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The Restaurant Roadmap is your guide to building and running a successful restaurant. Each episode explores the full journey of operations—from planning and development to menu design, execution, and growth. Hosts Danny Bendas, Amanda Stokes, and Chef Eric Lauer bring decades of expertise, joined by industry leaders and restaurant professionals who share their insights and stories. Together, they uncover strategies, tools, and lessons that help operators improve performance, strengthen teams, and elevate the guest experience. Whether you’re opening your first location or refining an established brand, The Restaurant Roadmap equips you to navigate every step with confidence.
Danny: Welcome to The Restaurant Roadmap podcast, powered by Synergy Restaurant Consultants, your go-to source for actionable insights and real-world strategies from the industry’s top experts, clients, and special guests. Whether you’re building a new concept or refining an existing one, we’re here to help you create a forward-thinking sustainable brand, elevate guest experience, streamline operations and maximize your bottom line. With decades of hands-on experience, our mission is simple: to deliver practical, proven solutions to the everyday challenges restaurant operators face. Let’s dive in and get to work.
Danny: Hey, good afternoon, everybody. This is Danny, Synergy Restaurant Consultants. Welcome to The Restaurant Roadmap podcast. Today’s subject is budgets, cash flow, and how to manage your costs, and how to get as much profit out of your business as you can. I am very proud to bring on Clyde Gilfillan. I think Clyde, you are the longest tenured consultant in the Synergy organization. We’re up to, what, 14, 15 years, I think, right?
Clyde: Yep, just about 15 years. Yes.
Danny: Yeah, very cool. Yeah, so Clyde is our financial guru. He does all of our financial feasibility studies for our clients. He’s also an excellent operator, has been around for a very long time. So Clyde, say hello, and then we’re going to jump right into the information.
Clyde: Hi everybody. Thanks for being on the show with us.
Danny: There you go. So, we’re going to talk about budgeting, we’re going to talk about cash flow, the importance of understanding your business, how money moves in and out of your business, and so I was going to ask Clyde, really, to start off, first of all, is you know, kind of define budget. I know that sounds a little crazy, but let’s understand what a budget is, why it’s important, and just so we have it for now or future reference, I’m going to put a basic budget layout up on the screen for you all to look at. So, Clyde, take it away.
Clyde: Sure. Sure. Budgets are an important exercise for any food service operator to go through, specifically, it’s geared toward setting targets. Some do annual budgets. I recommend more quarterly budgets than annualized because of the nature of the business in which sometimes it can be pretty fluid and seasonal in restaurants, specifically, but other types of food service as well.
So, when you use a budget, you want to not use it as your bible. It should be used as a measure for KPIs and projecting targets for your managers to hit. And when you do put a budget together, you want to make sure that it is quite detailed; you don’t want to just put general categories in there. Plus it should mirror your chart of accounts in whatever accounting software you’re using, as well as the income statement structure that you have.
Danny: Very good. Yeah, and I always look at it as a roadmap, like you said, Clyde. Many, many years ago, we had a consultant work for a company that I worked for, and, you know, we had to go through a three-step process to getting to a final budget. Step one was writing out assumptions and criteria for the year, meaning, if I can make any change in my business to improve sales, reduce costs, enhance guest service, what would those be? And then those assumptions got approved, and then the assumptions that were approved became a business plan, basically saying, if I’m going to change X, I have to do everything I need to do in order to change X to start May 1st, the first, you know, that particular month.
And then if that got approved, then I based my budget on all the approved assumptions and the business plan. So, I literally had kind of a calendar for the year of everything that I want to accomplish. And then that led to, obviously, writing the budget, finally, and then looking at where do I have to spend CapEx money, you know, and stuff like that. So, it was a really great way to think about budgeting. You know, to your point, they have to be very, very detailed. It takes a lot of thought. And a lot of people don’t like writing budgets, but I think once you get a good budget written, it’s a really good track for your team, right? So.
Clyde: Yeah. I agreed. I like that process that you walk through. You definitely want to—in this business for sure, you need to have base assumptions, specifically with your major sales and cost categories. But you also want to use historical data, so oftentimes, I’ll recommend to operators just start with, you know, your a quarter at a time, whatever your fiscal year is.
And there are some people who use calendar systems where a period starts at the first of the calendar and ends on the end of the calendar month. Others use what I call the old-school 4-4-5 method, that’s four weeks, four weeks, and then a five week period. It’s not used very often anymore. In fact, most operators actually use calendars. But the recommended procedure that I like is to have 13 four-week periods, and have those periods correspond to, first of all, your sales and your payroll breakouts, like, when you start your sales week and when you end your sales week, same with your pay periods, and then you can build out your budgets from there.
But using historical data, I think, is also important when you look at those assumptions, such as having a sales growth. So, some people might have a minus 2% sales growth in a January, but in June or July, which might be their prime season, like a lot of USR restaurants are like that, then they may have an assumption where I’m going to grow 6 to 7% just during these certain months and/or quarters. So again, going back to what you said, have as much detail as possible, but remember, a budget isn’t cash. It’s not where your cash is going to be. It’s just targeting where you want your sales and your major cost categories to be.
Danny: Yeah. And I think we’re going to, kind of, walk through this thing on the screen here real quick as we keep talking. But you know, I love the idea of the thirteen-fours. I personally always recommend that also because then you’re not accruing, everything starts at the same time. You can pick what day you want to take inventory, you know? With a calendar, you know, the month ends on a Saturday; it’s like, who feels like taking a month-end inventory after a busy Saturday night or a Sunday morning, right? So, you can control your business a lot better, right?
Clyde: I agree totally.
Danny: Yeah. And then I think you’ll also agree, we can touch very quickly, you know, it also gives your management team goals. And especially if you’re putting together a bonus program for your managers, you know, your budget, and then participating in the creation of the budget to make it realistic, you know, and attainable, right? So, you’ve done a lot of budget or bonus work, so talk about that just a little bit, Clyde.
Clyde: I think it’s important that you provide your managers with not only a competitive base salary, but also an incentive award program in which they’re moved to beat certain targets that you want. And I think there’s two different kinds of these incentive reward programs, so let’s break those two out. The first is what I would call more traditional, wherein there’s this budget, and then within that budget, you set KPIs, mostly on your general categories, like—let’s just break into three for this discussion—sales, prime cost, which is your cost of goods sold plus your all-in labor number, and then profitability, profit or income at the end. And oftentimes, operators will use a percentage of a base salary if they hit certain target levels or KPIs. That’s more traditional. And it could be 10, 15, 20%, depends on the operator or the company, et cetera.
The second part is more of what I would call a modified operating partner. Now, I don’t mean ‘partner’ as in they have an equity stake in the business, but a partner as in a partnership. And the budget can be used, especially if you’re going to use this operating partner instead of as a threshold of income. This is actually gaining a lot of popularity, it is actually very good for those operators that are more multi-unit, and that is, you can set a threshold in your budget and then give the operator, or multi-unit operator, a share in the cash flow over and above a threshold. And I think this works positively for both, one, if you’re the owner and/or operator or a company, you have this ability to gain a, you know, a hundred percent of the profit up to a threshold, but then you’re going to be generous with anything over and above that to the operating partner, let’s say a 20% share. If he or she beats the threshold, you’re still gaining 80%, but they get to share the 20% and it really incentivizes operators to provide as much profitability as they can.
Danny: No, I think that’s great. And I think, you know, I’m so glad that you mentioned sales first in the priority because it’s always about, we got to build sales. I mean, I’ve worked with companies in the past where they’ll put a bonus on a cost category, and all the managers do is manage the cost to the detriment of the company and the detriment of the location, right?
Clyde: Yeah, yeah. I agree a hundred percent. Yeah. You know, oftentimes, people—well, you know the old saying, Danny, you can’t save your way to prosperity. So, if your sales aren’t rising, then your customers are voting with their attendance and the number of transactions you have. And so, sales is always your number one. Yes, it can cover up a multitude of sins, but I think if you have excellent cost controls, which we’ll speak about in just a few minutes, aligned with growing sales, you have a financial model that’s going to be sustainable.
Danny: Yeah. And we always say, if you’re growing you can fix a lot of problems, right? If you’re losing [unintelligible 00:10:37] it’s really hard, it’s hard to fix things because you end up potentially cutting to lose, cutting to lose, and you basically cut your way to the bottom, right? So yeah, so real quick on this document on the screen here, Clyde, we have some categories. We’re going to touch on these, but you know, just to talk about sales and the importance of breaking down revenue and being able to analyze without over analyzing. So, anything you want to talk about there in terms of the way this P&L is laid out?
Clyde: Not necessarily anything in particular, but note that you have the basic general categories: sales, cost of goods, sold labor, and then your operating expenses. Now, there are some groups who would like to take their operating expenses and break them down into variable, semi-fixed, and fixed. So, variable costs like chemicals and paper and those types of things, semi-fixed might be marketing, for example, that there’s going to be some fixed costs to that, especially if you have a PR marketing firm on retainer, and then you’re going to have what I call semi-fixed. Those would be your rent, insurance, mostly your utilities. They don’t vary much, especially if you’re paying attention to them, so you can break those operating expenses down. But I would not over—in a budget; I’m talking about in a budget here—I wouldn’t overcomplicate things, especially if you’re going to use it for the KPIs we’re talking about, as well as your capital expense planning and projections as you go through the year.
Danny: And you know, the other thing I was going to ask you to touch on real quick—and I know I’m kind of drifting more into financials than I am budgets, but I think it’s worth talking about quickly—on here, the purple line ‘prime profit,’ as we work with clients, a lot of people don’t understand prime costs or prime profit and the importance. So, can you touch on that real quick, Clyde?
Clyde: To kind of broaden it out at first and then move back to that specific question, the math for any food service company is relatively simple: it’s sales minus prime cost minus operating expenses equals profit. And so, you have certain targets that you want. So, prime cost is usually your cost of goods sold. That could be generally food cost, beverage cost, you could break it down into beer, wine, and liquor costs, non-alcoholic. There’s a lot of ways you could break it down, but the cost of goods sold is that number that it costs you to produce the sales for those particular categories.
Second is labor, and it’s not just what you’re paying people. It’s also all the benefits that are associated with that, such as medical insurance, if you offer that, payroll taxes, vacation time, things like that. So, when you combine cost of goods sold and all of your payroll and/or labor expenses, all the management, hourly, payroll taxes, benefits, et cetera, that’s going to add together to a certain number. For example, if your cost of goods sold is 30 all-in, that would be that total cost of goods sold line that you see on this document, plus let’s say your total payroll costs are 35, then you’d add those together and your prime cost is 65. Our recommendation is, and especially when we’re doing financial forensic analysis and assessments of businesses, is that when we see prime costs over 65, there’s something amiss because that only—if you take a dollar and you’re spending 65 cents on your prime cost, you only have 35 cents left over, and that’s going to get eaten up pretty fast, especially if you’re paying occupancy and high insurance costs, which keep going up. And that 35 cents can dwindle down really very quickly. So, that’s why prime cost translate also into prime profit, which is that dollar minus 65 is 35. That’s really the key number that you want to focus on. That’s where all your money’s going.
Danny: Yeah. Yeah, and like you said, when we do feasibility work with potential new startup people, that number gets really, really important because if that number is too high, it’s really hard to bring anything to the bottom line, or bring anything to the bottom line where it makes sense to actually create the business because you’re working really hard for not a lot of dollars, right? So.
Clyde: Yeah. I agree. A feasibility model is also very important, and I don’t want to go into that in a detail of this particular podcast, but when you do a feasibility study before you’ve created and before you’ve actually opened up a restaurant, feasibility is decide whether it’s going to be a good investment or not, everything that’s associated with the prime cost is centered upon what kind of concept you’re doing. And it’s not just sort of guessing at this. It’s all about the concept, where it’s located, the menu, the service style, the size of the facility, you know, the equipment costs, all of those things. And you and I have done a lot of those feasibility studies together, and that’s why that prime cost is extremely important.
Danny: Yeah. Exactly, yeah. Okay, so let’s go back to budgeting and the idea of budgeting, and we want to talk a little bit, we have some categories here that I’m just going to throw out and Clyde and I are going to talk about. So, cost controls and expense management. In this world and in the restaurant business in general, we run on such thin margins, you know, it really is a game of pennies, right, so we have to manage all of these things very closely.
Obviously, cost of goods and prime is the biggest chunk, but there’s a lot of other stuff down there. So, I think we kind of talked on food and beverage pretty well. There’s anything else you want to add, or any sort of rules of thumb, or anything you want to talk about there, Clyde? Then we’ll go into labor costs, and then we’ll go into overhead as well. So, anything else on food and beverage you want to talk about?
Clyde: Well, I think briefly, just to say that oftentimes operators will focus—and I’m being general—is they’ll focus on labor costs because that’s really—it’s easy. You can see the people, you can see a schedule, and we’ll talk about how to control labor. It’s actually a lot simpler than people think. But the harder of the two is to control what I would call food and beverage costs, cost of goods sold. And there’s five main areas for that you want to, kind of want to be cognizant of, but it’s much more difficult. A lot of variables in cost of goods sold than labor.
Danny: Okay. So, we’re going to talk about that a little bit later. Anything about overhead, or anything you want to talk about there?
Clyde: Those usually are either fixed or semi-fixed, most of the majority. So, if you have remember, going back to that 35 cents on the dollar left over after prime cost, usually 10 to 15% of that is going to be eaten up in those fixed or semi-fixed costs, occupancy costs, such as insurance and rent and taxes and things like that. And then your utilities, normally at least 3%, and sometimes marketing is also in there. That could be 3 to 4%. So, you could see how things get eroded very quickly if you’re not cognizant of that product cost.
Danny: Exactly. So then, you know, we talked about cost of goods, and that very, very much goes into menu planning. If you’re going to budget a 32% food cost, let’s say, you know, let’s talk about all of the things you have to do when you’re working on your menu, your recipes, your food costing. You know, that all impacts all of these things and that has a lot to do with how you’re going to attain that 32% right? So.
Clyde: Yeah, I agree. At Synergy, we use a 19-step checklist to go through when we’re building either an entire menu through a menu [spine 00:18:23] and categories and/or individual menu items. There’s a lot that goes into that. We use this 19-step checklist. But essentially, what you want to do is you want to make sure that you have written recipes that will work, they’ll stay integral with volume—they need to work under volume—and then you want to be able to cost those out.
So, if you don’t know what your individual menu costs are, how much one plate costs—and that includes two types of recipes, prep or batch recipes, let’s say you’re making five gallons of soup or something—and then there’s the assembly costs as well. So, you can’t forget your garnishes and things like that. So, you need to know what your theoretical or ideal food cost is at any given plate before you even consider doing the other two things: menu pricing, and then, of course, designing the menu itself.
Danny: Yeah, and all of that planning, that’s how you get to your budget number, and then that’s how you maintain your budget, you know? So, you know, you have to price items, and you have to work on, you know, specific menu items in order to get to the budget number, the theoretical that you’re trying to get to, right? So, there’s a whole lot of thinking that goes into that, right?
Clyde: Yeah, exactly. And if you’ve operated for any period of time, let’s say two or three quarters on, you’re going to have some pretty good historical data. When you’re first starting out, to be honest, there’s going to be some guesswork, some hypotheses that you have to have, and some assumptions you have to have, but that’s why you want to do that feasibility study in the beginning.
Danny: Yeah. And let’s talk just a little bit about capital expense because that’s all part of what you have to budget for the year or for the quarter, or if you’re doing business planning and strategic planning or when you want to accomplish goals, you have to build in the capital expenditure. So, whether you have to replace something because of age, or you want to change something in your operation that requires a new piece of equipment to accomplish a goal. So, anything you want to talk about there?
Clyde: Sure. CapEx, if you’re a new restaurant, it’s not quite as important, but if you either purchase an existing restaurant that you’re either going to rehab or you’re going to renovate, or you have an existing restaurant that’s, let’s say, five years or more old because that’s… you’re getting to the shelf life of certain pieces of equipment, especially in the kitchen, and you’ve got to wear and tear on other furnitures, fixtures, and equipment as well. So, you need to use the two things that we’re talking about today as you said, a roadmap to understanding CapEx. Number one, your budget. So, when you use your budget, you’re going to be able to identify the periods in which you’re going to have—and I’ll put this in air quotes—“Extra money,” to be able to plan for when you think you might be able to either replace something, new chairs, new tables, refinish the bar top, buy a new flat top in the kitchen, you know, things like that.
But the second thing we’ll talk about is cash flow. The cash flow is going to tell you exactly when you’re able to buy those things. And we have to remember that when you buy a new 52-inch double-door reach-in, for example, you’re paying that bill immediately. You’re not paying it over time. You’re going to pay that bill to the vendor immediately.
Now, you can depreciate that on your balance, but it’s really an expense to your cash flow. And that’s why I think the budget’s really good, is because it can identify periods in which you should have, you know better cash flow to be able to purchase those pieces of equipment. So, it takes planning. You just don’t want to, kind of, like, let things, like, fall apart or be in disrepair, then be forced to buy something when you can’t afford it.
Danny: Yeah, absolutely. Yeah, and it helps you plan for these things when you know that an expense is coming at you, versus being surprised. And then, to your point, your cash flow goes to, you know, below zero, and you can’t afford for that to happen, right? So, all of this gets us to, on a budget basis, you know, profitability and potential to grow. So, some rules of thumb you want to talk about that we use, you know, in terms of profitability, and all these budgets are really designed to help you get there and manage your business. So, what are your thoughts on—where do you think profitability should be, if you’re running, you know, if you’re running a good concept, right?
Clyde: Let’s focus on the restaurant business, okay? So, three main categories: quick service, fast-casual, full service, and I’ll put casual full service, fine dining full service, kind of, together. But through those three, you’re going to have different levels. So, quick service, because of its lower average transaction and higher need for guest volume, is going to have a lower margin. You should be in the 10 to 12 range on your income. That’s the bottom line before taxes, commonly called EBITDA.
For fast-casual, you should have 12 to 15%, and in full service, believe it or not, because you’re leveraging sales in a relatively fixed manner, in terms of space and rent and insurance and things like that, you’re going to have higher sales because your, commonly called check average, that check average is going to be higher. So, those margins can be 15 to 20%. We have seen certain companies that we’ve had clients, and they have started in the 17, 18 range, and have fully passed the 20% profitability. When you pass 20% profitability, you’re getting into world-class range.
Danny: And just to be sure, for everybody listening in, to find profitability, is that what’s left after everything? Is that EBITDA? How do you look at that or how would you define that, just so we’re all perfectly clear?
Clyde: Right, so for what we’re discussing today, that would be your sales minus all your costs, before paying things like property tax or adding back in depreciation, taking it out. Because you take a depreciation out first and then you add it back in on a normal income statement. It’s really, kind of, your income before all of those things. So, you know, it’s before taxes, depreciation, and amortization. That’s normally what people see on a P&L. That’s kind of what we’re talking about here is, like, a common profit and loss number.
Danny: Yeah, and that’s what managers can generally manage, right? So.
Clyde: Yep, that’s all they can manage. And in fact, a lot of managers are unable to because it’s really out of their hands to control certain semi-fixed and fixed costs in that operating expense section which you have up there, such as rent, utilities, and insurance. I mean, you can save some money in terms of equipment off and do some things like that, which we do recommend, at certain times that the equipment power up, power down schedule. But having said that, you know most of a manager, it’s about sales, cost of goods sold, labor, and those variable costs that they can control: paper, chemicals, things like that.
Danny: And last question on the budget part, and we’re going to talk about ways we can kind of manage costs here next, but how often do you recommend reviewing and updating a budget, you know? Like, all of a sudden, the city decides to close the road, right, and it’s not fair to managers if they’re on a bonus. So, do you have any recommendation on how often to evaluate and adjust the budget?
Clyde: Yeah. So, that’s a really good question, and I’ll answer it in this manner: if you have loans outstanding, you’re servicing debt within your business, then the person who holds the loan, or the company that holds loan, typically a bank, they’re going to want to see a full-length, full-year budget. That’s what they’re going to want because they use more traditional valuation methods and risk management methods, risk analysis. But as an operator, I think that you need to look at a quarter at a time. So, if it’s February, you’re going to be doing Q2—if your fiscal year is January to December, and it’s February, you’re going to work your Q2 budgets, okay?
Now, there are some things that are going to happen. So, when you do do your budgets—and that’s why I’m thinking only go—that’s why I’m recommending only go through a quarter at a time because of the nature of our business, then you should make your adjustments to that budget as certain things happen.
Danny: Right, so quarterly updates, and then again, it’s fair for managers if they’re on a bonus, you know? It just, sort of, reset targets and stuff like that, right?
Clyde: Yeah. Yeah, you get the quarterly budgets and then it depends on when you decide to pay out those management incentive awards.
Danny: Yeah, yeah because you want them to, you know, like, after a while, if it just becomes unattainable, people just give up, right? It’s like, well, I’m never [unintelligible 00:27:22], right? So.
Clyde: Yeah. You have to be real careful on that. That’s a very good point. The budget should be motivating, not demotivating. You don’t want to have somebody who’s doing a really good job and making money for you, and then all of a sudden, the next quarter, you make it so hard because you don’t want to pay them a bonus or something like that. That’s really not right. You want to be having realistic targets, KPIs for these managers and you really want to pay out these bonuses because that means they’re doing a great job and you’re making money.
Danny: Very good. All right. So, we’re going to switch gears here real quick. You know, I put up on the screen, you know, the five areas you can control your profit or control your food costs. So, I just wanted to run through these real quick because this is integral to, obviously food cost is a big driver of profitability and a big driver in your budget, right? So, talk about ordering and receiving real quick because I always say, you know, “Losing money starts at the back door,” right?
Clyde: Oh, yeah. These five areas are the only ways in which, I think, from a financial standpoint, you can control these costs, and they very much dovetail into operations as all financial matters in the food service industry do. They go hand in hand: finance and operations. So, in ordering and receiving, you really need to make sure that you’re ordering properly, you’re using an online vendor, maybe you are big enough to have a master distribution agreement with a prime vendor, you want to have par levels, you want to have historical ideas, you want to set up your inventory levels. You want to make sure that you’re ordering the right things because, number one, you don’t want too much, but at the same time, you also don’t want to run out of things because if you’re consistently run out of things, that’s a problem.
You also want to make sure that what you’re ordering is the right price, the price you agreed upon paying. And oftentimes we’ll see operators, they’ll have three or four different people, and they’ll call around, and [unintelligible 00:29:19] is this one and that one and this one and the different prices, they’ll just order the cheapest one. But we also have to remember that cheap does not mean best. We have to be careful there. So, ordering starts with the amount you order and how much you’re going to pay for those things. You need to be very cognizant of that.
And then, of course, the next thing is those products show up in your back door, so you want to receive them properly, especially perishables like seafood, and beef, chicken—fresh chicken specifically, I’m talking about—produce. You want to look and examine those things. So, receiving is very important. And from a financial standpoint, we have to make sure that what the invoice says is exactly what you ordered, and at that price. So, you want to examine that as well.
Danny: Yeah. We find quite often, you know, unfortunately, that people just don’t take the time, or they don’t have the time, and you know, they don’t think they have the time to really do a great job of receiving. You know, so if you get a case of mediocre lettuce, you’ve already lost, like, 20% yield before it even came in the back door, right? So, you know, again, quality, quantity, price.
Clyde: Right. And you know, one of the things to also think about is if you have what’s called a key drop, and that’s where your vendor actually has a key to the back door, might drop it off it off at 2 or 3 a.m. you want to limit those to only vendors in which, A, you trust, and B, there’s verifiable methodologies in terms of receiving. So, if there’s something bad or you didn’t receive something, you want to be able to have mitigation to that. So, think about key drops as well. They can actually lower your pricing.
Danny: Yeah, absolutely. Yeah, good point. Okay, storage?
Clyde: Well, you’re going to receive everything and you want to store it properly. And what we want to see, from a financial standpoint, is everything is organized, it’s in the right spot, and you’re rotating things. So, if you have a big walk-in, you want to have all your shelves labeled, and you almost want this sort of militaristic attitude toward this is where it goes. And you want to make sure that when you do receive and you’re starting to store it, you want to rotate your products. And oftentimes we’ll see people, they’ll just put it on the shelf.
And that won’t be helpful because from an accounting standpoint, you’re always valuing your inventory based off of a first in, first out methodology, and that’s why rotation is most important from financial standpoint, but from an operator standpoint, you want to use the stuff that came in last first. You want to—I mean, came in first, first. You don’t want to use lettuce and it just came in and it sits in the back and never gets used. So, you want to make sure you have rotation as well. Everything is stored. Don’t ignore organization in your storage. That’s a hidden cost in food.
Danny: Yeah, and we always talk about, you know, it’s the pre-receiving part that can be critical, getting in, getting organized, breaking down boxes in preparation for the delivery makes your delivery a lot more efficient, gets your storage, and to your point, being really fastidious about organization is critical in this kind of stuff. All right, and then we have how to use your food. So, it all gets down to, like you said, recipes and everything else. So, what else we got there?
Clyde: There’s two kinds of use of food. So, there is how you prep your food, meaning you turn raw products into either work-in-progress or speed-scratch items or things that are ready to be assembled, either on the line, let’s say you own a Chipotle franchise, or you own some other fast-casual, you’re going to prep in the back and you’re going to bring it to the line, or if you’re full service and you’re cooking things all in the new, then you want to make sure that things that are prepared for you ahead of time. So, recipes are very important. Prep sheets are very important. You just don’t—we see operators where they’ll just take a piece of paper and some chef will write down what he thinks he needs to make today, and that’s not the way prep systems should work.
So, if you’re one of those types, or if you don’t take the time to really prepare yourself and make sure that the prep people are preparing exactly what you want in exactly the right quantities, then you’re already setting yourself up for higher food costs. We want to see those prep sheets done, and eventually do things like, you know, make sure, you know, portioning is proper. You want to weigh things and you want to make sure you use the right tools, and you want to conduct, you know, yields to make sure those are good as well. So, you know, it’s a lot of paying attention to the prep. You just don’t, like, write it out and off you go.
Danny: Yeah. And oftentimes—I’m sure, you run into it as well as we do—there are no prep systems because people have worked there for a while, and they say, “Well, I know how much we’re going to need, so I just make what I think we need.” So, there’s really no track and no history to really help you adjust based on, you know, volume need, right?
Clyde: Yeah, that happens. I mean, you have Susie, she’s worked back there for eight years. I don’t need recipes. I don’t—nobody need to tell me what to make. I know. And if you’re a chef and you allow that to happen, or a manager or an operator, and you allow that to happen, you’re setting yourself up for some disappointments, in my opinion.
Danny: Yeah, and then, God forbid, Susie leaves and you have no idea what gets prepped, right [laugh]?
Clyde: Yeah, [laugh] good point.
Danny: Susie goes on vacation, [laugh] you know? Okay now what?
Clyde: Yeah [laugh]. What did Susie do back here? I can’t remember.
Danny: Yeah. And then again, if Susie doesn’t follow the recipes, [unintelligible 00:34:58] doesn’t know how to cook the food, which is the next point we want to talk about real quick. So.
Clyde: Cooking, either in a fast-casual line or having it prepared in the back in QSR and either put into holding cabinets or put directly to a tray and moved on, or if it’s all new cooking, let’s call it in casual or fine dining, it all is relatively the same thing, and you have to have good proper equipment, good pans, all the equipment works, and proper tools. And you have to constantly be cognizant of the pressure on ticket times. I think that’s the biggest thing where mistakes are made, is that the cooks, they get this pressure because an expo is calling out times or customers are waiting for their food or anything like that. These ticket times really put a lot of pressure on them, and that’s when the mistakes happen. You got to make and just everything falls from there.
Danny: Right. Yeah, and that’s when quality suffers, so you know, being able to execute the food within your requirements for speed of service is really important. And then it goes back to menu planning. You know, you can’t have an item on that’s going to take 20 minutes to prepare, if your standard is 12 minutes, right? So, it all gets—all pieces together, right?
Clyde: Yes, exactly. And we at Synergy, we do two matrices that we do. One’s a station matrices. So, when you do a menu, you want to know which station has an overload or doesn’t have a low overload based on the menu [unintelligible 00:36:24]. And say for pieces of equipment, grill, flat top, fryer, salamander, you want to outline exactly where those items and what piece of equipment because you don’t want to overload a piece of equipment. That gets your line out of balance. And you really want a balanced line, at least to start with. You mean, you never can tell what the guests are going to order on any particular day, but if you have a balanced line, you’re more likely to be successful.
Danny: There you go. Yeah, good point. All right. And then, how do you manage waste? Obviously, that’s a big one because you can [unintelligible 00:36:57] very quickly and you don’t even realize it. So.
Clyde: Right, right. There’s always going to be waste in the restaurant industry or any food service industry, okay, there’s no way of getting around that. But there’s two classifications of that. The waste that you allow, which is things that get thrown away. So, let’s just say we’re taking whole carrots, right? You pay for the entire carrot, but you’re going to cut off the stem and you’re going to peel the outside. That’s allowable waste, also known as a yield. So, you build that into your recipe costs, knowing that your yield on your carrot is really 82% or whatever it might be.
The second is what you don’t allow, and that’s things that are, you know, like theft, for example, or not keeping the back door shut, or certain items that are—like, steaks that are kept in, what I call the purse-pack mentality. It’s easy just to put in there, or employees grazing, they’re just eating on the line all the time. You’re better off giving them a family meal, for example. So, there’s a lot of things that you really don’t allow, and it’s stuff that’s thrown away. So remember, waste can be things that are thrown away into trash cans—and you should be doing trash can checks at least once a day if you’re a good chef or you’re a good operator—so there’s always going to be things that are thrown away, but you want to limit the ones that you don’t allow, the ones that you don’t want. That’s where you’re going to control your waste better than the ones that you do allow.
Danny: Yeah, and then we always say our best friend is a rubber spatula, which, amazingly, oftentimes people don’t use. And we’ve done work where there isn’t a rubber spatula in the restaurant, which is kind of interesting to think about, right?
Clyde: Yeah. Well, some people kind of don’t really pay much attention to yield, and cans are a very good example. Or if you have a round—or you know, some—there are operators that use round cambros, and those are easy to be able to get things out. A rubber spatula gets it out. Squares, which are a lot easier to store and they are very efficient space utilization, but they’re hard to get everything out of. So, you have to really kind of have a mix of both.
Danny: Yeah, absolutely. All right, very cool. But let’s talk about labor. Labor is the second biggest piece, and sometimes even goes up faster than food costs. So, we talked about controlling labor. So, go ahead and touch on this a little bit, then we’ll get into cash flow.
Clyde: Well, this might be somewhat controversial to some of our listeners out there, but labor is the easiest thing in the world to control in a restaurant, in my opinion, because there’s only three ways that labor can cost you. The first is at hire, meaning how much do you pay a person? That’s either a manager’s salary or it’s an hourly salary. And you want to be competitive with these wages because you want to get the best people that you feel can fit your particular company and culture. So, that’s the first one. That’s a fairly fixed cost. It only changes once or twice a year at the most. So, just be careful of what you’re paying people, but be competitive with the marketplace because you don’t want them leaving for 50 cents to go next door.
The second is, how you schedule, and this is where people kind of don’t really think about this. When you make a schedule out, that’s what people are going to work and you affect their lives. You affect whether they’re going to pay rent or their baby needs new shoes, or things like that, but if you’re an operator, you want to cost that schedule out. You want to know how many hours you’re giving each person, times their rate of pay, and that’s going to tell you how much that person is going to cost you on that schedule. You add them all up, and then you think, “Well, does this beat my target budget?”—and we just talked about budgets—“Does it beat my target or doesn’t it?”
And you have to be ruthless with these schedules to make sure that, you know, you’re being kind and good to your employees and respectful, but you don’t want to waste money. And then the third way—so that’s only two ways, Danny, right there. So, you know how much you’re going to pay them, you know how many hours you’re giving them, each particular one, you add them all up, and then from there, you just have to monitor the clock-in, clock-outs. You got to make sure they actually work the schedule. Because, you know, people will switch out and, “Oh yeah, I’ll take your shift,” and all of a sudden it’s overtime, for example.
So, it’s really what you pay them, how many hours you give them, and do they actually work the schedule? That’s really it. And there are many people who use this schedule-and-cut methodology, which we don’t recommend. We like to look at things like hourly sales reports each day, or four week rolling averages on each Monday to kind of put your schedules together.
Danny: Yeah, and a couple of other points there. One of the things we always recommend, a good benchmark looking at productivity, sales per man-hour, right? You can gauge how productive your team is against your sales, and then keeping people productive, like the old saying, “If you have time to lean, you have time to clean.” Like, whenever I see somebody kind of hanging out, I always try to figure out if there’s something for them to do because you can either manage productivity by adding more work or by cutting time. There’s only two ways I know to manage productivity. But all of the things you’re talking about get down to maximizing productivity, living within the budget that you create, and hiring people that are going to get the job done for you, you know, in the best way possible, right?
Clyde: Yep, yep. You hire them, you schedule them, and you monitor their performance.
Danny: Exactly. Very good. So, I want to thank everybody for listening. I’d like to also always get your feedback. You can reach out to us, at info@therestaurantroadmap.com, suggestions, comments, feedback, what can we help you with? If we can help you with your budgeting or finances, cash flow, improving your operations. And if you have suggestions on a subject you’d like to discuss, that would be great. I would like to thank Clyde very graciously. This has been great information, and we’re going to look forward to picking it up again here very shortly in the near future. Thank you, Clyde.
Clyde: Thank you, Danny. I appreciate it.
Danny: All right. Take care everybody.
Danny: Thanks for tuning in. We hope today’s episode gave you valuable insights you can put into action. If you have questions, want more info on today’s topic, or need support with your restaurant-specific challenges, we’d love to hear from you. Reach out anytime at info@therestaurantroadmap.com, and visit synergyrestaurantconsultants.com to explore our services, sign up for our newsletter, and catch up on past episodes. Don’t forget to follow and subscribe on YouTube, Spotify, Apple Podcasts, LinkedIn, Instagram, TikTok, and Facebook so you never miss what’s next. Do you have feedback or a topic you’d like us to cover? Contact us. We’re here to help make the world a better place to eat.