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Managing Costs In An Economic Downturn

By Nick Mautone, Founder, Mautone Enterprises LLC

When initially approached about writing this article the thought was for me to offer 10 ways to cut costs. In this economic downturn everyone is looking for advice to trim costs and keep tight reigns on their expenditures. I struggled for a week with what to write. You see I have always felt that cutting cost for the sake of cutting costs can lead to bad decision making and lower quality. Both of these negatives occurring at a time when you can least afford them. Therefore let me offer another approach from the mindset of managing your expenditures to maximize your ability to remain strong, athletic and profitable.

Cost-Benefit Analysis

Before embarking on my 30 year professional career in the hospitality industry I was actually a pre-med student in college. I truly believed in the credo of the doctors Hippocratic Oath; “First do no harm!” So my first approach is to always truly look at what cost may or may not be too high and analyze if the benefit of saving a point will outweigh the potential harm in guest perception. Don’t cut where you will actually harm your business or hinder growth when the economy picks up again. My second thought is engagement. Bring your entire management team together, both kitchen and front of house, and discuss your goals. Be proactive and preemptive in your goals of cutting costs.

Several years ago I was working with an extremely high end, high volume restaurant. We were looking at linen costs and I sat down with the entire team & discussed that we were using far more linen than was budgeted and wasting money that could otherwise have gone to them in the form of bonuses or perks. When faced with the reality that this was a serious issue and looking at the numbers TOGETHER in the spirit of teamwork our linen cost went down 10% just by a team oriented focus. When we sat down a week later we actually came up with several ways of including the front line staff in managing a budget for their linen on a per station basis. For example every cook was issued x numbers of kitchen towels for their use during the shift and had to turn them in at the end of the shift. By analyzing this across the board in every area of the restaurant we were able to determine exactly what linen each person needed to work at a high level and again our cost went down an additional 10%.

Saving Money on Food Costs

My thought on saving money on food cost is pretty straightforward. Many restaurants will often go to cheaper, lower quality proteins to save on food cost. What often happens is the guest, who generally loves your salmon because of its freshness and quality, comes in one day and has a meal that was disappointing. That guest may or may not return. You saved money but at the expense of your guests trust. Analyze your menu and consolidate or cut out choices where appropriate. For example dessert menus often include high priced and or labor intensive recipes. I have found that cutting back by one or two choices on a dessert menu and tweaking the recipe on the others to keep choices minimal but exciting will dramatically save on food cost, training of kitchen personal and labor time in production. Eliminate overlapping and overly similar menu items and you can increase your buying power and save on certain ingredients.

Saving Money on Beverage Costs

Where beverage cost is concerned I look at minimizing what I have termed “pre-order paralysis”. A guest walks up to your bar and sees a cluttered back bar with 50 different flavored vodkas, or rums, or what have you (And generally a bar staff that does not know or care to know the difference!). That guest is subliminally confused as to what to order. Your bar is cluttered and therefore your inventory as well. By cutting back on the choices in this area and picking those few flavored spirits that truly integrate with your concept you will save time on inventory management, turn over your cash/inventory more quickly and save on cost by buying more of fewer products and getting the volume discount.

Saving Money on Labor Costs

How do you save on labor cost? That is always the most tense and stressful area of savings for me. I can never feel good about looking someone in the eye and essentially cutting their income at a time when they need it most. What I try to do is tightly manage the schedule and combine jobs wherever possible. One simple example is the host stand. My favorite place to be in the restaurant is the host stand. The reason for that is you get to see every guest as they arrive and make a connection with them. In lean times I prefer to hold the line on the high priced hosts or maitre d’s over servers and backwaiters. Not at the expense of hospitality mind you.

My preference is to integrate the managers into proactively managing the front door. By assigning one manager to the host stand I save on the high hourly rate of a host and get the benefit of one of my more talented employees greeting and speaking with the guest, making the first impression and overseeing the seating process to maximize the flow and profitability of our covers.

I treat management of the front of the house much like a zone defense. If each manager has a “zone” to work in we can cut on the hourly wages by sheer focus and tight schedule management. One thing I do not do is cut servers, etc for the sake of it. If hospitality suffers…so does your sales and cost savings do not matter.

Lastly, have a committee of managers and bookkeepers who review every purchase order before the order is placed and review every check once it is written but before it is mailed out. On this committee ensure that you have a mix of kitchen managers, front of house managers and office personnel. By reviewing po’s this you can engage debate on what actually needs to be ordered or not and have a true discourse on holding the line on expenditures. By reviewing the checks before they are mailed out your team will be enlightened by the sheer size of their purchases. It is one thing to place the $100 bread order every day it is another thing to see the $3000 monthly check go out to the bread purveyor. Once your committee gets into the swing of this exercise you will save oodles of money by cutting out needles purchases.

"In a storm leadership is detected"

In closing one of my favorite quotes is from Admiral Halsey who once said; “In calm seas every ship has a great captain. It is during a storm that your leadership is tested.” Do not let a good storm go to waste. Managing during tough economic times should only be an enhancement of what you should have been during more fat times!

About Nick Mautone

Brice Jones

Currently, Nick operates two multifaceted food service, management and consulting companies. Both companies are forward thinking organizations focused on extraordinary levels of excellence, balanced leadership and community involvement. With Partner Don Pintabona, Nick is the Operating Partner of The Alexis Group which consulted to the Atlantic Hotel in Fort Lauderdale, and Citarella Restaurant & Retail Stores. Mautone Enterprises has consulted to such restaurants as Amuse, The Carlton Hotel & Country and 6-Penn Kitchen in Pittsburgh. Other projects include the iconic Il Buco in Noho and The New French in Greenwich Village. In 2008, Nick assisted Chef Ed Brown on the highly regarded 81-Restaurant which opened February 2008, the Ligne Rosset designed Apiary on Third Avenue in Manhattan and Southgate at the Jumeirah Essex

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