We have seen a dramatic increase in internal theft while in the field and expect to see a continued increase in 2009, especially in employees who rely on tips for a large part of their salary.  Many hotels have been forced to dramatically reduce the number of hours as occupancy declines and many of the hotel restaurants have slowed down.  Many employees are now really struggling to make what they made in the past and most cannot afford to take a pay cut and still pay their monthly expenses.    

What can you do to make sure your employees don’t turn to theft to make up their lost tips?   

First, have a good long term forecast and reduce your staff accordingly.  Many hotels make the mistake of forecasting their labor week to week instead of quarter to quarter.  If you do a quarterly forecast, you can make better decisions.  Unfortunately, many hotels will be laying off employees over the next year.  If you evaluate your staff now based on forecasts, you can consider laying off a few employees now rather than just reducing everyone’s hours until moral really suffers.  Be upfront and honest with your associates and how the decreased business will impact their jobs.  For many employees, this is the first recession in their working lives. 

Second, make sure you are reviewing your internal controls.  One of the most important tools to have now is a system to track all employee’s sales and tips by day.  Be sure to compare each employees’ percentage of cash sales to other employees’ percentage and investigate any inconsistencies.  

Finally, continue to do what you have been doing in more successful times to keep theft out.  Many hotels are tempted to spend less hours reviewing internal controls or reducing mystery shopping to save money.  Don’t be short sighted.  Think long term.

Know Your Food Costs – It is surprising how little hotels actually know about their food costs.  Most hotels have a breakfast buffet, however, few hotels have any idea what their food cost is on the buffet.  Most just assume they are making a high profit because they were taught that buffets were always high profit.  Not true.  Spend the time to calculate your buffet cost.  You may be surprised to find out that your buffet food cost is 40 or 50 percent! 

Here is a simple way to find out the food cost for your buffet:  Have the kitchen log every single item that is used on the buffet during a 7 day period (10 cases of bacon, 22 cases of eggs, etc).  At the end of the week, add up the total food expense and divide it by the amount of revenue you posted for those days.  Be sure to do it for a whole week because you will find that your weekend food cost is very different than your weekday food cost.  Also, be sure to add in all items included with the buffet such as juice and coffee.

Re-engineer Your Menu – Hopefully, you are using a spreadsheet or computer program to monitor your menu engineering.  Be sure to re-evaluate your menu every single month.  For additional menu engineering help, check out this article.

Evaluate your menu prices – Now that you know your food cost and your menu engineering, be sure to evaluate your menu prices.  You will most likely have to raise prices.  However, don’t just raise all of the prices across the board, be very strategic.  Raise only the prices of the items that are the best sellers but do not have the best profit.  Keep the prices the same on the items that do not sell well but have a high profit.  Replace the items that do not sell well and do not have a high profit. 

Pressure Your Suppliers for Lower Prices – If the cost of a particular item has drastically increased, pressure your supplier for a lower price or a substitute item.  Let’s pretend the bacon that you use on your buffet increased 30 percent.  Switch to a lower cost bacon, there are tons of kinds of bacon available.  This is especially easy to do if you are using a big supplier such as Sysco and have an inside salesperson who handles your account.  Just pressure him/her to find substitute items for any items that have drastically increased. 

Decrease the Size of Your Portions – If you are like most restaurants, the size of your portions have become out of control in recent years.  Take a tip from the grocery stores.  You have probably already noticed that your box of Cheerios is now 21 ounces instead of 24 ounces, your Tropicana orange juice is now 58 ounces instead of 64 ounces, and a case of Coke now contains only 20 cans instead of 24.  Rather than raising prices, these brands all decided to decrease the portion size and keep the price the same.  This same strategy can work for your restaurant too!

Increase Your Profits by Up-Selling – Be sure to have a great up-selling training refresher course and a contest for average tickets.  For more tips on up-selling in room service, check out this article.

Whatever strategy you take, the most important thing is to know your numbers and be proactive.  If you have any other tips to share, please post them below in our comment section!

I was  in West LA last weekend and had time to get a quick bite to eat with some friends.  Most convenient, of course, was a major fast food restaurant down the street.  Some of us were not very hungry, so the ones who were ordered first.  Everything was normal at first; we ordered food that the cooks in the back had to make, the cashier entered the transaction into the computer, processed the payments, gave a receipt, etc.

Then the ones that just wanted small items came to place their orders.  As I waited for my food to the side, I noticed that she started to use a small calculator instead of the register that she had used with me to add up the cost of each order.  One of my friends ordered a drink and large fries (both items the cashier could retrieve herself).  She punched the amounts into the small calulator, and asked for $2.79.  My friend payed with cash, the cashier put the money in the drawer, did not present a receipt, and provided the drink cup and fries.  Another one of my friends ordered a specialty coffee drink.  The cashier listened to the order, then asked, “That’s it?”  Once my friend nodded his head, she then recalled the price from memory and asked for $2.19.  She then did the same with the money as the previous transaction.

There was a good flow of people coming in to order food and as I waited for my food, I could not help but laugh.  Every transaction that she did not have to send to the cooks or have to process a credit card, she would not ring the transaction into the register.  One can only imagine how much money this cashier was making, but even worse, how much more money the fast food restaurant was losing.  She obviously had been doing this for some time and because the restaurant was in a very high volume area, the managers or owners probably do not even notice.

Take it from me, she was being so obvious because she knows that she probably won’t get caught.  These things happen often in places I go.  Managers and owners just need to take a closer look at their operation.

Got a McStory to share?  Post it in our comment section.

With the advancement in technology, a server can make a guest check in seconds. That means they can easily manipulate a guest check in seconds. Here is one example our Mystery Shoppers see. A server serves 2 breakfast buffets and presents check number 101 to a customer. The customer pays $40 cash. Instead of closing the check to cash, the server pockets the cash and goes back and splits that check and creates check number 102 for 1 buffet and check number 103 for 1 buffet. Now the server has two open checks for very popular items that he/she can do many things with. He/she can present a check their next customer who orders a buffet or they can add additional items to the buffet or transfer it to another guest check. The opportunities are endless.

This not only works with buffets but with any items that are not prepared by the kitchen such as beverages, deserts, and especially alcoholic drinks.

How can you protect your restaurant?

1. Program a button on your POS for every single item you serve. Example: instead of a button for mixed drink, program a button for every single brand name of alcohol you have.

2. Require servers to input correct table numbers on their checks. Have a manager or supervisor occasionally pick up signed checks as soon as a guest leaves and verify the table number. If the table number on the check does not match, the server may be re-using checks.

3. Make sure all of your POS terminals are in a very visible location. The terminal should be in a place where it is seen by supervisors, other employees, and guests.

4. Subscribe to a Mystery Shopping Service. Have undercover shoppers come in on a regular basis to measure internal controls. It may cost a few dollars up front, however, most restaurants lose about 5 percent of their revenues do to poor internal controls so it will quickly pay for itself.

-On January 1, 2007, the minimum wage for California will increase from $6.75 per hour to $7.50 per hour.

-On January 1, 2008, the minimum wage for California will increase an additional 50 cents to $8.00 per hour.

To read the bill, click on the following link: http://www.dir.ca.gov/IWC/iwc.html

The biggest area the new law will impact is in the hotel’s food and beverage departments. Most restaurants only make a profit of about 10 percent. With server and bartender labor to increase 11 percent to $7.50, it could easily squeeze out the entire profit. Hotels with high benefits (especially high workers comp rates) will be hit the hardest. Now is the time to examine your menus and consider any price increases. There is a great article on menu engineering available at http://www.restaurantowner.com/public/330.cfm . There is also a menu engineering worksheet available for download to help you out. It is also a great time to examine your labor productivity. Make sure that you have a productivity number for each position and those numbers are used to forecast, schedule and report each week.

The earlier that you can prepare for the increase, the easier it will be to absorb the expense. It is critical to examine what positions that it will affect and have a plan for them. Typically any position under $10.00 per hour will be affected by this minimum wage increase. You may want to consider raising the wages on those positions immediately rather than waiting until January 1^st. As the word about the minimum wage increase gets around, employees will start looking around to see what other hotels are paying. The hotels who wait until January 1^st could risk losing some good employees to their competitors. Also, a large increase before the government requires could be a great boost for moral, especially in December when hotels are slow and work is scarce.

Link provided with permission from RestaurantOwner.com. For more information, visit http://www.restaurantowner.com/.