply update your prices and in seconds all your recipes and menus have been re-costed and you are alerted to any dishes not achieving your targeted margins.
As an industry, margin targets do vary and we get asked frequently what should our target be. As a rule of thumb an average healthy target is:
Food- 27-29% food cost / 73-71% Gross profit**
Beverage 24-27% Beverage cost / 76-73% Gross profit**
**NB these margins will vary depending on your type of business/location and competition.
2. Speak to your suppliers/vendors
You need to work with your suppliers/vendors to agree on suitable products which are not only of a quality that you are happy with, but also at prices which you can afford.
Some companies have a very aggressive approach to this and get suppliers to fight for their business on a weekly basis without a set price or a set period for any price agreements. Deciding where to buy from each week is incredibly time consuming for both parties. Whilst some procurement companies will offer to do this for you, they do so by charging the supplier a percentage of all transactions as well as squeezing them on price, a practise that benefits no one in the long term.
Modern, forward-thinking companies are now thinking differently, as we do at Kitchen CUT.
Meet with each of your suppliers
Explain your requirements and needs
Agree on suitable products and specs
Agree on suitable prices for each of those products
Agree on suitable time they can offer those prices for
Make note of everything you have agreed.
3. Reduce wastage
Every Food and Beverage/hospitality business or any company that deals with the production of food and/or drink has a wastage issue. Whilst this may not be considered a big problem, many businesses don’t realise the impact that wastage has on profitability, it’s enormous. Whether you want to reduce wastage for ethical or financial reasons, or even both; the best way to manage anything properly is to monitor it.
Recording wastage is very important, however if all you are recording is just how much the waste is in quantity and monetary terms, this can only take you so far regarding properly getting on top of this issue. At Kitchen CUT you can record why, where and how the waste is happening at a click of a button. This allows you and your team to properly track and monitor patterns and trends in waste in order to monitor, evaluate and implement change where necessary. With this increased knowledge, you can then decide what training/support the teams need to allow them to reduce wastage permanently.
NB: our clients have managed to move their margin by at least 1% by just managing this part of their business using our system.
4. Take stock/inventory
Taking a count of your stock on a regular basis is important to not only get accurate actual margins, but to make the operators understand the value of the products they have on the shelves and what happens when they start to use up stock instead of purchasing.
Many businesses decide not to take a count on Food and only do this for beverage, which is fine but we would always recommend that food stock count is done at least every 2 months, even if you do not have time to do this once a month.
At Kitchen CUT we understand that taking a stock count can be a long and arduous job, and from experience know that it can take many hours late at night stood inside freezers and store-rooms to complete this. However, we have created a unique and practical way of taking a stock count that allows you to complete this task in 75% less time than it normally takes, with 100% accuracy.
As a business owner/ manager you cannot do everything on your own, so it is vital that the team around you understands what you need them to do and why you need them to do it. Sit down with them and explain what the end goal is – for example explain that with product prices increasing globally over the next 12 months, just maintaining margins is the objective but everyone needs to play a part in understanding how this can be achieved. Set some objectives and tasks for the team and reward and praise them when they do well. Communicate success and failure and inspire the teams to maintain or improve.
If you can get the teams to buy in to your idea and how you want to achieve this, they will come with you on that journey.
How can Kitchen CUT help?
At Kitchen CUT not only do we provide a very simple platform for our members to better manage their businesses we also provide the support and guidance to do this through our blogs/ webinars and support. Why not take a look at our Recipe Cost Calculator?
We partner with companies to help them achieve their financial and business goals through the creative use of technology.
You can get more information about Kitchen CUT by emailing email@example.com or calling +44 (0) 330 113 0050
You can register for a free trial here.