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Don't be afraid to implement a good food cost control (Part III)

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By Ernie Daza

September 19, 2011

In my consulting practice in both the U.S. and Latin America, I have seen basically two trends among restaurant operators. In Latin America, operators are much more aware of the internal theft problem, and  more concerned with implementing solutions that provide alternatives to internal theft prevention.

In the U.S., many operators see it as a minor problem or too complicated to address.

The North American hospitality industry in many ways its starting to look much more like the Latin American market, by having a great influence of a Hispanic workforce in difficult economic market conditions that leads to lower sales, with fewer labor hours to schedule , smaller tips and the same cost of living for the worker.

The need for a good cost control strategy is a priority now, as increases in internal theft is a reality.

In my practice, I find that a large number of operators have serious deficiencies in management of the tools and methods of cost control, and curiously this includes many of the multinational chains selling franchises, whose franchisees do not have enough support in this matter leaving them with large gaps in the management of the business.

Let's make a short analysis of the different tools and approaches used to managing costs and inventory control.

The first and most common method is to use an accounting software like Quick-Books or any other accounting software on the market that simply delivers a REAL COST information but never THEORETICAL COST information. This makes this method highly vulnerable to help in stopping internal theft. The accounting process will help you keep information for your income tax filing, have a profit and loss statement and many other good information, but won´t be effective on optimizing your profits or reduce your losses in cost control or theft prevention. The restaurant business needs to have specialized software to support the accounting system in cost control.

Now about the specialized software available on the market, most software programs available today, are developed by POS companies, whose main objective is not the inventory management solutions, or where they bring their higher profits; in fact, their inventory software is usually the problem product, as for a successful implementation, requires specialized technical support with restaurant inventory management background, and long term customer support commitment. This type of personnel is in short supply on the market. I can say that most installations of this type of software are flawed and abandoned by the user, and this includes the inventory managements software products of the most recognized brands in the market.

I have seen many independents, and franchisees with high levels of frustration with these software products, with the installation project being abandoned after a painful process to end up with the accounting software as the only cost control method.

Finally the last method I will mention is the use of electronic spreadsheets, in some cases developed by good professionals with some knowledge on the subject and although a spreadsheet strategy is much better than just relying on an accounting software, or an specialized software poorly implemented, these are solutions that provide partial results in preventing internal theft.

In our next installments, we will begin to define some key points on how to implement or make the most of a commercial software you already have as part of your software product or use some low-cost tools available on the market today.

Ernie Daza
FBHconsulting Grupo inc.

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Posted by Marty Baird on 9/23/11 at 1:13 PM EST

Do you think that people are afraid of good cost controls in the same way they are afraid of real time customer feedback?

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