During a recent discussion with a restaurant franchisee, the issue of profitability came up. As he put it, the restaurant business has three basic levers that the owner/management can control: food sales, food costs, and labor costs. I call these the trifecta of restaurant profitability since you simultaneously need to get all three correct. (Ok, food and labor costs are prime costs, so technically it should be called exacta or perfecta of restaurant profitability. I wouldn’t describe most restaurants as exact or perfect. So I went with trifecta.)
These are so important, but when was the last time you looked at them in your restaurant?
Here’s a simple suggestion for each to get you started.
- Food Costs
Create a simple sheet that tracks throwaways daily. The restaurant franchisee found $75 a day in savings here.
- Labor Costs
Pick a day of the week and look at the staffing verses the sales. Is there an extra hand here?
- Food Sales
Pick the five most popular items on your menu. Does your wait staff consistency upsell add-ons for these entrees (assuming it makes sense)?
P.S. We are working on a product to make the management of the trifecta much easier. More on that in 2013.
In simplest terms, our vision is to create the definitive restaurant operating system that will make restaurants more profitable, more efficient, and ultimately create a better dining experience.
So what does this mean?
We want to provide restaurateurs a comprehensive and integrated set of tools to clearly see, manage, and optimize their restaurant from soup to nuts. If it’s affecting the restaurant, we want it to be part of the restaurant operating system. It’s a fairly ambitious vision that will take time to completely realize.
Right now, we are working on the core set of services for the restaurant operating system. We will be making it available soon. Over time, we’ll be adding additional services (35 identified to date) to complete the vision. It will include the features of a traditional point of sale (A POS with the functionality restaurants have been hoping for), plus a whole lot more.
Yes, it’s ambitious. Yes, it’s going to be a lot of work. But it’s time we brought the restaurants of the world into the information age. Restaurants deserve better information technology than they have been forced to cope with and we are going to bring it to them.
Our dream is to reduce the restaurant failure rate, reduce burnout, and give restaurateurs and staff a better life. Our vision of the restaurant operating system is a vital tool to help do that.
Following up from last month’s post, here’s the other half of why I founded Cloud Dine Systems.
I did it to create the change I want to see in the world and to make a place I would love working at.
Most business organizations today are hierarchical. I call them Taylor organizations since Frederick Winslow Taylor pioneered their workings around the turn of the century in “The Principles of Scientific Management”. They focus on specialization, top down communication, and foremost, efficiency. Unfortunately, they are characterized by slow reactions, turf wars, unempowered employees, and poor communication. It’s very difficult for these types of organizations to innovate.
The world is changing more quickly than ever and Industrial Age, Taylor organizations cannot keep up. The Information Age requires a new type of organization.
I believe this new type of organization will be:
- Networked and flat instead of hierarchical. (Like this).
- Directed by data driven self-organizing teams instead of top down commands.
- A learning enterprise employing the feedback loops of Lean Startup and Innovation Accounting instead of the rigid, fear-based, command by fiat.
- An innovative powerhouse operated by cross-functional agile teams without department silos.
- Financially transparent through open book accounting with every partner sharing in the profits and held accountable by their peers.
This type of organization is much more nimble, empowering, and ultimately, I believe, more profitable than traditional Taylor organizations. Part of the reason I founded Cloud Dine Systems is to prove this and create a place I love to work at.
Why did I start Cloud Dine Systems?
Here’s half the answer. The other half will come next month.
A wave of enabling technologies recently came into existence that will allow restaurants to be run in radically more profitable and customer focused way. Cloud Dine was created to bring the potential of these technologies into reality.
Recent innovations in technology have created sweeping changes in the possibilities for how restaurants operate. The list of changes coming together is amazing. Just to name a few: commodity hardware in the form of consumer off the shelf tablets, ubiquitous wi-fi wireless networks, cloud technologies, internet enabled smartphones, inexpensive internet connectivity, remote management technologies. These changes and others combine to create the foundation for a revolution.
Cloud Dine Systems was founded to utilize these enabling technologies and revolutionize the restaurant business.
So why should you care as a restaurateur? Because these coming changes will increase your profitability and efficiency. The last significant technology adopted by restaurants was the change from paper based systems to computer based point of sale systems. This increased the net profitability of restaurants by 1 to 3 percent. The upcoming revolution will have a similar impact and then some.
I believe these changes will reduce the horrible restaurant failure rate (by some counts 70% fail within ten years), reduce the need for 80-100 hour weeks with the associated burnout, and give restaurant owners and staff some of their life back. The potential to make a positive impact on millions of lives is a lot of the reason why this is worth doing and why I’m doing it.
Here’s a bit of company news.
We have a piping hot new logo, fresh from the Adobe® Illustrator® pixel mines. What do you think?
I think it looks amazing behind the reception desk. (BTW, that’s Sandy, the Verge Building receptionist, working away.) Then again I’m a bit biased.
Photo credits: Copyright © 2012 Cloud Dine Systems, LLC. All rights reserved.