For today’s tip, we turned to Brian Reccow, Director of Operations at Lolinda and El Techo de Lolinda in San Francisco. His restaurants are part of a larger group ( including Beretta, Starbelly, and Delarosa) known for their success in business and operations, so we asked Brian to share his advice for managing a restaurant budget. Read on for his best practices!
At Lolinda and El Techo de Lolinda, we start building our annual budget in October. We look at our historical data and trends and use that as a foundation, incorporating projected cost increases and decreases.
As for trends, now that we’re mature (over two years old) there are a couple of key indicators of what’s to come. The banquet program at Lolinda grew almost 40% this year, and brunch on the roof grew 50%, so we know those areas are going to continue to have significant growth.
Beyond that, there are things you can control and things that are outside your control. For example, if you’ve made a good deal with your rent, you can’t worry about that. But as you look at 2015, you can gauge indicators like minimum wage increases, products becoming more expensive, and other factors that will influence how you tune up your restaurants for the next year.
Here are three pieces of your budget that you can manage so they work for you, not against you.
Labor is a big issue, but we look at it as our best asset. Above all else, we have to make sure managers are not overtaxed or overworked, and that they have a good definition of their duties and timing so they stay efficient and focused. We have to ensure people take the necessary time off so they don’t burn out. A well-focused, well-energized management team is a cost saving – and an effective management team oversees an effective hospitality team.
In January in San Francisco, there’s a minimum wage increase and escalation that will continue throughout the year, so we have to account for that in our budget. [Editor’s note: the minimum wage was raised to $11.05 on January 1st and will reach $15 by 2018; read more here.] We’re making sure that we are providing good health care benefits and doing our job at the top level that keeps our next layer focused. If they are focused, they can take care of guests more effectively. We want to get away from looking at this business as a transient job and look at it more as an occupation. Providing benefits gives our staff more long-term security, making them more knowledgeable and effective.
These are effective tools that can help us manage, hone, and keep a workforce of people who are trained and motivated. Turnover is one of the key inefficiencies in this business.
Food & Beverages
Since we have a variety of restaurants, we’re working with vendor partners to find new cost savings by preferred purchasing, purchasing at scale, and other opportunities. We are asking vendors to come up with new solutions for reducing waste and packaging, which will help us on the front end and them on the back end.
We have to make sure we’re not reacting, but forecasting and looking down the line. Think about the great lime shortage of last year, when limes went from $28 a case to $130. We serve margaritas by the caseload! You’ve got to get ahead of that as early as you can. We looked at other products we could use, tried out a lemon blend, and found other ways to get us through so we didn’t have to return the cost to guests. At Lolinda, we’re always looking at meat prices and meat futures – when BBQ season heats up, different cuts become popular and prices go up.
When managing a budget, you have to keep your eye constantly on the horizon and account for these peaks and valleys. If you’re reacting to a price increase, you’re already behind.
We try to keep all of our restaurants independent because they live in different neighborhoods, but we set goals as a company that will help each restaurant thrive in its own environment. Each one has an agenda in its neighborhood that requires a different focus.
Consider environmental changes that will impact your restaurant. Look at new businesses coming into your area – in Q1, Q2, Q3, and Q4 — and how they will impact your neighborhood and increase your volume. Then take your budget and ask, how do we envision growth in our sales in these different quarters? Pencil that in.
The Big Picture
Budget is a great tool to go back to and measure, but we don’t run our businesses based on budget. That’s a foundation piece, but what’s truly effective is being present and aware and knowing how your business is running. You can get lost in managing to a budget and burn energy trying to live up to it. If you’re running well and people are happy and you have good employee retention and good reviews, budget shouldn’t be limiting or confining.
If something happens economically, it can affect you detrimentally or positively. Budget is only effective for the time and space of when it was created. It’s important to keep revisiting it to stay on top of the systems, programs, personnel and product that keep your momentum steady.