The Top Three
Restaurant
Profit Drains
and How to
Stop Them
When you look at your profit-and-loss statement
each month, do you wish you could change more
of your gross sales into net income? You may be
able to do just that, by identifying the profit leaks
that prevent you from holding onto the money
that flows through your restaurant.
Money flows in every time you make a sale; it flows
out when you pay vendors and staff. To increase
your profits, you need to maximize the value of each
sale and minimize the amount you pay out for goods
and labor.
Like water, profit drains always seek the path of least
resistance: the fewer standards, measures, and controls
you have in your restaurant, the more likely profits may be
leeching off.
Since stopping profit drains does not require raising prices or
drumming up new business, it is a surefire strategy to boost your net
income, even in tough economic times.
Website: www.speedlinesolutions.com
Toll free: 888.400.9185
Start by asking yourself these three questions:
1. Are you getting paid for everything you sell?
Profit Drain #1: Warning Signs
2. Could you reduce your key operating expenses?
 Pricing and charges are not standardized
3. Could you sell more to your existing customers?
 Order-takers do not know their prices
Check the warning signs below. How many apply to your
restaurant? If you are at risk, read on to learn how new
controls could stop your profits from leaking away.
 Staff training is haphazard
Profit Drain #1:
Are you getting paid for
everything you sell?
 Customers complain about price
discrepancies
 You do not have a POS system
You fully expect to be paid for everything you sell. It goes without saying. And yet, during a rush, it’s easy to forget to charge for small
extras. More ranch sauce, another drink, an extra topping: it’s never a huge loss, but over time, it all adds up.
At My Father’s Place, owner Todd Sichelstiel always had a 25-cent charge for a glass of water. But often, his staff forgot to charge.
When he installed his SpeedLine POS in March 2008 and started charging consistently for each glass, he was shocked to find out how
much money this small extra added to his bottom line: “I made $400 in water sales last month—a Styrofoam cup with ice in it!”
When it comes to profit busters, forgotten charges are only one culprit: undercharging or charging inconsistently can also be a
source of lost revenue.
At Diana’s Gourmet Pizzeria, owners Diana and Pierre charged for pizza delivery based on where a customer lived. In their pre-POS
days, they would apply a charge they felt was reasonable, based on their knowledge of the area. But the charges kept changing all the
time. “One employee would charge 50 cents,” Diana says, “and another would charge 75 cents for the same house. And customers
across town could get charged anywhere from $2 to $5.”
When Diana and Pierre installed SpeedLine, they set up delivery zones and charges in their POS. “It took the fees right out of the
employees’ hands,” Diana reports. “Customers are happy because they’re not overcharged. And we’re ecstatic because we are making
an extra $600 a month in delivery fees that we were missing before.”
Inconsistent or forgotten charges arise from human error. Standardizing charges and
training staff rigorously can help reduce profit loss in this area. But the best
solution by far is to install a POS. Once you’ve set your charges in the system,
they will be applied correctly and consistently every time. In addition, a
POS will decrease the number of mistakes on the make line and make it a
whole lot harder for staff to slip freebies to friends—ensuring that you
get paid for everything you sell.
Profit Drain #2: Could you reduce
your key operating expenses?
Labor and food costs are the heavy hitters on the debit side of your balance
sheet. For many restaurants, food and labor expenses eat up anywhere from 55
to 70 cents out of every dollar earned in sales. The good news is that both food and
labor costs can be controlled to achieve real savings that will drop straight to your
bottom line.
“I made $400 in water sales last month
– a Styrofoam cup with ice in it!”
Cost control starts with good tracking.You cannot hope to
really control waste, over-portioning, and spoilage without
tracking stock usage. Neither can you optimize staffing
levels if you only know what your labor costs are after
you’ve done payroll.
Accurate Forecasting
But tracking is only half the battle. To keep costs in check,
the ability to predict sales and set targets is crucial. When
you can accurately project how many meals you will sell in a
day, you can stock and prep just the right amount of food to
avoid waste. Similarly, when you can predict how many labor
hours you need to meet customer demand at any given time,
you can schedule just enough staff to get the job done.
Tracking costs, forecasting sales, and setting targets manually
can be time consuming and imprecise. Some operators use
spreadsheets that they update regularly. But without the help
of specialized software to crunch numbers, even the most
experienced operators have to rely on their best guesses.
Profit Drain #2: Warning Signs
 You are often understaffed or overstaffed
 You have no time clock controls
 Payroll is your only way to track labor costs
 You are not using a sales forecast to schedule
your staff
 Once upon a time, you costed your menu items
 You count your stock infrequently
 You have no portion control on the make line
 You do not keep track of waste
 You carry inventory for more than a week
A POS system that tracks your sales history can increase
 Your prep plan is not based on a sales forecast
the accuracy of your scheduling and prep planning and help
you reduce costs significantly. SpeedLine’s unique Operations
Planning toolset dynamically builds a forecast, based on your store’s sales history and daily notes. The forecast feeds sales projections
into labor and prep plans, so you can forecast sales for lunch or dinner, or for delivery or dine-in alone.
Labor Planning
Based on your store’s forecast and goals, the system then recommends labor targets, building in payroll tax and overhead, to help
you schedule staff efficiently. The schedule also integrates with the time clock, easily controlling early clock-ins and late clock-outs. All
through the day, you can keep track of your labor versus sales and adjust the schedule as you go to keep within budget.
Prep Planning
The system can also recommend a food preparation plan to minimize waste, providing more control over food costs. Even the
newest prep staff know how many tomatoes to chop or crusts to pre-sauce for the dinner rush—so at the end of the night, there’s
less waste and more profit.
Inventory & Sales Mix Controls
To get to the next level with food savings, you can use your POS system’s
inventory software, portion control (weights on make tickets), and loss
prevention tools to pinpoint and help you prevent waste and theft of
both food and cash.
By comparing food costs by item with your sales mix, you can keep
your costs even lower by eliminating low-margin, slow-moving
items from your menu, and focusing promotions on your highestmargin menu items. “We use the SpeedLine Sales Mix tools to
help set promotional offers,” says Gina Hollinghead, of Rage Inc.,
a 105-unit Pizza Hut franchisee based in Texas. “We’re able to run a
report on the fly to see recipes at the latest costs.”
“We’re able to run a report on the fly
to see recipes at the latest costs.”
The exhaustive data provided by a system such as SpeedLine
POS can give you unprecedented control over your key
operating expenses. For Chris Jordan, whose Luigi’s Pizza
Kitchen restaurants serve a small local population that grows
by 8 million visitors during tourist season, projecting sales
trends with the sales forecast from his POS system proved vital:
“Without using the previous sales information,” he says, “we
would be flying blind and making decisions reactively rather than
proactively.”
 Your staff is not knowledgeable about
your menu
Labor Savings article
 You do not have a customer database
Controlling Food Costs with Inventory Software
 You do not collect information about
your customers
Profit Drain #3:
Could you sell more to your
existing customers?
Profit Drain #3: Warning Signs
 Your staff is not trained or motivated to
use suggestive selling
 You have no way of tracking your
customers’ ordering habits
 You have a customer database, but do not
use it for marketing purposes
Any time a customer visits or phones to order from you, you
have an unparalleled opportunity to promote your restaurant
and sell your fare. Here is someone who likes you, and who plans to spend money buying your food.You want to make the most of
the chance you have to build loyalty, increase frequency, and increase the size of your average order.
Upselling
Suggestive selling can add thousands of dollars to a restaurant’s bottom line. But training an unskilled worker to upsell smoothly can
be difficult, if not impossible, without the right tools.
Most point of sale systems support some type of suggestive selling prompt. SpeedLine, for instance, provides the tools to script
multiple upselling messages and choices.
When his SpeedLine trainer added upselling prompts for staff into the menu of his new POS, Stuft Pizza franchise manager Jose
Raposo saw a 20% increase in sales in the first two months.
“The system is able to suggest certain products to our
customers, something that was hit and miss when totally left up
to the order-taker,” Jose says. With staff upselling and serving
customers more efficiently, the effect on sales was immediate: a
15% bump in the first month, and a 20% increase by month two.
The key to successful upselling is giving your staff the right words to
say at the right point in the order entry process—and making it easy to
add additional items to an order.
Seasonal Upselling
Promotions and Sales Contests
Spot promotions or manager’s specials, scripted into the ordering process, can
also be an easy way to push slow moving menu items in the restaurant. And
because most POS systems track sales by item and employee, sales contests and
incentive programs are easy to manage.
“the effect on sales was immediate: a 15% bump in the
first month, and a 20% increase by month two.”
Database Marketing
The customer database built into a POS is another valuable tool you
can leverage to improve service, customer retention and profitability.
A customer database enables you to collect information about your
customers: their names, addresses, telephone numbers, email addresses,
birthdays, and more.
The system also tracks customers’ ordering habits and can be
programmed to spot first-time customers and prompt an order-taker to
hand out a menu or a refrigerator magnet with the restaurant’s phone
number, or to remind a frequent customer that there is a special
coupon at the bottom of their receipt for next time.
Moreover, you can use the address information you collect in the customer
database to send targeted offers to your customers by mail or email. Boost revenue by
giving customers incentives to order more often and spend more each time. And because database marketing is targeted, you’ll spend
less and get a much higher response than with traditional advertising and bulk mail.
The challenge with database marketing is that it can be time consuming, and time is the one commodity that’s in short supply at
every restaurant. Automation can make it easier. For example, SpeedLine automates customer reminder and reward mailings through
a full-service program called SpeedMail. Restaurants using SpeedMail are averaging a 22% response to their mailings, which translates
to an average of $5234 per month in trackable sales.
“Fish where the fish are biting,” said Aaron Allen, restaurant marketing consultant for Quantified Marketing Group in Heathrow,
Fla. “The fact is, new customer acquisition is seven to 10 times more expensive than building restaurant sales through increased
frequency, check average and party size.” And according to a study by the University of Pennsylvania’s Wharton School of Business,
increasing customer retention by 5 to 11 percent can increase profits by 25 to 75 percent.
Better Marketing Results for less
Two easy ways to Sell More
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Stopping profit drains
Did you identify any profit drains in your restaurant?
If you did and already have a POS, take the time to
harness the capabilities of your system to reduce costs
and boost profits. To learn more, take a look at the
product documentation included with your system, or
get in touch with your POS provider for help.
If you do not have a POS yet, it may be time to
explore your options: SpeedLine provides a free
guided Web demo to help you see for yourself how
a POS would work in your restaurant. Visit www.
speedlinesolutions.com to book a demo or phone
1.888.400.9185.
Website: www.speedlinesolutions.com
Toll free: 888.400.9185