Free For All? Not So Fast: Comping in the Restaurant Business

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The diner on table 8 is a frequent regular, who always brings in new guests when she dines. So, you comp their desserts—Friends and Family discount. The couple at table 17 has an allium allergy, but the chef forgot about the chives in the potatoes; free entrée—Apology Comp. The owner’s sister-in-law is dining with her daughters–100% Owner’s Comp. And there goes $400 from that evening’s revenue.

 

That $400 can very quickly become five, six, or seven percent of sales that you’re letting go. Of course, there is reason—value, even—to discounting guests’ meals. But there needs to be control and accountability. Otherwise, your 10% EBITDA can quickly drop to only 4% or 5%. In this month’s Enterprise Insight, we will discuss three key steps in controlling discounts: first, defining comps vs. voids; second, budgeting for comps; and third, reporting and reviewing with management.

 

Comps versus Voids

This first tenet is simple: a void removes the item from gross sales, and a discounted item is shown positively in gross sales and then negatively in discounts. These different impacts call for different functions: if something was entered in error, or was ordered but never delivered, then this is a void. Anytime food or drinks hits the table but shouldn’t be billed to the guest should be comped, or discounted, from the bill. The primary reason being what we reviewed above: the impact on gross sales. If gross sales do not accurately reflect in totality what is actually served, then food and labor costs percentages will be inaccurate.

 

Budgeting for Comps

A key component to managing the amount you discount—ie, the difference between gross and net sales—is having a budget. Try to keep comps below 3% of gross sales. There are additional considerations, though: for example, if you have a marketing budget predicated on comping certain guests—writers, bloggers, industry—then include that, as well. So, if you want comps at 3%, but anticipate using freebies for marketing costs worth 2% of sales, then total comps should be 5%. This is particularly common when a restaurant first opens, and operators need to build buzz.

 

Reporting and Reviewing

As we just mentioned above, comps are often used for distinct purposes. This is why reporting and reviewing these figures with management is so important. If, as in the prior example, 40% of comps are meant for marketing purposed, but no one is watching, an operator won’t ever know that the bartender is just too generous, or the kitchen is making too many mistakes.

 

Thus, we recommend reviewing weekly, as we do with our clients: comps by type, comps by menu category, and if possible, where the comp types are used by category. For example, if you’re trying to build up your bar business, you need to review the current distribution of comps with management and then push them to using more Friends and Family discounts on drinks. If you notice too many Apology comps in the Food category, audit the kitchen operations, because something is not right. We recommend using at least the following types for reporting: Friends and Family, Apology, Owner’s, Marketing, Employee Meal, and Manager Meal. One for every reason. Then train the team accordingly.

 

To review: discounts have real value—both in functionality and cost to your business. Thus, it is important to establish the right parameters and protocol for usage, and then report and review the comps frequently. Otherwise, you can easily see a gap between gross and net sales that represents a gap in understanding your operations.

Food Tech Introduced at CES 2018

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The annual Consumer Electronics Show took over fabulous Las Vegas this week, bestowing upon the world the new technological advancements that might or might not shape the future. This tech isn’t limited to autonomous vehicles, smartphones, and ultra-thin televisions; it’s applied to the realm of food and dining too. Here are the new culinary gadgets — some appearing to actually be useful, some not — to come out of CES 2018.

Read the full article here

Amazon Prime Customers Can Now Order Delivery From Whole Foods

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For those who enjoy high-end groceries but dread schlepping to over-crowded upscale grocery stores, an Amazon Prime subscription just became a bit more appealing. Prime customers can now order goods from Whole Foods for same-day or one-day shipping, and Whole Foods 365 products are available for two-hour shipping. Perhaps this added convenience for Whole Foods shoppers will soften the blow of the supermarket chain’s rising prices.

Read the full article here

Elon Musk Wants to Build a Retro Carhop Restaurant With Tesla Charging Stations

 

855370170.jpg.0.jpgThere’s no shortage of ideas laying around the house of Tesla founder Elon Musk, from space colonization to large-scale lithium battery manufacturing. The always broad-thinking billionaire’s latest plan? A retro carhop restaurant, complete with drive-in movies and staff on rollerskates, to be built at the site of one of his company’s Tesla Supercharger stations around LA.

Read the full article here

How We’ll Dine in 2018: The Rise of the All-Day Menu

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Life moves pretty fast. Power lunches are out, and who sits down to a formal dinner these days? In the year of 2018, expect more restaurants where mealtimes are mutable and noshing is the new dining.

Explore new way here

Chelsea Market Adds a Restaurant Inside a Furniture Store

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NYC’s favorite tourist-destination food hall Chelsea Market now has a new restaurant-cafe-home design shop. Blackbarn — selling furniture, home goods, and food — has opened on the ground floor of the market, serving cafe fare like paninis and traditional entrees such as beef short rib.

The business is a collaboration between chef John Doherty, a former Waldorf-Astoria chef, interior designer Mark Zeff, and Zeff’s wife Kristen, inspired by the Zeffs’ home in the Hamptons. They’re calling it a “lifestyle brand”; everything used in the restaurant can be purchased in the retail store.

Read the full article here

Mind your own business

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Have you ever tried taking an exam without studying? How about cooking a dish from your favorite restaurant without following the recipe? Now imagine trying to run a business without knowing your competition. The underlying principles remain.

Understanding the competitive landscape within your market is a narrative that business owners and managers often overlook. It’s one thing to know your company inside and out; i.e. labor cost, cost of good sold (cogs), sales, etc. but taking a step back can give you a fresh perspective that will not only help your organization internally but also provide your customers with a better experience.

Know where you fall within your market. What’s your competition charging? What type of packaging do they use? What’s the average portion size? Average sale price? What type of ingredients are they using? Do they sell online? Do they use a co-packer? Is there new technology that can steam-line your process? On the surface some items are easier to recognize over others but once you scratch below the surface you’ll find the magic lies within the details. Don’t be afraid to get specific. Analyze the micro and macro trends. Look at the flow of traffic, the presentation of the product, or the logistics of the supply chain. It’s easy to become complacent when you’re riding the wave of success but never assume that’s the end-all.

Remember, this is continuous exercise that should be revisited every couple of months. We leave you with this challenge: every quarter go back and run a SWOT analysis (strengths, weaknesses, opportunities, and threats) comparing you along with your top 5 competitors. Don’t think of this as a burden; try to have fun with it. Pick a night, bring a colleague or business partner and take a moment to enjoy your meal. If at the end it feels like a dead end, try to keep with it but be humbled at the fact that you now know your market better than your market knows itself.