Controlling Costs To Protect Profits

Chris MarshallRegency Purchasing Group

My Background…

• BA (Hons) Hospitality Business Management.• Over 20 years in catering environments.• Hotels, Restaurants/Bars, Michelin, Play Operator, Purchasing.• Experience in running/owning own operations.• Now working for RPG alongside a team of operators.

Topics

• The Profit Triangle• Purchasing Flow• Money Saving & Profit Increase• Utilities Overview• Q&A

The ‘Profit Triangle’

A systems approach to purchasing.• Think of it as a flow chart.• Need to choose a starting point.• This depends on if a new starter or existing operation.

Purchasing flow

Breakdown the ingredients needed.

Decide on/review your menu or offering.

Compare the market for pricing.Assess value added benefits from suppliers.

Manage and monitor purchasing over a period.

The menu/offering

This may be determined by; (not exhaustive)

• Your customer demographic.

• The style of menu you wish to offer.

• The brand/quality you are portraying.

• The ability of the staff.

• The equipment you have at your disposal or the layout of your business.

• Use the resources and people around you to help you decide (FECA members, RPG etc.)

Breakdown ingredients needed

• Work back from your menu.• Include your workforce in the task.• What is the ‘recipe’ for each dish or item sold?• You may consider ancillary items for some. e.g. ketchup, tartar sauce.

Create spreadsheet of all ingredientsThis will come in useful when monitoring/managing purchasing;• Supplier comparisons. (At review or ongoing).• Basis for stock and order sheets.• Basis for stocktake sheets.• Allergen data (as required since December 2014).• Contract lines (CL) or Specially Priced Lines (SPL) assessment.

Supplier A

Acc No: 12345678Tel:01234 56789 Regency ASM

Rep:Mr Bloggs (01234) 56789 Chris Marshall (07717) 646129Delivery Days:Mon Wed Sat

Order Dry Goods Fri for Monday Last updated 01/01/01Order Date:

(Orders) (Stocktake) (Stocktake)

Code Description Pack Qty Stock Price Value1061 Teacakes 5" 5x48s £9.81 1281 Cornflour 3.5kg £3.95 1492 Pizza Sauce Spicy 2.95kg £2.55 1885 Chocolate Brownies 12ptn £8.45 1963 Black Olives 2.37kg £5.72 1982 Soft Light Brown Sugar 3kg £4.90 2897 Superior Ham 500g £3.60 2951 Macaroni 3kg £6.77 3271 Salt Sachet 1000 £1.30 3483 White Bread Each £0.90 3484 Brown Bread Each £0.90

Account Name Account Number Category Code Description SPLOutlet A 123456 Bakers Mixes & F 10866 Brakes Self Raising Flour 1x1.5kg £0.77Outlet A 123456 Beverages 26448 Brakes The Juice Cranberry 12x1L £6.83Outlet A 123456 Beverages 100243 Brakes The Juice Orange 12x1L £7.41Outlet A 123456 Butter, Spreads 12718 Brake Salted Dairy Butter 70041 40x250g £40.55Outlet A 123456 Butter, Spreads 23179 Summer County Spread CB 2kg £2.74Outlet A 123456 Carbohydrate Acc 100268 Knorr Npc Lasagne 1x3kg £10.71Outlet A 123456 Cheese 22383 Somerset Brie CB 1kg £6.60Outlet A 123456 Cheese 71148 Brakes Mat Col Ched 70083 CB Min 4.75kg £21.32Outlet A 123456 Cheese 71344 Brakes Smoked Cheddar Cheese CB 1kg £7.56Outlet A 123456 Chips 3897 Brake Dual Stor Thick Fries 9/16 6x2.5kg £10.66Outlet A 123456 Chips 34484 McCain Bob DS Beefeater Chips 4x2.27kg £11.08Outlet A 123456 Non Food 88308 Brks White 2ply Napkin 40cm 2x300 £10.54Outlet A 123456 Non Food 88394 Brakes Black Bendy Straw 200mm 4x250 £3.18Outlet A 123456 Non Food 89798 SQUAT C/Feed Kitchen Wipe 250 sheets 1x6 £8.44Outlet A 123456 Non Food 555207 White 2ply Napkin 40cm 1x2000 £24.27Outlet A 123456 Non Food 555451 Thermal Credit Card Printer Roll 1x20 £4.43Outlet A 123456 Oils & Dairy 9802 Brakes Extended Life Oil 1x20ltr £18.27Outlet A 123456 Oils & Dairy 87045 Brakes Olive Pomace Oil 1x5L £9.14Outlet A 123456 Poultry 4027 Hot'n'Kickin Chicken Wings2.27kg(876143) £13.18Outlet A 123456 Poultry (Chill) 106664 Imp Chicken Fillets 200-230g 2x5kg £41.54Outlet A 123456 Sauces & Gravies 12383 U/Bens Mexican Salsa 1x2.23kg £6.09

Outlet A

When comparing the market place.• What is a good price? Include at least 3 suppliers in comparison.

• Look at high volume lines then also look at basket of goods.

• ‘Quality’ of products is as important (not always price led).

• Delivery & flexibility of suppliers.

• ‘One stop shops’ vs ‘cherry picking’?

• Data available to you to help you i.e. management reports.

• Pro-activity/New products are they actively put in front of you. (Be careful though!)

• Brand owner support. E.g. POS, Equipment, Training.

• Rates of sale between brands or products.

• Worth thinking cost per portion rather than case price. Helps in making decisions.

Simple Supplier Analysis

PRICE

QUALITYSUPPORT

IDEAL

Once agreed on suppliers

• Ensure pricing fixed for a good period if possible.(wont always apply to all products).

• Get a copy of contract lines (CL) or Special Price Lines (SPL) to ensure pricing loaded correctly and pricing is on file for review.

• Get any added value deals in writing.• You may want to get allergen data for later at this stage.

Ongoing monitoring

• Periodically check pricing against contract lines. Ensures no ‘price slippage’ (or get someone to manage that for you).

• Also check for items ‘off contract’.• Keep a note of what dishes sell well and which don’t (EPOS reports) to

help on next menu review.

Money saving & profit increasing tips• Buy in bulk where possible.• Watch for split case charges.• Use the ‘deals brochures’ but be careful!• Own brand over branded?• Upselling within the menu and at the till. (Can build menu with this in mind).• ‘Premiumisation’• Comparing rates of sale using supplier data.• Brand owner support to help sell product. E.g. Equipment, POS, Training etc.• Use planograms from suppliers.

Controlling cost of sales…Examples of ‘Constant Control’.• Food• Drink (Soft Drinks/Tea/Coffee etc.)• Non-Food (Chemicals/Cleaning/Paper/Hygiene etc.)..Examples of ‘Periodic Control’• Waste• Utilities

Utilities… a costly affair?

• It’s back to profit triangle!• Utilities is commonly one of the top 3 costs in the business.• Contract lengths.• Notice periods.• Assumptive renewals.• Tariffs and charges difficult to compare like for like.

When can I change?

• Contract end (having given notice).• Out of contract.• New premises.• Buying a business.

Where can I get help?

• The Internet - Comparison sites• Agents• Consultants• Brokers

Commonly asked questions.

• How much notice do I have to give?• What happens if I don’t?• Why would a broker need to see a copy of my bill?• Why would a ‘Letter of Authority’ be needed?• How long does it take to switch suppliers?• Can my current supplier block the transfer?• When I switch will there be any interruption to my supply?

Q&A

Open to the floor for questions.