How Can I Use Recipe Costing, Incentives to Boost Profits and Productivity?

MRM’s “Ask the Expert” features advice from Consolidated Concepts Inc.

Please send questions for this column to Modern Restaurant Management (MRM) magazine Executive Editor Barbara Castiglia at bcastiglia@modernrestaurantmanagement.com.

Q: It's a well-known fact among restaurant professionals that the foodservice industry runs on razor-thin margins.  Therefore, how can I use recipe costing and server incentives to boost profits and productivity?

A: Throughout the foodservice supply chain, profits are made on incremental markups.  Amidst rising costs of labor, real estate, licensing and other operating expenses, it has become increasingly important for restaurants to stay focused on their margins via a heightened awareness of margin-adjacent factors such as recipe costs, staff retention and table-side selling of the operation's most profitable items.

Recipe costing is a complex moving target that can be very tricky to accurately calculate on an ongoing basis.  Many restaurants only calculate recipe costs quarterly or when introducing new menu items – and then do so without the most accurate commodity forecasts, pricing information or trend analysis. However, with the proliferation of online ordering tools, POS integrations and restaurant data technologies, restaurants can now generate much more accurate recipe cost analyses that factor in up-to-the-minute information.  

In order to succeed, purchasing departments at restaurants must carefully consider what software and data tools their operation will utilize and how all of those tools integrate to create an accurate and actionable flow of information.

One example is FoodBAM, an app and software tool that allows restaurant operators to input complex recipe costing parameters such as labor and waste. This gives operators a crystal-clear picture of what their dishes actually cost to produce. 

And while marketing, promotions, and reviews can help, the real key is training and incentivizing servers to sell the items that are most profitable for the business. Research shows that 54 percent of staff recommendations result in conversions, but restaurant staff are only making recommendations less than five percent of the time. (MSS Bartender Influencer Beer Report January 2015 & TNS 2014).  

This as a huge opportunity to boost a restaurant's profitability; however, you have to train servers and bartenders to sell the right products the right ways. It's not just a matter of reminding them, it's about effectively communicating whyand howto sell the items on your menus.  

Once again, this is an area where technology can play a large role. The days of informal server contests for T-shirts or scratch-offs are behind us as newer, more sophisticated systems are available to help restaurants equip their servers to sell effectively.  

Tipzyy is a server incentive program that creates competitions that can be run via mobile phones. Servers download the application, take trainings on their own time, and compete with one another to win cash prizes. Tipzyy integrates directly with the POS system to automatically track the contest and populates leaderboards, stats and positive reinforcement for the selling staff.  

Beyond selling drinks, appetizers and specific entrees, managers can offer contests for upselling, gathering emails for the restaurant's newsletter, filling out comment cards or bringing guests in for special events. Restaurants with employee incentive programs have reported a 64 percent increase in the level of employee engagement then those without one, making the incentivization piece critical to success.