Struggles Presented by NCBI

Overcoming Common Restaurant Struggles

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Welcome to Struggles: Navigating Challenges, Together, the podcast where we delve into the common challenges faced by entrepreneurs across all industries and uncover practical solutions to overcome them. Our show is designed to inspire and educate business owners, aspiring entrepreneurs, and leaders by sharing real-world stories, expert insights, and actionable advice.

In this episode of "Struggles," hosts Chris Inman and Chuck Johnson discuss the intricate challenges faced by restaurant owners, particularly in the areas of food cost management and labor issues. Drawing from his extensive 30-year experience in the hospitality industry, Chuck shares invaluable insights on the necessity of cost-effective systems, such as portion control and point of sale (POS) technology, to navigate the volatile market of food supplies. He emphasizes the importance of accurate cost analysis and adapting to rising labor costs post-COVID. Moreover, Chuck highlights the significance of credit card processing fee optimization, which can yield substantial savings for restaurateurs. Through this engaging conversation, listeners gain a deeper understanding of the often unglamorous realities of running a restaurant and the strategic measures needed to sustain profitability in a competitive market.

Episode Time Stamps:

  • Introduction to the Podcast
  • [0:00]
  • Chuck's Journey in the Hospitality Industry
  • [1:30]
  • The Glamour and Reality of Owning a Restaurant
  • [3:00]
  • Food Cost Management Tips
  • [5:47]
  • Technology for Inventory and Sales Management
  • [10:45]
  • Labor Cost Increases and Solutions
  • [15:00]
  • Innovative Credit Card Processing Savings
  • [18:00]
  • Family-Run Business Turnaround Tips
  • [22:30]
  • Ending and Call to Action
  • [29:00]

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It used to be like, oh, I want to charge $10 for a burger. Let me find a way to do that. But now you're putting together the ingredients and going, I need to charge $15 for a burger. But I'm not. Now I'm not gonna charge any. Now I'm not gonna sell any burgers. So they have to retool market. Who are we marketing to? Where do we need to increase? Because there are people that still want, you know, that two dollar Bud Light at happy hour and a five dollar burger and fries. The burger fries at McDonald's was 12 bucks. Welcome to another episode of Struggles presented by NCBI, the podcast where we navigate challenges together. Hey, everyone. Welcome to another episode of Struggles presented by ncbi. This is Chris Inman with Idea Cleveland. And joining me today is Chuck Johnson. From Erie Hospitality Consulting and Erie Payment Solutions. Excellent. Well, thank you for joining me, Chuck. Now, what got you into this consulting of hospitality? How did you get into this field? So I spent 30 years in the business. I've literally done every position there is to do in the business, from dishwasher to executive chef to regional manager to owner operator. And around 2018, I decided that I wasn't going to work for somebody else anymore. I wanted to do this for my. And I. And I realized that I had a lot of knowledge that I could help my independent customers out with, fill in the gaps, as it were. So turned it into a business. Awesome. So there's this whole thing where, like, because I worked in television and video production, that must be glamorous. It must be glamorous to own a restaurant, right? The glamour of owning your own kitchen to make you whatever you want and your friends come over and eat and drink off of you for free all the time. Yeah. And that's one of the funny things. I have a friend who used to come to my place all the time, and every time something horrific would go wrong and I had to fix it, I'm, you know, laying on the floor fixing plumbing, under a sink or whatever. He would just lean over the bar and go, own a bar. They said, it'll be fun. They said, you know, just to remind me just how hard it was. And I was the worst person to work for, for myself. My employees love me, but I work myself, you know, 70 hours a week. It's physical, it's hot, it's. It's not great. No kitchen and everything is not a glamorous position at all. Being back there in the kitchen, sweating it out. So we're gonna talk about Some ideas and some common things that restaurant owners have a struggle with. Sure. So the first one, let's talk about, like, food cost. We all feel it at home. We all know how eggs have skyrocketed. And we went through that whole thing where, man, I remember when chicken wings were cheap. Now they're the opposite of that. Yeah, chicken wings were literally a discarded item. There's a famous story about a guy from Buffalo chicken sales went around and said, I can sell these. And that started a trend. However, every restaurant, every restaurant, save a couple, has some version of a chicken wing on their menu. I've gotten to the point where I've told operators that are creating a new concept, don't put chicken wings on the menu. If you want to do a special sometimes when the costs are in line. Sure. But they are so volatile, they will be$50 a case. Well, they probably haven't been $50 a case in three years at this point, or they will be $120 a case. And it's already a struggle to make your food costs work, especially with the inflation we're facing today. So how does restaurant owners tackle that? And what's some advice you have for them? So my biggest advice is you've got to have systems, right? You've got to have portion control. You've got to have recipes that you've actually costed out with your latest, you know, invoices. You know, we all think, oh, how much does a burger cost in our head? You know, but that might be the cost that it was three years ago. You know, we cost out our burger on the menu, and it was $1.15 per patty, and now it's$253. You know, some of the more specialty grinds are 6,000 a pound, even wholesale. So you've got to look at that stuff, and you've got to be honest with yourself. As an entrepreneur, I think that's my number one thing, is you've got to be honest with yourself. And the numbers don't lie. So do the math, figure it out. Don't just go by feelings. Oh, we've got to do this, we've got to do that. Be willing to throw that, whatever that pet project is out. Say, you know what, Maybe we shouldn't do this because we don't make money or we lose money when we do this. So gotta be honest. So are there technologies that help with this? Oh, yeah, absolutely. So one of them is, like, you will not walk into a corporate restaurant or hotel anywhere and not see a point. Of sale computer system. And there are some old school mom and pop bars in the corners that still try to get get by with like a cash register, you know, from Sam's Club, $100 one. But unfortunately that doesn't give you the info you need. And a point of sale system can really just the report of menu item sales, what did you sell this week? And now you can take that compared to your inventory. Are you losing inventory? Maybe your recipes are off, maybe people are wasting, it's not portioned, et cetera. But it's only as good as if you actually use it just like anything else. So point of sales reports, they can identify trends, they can identify again costs, where your costs are, where they're going. But you've got to use the tools. Got to use the tools. But does a tool like that cost a restaurant owner a significant amount of money to set up? It can. There's a whole bunch of options. And as technology continues and continues to improve, there are new companies out there, there are new ways of going at it. Almost everything is cloud based now. Back in the day, I actually used to work for a point of sale company back in the early 2000s and it was kind of one of those legacy brands where you had to buy everything from them and so forth. And it was all in this big server in your back closet. Now it's cloud based. It's on iPads and sometimes PCs and Android tablets and whatever. But basically you can sit on your couch and change up your menu and look at reports and look at the trends even without being there. And so there are options now where credit card companies have gotten into it, where if you do your processing through the POS system, they will cut down that cost significantly, if not entirely. Now nothing's for free, right? If you're not paying for equipment, it's built into your rate somehow. But it is. But it's great when you don't have to write a check for 8 to 15 thousand dollars on a POS system. Instead, maybe it's built into a monthly payment or included in your rate some way that it doesn't feel quite as bad, or you write the check for $15,000. Either way, the ROI in that stuff, it's demonstrable. It has been for years. That's why the big boys do it and why independents need to look at it the same way. It's interesting. So we're talking about the food cost and you know, dig in to actually figure out what it costs per plate. And I've also heard that some of these POS systems can integrate and like, hey, these are some popular items. Hey, GFS over here is having a sale on this or whoever your supplier is. Not to name names exactly, but they can like, hey, here's a special you might want to run. Can you talk about kind of the technology there too, that. Yes, there are actually third party software applications now that integrate with that. Exactly. They integrate with your ordering and they integrate with your inventory and they integrate with your point of sale system. So that you can see some of the distributors don't love it because they'll say, hey, I always buy my, let's say lettuce from this distributor. But like you said, it's on sale over here. Just because the trucks maybe came in at a different time. I mean, everything is volatile and depends on crops and trucks and trains and what got stuck in Idaho this week and didn't make it. And so you look at that stuff and you have the opportunity to potentially save money by utilizing that third party stuff. And of course they've got their ROI on, you know, well, this is what this will save you and so forth. But either way, as long as you're using those tools, looking at them and you're not just checking out the order, you've got to look at your costs. Even if not using third party, you've got to look at your costs. You can't just go, what I was paying for hamburger two months ago is what I'm paying for now. Eggs is a great example. They go up and down. If you're a breakfast place that's cutting into your bottom line a lot. Absolutely. Food is one reason people pick a place. The second reason people choose to go to certain places is because of the staff, the friendly staff, the atmosphere that's there. But I always say Amazon has raised minimum wage more than anything the government could ever have done. Bernie Sanders got his way thanks to Amazon ultimately. And it's been forced upon an industry that used to pay bartenders five, six bucks an hour plus tip. These waitstaff, I forget what the tip rate was. It was like what was three bucks or still now. Yeah, we are a tipped wage. Like because we're here in Ohio, it is a tipped wage still. But most operators are paying more than the tipped wage just to get quality people. And the back of the house staff is the one that got probably affected the most. The guys that were used to making, you know, 10, 12, you know, 13. I was blown away when I found out like these chain restaurants, the guy that's making your $20 steaks, making like 12 bucks per hour. That used to be. That blew my mind back. Like it was pre Covid. That blew my mind. Yeah. Pre Covid in the before times. Yes. Now those guys are making $24 an hour. And that's like, that used to be a union type job, was paying $24 an hour in a factory. Now you can get that, you know, being a fry cook in some of these restaurants. And I'm not even talking about the fine dining, not the celebrity chef ones, I'm talking the corner neighborhood bar and grill. And they're struggling to make that work in this because, let's face it, their whole business plan they had, you know, if you had it even three, four years ago, it's completely different how you have to make money now. It really was because it was like food costs have gone up, labor has gone up. So how are you working with your clients to really separate from the pack? Because I feel like new places pop up every single month. I live in Parma and there's another new chicken tender place opening up. It's like, how many chicken tenders can we eat as a community? Who eats out this much? I know that we're a nation in debt and people just continue to go out to eat, but at a certain point, the bubble's gonna burst here. And if you're a restaurant, what's the average lifespan of a new restaurant even? It's pretty low, right? It's really low. And unfortunately. So there's those stats out there now. These are the made up stats that you would hear all the time. But it was something like 50% of all businesses, independent businesses, startup, close within the first five years. And 50% of those are restaurants. And part of the issue is that for some reason people think that restaurants and bars are not like other businesses, when in reality they're exactly like other businesses. Every business has somebody that sells it, somebody that makes it and somebody administers it, period. And in those things, you've got cost of goods and you've got your profit margins and so forth. If I told you I was going to start a trucking company, your first question would be, Chuck, I didn't know you ever drove a truck. And I mean, well, I haven't. I just, you know, how hard could it be? I'm going to put boxes on a truck, take them from point A to B. You know, we'll do some marketing, we'll get some customers. You know, we got to pay for gas. People literally think that's what a restaurant is. Oh, I cook the burger, I put it on a plate, I take it out and I take the money easy. In reality, you have to look at it like any other business. You have to have systems. So when you're talking about labor and streamlining, you've got to do operational analysis just like anybody else. You've got to take the time. And if you can't do it or you don't have that knowledge, that's where people like me come in. I fill in those knowledge gaps. You might be great in the front of the house, but not in the back of the house. Or you might be great in both of those, but don't know the admin or the marketing or profit analysis. That's what we come in and help you with. We look at that line flow, we look at the portioning of your, of your, in your kitchen. We say, you know, is it repeatable? Is it scalable? Because honestly, if it's not repeatable and scalable, then with the turnover we're having, you're reinventing the wheel every time you flip that kitchen staff. And it's way too expensive to do that. That's amazing. So what's your tip for somebody that's running or maybe they inherited it, it was a family run business. That's really common in this industry. You inherited a restaurant, your heart was not. I mean, you're in it because it's the family business. But what is your tip that like how to flip that and turn it into profit. What's like one major thing that people are doing wrong? That man, you come in and you go, let's look at this first. Oh, wow. That right there is a sign of like, hey, this is where we can kind of flip this and make this a more profitable company for you. Right? I think the biggest part of it is understanding and asking as many questions as possible. Especially if it's a previous generation thing about what you don't know. Part of succession planning in any business, big or small, is getting all that information out of the people's heads that have it. There needs to be some sort of understanding that that's going to continue to happen. And if you don't have the desire to really dig in and learn the nitty gritty of that business, that's fine. But you should hire someone to do it for you. Hire a manager. Like maybe your grandfather was basically the general manager and your grandmother was the chef, that's fine. But you need a new general manager and new chef if you're not going to do it. And any Entrepreneur, especially retail and restaurant, will tell you they're picking up brooms, they're fixing plumbing, they're changing light bulbs and painting and all the things that need to be done that you don't want to pay somebody else to do in order to try and preserve that 5 to 10% margin that restaurants experience. That's a low margin. It goes away real quick when you have things like inflation and labor challenges. All right, this is my pause. What? Did I not ask you that? You wish I did. I'll tell you what ask me about. Are there any expenses that maybe they haven't looked at that, you know, restaurateurs should look at now that maybe there's a possibility to save some money? And I'll get into credit card processing. Okay. All right, cool. Is there one thing that, you know, owning a restaurant that you can look into and be like, hey, this is one place I can save some money? So right now, one of the industries that has really turned over a lot and come out with new ways to save entrepreneurs money is the credit card industry and merchant processing. If you haven't looked at your rates in the last two or three years, and those are really complicated statements, they're that way on purpose, unfortunately, by some of the competitors. There are significant savings of 2 to 4%. And again, I just said the profit margin is only 5 to 10. So if you can get 2 to 4 out of saving your credit cards, there are ways to process credit cards for free to you by passing those fees on to customers. It's very, very common now. And if you're paying 3, $4,000 a month in credit card fees, that's huge. You know, that's a couple manager salaries, right? That's. That's helping pay for what you now have to pay those line cooks for. And then on the other side of things, if you are eating those fees, that industry is so competitive, and if you can find a trustworthy partner on that and have them do a real analysis for you, show and make sure they show you how they're going to save you money? Because I love it when they say, I could save you $500 a month. And they're one of my customers, so I'm defending against it. I go, where are they going to save you $500? Where did they tell you? So part of my job is to educate the customers into what they're paying, why they're paying it, how they're paying it, and then show them how they could potentially save hundreds, if not thousands of dollars. So that's a big one. Look at your credit card fees. Awesome. Well, thank you so much for joining me. It's been a great discussion. If you're looking for more information about like starting a restaurant or your restaurant owner, how do they. How do they connect? The easiest way is our website, eriehospitality.com there are links to Erie Payment Solutions on there as well. And we put out articles. We have a newsletter. We're trying to constantly give tips on like, new trends, ways to save on food costs like value added products and so forth that can kind of cut down on labor. We're all in this together. I love Pack and Shop. Awesome. Well, thank you so much for tuning into another episode of Struggles presented by ncbi, and we look forward to hearing you on the next podcast. Thanks for tuning in to this episode of Struggles presented by ncbi, where we navigate challenges together. Don't forget to subscribe, listen and share this podcast with others who might benefit. We'd love to hear about the struggles you're facing or have overcome, and we'd be thrilled to have you as a guest on a future episode. Let's continue this journey together.