Hey, restaurant owners, operators, and managers out there.
Today, we're going to talk about recipe costing, but we're going
to talk about why I hate a lot of the very detailed, very expensive
software tools that claim to make restaurant costing easy for you in
your restaurant, coming up right now.
Hey everybody, Ryan Gromfin here – author, speaker, chef, restaurateur,
founder of TheRestaurantBoss.com, as well as ClickBacon.com,
and ScaleMyRestaurant.com.
Now I have put out a lot of videos on costing out recipes and calculating
food costs and costs of goods sold in your restaurant, and we're going
to put a link to that up here or up here, I'm not exactly sure how this
works, but we're going to put a link to that up there and I encourage you
to go watch that, but this video is more about my theory behind costing.
I'm going to get in big trouble for this and that's okay, I'm
willing to accept the challenge.
Go ahead and type in your comments as you're watching this video,
please, I'm willing to accept it, I can take it, I'm a big boy.
I'm going to get in big trouble for this, but I don't like
all of these really popular.
really big, really expensive software tools that are coming out that claim
to make recipe costing simple for you.
The reality is, it's just not simple.
Now the software tools are good, don't get me wrong.
There's a lot of them out there that are good, some are great, but the
challenge that I have for your average everyday ordinary operator is that
it's not that the software is not good, it's that the process itself.
I've put out videos on restaurant financials are just
complicated, it's the process itself that's very complicated.
So the reality is, it's just not that easy, and please don't get
sold into the marketing of it's easy because it's not that easy is
exactly why we've not included a detailed recipe costing module into
our software Click Bacon because we just found that it's way too difficult
for your average person to do it.
Is it important… is it important to get exact recipe costs?
Maybe, I'll let you make that determination when I'm done with this
video here, but consider this, let's assume that you're charging $11 for
a hamburger right now and after your perfect recipe costing, you find out
that you should be charging more like $12.50 or $13 for that hamburger.
Well, you can go ahead and raise the price but are you going to
make some of your guests angry?
Are they going to not come in as often?
Are they going to stop coming in just because you raise the price?
Remember, your guests don't care what you pay, they only care what
they pay and that's all they should care about, but the reality is, maybe
at $11 your burger was good, but at $13, is your burger still good?
Is your location still good enough?
Is your build-out and your service still nice enough for a $13 hamburger?
Because here's the reality, there's a lot of restaurants that
I eat at that have good food but it's good because it's cheap.
Once that food gets more expensive, it's not that good anymore.
I'm not going to eat at that restaurant anymore.
So by knowing exactly what the cost is on your burger, are you
going to make the burger smaller?
Are you going to go to a lower quality meat?
Are you going to go to a bun that's not as good?
Of course, you're not going to do that.
So I'll make the argument throughout this video of what's really the
point of knowing exactly what the cost of each recipe is?
And I'm talking exacting, not average.
I'm talking exacting, I'm going to make this argument
over and over again.
And here's one right now - you're going to make the argument that
we should, that we need to do this for inventory reasons, but
again, here's a video up here as to why I hate inventory.
If you have less than five units and you're doing less than five million
per location, generally speaking, I don't think you should be spending
your time on a perfect inventory system and perfect recipe costing.
Again, watch that video up there to learn more about my inventory
methods and why I don't like the generally accepted inventory methods
that most people are teaching in the restaurant business, but back
to recipe costing, to me it just comes down to time and resources.
Wouldn't it be great to have a perfect system?
Of course, it would, but the amount of work that it's going to take
for you to build that perfect system, you could be out shaking
hands and kissing babies with your guests, you can be out making sure
that your guests are having the most amazing experience, the best
experience ever possible or imaginable rather than sitting in an office
working on these perfect recipes.
And even if you did get perfect recipes which you're likely not
to because of all the challenges that go along with weights and
measurements and conversions and changing things from purchase units
to recipe units and having multiple different recipe units, all of the
challenges that go along with this.
If you've done this before, you know what I'm talking about.
If you've never done it before, trust me you're going to know if
you try this, then that's assuming that all of the costs of all of
your purchased items are up to date every single time you purchase.
Remember, not all of your vendors are on an EDI system, especially if
you're a smaller restaurant, you're probably working with some smaller
vendors that don't support EDI.
So even when these software tools claim that their integrations
and they integrate with all of this other stuff, the reality is
you're still going to have a lot of manual data to do anyways.
And if you don't believe me, that's fine, but I can tell you right
now, I've worked with chains, I worked with a chain that had 11
units, a very successful chain.
It's been around for 40-50 years with 11 units, 12 or 13 now, but at
the time I was working with them a couple years ago, they had 11 units.
They were paying $300 per month per unit, plus they needed another license
for their home office, so 12 units at $300 each per month for over three
years, and they didn't know their food cost, they didn't know their
cost of goods sold, they didn't know each individual recipe cost, why?
Because it's hard, it's complicated.
They didn't have the staff or the time to figure all this stuff out.
They kept saying it was a priority, but then other things kept coming up
and so they never made it a priority.
Now, why are they paying for all that software?
Why are they fooling themselves?
I don't know, I tried to teach them simpler systems, they didn't want
to use it, but they still don't know the answers to these questions
because they want the fancy tools.
To me, I think a lot of this is ego-driven, but more recently,
literally, last week I spent three hours on the phone with an operator
that I work with now trying to explain to him and his chef and his
entire team how all of the work that they've been doing for the last six
months paying for one of these tools has been wrong and here's the way
that they have to do it right, and when they finally grasp the concept
of what I’ve been sharing with them and how they've been doing it wrong
and how hard it is to do it right, literally their answer is wow.
This is a lot more work than I thought.
And I'm like, I've been telling you that for six months, that's
why I don't think you should be paying for the software, that's
why I don't think you should be dedicating your resources.
So again, I go back to it's not that I don't want you to have perfect
recipes and I don't want you to have perfect recipe costs, I should
say recipe cost; it's that it's just not worth the time and the
resources until you're big enough.
When you're small, you got to go out and you got to shake hands
and you got to kiss babies.
Go out and sell a catering event.
Take the time that you'd be sitting in the office, shake
hands, sell a catering event.
You're going to make more money than you're going to make knowing
if your recipes are perfect or not.
And the reality is, unless you're crushing it at the top
line, it's not even going to make that big of a difference.
If your burger is awesome now and people love it, you can
probably charge more for it.
It's simple supply and demand theory, but if your burger's not awesome and
people don't love it and you're not crushing it at the top line, knowing
your recipe or knowing the cost of your recipes and charging more to
your guests is not going help you.
You have a bigger issue.
There's a reason people aren't coming into your restaurant, it's
not because you're not charging more, it's because your product
isn't good enough to charge more.
Your product might not even be good enough right now, so knowing how
much it costs and wanting to charge more is not going to help you.
Now again, if you're absolutely crushing it at the top line, if
you've got five units doing 3-4-5 million, so you're doing 20-25
million throughout your whole company, then maybe you should be
considering this, but if you're an average restaurant doing a million,
million and a half, two million or even less than that, this should
not be on your radar in my opinion.
The reality is that I know you're going to make the argument of
inventory and if you haven't watched that video, let me just
quickly explain it to you here.
You can use a very simple formula to just take your weekly sales divided
by your weekly purchases and get your weekly cost of goods sold throughout
your whole menu, and that's going to be enough to tell you if you're even
remotely in the ballpark of where you're supposed to be, even better,
use software like Bacon to incorporate rolling costs of goods sold in
labor, so you can get a prime cost.
You can go to clickbacon.com to learn more about that, but also once
we know are we even remotely where we're supposed to be, we can look at
a P-mix and strategically make some decisions based on supply and demand
like I said on whether we should be increasing prices or not, or whether
we're hitting the mark for what our guests want, but we also have to
be looking at factors like waste, theft, spoilage, over purchasing.
I'm sorry, over portioning and purchasing, and some of those
things without massive, massive inventory systems are hard to figure
out unless you just get into the kitchen and get your hands dirty.
So, I've got some systems and processes and procedures to make
this a little bit easier, but again, I just wanted to come out and say….
I know a lot of you have been taught this and I know that a lot of you
want these perfect recipes and you want these perfect systems and you
want these perfect tools, and you want to pay all this money for the
software that you think is going to make it easy for you, but there's
nothing that replaces getting your hands dirty and doing some good hard
work and just going out there and making sure your food's great every
day, making sure your line is set up properly, making sure your guests
are trained properly, making sure that you're exceeding your guest
expectations on every visit because one of the brands that I work with
is absolutely crushing it and they use my theories, my philosophies of
kind of knowing, are they good at it?
Yes, they're very good at it.
Are they great at it?
No, but you know what they're great at, they're great at exceeding their
guest’s expectations on every visit and they're not going to make any
more money by investing hundreds of thousands of dollars and hundreds
of hours or six months or a year of their time to figure out that maybe
they could be charging 10 cents more.
The reality is, their guests are loving their product, they raise
their prices all the time and the guests keep coming and they keep
coming and the bigger they get, the less they pay for products, they're
able to negotiate their prices down and so what we're looking at are
things like portion controls, we're looking at things that we can control
without having to go down the rabbit hole of these perfect software
tools with perfect recipe costing because we focus on operations.
There will be a day when they want to get more focused on bottom line,
but right now, we're just focused on growing this baby, building the
top line, making sure that every guest’s expectations are exceeded,
and we will deal with the other stuff later when the company is big
enough and they have the time and the resources and it's worth it for them.
So instead of spending tens of thousands of dollars and hours
and hours of your time trying to get these perfect recipes.
Grab a piece of paper right now and cost it out and just
know are you in the ballpark.
If you're trying to cost out a hamburger, how much
do you pay per pound?
How many ounces are in your burger?
What do you pay for the bun?
What do you pay for a slice of cheese?
What do you pay for a bag of French Fries?
And how many ounces of French Fries are you putting on the plate?
Add 10 or 20 cents for your lettuce and tomato and pickles
and you're done, that's it.
It's that simple, and then you'll know are you even
remotely where you need to be.
So I've always been a top-line operator, I'm a top-line guy, I
believe in treating the guests great, treating your staff great,
exceeding expectations, giving the guests everything they need, having
them come back over and over and over again, and just absolutely loving
your restaurant while you need to know numbers, you only need to know
a little bit until you're that big.
I would highly encourage you if you've tried recipe costing, if you're
wanting to do inventory, if you're stuck, please check out Click Bacon,
and please don't overcomplicate this.
Restaurant financials in the restaurant business is complicated
enough, we need some simple tools in our life to give us just the
right amount of data that we need to know that we're operating
within a range that's acceptable, and then go build the top line.
I hope you enjoyed this week's video and I look forward to
those comments, I know you're going to have comments here.
I also think I forgot to mention, if I did forget to mention, there's
another video that I want to put a link up there for, it's about how
to cost out your recipes or how to cost out your menu items using
supply and demand, it's called a market minus pricing model instead
of a cost-plus pricing model.
The link is up there, watch that video if I didn't mention it earlier, we're
going to put it up there for you now.
I hope you enjoyed this week's video.
I look forward to bringing you another one just like it.
Remember, systems create freedom, freedom creates
value, and value creates scale.
Have an absolutely amazing day, bye-bye.
Are you struggling to grow your restaurant business?
Are you failing to find the time to do all the things you
need to do because you're stuck doing everybody else's jobs?
This sucks, I know, I've been there.
You're not alone.
The difference between where you are now and where you want to
be is a plan and some new tools, and that is why I created scale.
It's my newest course for restaurant owners who want
to grow their businesses and build an extraordinary brand.
Learn more at www.ScaleMyRestaurant.com.
I hope you enjoyed this week's training video.
If you haven't subscribed to our channel yet, would you go
ahead and smash the like button right up there so you can get
notified every week when we release a new free training video.
I've also gone ahead and put a couple of videos for you here and here
that I think you're going to enjoy.
Remember, systems create freedom, freedom creates
value, and value creates scale.
Manage systems, develop people, and be awesome.