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Using Your Food Effectively: Three Tips to Control Food Costs for Restaurant Owners

Editor’s Note: This post was originally published in February 2017 and has been revamped and updated for accuracy and comprehensiveness. 

As a restaurant owner, you have a lot of expenses on your plate every month that a partner like Xendoo can help you manage, such as providing tax tips for restaurants. Like rent and insurance, many of those are fixed and are beyond your control except when it’s time to renegotiate those agreements. But others are variable and are within your power on a day-to-day basis. By far, the two most significant of these variable expenses are food and labor, and there are things you can do to minimize both without sacrificing customer service or menu quality. Labor is relatively straightforward, but food costs can often be an elusive target for new restaurateurs. Let’s take a look at some things that you can do to reduce food costs and increase your bottom line.

What Is Food Cost?

Put simply, your food cost is the ratio of what you spend on groceries to your front-of-house sales and is almost always expressed as a percentage. For example, if you have a good restaurant bookkeeping system in place and know that your monthly Sysco invoices are $30,000 and your sales for the month are $100,000, your food cost for that month is 30%. Of course, lower is always better when it comes to ways to reduce food costs, but 30% is the generally accepted ideal for most restaurants.

several plates of food with similar ingredients sit on a table

Reduce Food Costs: Know Your Plates

There is a science to menu planning, and it involves a lot more than just deciding what dishes you are good at preparing. First, you need to know exactly the cost of ingredients for each dish you offer on your menu, which is often called the “plate cost.” Calculating your plate cost can seem complex at first glance, but it’s fairly simple once you get the hang of it. Before you can calculate anything, you need to be sure you have standardized recipes with clearly defined units of measurement and quantities.

Make a list of each ingredient in the dish and do the same calculation for each one. You need to know the unit of measurement your supplier uses (the purchase unit), what your supplier charges you for it (the unit purchase cost), and the yield. Yield will only apply to some items that require trimming or peeling (like meat or potatoes) before they can be used, resulting in some waste that needs to be calculated into your cost. Standardized yield charts are available from most vendors. These three numbers will give you your actual unit price for the ingredient.

Menu Engineering: Putting it all together

Next, think about how you prepare your dish and define the unit of measurement called for in your recipe (the serving unit). Next, figure out how your serving unit relates to your purchase unit and calculate your serving unit cost. For example, if you buy ketchup by the pound and serve it by the ounce, you would divide your purchase unit cost by 16 to get the price per ounce. Lastly, define the quantity of serving units in the recipe (portion size).

That may sound like a lot of numbers, but you can calculate your plate cost with these numbers in hand. Let’s take the example of a side order of french fries. You buy Russet potatoes for $2 per pound, and let’s assume four potatoes to the pound. After peeling, you have 19% waste (an 81% yield). Your recipe calls for 8oz of potatoes on the order, so it’s easy to calculate the plate cost from there. At $2 per pound with 81% yield, your actual cost per usable pound is $2.47. Divide that by 16 to get the price per ounce ($0.15) and multiply by 8oz called for in your recipe to get your plate cost of $1.20 for an order of fries. Sticking to the 30% food cost rule, you should be pricing this menu item at no less than $4.00.

Menu Engineering: Reuse Ingredients

Mexican restaurants are often cited as one of the most profitable restaurant categories. One of the key reasons is the relatively small number of common ingredients used in most menu items. Think about it: how many things on a Mexican menu can you make with some ground beef, chicken, tortillas, cheese, beans, and rice? A lot. Having common ingredients among dishes means you don’t have a lot of different items sitting around on the shelf not being used if a particular dish isn’t selling well. Avoid menu items that call for ingredients—especially expensive ones—that are unused in any other dish.

Take Regular Inventory

A good, detailed inventory taken regularly is important in figuring out how to reduce food costs because you need to know which items are running high and whether you might have food walking out the back door at night. No one likes to think that someone on the staff might be stealing, but the sad reality in the restaurant business is that theft does happen. Therefore, always have the inventory conducted and signed off by at least two people to reduce the inventory shrinkage. Other reasons for an item running high may be poor preparation resulting in unnecessary waste or spoilage from incorrect rotation.

Compare Foodservice Vendors Regularly

You have several options for foodservice vendors, and just because you’ve chosen one doesn’t mean you have to stay with your current choice. The vendor that had the best pricing a year ago, or even six months ago, may not have the best prices today. Food prices fluctuate based on market supply and demand, and vendors often try to entice new clients with low introductory pricing that they can’t maintain for long. So be sure that you’re shopping your options regularly to keep them honest.

Produce delivered to market with classic vw bug on cobble stone street in front

Check-In Your Food Truck

When your truck comes in, be sure that someone checks off each item on the invoice and verifies the correct quantity before the driver leaves. Foodservice vendors will often run out of stock in the warehouse and either make substitutions or omit back-ordered items. Be sure that your rep knows what substitutions are and aren’t acceptable and what items are critical for your business. You should receive a credit for any back-ordered items, but sometimes the vendor might make an oversight, or the driver might simply make a mistake unloading the order. You can’t afford to pay for food you never receive, right?

First In, First Out

One of the most common reasons for spoilage is the lack of proper rotation on the shelf. When the food truck comes in, ensure that the person putting it away understands that new items always go in the back and older items get rotated to the front. It’s often tempting when things get busy to stick the new inventory in the front where it’s most convenient. A periodic spot check of expiration dates will usually reveal whether your team is rotating items properly.

Prevent Cross-Contamination and Spoilage

The way you store perishable items can sometimes affect their shelf life. Be sure that your cooler is set at the recommended temperature (28-32° for fresh meats) and that items in the cooler are correctly stored to prevent cross-contamination of microorganisms that can lead to early spoilage or even sickness. In addition, be sure that raw meats, poultry, and seafood are placed on bottom shelves to prevent meat juices from dripping onto other foods and causing contamination. 

Run Daily Specials

Daily specials are a great way to offer a tasty variety to your customers and get rid of that extra inventory lingering in the pantry a little longer than it should. Train the front-of-house staff to sell the specials effectively and promote them on social media. If you offer a buffet, that’s also a great way to reduce food costs while keeping your customers happy.

Food cost will always be one of the challenges of the restaurant business, but it doesn’t have to be a nightmare. Using these tips, you can help keep your food cost under control and tame one of the biggest variables to your profit margin. If you are already close to the ideal food cost of 30%, congratulations, you’re ahead of the curve. But if not, you now have the tools to figure out where your grocery money is going and make sure you’re getting the most bang for your buck. Xendoo is here to help, so be sure to reach out and discover the full suite of services that Xendoo offers to restaurant owners just like you.

 

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

Five Customer Loyalty Tricks for Fitness Franchisees

Editor’s Note: This post was originally published in October 2017 and has been updated for accuracy and comprehensiveness.

As a fitness franchise owner, you know very well the challenges of getting new members through the door, even in the best of times. It’s never been easy, but the fitness industry has been one of the hardest hit by COVID-19, with value brands representing the largest share of losses in the industry. Major gym franchises like Gold’s Gym have filed for bankruptcy protection, and others may soon follow. Polling has shown that as many as 60% of Americans either have canceled or are planning to cancel their gym membership due to financial hardship or concerns about safety. Simultaneously, the growth of digital and at-home fitness products has added to the pressure on gyms, with Peloton doubling its sales in 2020. 

So, in that environment, how do you get new customers through the door and convince your existing customers to remain loyal? We can start by taking a cue from one outlier in the value gym segment that has shown more resiliency than its competitors through the pandemic. The Anytime Fitness franchise has rolled out a comprehensive COVID-19 policy to protect their members’ and staff’s safety and begun offering advance reservations to secure a spot when capacity is limited. When customers have confidence that you are genuinely looking out for their best interests, they are more likely to remain loyal.

But beyond just building trust among your members, there are some other things you can do to encourage customer loyalty in this most challenging of times.

Loyalty Rewards Program

Have you ever noticed that it seems like every store you go into wants you to join their rewards program? Well, there’s a reason for that – it works. Create a rewards program for your loyal customers with some nice little freebies to help keep them engaged. This might take the form of a free t-shirt after ten visits, or maybe a free post-workout smoothie with every 10 purchased. You can get very creative with this, so don’t be afraid to experiment. Never underestimate the power of free swag for customer loyalty. Everyone wants to feel special.

Frequent Customer Discounts

Many gym members, particularly in the value segment, care just as much about the size of their wallets as the size of their jeans, so giving them a discount on a product or service is a great way to boost customer engagement. This might be a discount on a personal training session within the next month, or possibly a coupon for deals on gym apparel. Gym apparel is a particularly desirable thing to encourage because, in addition to the revenue from the sale, you get the added benefit of free advertising for your fitness franchise every time the customer wears it.

Three women stand besides each other at a gym

Referral Rewards

Let’s face it – we all have that one annoying friend who can’t stop going on about how great his or her fitness studio or workout program is. Well, that’s exactly who you want to be your customer, so you need to create a compelling reason for that person to be your customer. Create a referral rewards program and offer a membership discount for each new customer brought in on a referral. You’ll soon find your membership roster – and your bottom line – growing steadily.

Premium Memberships

Take a cue from companies with the most loyal followings and offer VIP or premium membership packages. Do a little up-selling. The key here is to create a value proposition that’s compelling enough to entice your customers to pay a little more without eating into your bottom line. If a member is already paying $30 per month for a basic membership, he or she would probably be willing to pay $35 or $40 to add free tanning or a free monthly workout with a personal trainer. It can be tricky to find the right balance for your package, but this is a great way to reward your most loyal customers if done right.

A man holding onto rings tries to beat a record for a gym contest

Run Contests

Contests can be a great way to keep your members engaged with the club and create valuable rewards for members who participate. You might run a contest with a free gym t-shirt or duffel bag to the member with the most visits during the month, or possibly a “Biggest Loser” type contest with a free month of membership as the prize. You can also incorporate social media into your content strategy by encouraging people to share, like, and comment on your content. Give members who complete one workout and check in on Facebook during the next month a raffle ticket to a drawing for a free duffel bag or another prize.

Focus on Your Core Business

Business owners are notoriously bad at time management, spending too much time on things that others can do and not enough on what an owner should be doing – growing the business. Offload time-consuming administrative tasks to employees or an outside firm. Consider outsourcing your bookkeeping and accounting, which is one of the biggest time vampires in an owner’s day. By getting those off your plate, you can have time to spend on thinking up creative ways to engage with your members and drive loyalty at a time when you need it most. 

 

So what’s the best way to boost customer loyalty at your gym franchise? Start by taking your own gym’s advice and just do it. Set a goal and commit to seeing it through. Start with these tips, but don’t just stop there. Be creative and come up with other ideas, and then let us show you how Xendoo can help your fitness franchises become more profitable with a free trial. Let’s start building that customer loyalty muscle together!

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

A Prettier Profit and Loss Statement: Up- and Cross-Selling Techniques for Salon Owners

Editor’s Note: This post was originally published in October 2017 and has been updated for accuracy and comprehensiveness.

If you’re like most salon owners, the chances are good that you decided to start a hair salon because you love meeting new people and helping them feel more beautiful than when they walked in your front door. It’s only natural because everyone loves a rewarding job. Focusing on sales techniques, like up-and cross-selling for salons probably wasn’t high on your list of “pros” when you got into the salon industry.

But for better or for worse, persuading clients to purchase products or services that they didn’t initially come in for is an essential part of your marketing strategy and can boost your profit and loss statement. That doesn’t mean selling them products they don’t need. Cross-selling and up-selling are selling them products they need but didn’t know about. It’s part of your job to educate the client, so let’s take a look at how up-selling and cross-selling for the salon business can be less faux-pas and more moo-lah, and why salon owners already have a head start. 

Two women in pola dotted dresses work at a hair salon

The Difference Between Up-Selling and Cross-Selling

Up-selling is the practice of encouraging customers to purchase a more expensive item than they had initially intended. We do this by creating value for the customer in the more expensive product. Often, the customer just needs someone to point out the extra value. Depending on the type of salon, if a client is scheduled for a regular mani/pedi at retail price, check-in staff can create value for the customer by offering a deluxe spa treatment for just a slightly higher price. You might even be able to have your salon software automatically remind staff to offer the upgrade at check-in. If the customer is already spending $50, it’s easy to justify upgrading for just $10 more because it represents a good value.

Cross-selling for salons is the practice of encouraging customers to purchase other products or services that complement the original sale in some way. Sometimes customers don’t know what they need, and it’s your job as the expert to educate them about it. Effective cross-selling for salons might look like this: If a dark-haired client has decided to go blonde, you as the stylist know that those harsh chemicals can damage and dry out the hair, but the customer may not know that. You can explain this and encourage your client to buy a conditioning treatment to help offset that damage.

Why Cross-Selling and Up-Selling Are Important

 The bottom line is that up-selling and cross-selling for salons are critical to your bottom line in several ways. If you’re not doing it, you’re leaving money on the table. If you have a low-margin product that’s selling great and a high-margin product that’s not selling so well, an excellent cross-selling technique might be to bundle the two together and get that extra profit. But even more importantly, it allows you to create additional value for your customers, which is crucial to maintaining customer loyalty and trust. After all, value is why your customers come to you to begin with and what makes a successful salon. When deciding whether a sales opportunity is right, ask yourself, “Will this improve my customer’s life? Will it help them feel more beautiful?” If the answer is yes, you know what to do.

A woman hair stylist chats with a client.

So What’s This Head Start?

Salon business owners have a special trust relationship with their clients, which gives them an edge in ideas to increase profits. Stylists don’t just know their customers’ names; they know everything going on in their lives —their children, jobs, and health. They open up their entire lives to you, which puts you in a unique position of influence with your customer. To put it more bluntly, if they trust you enough to let you bring sharp blades around their heads and irreversibly alter their appearance (for a few months, anyway), they will trust your recommendation on special products and services. Remind your team that they have this superpower because it’s critical to your business, but don’t abuse it by selling customers things they don’t need. That will almost always backfire and damage your relationship.

OK, I’m Convinced. Now What?

Now that you know the importance of upselling and cross-selling for salons, here are a few things you can do right away to get the ball rolling.

  • Get effective inventory management and accounting system for your salon if you don’t already have one to know exactly which products are moving and which aren’t, and what the margin on each one is. Good accounting for hair salons is a must, and if you don’t have that information at your fingertips, you’re flying blind.
  • Create an attractive display with high visibility where customers can browse it easily. Never put it behind the counter because curious customers will feel like it’s inaccessible. Keep it organized, and well-stocked with the products that you believe are strong candidates for this strategy. Remember: eye-level is buy-level. Research has shown that products placed at eye level get 35% more attention than products placed at lower levels.
  • Ensure your staff is using the products you sell and posting them on social media. The best advertisement for a product is being able to see the results in real-time on a person’s natural hair or skin. Remember the trust relationship; if the stylist uses the product, it gives the customer confidence that it must be good. It’s almost like giving away a little trade secret. Purchasing salon-quality products that stylists actually use makes your customers feel like they have a leg up in their beauty routine.
  • Give your staff the tools to make cross-selling for salons easier. At a minimum, everyone in your salon should be familiar with every item you sell and be able to describe it to customers. But knowledge of the products is only a start. Your team needs to be trained in effective cross-selling and up-selling techniques and incentivized to use them. Be creative in coming up with ways to encourage selling, like contests with prizes, bonuses, or other incentives.

Remember, you may not see the benefits of cross-selling for your salon business right away. Sometimes the customer may be in a hurry or on a tight budget, and you have to respect that. Just remember that by maintaining the customer’s trust, there will always be another opportunity down the road. Do that consistently, and you’ll begin to grow your business and watch your bottom line trend up.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.

 

9 Ways for Franchisees to Outrun the Competition

Editor’s Note: This post was originally published in October 2017 and has been updated for accuracy and comprehensiveness.

As we’ve seen, there are a ton of fantastic, low-cost franchise opportunities out there that will give you a lot of advantages in starting up your new business. As a franchisee, you’ll still have the independence of owning your own business and being your own boss, but you’ll gain the name recognition, volume pricing agreements, and support services of an established brand. It’s the best of both worlds, and over 795,000 business owners in the United States have chosen this path. But as much as a good franchise can boost your chances of success, there is one threat to your new franchise which will always be present—your business competition.

 No matter the type or location of your business, whether restaurant, child care center, gym, or staffing agency, you will always have to know how to overcome competitors. Even if you start out in a niche that you have all to yourself in the beginning, you will soon get some competitors because success always breeds imitators. For every McDonald’s franchise out there, there is almost always a Burger King franchise across the street. If there isn’t, there soon will be.  

So how do you stay ahead of your peers in this horse race? Here are a few things you can do to outperform your business’s competition.

Know your business competition

If you don’t know all about your competitors, you can’t know how to overcome your competitors in business. The reality is that a lot of business owners don’t know as much about their competitors as they should. Make a list and call it “My Local Competitors Are….” Write down who you think your strongest competitors are, and then mystery shop them. If you sell widgets, buy a widget from your competitor and compare it to yours. Were the prices comparable? Is the quality as good as yours? Maybe even a little better? Does it have any features that yours doesn’t?

If your business is a restaurant, go and eat at the restaurant across the street. Pay attention to the cleanliness, the service, the food quality, etc. If your competitor is a hotel, spend the night and take a walk through their parking lot at night to look for fleet vehicles that can tell you which companies to make sales calls on. Now you know where you stand in comparison and what you need to do to win customers away from the competition.

Perform a SWOT analysis

If you’ve never heard of a SWOT analysis, it stands for Strengths, Weaknesses, Opportunities, and Threats. In it, you draw a map with four quadrants using those labels and compile a list in each quadrant. First, define clearly and honestly what you believe the biggest strengths and weaknesses of your business are in relation to your competitors. What do they have that you don’t? What gives you an edge over them? Knowing that, you next identify the top opportunities you have to steal business away from your competitors, and which of your competitor’s strengths pose the biggest threat to your business. A SWOT analysis is essentially a high-level business plan because now you know which holes to patch in your ship and which to exploit in your competitors.

A customer interacts with a cashier at a small business

Solicit feedback from your customers

The most successful companies ask their customers to give them feedback about their experience. Have you ever eaten at a restaurant and received a code printed on your receipt for a free drink if you take a survey? Stayed in a hotel and received a survey? Visited a business and seen a sign that says “Tell Us What you Think!” with a QR code that you can scan? The ways to solicit feedback are endless, and you’re only limited by your creativity. You need to know what your customers like and don’t like about your business, and the only way to know is to ask.

Listen to your customers

Soliciting feedback is only half the job. The other half is what you do with it. When receiving negative feedback, many business owners instinctively become defensive and dismiss it as untrue, unreasonable, or uninformed. Sure, there are professional complainers out there and we’ve all run into them at one point or another, but they’re few in number and easy to spot. The vast majority of your customers are being sincere. If you don’t already, be sure to take the time to review and respond to your social media accounts for your business. These may be the first channels that your customers use to voice a complaint or offer a compliment. 

A complaint is a gift and should be treated as such because the customer is giving you an opportunity to fix a problem before going to a competitor. The worst complaint is the one you never hear because that customer just starts going to your competition and you’ll never know why.

Create a service culture around your customers

Do you know who your customers are? Be a “lobby lizard” and spend some time in the front meeting and shaking hands with your customers and getting to know them. It’s important to create a service culture around your customers because they are generally not as loyal to brands or products, as they are intensely loyal to people and relationships where they feel valued. Even in the face of fierce competition, customers are attracted to and will be loyal to companies that put them first.

Customers line up at a small business coffee stand

Sell the product, not the price

Try to avoid price wars with your business competition whenever possible, because that’s just a race to the bottom. Somebody else will always be able to absorb more loss than you until one of you is forced out of business. Instead, focus on creating value for your customer by providing a good product at a fair price combined with great customer service. Cheap isn’t always a bargain, and customers are often willing to pay a slightly higher price if they see a strong value proposition for their money. You don’t necessarily need to be the cheapest, you just need to create the most value.

Know your numbers

We’ve already established the benefits of outsourcing your bookkeeping and accounting to a professional accounting firm, and one of the most important is that you will receive professionally prepared financial statements that will give you an accurate and complete picture of what’s going on with your business. 

Do you know exactly what your margin is? Do you know your year-over-year performance in each category? If you don’t have that information at your fingertips, you’re flying blind. This is where Xendoo can help because we offer a complete suite of affordable bookkeeping and consulting services that can keep you on top of your business competition and help you make the right choices.

Prioritize your time

There are dozens of ways time gets away from us because it seems like there’s always a fire that needs to be put out. Being a business owner means everyone wants a piece of you, and you have to figure out how to balance everything and keep the wheels on the wagon. Start each day by taking five minutes to write down all the tasks that need to be done that day, and then prioritize them. In fact, studies have shown that just writing a to-do list can help reduce your anxiety.

Go down your list by priority and scratch them off as they get done. Additionally, by using technology, cloud software, and business automation, you can eliminate some time-consuming tasks, allowing you to focus on the big picture and beat the competition. 

Only do what only you can do

In addition to prioritizing your time so that the most important things get done first, you need to spend it as efficiently as possible so that you can complete the maximum number of tasks on your list. If you feel like you have to do everything in your business yourself, that means you’re a great employee but a terrible manager. Effective management is about delegation. There are some things that only the owner can tend to, but a lot of things – like accounting – can be either outsourced or delegated to someone else to allow the owner to focus on staying ahead of the competition instead of cleaning windows.

Business competition is a guarantee, but it doesn’t have to be a problem. Did you notice how many of these tips revolve around customers? That’s because, without them, you’re out of business. You may be the business owner, but you work for them because they can fire you at a moment’s notice and go to your competitor. Just remember that as a franchise business owner, you can choose your own destiny by focusing on your customers, creating value for them, and building relationships with them. 

 

Do that, and you will always stay one step ahead of the competition.

 

This post is intended to be used for informational purposes only and does not constitute as legal, business, or tax advice. Please consult your attorney, business advisor, or tax advisor with respect to matters referenced in our content. Xendoo assumes no liability for any actions taken in reliance upon the information contained herein.