Archive for February, 2010

Forget the Answer, It’s the Question that Matters

Recently one of my company’s projects was especially challenging – and interesting – because it required me to expand my breadth of knowledge about a certain area in a short period of time. I would have even a shorter period of time to interview key players, to get to the root of the issues. If I failed to get to achieve an understanding of the underlying fundamentals driving the issues, then the project would fail.

Jacques-Louis David (1787)

So, I began planning my questions. Which reminded me of the favorite saying of one of my mentors, “if you ask the wrong question you’ll get the wrong answer”.

Great questions are more powerful than great answers, as Socrates proved many centuries ago. It’s just so easy to ask a question, get an answer consistent with expectations, and move on to the next topic or issue. But Socrates would solve a problem by breaking it down into a series of questions, a sort of “verbal distillation” process (“distillation” – I knew I could get back to an F&B topic).

This question process influences us today, and may witnessed in critical processes such as the “scientific method” and TQM.

For a hotel restaurant analysis I might want to know “who is the customer” and seek out traditional information relating to their stay (business or leisure, group or individual, age-income ranges, etc.). But I might learn more if I ask how the customer arrived here, why did they eat here instead of somewhere else, where are they going and what are they doing after they dine, and how are they getting there, for example.

F&B DIRECTORS RESTAURANT MANAGERS, HAVE YOU ASKED THESE QUESTIONS?

  • What is the purpose of my restaurant? Why does it exist? (Begin every exploration with “purpose”)
  • Not, “who is the customer?” but “what is the occasion?”, why are they here? (If you answer “breakfast” and move on, I have not been sufficiently persuasive).
  • Not “what is my labor cost?” but “what is my productivity rate?”, then break it down further, job position and meal period, for example
  • Not “what is my food cost?” or even “did I meet my budgeted cost?” but “what is my variance to theoretical this month?”
  • Not “how can I improve on my weaknesses?”, but “how can I improve on my strengths?” (As for weaknesses, find someone good in those areas, partner with them, and get on with your strengths…)
  • Not “what are the hotels in my competitive set doing?” where does  the guest eat when they don’t dine with us?” Why?

These are my questions, let me know yours.

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RFID Beverage Controls: a New Paradigm?

Heads up: you may think this blog is about RFID technology (it is not). Or, you may think it’s about beverage controls (it is not). It is about using technology to unleash practices that change behavior and enhance the guest experience.

RFID – Radio Frequency IDentification – is among the latest and most sophisticated technologies to be applied to beverage cost control.

Are you familiar with the technology? Does an image of Mel Gibson with a tin foil skullcap pop into your head when you hear “information through radio frequency”? If this is news to you, take a quick peak at the sites of some of the companies that offer these systems (Capton, www.captoninc.com, Beverage Metrics, www.beveragemetrics.com, and Liquor Monitor, www.liquormonitor.com are three that come to mind).

"Signs" 2002

In short, a bottle’s pour spout (or collar) contains an RFID chip and battery, and by measuring the tilt of the bottle along with other information such as the bottle’s contents, size and initial volume, the system measures amounts poured with remarkable accuracy, and reports data via radio frequency to a pre-specified program which may be accessed later or even in real time by a computer. They provide best results when interfaced with the POS, which enables management to learn, for example, if a specific recipe was executed properly.

Cool. But how do you “control” beverage costs? Historically we control costs by restricting access to the raw materials, or restricting output. Locks & keys are a timeworn technology for restricting access.

Mechanical and electronic devices have been in place for decades: mechanical portion-pourers like Posi-Pour (http://www.posi-pour.com) and electronic pour restriction systems like Berg Company’s (http://www.berg-controls.com) have been industry standards for years and continue to have relevance today.

But this is an age-old paradigm: control through constraint. Now let’s look at the RFID model again: there is no restriction of pouring or access, there is only information. THIS is the “paradigm shift”: controlling through information rather than restriction. How do you “control through information”? The answer: by changing employee behavior.

That’s right. Results are achieved when these time-honored practices are employed:

  • Measurement & analysis
  • Training & teaching
  • Feedback (two-way!) & recognition
  • Re-training as needed, more teaching
  • Recognition & reward

Restrictions, though sometimes necessary (I’m not advocating open storerooms, for example) don’t “stick” without help. The locked liquor storeroom requires a second lock, perpetual inventory, broken-empty requisition procedure, marked bottles and cameras in the hallway. This might be OK – but all of it adds little value to the customer experience.

On the other hand, behaviors changed through training, teaching, measurement, recognition and reward will “stick”. And they will impact the customer experience in a positive way.

And THAT is why this blog is not about RFID or beverage control. It’s about combining the measurement systems you have (RFID, POS, Guest Survey System, P&L) with training, teaching, analysis, feedback, recognition and reward to achieve the results you are after.

Those are my thoughts, let me hear yours.

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The Purpose of Beverage-Cost Control Is Not Lower Cost

The purpose of controlling beverage cost is to increase your sales. I’ll explain.

First, let’s digress. You are an F&B Director, or perhaps Beverage Manager or Bar Manager. You work hard to keep your beverage costs in line. If your cost margin is over budget you are “challenged” by your boss. If the cost is better than budget you are praised in the short term (but sometimes “punished” by future budgets that will now set this lower number as the new expectation).

Here is the typical scenario: 

But if the current economic environment teaches us anything it’s this: the model above isn’t sustainable. And here’s why – eventually the never-ending demand for lower cost will create pressure to raise prices, and this could threaten your business. 

 

So, what should your bar cost be – what is a “good” bar cost? I’ve seen everything from 14% to 35%. BTW both numbers might be “good”, because a “good” cost is any cost within acceptable variance to the theoretical (or “potential”) cost. That’s right: 14% might be good, and 35% might be good.

Then what should your theoretical cost be? That’s a strategic decision, and the tactics that will fulfill your cost strategy begin with your target market and include pricing, purchasing, promoting, merchandising, inventory and accounting practices, recipes, menu engineering, equipment selection and more. Controlling costs is about meeting your cost strategy targets – 14%, or 35%, or somewhere in between – and is success measured by the variance between your theoretical and actual costs. Ideally your budget is based upon this “cost strategy”.

Your cost strategy should allow for “targeted pricing”, i.e. pricing (supported by promotions and merchandising) that will promote sales. I’m not saying lower prices across the board, rather consider the category of products favored by the primary customer target, and then find ways to add value to select offerings in that category. Incorporate this into your cost strategy, factor it into your theoretical cost analysis, support it with a special program or promotion with merchandising and marketing: and now you have a sustainable process. You are controlling your costs strategically so that you can increase sales.

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