By Brooks West, Delaget
There are countless challenges facing restaurant owners, and among those challenges is the ever-rising cost of food, a large expense that continues to inflate the cost of goods sold. According to the 2015-2016 Food Price Outlook by the U.S. Department of Agriculture, food prices are 1.3 percent above the November 2014 level. In particular, prices for beef and eggs are showing noticeable inflation.
But for many fast casuals and QSRs, eggs are now even more expensive, considering a plethora of brands, including Dunkin Donuts, Panera, Taco Bell, McDonald’s and Wendy’s, have jumped on the cage-free egg bandwagon — a decision that is taking a substantial bite out of profits.
According to Ken Klippen, president of the National Association of Egg Farmers, operators pay $1 more per dozen for cage-free eggs. That’s because the production system to produce cage-free eggs causes more feed waste, higher mortality, and costly cage design, and those costs are passed on to the egg buyer. If the average brand serving breakfast uses roughly 120 dozen eggs per week, at $1 per egg more, that’s an increased cost of $120 per week. Over the course of one year, that’s an increased cost of $9,000 — a nearly 1 percent increase in the cost of goods sold, which is already a fast food restaurant’s largest operating expense.
While restaurant owners and operators can try to pass this cost off to customers, recent media reports suggest that although consumers are willing to pay more for cage-free eggs at the grocery store, they are less likely to pay more for them at a restaurant. That means that operators will have to make up that cost elsewhere.
“They should look at their loss,” said Jeff Williams, vice president of Operations for Border Foods, a Minnesota-based Taco Bell franchisee. “Loss happens in all kinds of forms, from employee theft to mismanaged inventory. Operators need to know exactly where their loss is happening, and take action to correct it.”
Ed Heskett, a long-time restaurant loss prevention specialist, agrees.
“Restaurant managers need to be aware that loss isn’t just the result of employee theft. Loss happens in the form of food waste, inventory management, portioning issues, and more,” he said.
According to Heskett, loss prevention behaviors should be part of almost every process in the restaurant. From hiring and onboarding to staff development and training, restaurant operators can use best practices to mitigate the many forms of loss. Educating employees about inventory best practices like First-In-First-Out (FIFO), the importance of clean and organized shelves, and how to report overages and shortages will help operators hone in on loss. Communicating and enforcing company policies will also help prevent loss. In addition, restaurant supervisors should make sure employees use portioning tools and follow flavor profiles so that every menu item matches the estimated served cost.
Taking action with data
While promoting a culture of accountability is one important facet of loss prevention, data plays another important role. Every restaurant produces thousands of data points and should take action with that data. By reviewing the metrics that matter, like labor, food costs and theft, for example, operators can easily monetize their loss and start protecting profits. By integrating to the point of sale, more advanced data analytics tools are able to pinpoint missed revenue, daily; track speed of service; and gauge employee performance.
As it relates to employee theft, loss-prevention software can track suspicious transactions like voids, refunds and deletes, and connect those transactions to specific employees. This allows restaurant leaders to view missed revenue opportunities by employee, grade each employee’s operational performance, identify suspicious trends that show loss over time, and even suggest corrective action measures to recoup that loss. When one employee rings up a transaction as a refund, that’s not enough to signal theft. But when data shows that the same employee has tendered $100 in refunds in one week, that’s cause for a theft investigation.
For many brands, hiring a loss-prevention specialist or team of specialists and leveraging data analytics and loss prevention tools can make a noticeable difference in their bottom line. In fact, a successful loss prevention program can recover roughly 3 percent of all sales—a major step in the right direction toward offsetting higher food costs, such as cage-free eggs.
Brooks West is a product manager at Delaget, a provider of innovative restaurant technologies, and is responsible for the innovation and implementation of Delaget’s suite of services.